There is some good news starting to percolate on the economic front. You will not hear much about it given the media’s desire to scare you out of your skivvies.
Their rationale is that if you feel good about things, you won’t watch the news.
So, the housing market saw a bit of a rebound. New home purchases went up in the short run and year over year saw improvement even though sales were down 3.5% from a year ago. Additionally, McDonalds surprised to the upside with revenues and earnings. And, this morning, U.S. Steel came in with a good report. I would guess that U.S. Steel numbers had something to do with infrastructure; so, now, we have to ask a question about the new stimulus proposal.
Hundreds of billions of dollars and a lot of it targeted for infrastructure makes me want to take a hard look at infrastructure companies. Places to start might be Caterpillar (which announced a major lay-off plan), and Deere. One might also look at Fluor. These are not recommendations; just ideas.
Also, the energy sector deserves a look. With oil at 40-60 bucks a barrel as a benchmark, those situations, given their valuations, probably deserve a look. I heard one oil maven this morning talking about 1 dollar per gallon gasoline when oil hits 20 bucks a barrel. It is currently in the mid forties.
Is he right?
I spoke at my annual state-of-the-economy seminar last year about a quote from the head of British Petroleum who said that oil would be 40 bucks a barrel when it was 60. He turned out to be right but he never mentioned that it would go to 147 dollars before going down to 40. I guess that part of it slipped his mind. The admonition to be nimble remains in effect. Even though I do believe that we are at the bottom of a very narrow trading range, you still have to be selective in your criteria before jumping in.
The obvious things may have already moved; things like McDonalds or Family Dollar given our belief that in tough times, cheaper things become vogue. So while Home Depot is closing Design Centers, McDonalds is opening restaurants and Family Dollar raises their dividend.
I will be giving this year’s state-of-the-economy seminar in Charlotte, North Carolina on February 3rd and again on February 12th where I will be laying out my forecast for the coming year. You can get the details on our website (www.triunecapital.com) or by e-mailing the firm.
I hope to see all of you there.
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