UNEMPLOYMENT TOOK A SURPRISING TURN DOWNWARD WITH LAST MONTH’S REPORT RELEASED ON FRIDAY. GIVEN THE STATISTICAL MANIPULATION (SEASONAL SMOOTHING) AND REVISIONS THAT HAPPEN REGULARLY, THE REPORT IS TO BE TAKEN WITH SOME GRAINS OF SALT. STILL, WE MAY HAVE SEEN A MEANINGFUL DECELERATION IN THIS IMPORTANT NEGATIVE TREND. RISING EMPLOYMENT IS THE CORNERSTONE OF A LASTING ECONOMIC RECOVERY. THE STOCK MARKET HAS BEEN PREDICTING RECOVERY FOR NEARLY NINE MONTHS, AND IS AN IMPORTANT COMPONENT OF LEADING ECONOMIC INDICATORS. ANECDOTALLY, MY FRIENDS WHO ARE IN RESIDENTIAL REAL ESTATE CONFIRM THERE IS A LOT OF RESALE ACTIVITY IN “THE LOW END” WHICH FOR SOUTHERN CALIFORNIA MEANS HOMES SELLING FOR $600,000 AND UNDER. THESE ARE EXISTING HOME SALES, MIND YOU, BUT CLEARING INVENTORY IS ANOTHER KEY COMPONENT TO RECOVERY. ONCE HOMEOWNERS, THE BACKBONE OF THE MIDDLE CLASS, FEEL THEY ARE NO LONGER LOSING NET WORTH, SPENDING SHOULD RETURN.
A PROFESSIONAL PHOTOGRAPHER FRIEND NOTICES PEOPLE ARE WILLING TO SPRING FOR THE LUXURY OF HOLIDAY PHOTOS FOR CARDS,.HE DETECTS A SENSE THAT PEOPLE, HAVING SCRIMPED FOR A YEAR NOW, FEEL ENTITLED TO A LITTLE SPLURGE. THEY ARE PAYING LARGELY IN CASH OR CHECK, NOT BY CREDIT CARD. CHRISTMAS TREE BUYING IN SAN CLEMENTE THIS WEEKEND FEATURED LINES AT LOEWS AND WALMART WHERE PRICES ARE LOW TO A STEADY BUT LESS FRENETIC PACE AT ONE OF THE TRADITIONAL “MA AND PA” LOTS WHERE PRICES ARE A LITTLE HIGHER. THESE OBSERVATIONS, PAINT A PICTURE OF A MORE CAREFUL CONSUMER, ONE WHO CAN BE ENTICED TO SPEND FOR CLEARLY DEFINED NEEDS, BUT AN ABSENCE OF IMPULSIVE BUYING THAT CHARACTERIZES MUCH OF MIDDLE CLASS CONSUMPTION DURING NORMAL YEARS.
THESE VIGNETTES SUGGEST AN IMPROVING ECONOMIC PICTURE THAT IS BUMPING ALONG, CONSIDER THIS,HOWEVER: AN AVALANCHE OF FEDERAL STIMULUS, SOME $727 BB IS DRIPPING INTO THE BLOODSTREAM OF A WEAKENED ECONOMY. OF THIS, LESS THAN 10% HAS BEEN SPENT, MEANING AN UNPRECEDENTED AMOUNT OF MONEY FOR PROJECTS SUCH AS IMPROVED INTERNET, LOW POWER ELECTRICAL MOTORS,TOXIC CLEAN UP AND DIGIIZED MEDICAL RECORDS WILL SOON STIMULATE JOB CREATION. UNLESS SMALL BUSINESS IS ABLE TO EXPAND, SUSTAINABILITY IS IN QUESTION. GOVERNMENT FUNDS MAY KICK START THE COUNTRY INTO A TEMPORARY BOOM BUT MOST NEW JOBS ARE CREATED BY SMALL BUSINESS AND RIGHT NOW MONEY DOES NOT APPEAR EASILY AVAILABLE TO SMALLER ENTREPRENEURS. THUS, I WORRY THAT FEDEERAL STIMULUS COULD PROVIDE LITTLE MORE THAN TWO YEARS OF INFLATIONARY BOOM FOLLOWED BY A REAL LET DOWN IN ACTIVITY. TAX RATE INCREASES MAY FURTHER HINDER INVESTMENT IN WORTHY PROJECTS THAT COULD CREATE WORK FOR MILLIONS. THERE ARE MANY HIGH PAYING JOBS, ESPECIALLY FOR MIDDLE MANAGEMENT AND THOSE WITH ASSEMBLY LINE SKILLS THAT MAY NEVER RETURN.
AGAINST THIS BACKDROP, WE CONTINUE TO ACQUIRE COMMON AND PREFERRED SHARES OF COMPANIES THAT HAVE THE FOLLOWING CHARACTERISTICS:
1.FINANCIALLY SOUND
2.COMPETITIVE STRATEGY INCORPORATES SIGNIFICANT EXPANSION INTERNATIONALLY
3.SMART ALLOCATION OF SHAREHOLDER CAPITAL- PAY DIVIDENDS AND BUY IN SHARES WHEN THERE ARE FEW APPEALING OPPORTUNITIES FOR EXPANSION OR PLOW BACK CAPITAL WHEN PROJECTS HOLD MEASURABLE PROSPECTS FOR HIGH RETURNS ON CAPITAL.
WE’LL BE TALKING ABOUT FOUR SUCH COMPANIES AT OUR ANNUAL CLIENT HOLIDAY LUNCHEON THIS WEDNESDAY, DECEMBER 9. IF YOU HAVE NOT RECEIVED YOUR INVITATION, IT IS BECAUSE YOU ARE NOT A CLIENT. BECOME ONE AND JOIN US FOR A FABULOUS LUNCH AND SOME HIGH VALUE INSIGHTS INTO OPPORTUNITIES TO PROSPER FROM COMING PROSPERITY.
