“The future was always more important than the past.”
– Paul Park
Our passion is helping clients focus on the more important issues as we collectively gaze upon the horizon ahead. Concierge-level services, open communications, transparency and a never-ending inquisitive view of the positive future are all hallmarks for us and our Partners.
The persistent view helps to create a platform for building pathways to successfully meeting or exceeding long-term goals for clients. These sincere beliefs which we strive to help long-term investors focus upon, permit us to overcome the many hurdles which are assuredly part of the deal along the clients’ road to that success.
So, with all due respect to the significant hurdles always present – let’s stay focused on the good news…even when it is very difficult to outline in the fog.
In The Haze of The Election…
Some may have lost site that we were in the middle of an earnings season. We are happy to report that the massive transformation of business, happening all around us at light speed (seemingly on steroids), continues. It is evident in the results.
Pretend for just a moment that we all sat around a conference table together on the evening of January 1, after the various New Years Day celebrations. At the table, a sheet was passed out to each of us which read as follows:
“We are deeply saddened to inform you that 2020 is a year set for the record books. In weeks, we will officially announce that a global pandemic virus has emanated from China and will soon inflict untold carnage on the health of the sick and elderly across the globe. In response to that we will take unprecedented measures to quell the spread of the virus.
Everything – other than essentials – will be shutdown and we will decide between ourselves when they will open back up, how they will open back up and at what pace (rolling or otherwise) they will open back up.
You will listen to us then – and suffer the extraordinary consequences of those steps – or face punishment (of all shapes and sizes still to be decided upon). Your business will be at risk. Your livelihood will be at risk. Your health will be put further at risk. Your financial well-being will be under our control. Your future will be – well, let’s just say – at times – questionable. The good news is that we will be happy to let you know when we think it is over.
Happy New Year.
The Governing Powers of the Planet”
Now, of course – some of that is meant to be slightly comical – but only slightly. And only comical when viewed in the context of what has actually unfolded. None of it is designed to disrespect the needs of those in danger from the illness.
The events of 2020, unfolding in a downpour at times since and at an unprecedented pace, drove government actions we were about to all experience together. They caused the word “unprecedented” to surge into the “way overused word” category – almost overnight.
Further pretend that – moments after that “memo” was read – we then received a second short piece asking us these questions:
Given the news we have just received, please tell us where you believe the DOW Jones Industrial Average will be on November 12, 2020? ____________________
In the same vein, how far will revenues and earnings drop in the S&P 500, YOY – by the end of the Q3 Earnings Season? _____________________
And finally, how many years will it take for earnings and markets to return to 2019 (just closed out last evening) levels? ____________________
The lesson hidden somewhere in this mess?
It is highly likely that not a single person in the room would have chosen the answers below – or anything remotely close:
Down 8.9% in earnings and down 1.3% in revenues
Less than 12 months
We must – as long-term investors – focus on the idea that our history is filled with chaos at times. So far – every single one of the events we have experienced have been overcome by us – together. I’ve stated often before but it is worth pasting on your bathroom mirror to review each morning:
America is in the business of building, learning, expanding, striving, overcoming, getting beyond, exceeding expectations and seeding better years ahead than in our past – and friends, we have once again proven: business is good.
The tough part?
Believing – having faith – stepping forward through all of the storms.
Ok – monologue over – time for the pictures.
Lots of Green Shoots
Latest earnings snapshots with only a small percentage left to report, are solid. No worries, in a mere 9.4 weeks, Q4 earnings season will begin with the banks LOL:
Note in the first image above, not only were many losses reversed in Q3 after a very ugly shutdown-induced Q2 waterfall, but Q4 numbers have continued to see improvement. Note that revenue change YOY by Q4 is now expected to be basically unchanged (-0.01%).
One must not underestimate the powerful forces driving this massively positive recovery process. Notice what the first 2 quarters look like next year already. Further, recall that analysts are consistently underestimating numbers so one can be confident these are low as well.
Why is that good?
Simple: By late July / early August or so, of 2021 (only 9 months from now), investors will be set to stare into a 2022 with projected earnings of roughly $198 a share for the S&P 500. Rates will very likely continue to stay lower than most fear, setting the stage for multiples to edge higher.
In your mind, place a multiple of 22/25 on the $198 figure and you get an “end of 2022 projected S&P 500 level” significantly higher than where we are now.
The solution? Patience, discipline, planning and staying on course.
Recall when we suggested that the virus would cause a steady but significant return of manufacturing to US shores. Hey, it is still early (roughly 90 days A.G.S.) (After Global Shutdown) – but we expect the pace of improvement to continue for many years into the future. Supply chains will be far closer to the US than ever before – and tech will crunch out any cost increases at the margin level.
Sure – there will be kinks along the way for a quarter here and a quarter there – but the runway is vast and the upswing benefit to come, significant:
From top to bottom on the data images above:
√ Don’t look now friends – but in the middle of all the still terrible news, employment is surging in the manufacturing world. That only happens for one reason….and it’s good.
√ Now export orders too. forging back into growth mode a mere 90 days after global shutdown. Fantastic.
√ Last for now on this front: note the manufacturing indices are within whispering distance of record highs!!
For all …read ’em and reap!
Space…The Final Frontier
You thought we were kidding?
No – we weren’t.
Generation Y will bring us Star Trek far faster than most can even begin to fathom. Don’t worry – the naysayers will have plenty of bad news about it all to scare the crap out of you every step of the way:
Demogronomics® suggests – as stated for years – that the runway of opportunities ahead is long – and profitable. But not without volatility and the required patience to withstand stress and rapid change at times.
√ Again – pray for a correction.
√ Dips are your friend – don’t forget.
The Grim Reaper never rests. Media revenues would die if he did.
Don’t fret…instead – tell him to bring it on.
Stand tall in the storm – and look forward, above the noise – not back and into the fog.
This rocket-ship ride is just getting fueled up for the trip – even now in the midst of all of this…we are set for collective good years together like none in history – no matter the politics of it all.
Long-term investors have learned that when all of the above ingredients are baked into the pie, the road ahead has been marked by a clear and resounding message:
…surprises to the upside.
It is our job to withstand the assured storms ahead and be disciplined in our planning for clients’ goals.
Sure, more choppy waters are likely as the future unfolds.
The media will do their best to knock you off your focus, grabbing at your fears, stabbing at the ghosts in the back of one’s mind and working to take you off your pathway.
Focus your mind on rising above this tension and angst instead – as we all succeed together…
It is set in stone with The Barbell Economy®.
Pull your seatbelt tighter and hold on to your popcorn.
Exciting things are dead ahead.
Enjoy Your Weekend As Always
Please Stay Safe & Healthy
We are here to help always, even if just to talk.
Until we see you again, may your journey be grand – and your legacy significant.