Screw Osama, I'm Buying Stocks
Dr. John Rutledge, Rutledge Capital, 07.11.05, 2:15 PM ET
Forbes.com
NEW YORK - We don't need to kill or capture Osama for the Dow to reach 11,000 and beyond. We need to ignore him. (Or better yet, use our government's newly enhanced powers of eminent domain to seize his house.) The stock market will see 11,000 this year based on the strong performances of companies and low interest rates.
Osama bin Laden is actually a technology story. Advances in communications technology over the past ten years have turned on the lights around the world and given all of us real-time looks at everything happening on Fox, CNBC and CNN, right in the comfort of our living rooms. This has increased the return on terrorist acts big-time--the entire world watched the World Trade Center fall; we heard live gunfire when the Chechnyan terrorists invaded a Russian grade school; and we saw the dead and injured in the recent London bombings. It is much more 'profitable' to be a terrorist today. But this is a side show.
What's more important is that people in the United States and other wealthy countries can now see, in real time, how poor and violent the rest of the world is. This makes it more difficult for governments to do bad things to their people in the dark. (For example, the mass murders that occurred in Sudan.) Sometimes that provokes us to take positive action, as when American money and investment was the driving force behind the Easter Accord in Northern Ireland: They actually '"bought out'" individual members of the core Irish Republican Army and relocated them around the world. This is very good.
Also important is that poor people around the world now have uncensored televisions. They see how rich we are and have reached the conclusion that it is not our intelligence, work ethic or good looks that are the reasons for our wealth. They want some of this wealth, too, and are pressuring their governments to deliver. These governments know the only way to do this is to attract capital.
Capital is the source of growth; it is the key to raising their people's productivity. Since the capital is all located in the U.S. (as well as in the European Union and Japan), these countries (like China, Korea, India and Russia) are systematically changing their rules to attract foreign (mostly U.S.) investors, and, in the process, reducing investment risk. The resulting reallocation of capital has created the huge growth stories in China, India and Russia. We are struggling with the side effects of this growth now with high oil prices, trade deficits and outsourcing. But, it is an immensely positive story for capital owners around the world, including U.S. investors.
To the extent that we allow terrorist acts to frighten us, we are throwing in the towel. Throughout history, people have adjusted to whatever challenges they have faced. I think America is ready to hoist a single finger to bin Laden and get back to work. When that happens, a ton of cash will be invested in the stock market.
Conclusion: Terrorism is an unavoidable sideshow to the greatest investment story of our lifetimes. When bad things happen--as they did in London--and stock prices fall, invest more, not less, in the stock market. It's time for America to exhale, unclench their buttocks and buy stocks.
As far as anti-terror stocks, I'm always tempted to recommend Anheuser-Busch (nyse: BUD - news - people ) (beer always calms me down), Eli Lilly (nyse: LLY - news - people ) (Prozac) or GlaxoSmithKline (nyse: GSK - news - people ) (Paxil). But enough with the jokes. I think everybody will have the idea to buy security companies, X-ray companies and the like.
I'd like to throw in Symbol Technologies (nyse: SBL - news - people ), a $2 billion company that dominates the market for handheld-scanner equipment (their old business) and is going to dominate the future market for RFID (radio frequency identification) technology. Security is about knowing where things and people are, and RFID chips are the answer.
Wal-Mart Stores (nyse: WMT - news - people ) has mandated that their vendors use RFID by next year, so they can track the shipping and sales process from start to finish, no matter what vendor is involved. Brittan Elementary School, north of Sacramento, had to abandon its plan to monitor attendance and prevent vandalism using mandatory RFID badges for students when parents and the American Civil Liberties Union got involved, and California legislators got excited about passing laws to restrict their use. But you can also put them on kids on nursery school playgrounds to avoid kidnappings, like they do in Mexico. In Japan, they not only use RFID bracelets on school children, but also on hospital patients so that they get the right dosages of drugs. Symbol's CEO Bill Nuti is a former No. 2 at Cisco Systems (nasdaq: CSCO - news - people ); he is a winner. I own the stock and know the management.
Another good buy is Peabody Coal (nyse: BTU - news - people ). Besides their cool ticker symbol, they own a ton of coal reserves (well, actually many tons). Terror equals oil prices. Coal is the new oil.
Excerpted from the Rutledge Blog, accessible at Rutledge Capital.
Dr. John Rutledge is a leading economist who has advised several presidents, including President George W. Bush's administration. A former Forbes Magazine columnist, he also advises multinational corporations, financial institutions and investors.
howdy KLP--
what a busy summer, best. |
