Can the S&P 500 Finally Vault Above the 1420-1430 Resistance Level?
By Jeff Saut Dec 10, 2012 9:42 am
Plus, recapping a lunch with icons covering equities, investment ideas, and more.
My little town blues / Are melting away / I’m gonna make a brand new start of it / in old New York. / If I can make it there, / I’d make it anywhere. Come on, come through / New York, New York.I have loved New York since working on Whitehall Street in the early 1970s. Every year I return around this time of the year to attend Minyanville’s Festivus event to raise money for the financial education of underprivileged children. Last week I spent time attending said event, seeing institutional accounts, doing media, and renewing friendships. I was surprised, however, to see pumps still sucking water out of the subway. In fact, part of the subway system, and a few streets around the exchange, remain closed. Moreover, while cell phones have always dropped calls in NYC, Hurricane Sandy has definitely exacerbated that annoyance.
-- Theme song from “New York, New York”
-- Theme song from “New York, New York”
While my schedule was jam-packed, the highlight of the trip was lunch with my friend Craig Drill, eponymous captain of Drill Capital. A few months ago I told Craig I was coming to “the city” and he invited me to lunch. I thought “lunch” meant sitting around his conference table with Craig and his team – CIO Steven Reynolds, Dr. Al Wojnilower (named Dr. Doom in an era gone by), and Jerry Goodman (aka Adam Smith, author of many books like The Money Game) – but I was in for a big surprise.
My first surprise came as I entered the elevator only to see Ken Langone – “seed investor” of Home Depot (NYSE:HD), former director of the NYSE, President/CEO of Invemed Associates, patron of many charities, etc. As I looked at him, I said, “You’re on TV.” He said, “Me, not me.” I said, “I have been on TV with you.” Then the elevator door opened and we walked into Craig’s offices. As we strolled toward the conference table my jaw nearly hit the floor. Sitting around the table were Michael Price (MFP Investors), David Einhorn (Greenlight Capital), John Hathaway (Tocqueville Asset Management), and others that I did not immediately recognize, but who turned out to also be icons in this business. Sitting down at the table, I spied a list of the attendees. As I studied their names, and the companies of these folks, it became apparent I was clearly the only interloper there.
Ken Langone opened the meeting by taking about Home Depot and the products that have been “selling off the shelf.” Plainly, generators have been a “hot” item, but the usual seasonal goods are also selling well. He then centered on the presidential election, the Republican Party, and politics. With Ken ending on a political note, the conversation turned to Stephen Bell, the Senior Director of the DC-based BiPartisan Policy Center. At a young 69 years of age, Steve has seen a lot; he is well connected inside the Beltway, and knows how the Washington Waltz plays. He began by stating, “All outcomes to the fiscal cliff are binary, and they are either going to half bad or really bad.” He continued, suggesting that if the president really wants to make a deal, he needs to use some of his “political capital” to give John Boehner some “political cover” because each of them are going to have to agree on things their constituencies won’t like.
Recall what President Clinton did after in essence being impeached and subsequently tried a second time in the Senate. Bill Clinton took a deep breath, and putting all the political in-fighting aside, announced, “We need to balance the budget.” Having lived inside the Beltway myself, that is how things get accomplished in Washington.
The conversation then moved to the equity markets, as well as individual investment ideas. It was noted that the apartment rental complex is “on fire,” punctuated by Sam Zell’s recent bid for a large stake of the apartment company “Archstone.” Of course that squares with my theme given there are millions of 18+ year olds still living with their parents, but they are starting to move out. Another lunchmate talked about one of his companies moving its entire manufacturing operations back to the US from China due to quality issues, rising Chinese wages, increased transportation/insurance costs, etc. Hereto, this is a theme I have highlighted for some time, and I have many examples reinforcing this theme. To be sure, the reindustrialization, or reshoring, theme is intact.
As for individual ideas, Joe Foster, portfolio manager (PM) of Van Eck International Gold Fund (MUTF:INIVX) told me that if the same “guys” that are printing money are buying gold it reinforces the belief in gold as an alternative currency. Two recent such “buyers” have been South Korea and Brazil. He added, however, “Gold needs a new catalyst.” John Hathaway, PM of Tocqueville Gold Fund (MUTF:TGLDX), agrees and opined that with the large capitalization gold stocks trading at about 5x earnings, and the illiquid names trading for pennies on the dollar, it feels like capitulation.
No positions in stocks mentioned.
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