|
|
Tuesday, February 07, 2012 | |
|
Lesson 11
The Investment Environment
Copyright 2005 by Milton Garber Companies do not exist in a vacuum. They exist in countries and in the world; consequently, there are both national and international factors that shape the investment environment. In general terms a favorable investment climate is one marked by peace, prosperity and predictability.
General conditions of economic prosperity favor all companies and hence all stocks. As they say, a rising tide lifts all boats. War, on the other hand, benefits companies that sell to the military; however, most companies do not and most companies prosper more in peace time than in war time. Not only war but also civil violence such as that stemming from insurrections, revolutions and organized crime are disruptive to economic prosperity. Predictability is also essential to business success and hence to the success of investments in business. A company must be able to plan with some degree of assurance regarding the continued availability of capital, raw materials, supplies, labor sources, and markets. A lack of some minimal degree of predictability, or “visibility,” with respect to a company’s business prospects is a heavy strike against that company in the minds of most investors.  The Ford That Never Runs Out of Gas Last February my wife and I left Jefferson City for a getaway that would take us as far south as Colon, Panama. When we left, gas was $2.85 a gallon. Yesterday I filled up for $3.19 a gallon, just shy of a 12% increase in 12 months. That’s why it was no surprise when I picked up a copy of NEWSWEEK magazine today to see the cover story was DETROIT THINKS SMALL. The surprise was that the magazine was dated April 1, 1974. I remember those days (fairly) well. After growing up thinking 30 cents a gallon was high for gasoline (even Ethyl - remember that?), gas prices had soared to 75 cents a gallon. My wife and I responded by buying a small GM station wagon, a brand new 1974 Chevrolet Vega. It was the absolute worst car I’ve ever owned, and I’ve owned a lot. Detroit may have been thinking small but they weren’t thinking quality. A former auto executive was quoted in 1974 as saying “Man, there’s an air of morbidity about this town (Detroit) right now, isn’t there?” It would probably seem like a circus compared to today. Another headline in that issue of NEWSWEEK that would be timely today was “IF YOU THINK NOW IS A BAD TIME TO BUY A HOME WAIT UNTIL NEXT YEAR.” Global warming scaremongering wasn’t in vogue back then because scientists thought we were on the verge of another ice age. In 1974, alarmists were hyping famine and starvation in poor countries. Sen. Hubert Humphrey, in an article about world hunger headlined RUNNING OUT OF FOOD?, had this to say: ". . . the question, I believe, is going to come down to whether Americans will be willing to cut down on their own consumption to help those poor people.” In 1974, Congress was debating whether to impeach President Nixon for his Watergate cover-up. One protester pictured in the magazine carried a sign that read JAIL TO THE CHIEF! Though he reassured Americans "I am not a crook!", Nixon resigned 4 months later. In 1974, NEWSWEEK made a large portion of its advertising revenue from tobacco and alcohol. The magazine was chock full of ads with slogans like: WINSTON TASTES GOOD LIKE A CIGARETTE SHOULD START SOMETHING WITH WOLFSCHMIDT GENUINE VODKA THERE’S NO CANADIAN MORE CANADIAN THAN CANADIAN LORD CALVERT SMIRNOFF LEAVES YOU BREATHLESS THERE ARE TIMES WHEN A GUY JUST CAN’T SMOKE. SMOKELESS TOBACCO. A PINCH IS ALL IT TAKES. MICRONITE FILTER. MILD, SMOOTH TASTE. AMERICA’S QUALITY CIGARETTE. KENT. US TAREYTON SMOKERS WOULD RATHER FIGHT THAN SWITCH! The Rolling Stones were touring the United States. Newsweek touted the tour with the headline ROLLING STONES “LET’S SPEND THE NIGHT TOGETHER” TOUR A HIT WITH THE MISSES. An article on women’s lib was headlined WILL POWER CHANGE WOMEN? And Congress was fighting. About chili. When he discovered that the National Press Club served only chili made from a Texas recipe, Arizona Senator Barry Goldwater fumed “A TEXAN DOES NOT KNOW CHILI FROM THE LEAVINGS IN A CORRAL”. That prompted an official response from Texas Senator John Tower: “COMPARING ARIZONA CHILI TO TEXAS CHILI IS LIKE COMPARING PHYLLIS DILLER TO SOPHIA LOREN." In the cover story (Detroit Thinks Small), auto executive Henry Ford II was described as “The Ford That Never Runs Out of Gas”. Based on the amount of chili it sounds like Congress consumed, I doubt they ever ran out of gas either. email: aboomer@embarqmail.com -- (February 06) Email us your thoughts about our newest feature 
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
-day