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Socialism Ain't All That BadBy
Friday, September 6, 2013
"If this is what socialism looks like, then I think I'm going to be just fine..." my father-in-law said while we were in Europe earlier this summer.
He was only partly joking...
You see, my father-in-law is in his seventies. He is an American war veteran who served in Vietnam. He is proud of his country.
But he also worries about his country – every day. He worries that government spending in the United States is out of control.
He worries that our nation – founded on principles of individual liberty – has become a nanny state... one that penalizes entrepreneurs with more regulations and higher taxes while it makes retirement and health care promises it can't possibly fulfill down the road.
He worries that our country is becoming less like the Founding Fathers intended, and more like – well, France.
Sure, he was looking forward to visiting France. He'd always dreamed of visiting the Normandy coast – where the Allies stormed the beaches in World War II – and paying his respects. It turned out to be an amazing experience.
But he also knows that France has some seriously bad, long-term trends in place. He knows that France's entrepreneurs (and rich people) are leaving the country for good. He knows that the French government can't keep the retirement and union promises it's made to its citizens.
While we were there, for example, the French government offered up to $9 billion to French carmaker Peugeot to help the company stay alive. In other words, taxpayer money is being spent on propping up a money-losing business. (Peugeot proudly announced a few weeks later that it ONLY lost $565 million in the first half of this year... down from a loss of over $1 billion in the first half of last year.)
The thing is, we already know all this stuff about France... We know that France is socialist. We know that its government is going down a dangerous road of throwing good money after bad.
What scares us the most? Deep down, we know that the U.S. is headed down the same road. France has simply beaten us to it.
As my father-in-law sat in the Grand Salon at the Chateau de Courtomer in the French countryside with his favorite drink in hand, he joked that "this ain't all that bad yet."
His point was that it will take years for the U.S. government to get to where the French government is now... It could take so long, that my father-in-law said he "might not be around long enough to see the U.S. go downhill."
In the meantime, however, a lot of money can be made in France. Everyone has given up on the country. So now, investments are dirt-cheap.
As I write, the main French stock index – the CAC 40 – trades for just 11 times forward earnings. And the top stocks are even cheaper... Top French names Total, Sanofi, and BNP Paribas trade for an average forward earnings of less than 10.
The same is true in the U.S. We're making a lot of the same mistakes as France. We're headed down a dangerous road. But I believe it's going to take a long way to get to the end of that road.
In the meantime, we'll have several years when it "ain't all that bad." And when a lot of money can be made.
As I've showed you before, the biggest, best stocks in the U.S. are ridiculously cheap... less than 12 times earnings estimates. Compared to just about any other investment out there, stocks are the best place for your money.
In sum, I agree with my father-in-law that there are REAL problems facing the U.S. and Europe. But that didn't stop us from enjoying a drink in the countryside. And it won't stop me from making money in stocks.
Good investing,
Steve Sjuggerud
Further Reading:
Over the next three years, Steve believes that a cheap market, low interest rates, and a "Great Migration" of Mom and Pop America will push stocks to unimaginable highs.
The "Great Migration" will happen in three stages, he says, but "the REAL money in this bull market will be made in Act III, when Mom and Pop start moving into investments like small caps, emerging markets, and gold stocks."
And Steve believes Act III is just beginning. Get all the details here:
Market NotesTHE STEALTH BULL MARKET CONTINUES Yesterday's trading brought another new high for the big "stealth" bull market in biotechnology...
Regular readers know we see biotechnology as one of the market's greatest "boom and bust" sectors. With its promise of individualized medicine, cancer cures, and miracle drugs, the biotech sector easily captures imaginations and huge speculative money flows. As Steve has written several times, if you catch a good biotech boom, you can make extraordinary gains.
Over the past few years, we've profiled how biotech stocks are enjoying a big bull market. Still, biotech stocks are rarely featured in mainstream media. Investors aren't chattering about their biotech profits at cocktail parties.
A good way to monitor this bull market is with the Nasdaq Biotechnology Index. As you can see from the chart below, the index sat at 1,000 in late 2011. Just yesterday, it climbed above 2,100. This bull market isn't front-page news... but it soon will be.
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