In a note up on the website of his fund Seabreeze Partners, investor Doug Kass argus that US equities offer the best place to put your money, as things go aggressively in reverse in other parts of the world, specifically Europe.Here are his 10 reasons for liking America:
1.Above all (and as cited above), U.S. relative and absolute economic growth is superior to global growth. The U.S. economy, though sluggish in recovery relative to past expansions, is superior to most of the world’s economies (with the exception of some emerging markets) in terms of diversity of end markets, quality of global franchises, management expertise, operating execution and financial foundations.
2.U.S. banks are well-capitalised, liquid and deposit-funded. Notwithstanding JPMorgan’s (JPM) recent trading gaffe, our banking industry’s health (which is the foundation of credit and growth), is far better off than the rest of the world in terms of liquidity and capital. Our largest financial institutions raised capital in 2008-2009, a full three years ahead of the rest of the world. As an example, eurozone banks continue to delay the inevitability of their necessary capital raises.Importantly, our banking system is deposit funded, while Europe’s banking system is wholesale funded (and far more dependent on confidence).
3.U.S. corporations boast strong balance sheets and healthy margins/profits. Our corporations are better positioned than the rest of the world. Through aggressive cost cutting, productivity gains, external acquisitions, (internal) capital expenditures and the absence of a reliance on debt markets — most have opportunistically rolled over their higher-cost debt — U.S. corporations are rock solid operationally and financially. Even throughout the 2008-2009 recession, most solidified their global franchises that serve increasingly diverse end markets and geographies.
4.The U.S. consumer is more liquid and stable. An aggressive Federal Reserve (through its extended time frame of zero interest rate policy) has resulted in an American consumer that has re-liquefied more than individuals that live in most of the other areas in the world. (Debt service and household debt is down dramatically relative to income and back close to historic averages.)
5.The U.S. is politically stable. After watching regime after regime fall in Europe in the last year (and given the instability of other rulers throughout the Middle East), it should be clear that the U.S. is more secure politically and from a defence standpoint than most other regions of the world. Our democracy, despite all its inadequacies, has resulted in civil discourse, relatively balanced legislation, smooth regime changes and law that contributed to social stability and a sense of overall order.
6.The U.S. has a solid and transparent corporate reporting system. Our regulatory and reporting standards are among the strongest in the world. Compare, for example, the opaque reporting and absence of regulatory oversight in China vs. the U.S. (It is beyond compare.)
7.The U.S. is rich in resources.
8.The U.S. has a functioning and forward-looking central bank that is aggressive in policy (when necessary!) and capable of acting during crisis.
9.The U.S. dollar is (still) the world’s reserve currency and is far more solid than the euro.
10.The U.S. is a magnet for immigrants seeking a better life. This and other factors have contributed to a better demographic profile in our country that has led to consistent population growth and formation of households. (Demographic trends in the U.S. are particularly more favourable for growth than those population trends in the Far East.)