Do You See the Parallels?

Written by GSCR Staff   
Sunday, 23 August 2015 04:59

As we near the primary and election cycle, the leading Democratic candidate for President, Clinton the anointed one, is facing a scandal that could derail the campaign and candidacy.  Meanwhile, the nation is divided on an important issue regarding Mexico that could cause Americans to lose jobs, cost us money, etc.  No one is particularly enthralled with the traditional Republican challengers for President.  This has prompted a billionaire maverick that has a penchant and proclivity to speak to the “everyman” and is fueling the fire against Mexico, to throw his hat in the ring and is taking over the media and polls.  Meanwhile in Asia, a giant economy endured a self-imposed economic mess as asset prices plunged, affecting markets around the world.

And of course, we have had people “in the media” make a mockery of the bizarre political scene and the TV anchors.

It may sound like August 2015 but it is really 1991/1992. Let me count the ways.

The Clintons being involved in a scandal is like a Hip Hop Awards after party without a gunfight, so that is no surprise.  Our protectionist attitude is interesting, and totally logical and understandable.  Hell, even Baltimore Ravens Head Coach John Harbaugh advocated building a “border”. Where would Israel be without one?  The whole thing is crazy and the groundswell of anti-government, anti-cop, and anti-minority that isn’t the PC flavor du jour is likely to spawn a remake or significant replaying of  Twisted Sister’s “We’re Not Gonna Take It.” (https://www.youtube.com/watch?v=4xmckWVPRaI)  In some respects I see correlations to the punk rock movement in the U.K. during the 1970’s but that is another story…

While the “Donald” is not yet a third party candidate he is taking the country by storm and fomenting the righteous indignation so many Americans feel about the government and immigration, much like Perot did with NAFTA in 1992.  Meanwhile, we all loved Stuttering John’s interviews and Howard Stern’s unabashed obsession with Bill Clinton back then but today we have others carrying the mantle of who can make the most fun out of the vapid TV airheads.

The unpopular sitting President Bush wasn’t setting the world on fire with confidence and neither is his son, present-day Jeb Bush.

Admittedly, the mess in Japan was brewing for a few years and did not “f” up the global markets like China’s recent games and subsequent global growth concerns.  Still, the scenario is definitely worth mentioning.

After yesterday’s market debacle, where the Russell 2000 Index ended the day inches from the correction territory, it is hard to smile. But, instead of wringing our hands we should embrace it and deal with it for 10 weeks or so before we have some real daylight and more reasonable valuations, especially since 2016 will be markedly better than 2015. After all, energy alone will come back and that will help the S&P 500 Index, among other things.  Plus, EPS growth rates for next year, even if trimmed as they usually are in Q4 are likely to be above average. Meanwhile, much like there are other parallels to 1991/1992, history tells us to look forward to 2016---regardless of whatever numbnuts (Clinton included) runs this great nation.  

Check it out.  Since 1979, the election years have endured no down years (although recent returns have been weak) and the average annual return is substantially higher than in other years. And, the returns during the first year in office for Presidents haven’t been too shabby when you eliminate the unusual circumstances in 2000 and 2008. 

If the parallels between 1991/1992 and 2015 are truly similar, and that appears to frighteningly be the case, then perhaps 2016 is a kick-ass year after all. It is hard to do now, but sometimes it isn’t a bad idea to look ahead, especially when the future is bright.  It helps you make the right contrarian decisions at the darkest hours, and darkness always leads to daylight.

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