The television news channels are all atwitter over the government shutdown and the potential for a default in the current payments on U.S. debt after October 17th.
Talking heads, politicians and anyone else with an opinion on the question of the day are watching the stare down between Speaker Boehner and President Obama and what this supposedly all means.
Financial commentators are now adding a decline in stock prices as part of the fallout from the government shutdown and the potential default on debt payments. Our friends at Société Générale (or SocGen, a French financial services firm), are predicting a 15% decline in the S&P 500 in the near future.
Others are pontificating on the potential for a slowdown in consumer spending as a result of the current government impasse. I suppose there will also be an increase in personal depression as a result of the government impasse. This all brings to mind a nursery rhyme about Henny Penny and the sky falling.
If you can pull yourself away from this drama for a moment, there are more important trends in the economy that will likely have more impact on your investments than the current gridlock. So set aside the current media storm and consider the following:
1) Cree and other producers of light emitting diodes (LEDs) are finally becoming commercially viable, providing low energy, mercury-free, long-lasting light sources. This portends a huge savings in energy costs and much safer lighting source. In short, LEDs put incandescent and CFL bulbs to shame.
2) Energy. As I have mentioned in previous columns, we are rapidly developing vast new sources of natural gas and oil on private lands in the United States. The United States has one of the lowest cost energy structures of all the developed countries on the world.
Furthermore, natural gas production is also leading to a vital new source of plastics, enabling us to produce many plastics cheaper than those made in the rest of the world. So we look at drillers, processors, pipeline companies and end users, like gas-fired utilities, as beneficiaries of the development of cheap energy right here at home.
Maybe even the federal government will get on the bandwagon and start participating in the development by leasing federal lands and allowing the Keystone XL pipeline to be completed.
3) Three dimensional manufacturing is coming of age. In the past few years, the 3-D printing industry has rapidly matured into a new capability for American manufacturing. You can even buy a 3-D printer for your home computer for about $1,000 and tinker around.
More importantly, large industrial firms are using 3-D printing to make rocket motor nozzles more rapidly and a lot more cheaply than conventional machining. There are lots of articles on the impact of this development. For now let me just say that it is apparently all good and some great long-term investment opportunities are emerging.
4) Biotech is finally coming of age. While the conventional pharmaceutical companies are struggling to increase sales and earnings, the biotechs are growing sales and earnings rapidly and their stock prices are skyrocketing.
More than just a great investment, these firms will find ways to lower health care costs more effectively than any government program. Certainly, some biotech firms will fail, but others will soar and become household names in the years ahead.
So there you have it. You can pay attention to the drama out of Washington, or you can dig into the wonderful investment opportunities that private industry is creating right now. What are you focused on?
Nothing contained in this article should be interpreted as a promise or guarantee of earnings or investment results nor a recommendation for the purchase or sale of any security or sector.
