News & Insights
Endure the Starlings, Pray for Eagles
While we are not a political bunch here at Altavista, this quarter we reluctantly ruminate on the sad state of the fiscal debate in Washington. The markets are uncomfortably reliant on an acceptable solution to our government’s yawning mismatch between tax receipts and expenditures.
The eagle is an ancient symbol of strength and character. According to St. Augustine, the eagle is alone among God's creatures in being able to stare at the sun and grow strong, not blind. "The sun invigorates the eyes of eagles, but injures our own” he wrote. When facing an approaching storm all other birds head for shelter, only the eagle endeavors to fly above the clouds. American leadership at critical moments in history lived up to the example set by the eagle. Washington rallied the Continental Army at Valley Forge. Lincoln resolved that the Union would endure. FDR stared down the "rising sun" amid the rubble of Pearl Harbor, mobilizing a depression-wracked nation to send the imperialist Japanese and the German fascists to the bottom of the Coral Sea and cowering into the fetid bunkers underneath Berlin. More recently, Ronald Reagan glared at the decrepit leadership of the Soviet Union; they blinked and they now rest in the “dustbin of history.”
To understand today's political leadership, consider the starling. The starling is an invasive species, brought to America in an attempt by a small literary society in New York to bring all the birds mentioned in Shakespeare’s plays to America. This was a harmless trifle until the birds quickly multiplied and began to create havoc in Central Park. They spread across the country ruining crops and damaging other species. They are squat, bold, ugly and loud. They steal the food gathered by others and dominate by traveling in squawky, anarchic mobs known as murmurations.
As our nation faces a fiscal disaster, we are reminded of the starling when the President and our Congressional leadership use up the national debate space squawking over such weighty issues as tax deductions for business jets and cost of living adjustments on Social Security, while playing golf together at the Congressional Country Club. This week a debate was held by the President on Twitter, and no one picked up on the irony or criticized the trivialization of our national discourse.
We could take a lesson from the normally progressive and sane citizens of the State of Washington. Beset by murmurations of starlings devastating their crops and native species, they have systematically executed millions of starlings by poisoning, trapping and shooting the little beasts. Even mild mannered naturalists boast of the thousands of parasitic, loud destructive starlings they have sent to the ornithological beyond in a common pursuit to rid their native land of this pest. We are not suggesting that politicians should be trapped and shot, but voting them out of office until they deal with big problems with appropriately big solutions worthy of an America that celebrates eagles should be the order of the day.
On the investment front we still believe we are in a timid starling's recovery. The slowdown of this spring will relent, with a lower oil price, a recovering Japan and expanding emerging markets providing a boost to the U.S. GDP. Profits will continue to improve but at a slowing pace. At over 1300, the S&P 500 is a tad pricey when you adjust for today's unsustainably high profit margins, but not so expensive when compared to the investment opportunities available in the bond market. We continue to advise a strong emphasis in stocks that have the ability to pay and grow dividends. Among commodities, we believe that oil and other energy investments hold the greatest promise over the next year or so.
The Altavista Investment Team - Summer 2011