Eastbound and Down

First there was the Big Bang. Then we had the Big Dig. Now get ready for the Big Move.

Expect an exodus from California and the Rust Belt states of Wisconsin, Michigan, Ohio, the Lake Erie region and western Pennsylvania to ensue over the next decade. Of course, this phenomenon has already begun, and it will be a secular trend as failing local governments and the decline of manufacturing in these regions will force the 40-and-under population to seek opportunities elsewhere.

A shift east and southeast will take place. Our population will not decline in the aggregate. It will still grow from births and immigration. We will see the Big Move shift populations so that current large metropolitan areas (New York, Boston, metro D.C., Philadelphia, Atlanta, Miami, Houston, Dallas) get even bigger. I think Chicago is a wild card, but Obama won't let his hometown down. Utah, and particularly Salt Lake City, is a fast-growing region that could emerge on the scene as a major metropolitan area in the next two decades.

How can you play this emerging trend? I would start by pairing off the companies that will attract population growth vs. those that will not. I would rather own Southern Company (SO) than PG&E (PCG) or Detroit Edison (DTE). Kroger (KR) has a high concentration of stores in California, Detroit and Ohio. Kroger is already having enough trouble competing with Wal-Mart (WMT); having to deal with declining populations in its core markets could further hurt the supermarket chain. While Costco (COST) has a huge number of stores in California, its presence in the Rust Belt is quite small. Also, Costco is steadily expanding outside the U.S. We have already begun to see the demise of the West Coast retailers such as Mervyns and Gottschalks. This trend will continue as retailers concentrated in the East, South and Southeast will prevail.

---

At the time of publication, Rothbort was long SO, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.