This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Kass: Look Within

Stocks in this article: OCNASPS

This column originally appeared on Real Money Pro at 8:04 a.m. EDT on June 27.

NEW YORK ( Real Money) -- Yesterday I got an email from a subscriber who asked me why I so frequently mention Ocwen Financial (OCN) and Altisource Portfolio Solutions (ASPS) in my posts.

Besides superior earnings prospects, an important reason is that both companies generate almost all of their sales in the U.S.

My friend/buddy/pal BTIG's Dan Greenhaus had a wonderful chart in his missive on Tuesday evening that highlighted the strength of company share prices that are domestic-based and are insulated from the sovereign debt crisis in Europe (compared to the S&P 500).

As I have previously written, sharp and growing differences in geographical growth are now emerging.

Europe's economies are moving in reverse. There is a sense of hopelessness.

By contrast, the U.S. economy is expanding at a modest but steady pace. In the U.S., there is hope.

Moreover, the flight to safety around the world is paying short- and long-lasting dividends for the U.S. in the form of much lower interest rates. The beneficiaries are U.S. consumers and corporations, both of which have locked in these low interest rates in the guise of mortgage loans and corporate borrowings.

The events over the past few years have highlighted the likelihood that the U.S. stock market (the best house in a bad neighborhood) will be favored over most other investment markets in the world.

Here, again, are my 10 reasons why I remain optimistic about the investment opportunities in the U.S.:

  1. Above all (and as cited above), our country'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-capitalized, liquid and deposit-funded. Domestic financial institutions are 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 - while the badly capital impaired EU banking industry continues to delay capital raises. Importantly, our banking system is deposit funded, while Europe's banking system is wholesale funded (and, thus, far more dependent on confidence).
  3. U.S. corporations boast strong balance sheets and healthy margins and profits. Our corporations are better positioned than those in 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 a U.S consumer who has re-liquefied more than individuals who live in most of the other areas in the world. (Debt service and household debt are 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 defense standpoint than most other regions of the world. Our democracy, despite all its inadequacies, has resulted in civil discourse, relatively balanced legislation, smooth political regime changes and the most stable rule of law (that has contributed to social stability, a relatively limited amount of outright corruption 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 responsibly during crisis.
  9. The U.S. dollar is (still) the world's reserve currency and is far more solid than the euro and many other currencies.
  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 favorable for growth than those population trends in the Far East.)

In summary, conditions that have evolved over the last decade have conspired to favor risk assets in the U.S. over many other areas of the world. In the period ahead, look inward (not outward), as I continue to expect a powerful reallocation trade out of non-U.S. equities and into U.S. equities.

Continue to buy American. I am.

At the time of publication, Kass and/or his funds were long OCN and ASPS, although holdings can change at any time.

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV

Markets

DOW 18,074.87 +44.66 0.25%
S&P 500 2,090.38 +8.50 0.41%
NASDAQ 4,799.6490 +26.1770 0.55%

Our Tweets

Brokerage Partners

Top Rated Stocks Top Rated Funds Top Rated ETFs