Cole Smead, director of marketing at Smead Capital Management Inc., which manages $170 million and has stakes in Starbucks Corp. (SBUX), McDonald’s Corp. (MCD) and Bank of New York Mellon Corp., comments on the impact of the U.S. presidential election on capital markets. He spoke in a telephone interview from Seattle.
On investors before the U.S. presidential election:
“Here in the U.S., investors are at a standstill. They’re saying until they figure out what’s happening post-election, they’re not going to commit capital to anything. The last nine months have been fantastic for the people who want to be lonely and be out there taking on good stock risk.
Obviously the market at large thinks Obama’s bad for the capital market and Romney’s good for the capital market. While people are saying ‘I’m not going to do anything until XYZ president is going to get elected’, I don’t know anyone who said ‘I want to be a billionaire some day’ and did that based on who became president.”
On the impact of the fiscal cliff:
“The fiscal cliff has been a ‘seen’ risk that been priced into the market. Are we going to come to a good solution? Yes. Are we going to do that in a timely fashion? No. We always come to that at the very last second.”
“As of the most recent reported data, the household service debt ratio was down to 10.69 percent. The last two times we were at this level in 1981 and 1991, the U.S. was going through a major economic cleansing in the country. Both those times of getting down to those low household service debt ratio levels, it kicked off five-to-seven-year economic prosperity periods here.”
On the fund’s strategy of owning consumer stocks and avoiding commodities:
“If you own the Goldman Sachs commodity index, you’re doing flat to slightly up this year, versus the S&P 500 (SPX) making double digit returns. Until China announces it’s going to recapitalize its banks, we just don’t see anything good on the horizon for commodities.”
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