Focus on Good Stocks, Not Bad News

 | Jan 02, 2013 | 12:04 PM EST
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May 2013 be as good as 2012! That's what I find myself thinking as I feel surrounded by people who are already worried about the next big bad thing, this time the debt-ceiling fight.

I like to take a moment to smell the roses, because they smell pretty darned good, and it is easy to go right past them without an ounce of thought.

I am not advocating wearing rose-colored glasses. I am simply saying that there are some roses out there.

My job is to try to help you make money. I may not always be right, but I know there is an opportunistic, optimistic way to make money, embracing skepticism and reality, and there is an unrealistic way to not make money, which is to be continually cynical, offering a corrosive mindset dedicated to the proposition that there are no roses to begin with, just thorns, thorns that are endlessly in your way. Maybe it's because in my spare time I like to garden more than just about any other hobby, but the rose of an S&P 500 that's up 16%, as it was in 2012, a rose that keeps capital gains and dividend taxes lower than I would have ever expected, a rose that allows the middle class to stay ensconced in lower rates until this economy really recovers, must be noticed and, yes celebrated.

I start this year somewhat dazzled by events. A week ago, I was worried that tax rates could go up for everyone, that you would barely be compensated for owning higher-yielding stocks than for owning Treasuries, and that we would have a meat ax put to government spending. Going over the cliff worried me and gave me pause about 2013, as I trust it did for you.

Even yesterday, when I heard that Eric Cantor, the majority leader of the House, was going to try to scuttle a hard-fought deal that was overwhelmingly approved in the House, I took pause about what could happen even this morning.

But Cantor, a sure candidate for the Wall of Shame if that kept up, backed down, and we got a deal that everyone dislikes, which is the essence of what it means to rise above politics.

Now, what makes me reluctant to be as concerned as others are right now about the pending vitriolic battle over the debt ceiling?

First, I know there are plenty of other people who can worry about it, so I don't have to do it. I worry about what very few are worried about, not what every other talking head -- and I acknowledge I am one -- is fretting over, because problems that are thought about in advance have a way to be resolved.

Second, I was far more concerned about what individual tax rates would be than I am about the coming battle about spending. I want to see Social Security ages pushed back for people in their 30s, and I want to see people pay more for Medicare, and I want to see some creative ways to raise money, including a tax on goods that come from polluting countries that dump their goods here. But all of these are secondary to the big cliff we just avoided. And I suspect the president might invoke the 14th Amendment to ignore the debt-ceiling limit and argue that the federal government's bills must be paid. There is a strong constitutional argument in favor of this stance, even as I want to see spending reined in very badly.

Third, I keep thinking what has happened each time we have been blinded by Washington, and it is definitely a blinding influence. We miss what is happening around the globe, which is a first-class recovery and a rather remarkable one at that, something that my Action Alerts PLUS charitable trust, which beat the S&P this year, has been investing in.

We miss the wave of mergers and acquisitions that I now believe can happen with the cliff avoidance. Don't you wish you owned the rental car companies today, as pricing just got even better now that Avis Budget Group (CAR) bought lowly Zipcar (ZIP) for $500 million?

We miss the big-bank stock rally that dominated the fourth quarter and is continuing today, with worst-to-first names like Citigroup (C) and Bank of America (BAC) charging ever higher, even as they are so far behind the market that they could go up very big from here without stretched valuations.

We miss the continuing improvement in housing and the housing-related stocks, one that won't be derailed by a rancorous debt-ceiling debate and will stay stoked by low rates and affordability, augmented by a gigantic rebuild in the Northeast.

We miss the steep recovery rally in tech with everything from Apple (AAPL) to Facebook (FB) on the move, the former because tax-gain selling is over and the latter because numbers may be too low and at last the promise could be realized because of the newfound embrace of mobile opportunities.

We fail to capitalize on what might just be an increase in small businesses now that the cliff cloud has cleared. I keep thinking about the words of Marty Mucci, keeper of the tax bills for so many as CEO of Paychex (PAYX), that if we just got some certainty, then people will begin to start new businesses again at a pace that used to be rather natural. Well, we have that new level of certainty.

Finally, I keep thinking that there really was a small minority that held our nation hostage in the end, as only 167 members of the House did rebel against a compromise, while 257 were in favor of the compromise. Couldn't the same thing happen again with the debt-ceiling wrangling? Do you sell those dividend stocks again, dump those master limited partnership stocks, the Enterprise Products Partners (EPD) and the Kinder Morgan Energy Partners (KMP) that you never should have anyway? Is that the takeaway of the rose garden that sprang from the thorns of the debate?

Throughout my 33 years in the stock market, I have always taken heed of the skeptics but have blocked out the cynics. I have done so because the Dow Jones Industrial Average was 12,000 points lower, and empirically it was the right call. As you know, when I think we are going to take a gigantic hit, as I thought we would in 2008, I am willing to shout it from the rooftops, finding a creative way to get people out of a crowded theater that was certainly on fire, only to bring them back in when the fire was out.

But there's no fire in sight now. Just a smokescreen from Washington that will again keep people from realizing what gains this year can produce.

Sorry, can't play that game. Will let others play it. Too busy. Too busy trying to find the next super stocks that are out there, the next undervalued break-up plays, the next regional to national and international investments, the next opportunities that present themselves only to those who are not blinded by the smoke from a distant Washington fire.

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