Parsing the Speech

 | Jan 25, 2012 | 10:32 AM EST
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My wife hates the State of the Union address, but I have been a political junkie since I was a youngster and have not missed an address since Richard Nixon in 1972. I watch the speeches like others watch a football game -- with snacks, adult beverages, while tweeting or instant messaging my politically interested friends on both sides of the aisle, etc. This speech was no different, and I have reviewed and dissected the speech again this morning. Although it is the political junkie in me that watches the speech, my inner investor keeps his ear tuned for any useful information as well.

Today we will probably hear a lot of talk about investable themes and actionable opportunities arising from last night's speech. Please be aware that there were none. You almost never get instant opportunities from a presidential speech, even one that receives as much attention as the State of the Union. I heard a lot of ideas tossed out last night, but none of them will be acted upon today ... or, in all likelihood, even this year. If you make a trade today based on last night's speech -- or someone's opinion of last night's speech -- any profit will be the result of pure luck. What the speech does contain is some information that provides valuable background for investors as they look at the world and markets.

That said, here's what I took away as an investor last night.

This was the first speech where Obama addressed the need to focus on our abundant supplies of natural gas. There were a lot of caveats and tradeoffs offered as well -- especially when it comes to the use of chemicals in the fracking process -- but it was addressed. Opening up additional areas for drilling as promised is also a potential positive for the oil and gas industry.

Of course we also heard more talk of the need to develop alternative energy sources, which is an economic loser at this stage in the cycle. It is simply not economically viable without subsidies and tax breaks. The general theme of taking tax breaks from oil companies and giving them to wind and solar companies may be a vote-getter but is not sound economics at this point. Rather than browbeating the military or other branches of government to use costly early-stage alternative energy technology, I would rather see a Manhattan Project type of effort involving the top minds of our nation working to make solar and wind more practical and less expensive. It night not create as many government-subsidized jobs and gather votes today, but over the next five to 10 years it could pay huge dividends.

I am a big fan of the proposal to offer to lower tax rates for U.S. manufacturers and additional tax breaks for high-tech manufacturers. I am not so much a fan of the proposed minimum tax rate on multinational companies or the continued attempts to tax overseas profits and cash stockpiles. We will hear a lot of talk about these proposals, but I suspect that it is much ado about nothing for investors. Most high-tech manufacturing will stay right where it is with little impact on corporate revenues or profits -- for now.

There was one huge takeaway for me as an investor. President Obama talked about the need to bring down the cost of higher education and student loans -- a direct shot across the bow of the for-profit education industry. The industry dodged some bullets last year when lobbyists where able to soften the language and tone of the new legislation on federal funding, but the remarks last night let the industry know that it is still going to be a target of the administration.

I'm now feeling even better about my long-term short of Apollo Group (APOL). The for-profit business model does not work and has led to excesses in sales and lending practices. I think every stock in the group will eventually trade for single digits.

There are takeaways from the president's political platform as introduced in the speech last night that are worth considering as investors. But remember, there was nothing that needs immediate action. File these ideas away for now.

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