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The Sandy Spring Way

November Observations

November 4th, 2013 | By Beau Mercer

FredericBurke“Someone told me long ago, there’s calm before a storm; I know, it’s been coming for some time; when it’s over, so they say, it’ll rain a sunny day, I want to know, have you ever seen the rain.”

—Creedence Clearwater Revival. 1971

November is typically an excellent month in which to invest and to enjoy the benefits of market success. Over the last 23 years (1990-2012), the S&P 500 has gained an average total return of plus 1.5% during November. The market is currently being propped up by QE3, the attempt by the Federal Reserve Board to stimulate growth by pumping $85 billion into the economy every month and that won’t change. We continue to struggle with an economy stalled at 2% and a disinflation overhang.  (Historically real GDP grew 3.1% per year since 1948 until 2008.) Equities have managed a delicate balancing act for three years but the beam is becoming slippery. The S&P 500 has generated a 16.1% return over the last three years with heavy support from monetary policy. The market is a leading indicator and it is projecting future GDP and earnings growth but that cannot happen with persistent high unemployment. The tea leaves are difficult to read with a green cloud of a $17 trillion debt and a nuanced legislative process. BUYER BEWARE!

November is a month of idealism. Idealism is not a given right; it must be acquired and treasured. Veterans Day, President Kennedy and Thanksgiving Day each symbolize recognition of the moral of our society. On November 11, the President will represent the nation by laying a wreath at the Tomb of the Unknown Soldier. The Tomb is a potent symbol of the sacrifice of the ‘unknown soldier” who died in combat for others. The Unknown Soldier stands for the ideals of courage, valor and sacrifice. On November 22 we commemorate the death of President John Kennedy. President Kennedy brought spirit and zest and learning and intellectual pursuit to the White House where it continues to be too rarely seen but often spoken about. On November 28, we will celebrate Thanksgiving and those who made us the beneficiaries of their sacrifice. Thanksgiving is the day in which we are given rainbows after a rainy day.

 “The time has come,” the Walrus said,” To talk of many things: Of shoes-and ships-and sealing wax-of cabbages-and kings-“.


The incessant talk of sometimes classless legislators suggests that they NEVER SAW THE RAIN nor did they care to. Seemingly our government is managed by individuals who see magic in words but don’t care for action. During the negotiations over the government shutdown, heady dialogue included references, such as, ‘terrorist’, conducting a ‘jihad’ and having ‘bombs strapped to (your) chest’. As expected President Obama signed a bill that ended a 16 day partial government shutdown and raised the debt ceiling. The impact of the sordid legislative process may be irreparable. The bill amounted to the clinched kicking of the can down the road. Our economy has an ingenuity that enables growth but politics and investing don’t mix. Political leadership needs to be progressive and sensitive to the development of human capital. Currently the economy can produce and employ more people but is debilitated by tax policy, regulation, and politics.  October demonstrates why our economy has been in the state of near paralysis for the past five years. “Where are you Joe DiMaggio”?

ADAM SMITH wrote in The Wealth of Nations that there was a need to remove the blundering hand of mercantilist governments; to cultivate attitudes of honesty, zeal, and thriftiness; to unleash the competitive profit motive, which would-as if lead by an Invisible Hand-achieve the maximum well being of all.

“The woods are lovely, dark and deep.
But I have promises to keep, and miles to go before I sleep,
And miles to go before I sleep.”

Robert Frost in “Stopping by the Woods on a Snowy Evening”.