[ Editors Note: this week My Gut Feeling will be unprotected for all to read. Next week this featured commentary will be password protected and accessible only by Wall Street All-Stars Platinum Subscribers. You can subscribe here. ]
Congratulations to Cody Willard’s New Mexico Lobos who beat my son Steven’s UNLV Runnin’ Rebels for the Mountain West Conference Men’s Basketball Championship. Both schools got nice rankings in the NCAA Men’s Tournament. It will be a fun road to Atlanta. I have my tickets in hand. I am expecting an Indiana / Louisville final after they knock off Ohio State and Georgetown in the Final Four. And the winner is …. Indiana. Email me your NCAA picks for the finals winner (by tomorrow) and be eligible for a Wall Street All-Stars T-shirt. Include the total points for the final game as a tie-breaker.
Also, congratulations to the Lake George Warriors Boy’s basketball team on being crowned the New York State Division C champions. Lake George, NY is where I am part-majority owner of From Bagels to Burgers. Yesterday our mascot participated in the St. Patrick’s Day Parade. We also finalized the new and improved menu (which is yet to be posted to the website).
Too bad, that with so much good news and fun things to talk about, we are waking up to another Eurodisaster. This time it comes from Cyprus. Let me put things in perspective first. Cyprus is an island nation in the Mediterranean Sea of about 1.1 million people, of which about ¾ are Greek (get the connection?). I am sure it is beautiful but beauty does not guarantee fiscal sobriety. The country represents less than ½% of the European economy. All of a sudden, this little dot on the world’s economic map is going to undo the global economy. Come on now. Apple (AAPL) and Blackstone (BX) can join up to do an LBO of Cyprus. The can zip and and zip out and it would be taken care of. It reminds me of the line in Stripes about Czechoslovakia Yet, the fact remains that the world’s markets are getting spooked by the bank tax that the Cypriots may levy.
All the above does not impact what is going on over at Capitol Hill. It is becoming increasingly clear that the White House is running scared after the House Republicans called the President’s bluff on the sequester. Since then we have learned that the impact of the sequester is inconsequential. All of this is leading up to a possible compromise whereby entitlements and Obamacare will feel the pinch. This is what the markets want.
In the meantime, the City of Detroit is now under control of the state of Michigan. Here are a few takeaways and lessons from that situation. First, think twice about electing a former NBA star to become the chief executive of your city or state. Second, the bond market is fragile enough with rising interest rates. The municipal bond market is not going to react well to the goings on in Detroit. Third, the anti-union sentiment will only grow as the truth of largess with municipal union benefits in the city of Detroit comes into focus and more of the auto business heads for non-union states. Fourth, New Jersey Governor Christie will be a big winner with the goings on in Michigan with all that he is doing to fix up the public pension mess in New Jersey. Lastly, Detroit is no Cyprus as it has only about ¾ million citizens. My suggestion is to let Les Gold take over the city, with backing of course, from Apple and Blackstone.
In the fullness of time the Cyprus episode will be another one-time financial ‘Noreaster like Dubai, the Fiscal Cliff and the London Underground Bombings. Weather the storm and put the cash you have hopefully recently accumulated once the skies have cleared. Furthermore, today could be a One Percent Rule Trade Day.
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Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL and BX stock and calls — although positions can change at any time.
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant and agricultural stocks. You can subscribe at www.restaurantstox.com
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