What IF The Economy Is Doing Better Than We Think?

One of the things you are going to here me discuss in more detail going forward is that I think that a big issue flying under the radar is that the economy, that real land somewhere out beyond the horizon where people actually make things, is doing better perhaps than the national press and most of the rest of us think.  This post from businessinsider.com paints a picture of employment and consumer spending that is more positive than what you'll see in the national press or popular imagination.

These charts in the link above paint a picture of an economy that is bubbling under the surface and could be ready for much stronger upside growth than most are currently looking for.  This is important because if the economy expands at a much faster rate than current economic estimates, then an argument can be made that forward estimates for companies next year are too low.  If that is the case than stocks are much cheaper than we think right now.  Now let's say right up front that I don't know that in regard to earnings that this is correct quite yet.  I do know that so far as we look at earnings season, stocks in aggregate are issuing better quarterly numbers than most were looking for over the past few months.

Now I know this is a variant view and I know the pushback is going to be this.  "Just look at the economy in ________."  {You fill in the blank, maybe your hometown, someplace nearby or someplace you've either read about or seen on TV}.  I know there are parts of the country where there is still a depression going on.  I know that the difference in employment is staggering between those without college degrees and those who do.  I also know that the damage done by the Great Recession {I'm going to use this as a title now as that seems to be the name settling in on what to call the last half decade or so.}is lasting and the scars are  likely to be with us for a generation.  But I also know that auto related jobs in Northern Ohio are booming.  I know that energy jobs in the plains states and in the midwest are booming.  I know that housing is beginning to make a recovery.  Finally I know that there are new technologies and industries that are just beginning to be felt in the economy at large.  All of these paint a picture of an economy that may have previously been on the mend in fits and starts but may be finally starting to find its legs.  If I'm right then this has very positive implications for investors in the next few years.

Finally if I'm right then this has large political implications.  It is probably happening too late to be much of a factor in this election cycle.  But whoever becomes President next month will be the beneficiary of this economic tailwind if it occurs.  It would be especially ironic if Gov. Romney wins and it turns out to be that the policies put in place by his predecessor allow him to take credit for economic growth whose birth he had little to do with and whose policies he did not agree with!

Stay tuned!