NAME: Randy Bateman
FIRM: Huntington Asset Advisors
TITLE: President and CIO
ASSETS UNDER MANAGEMENT: $14.6 Billion
YEARS IN THE BUSINESS: 40
LAST YEAR’S RETURNS VS S&P: Past 12 months Huntington Situs Fund +28.79% versus S&P 600 +24.31 and S&P 500 +23.49%
FIRST JOB IN BIZ: Analyst at First Citizens Bank in Raleigh, N.C.
• What is the most dominant theme you are seeing that will impact the market over the next year, and how do you use it?
The most dominate theme will be to assess the impact of regulation and taxation on the status of the economy. Even if the ‘fiscal cliff’ can be averted, we would still have to deal with a slower growing economy and weaker corporate profits. We tend to expect to see the two dominate pieces of legislation (Dodd-Frank and healthcare) to have extensive unintended consequences on the housing, healthcare, financial and energy sectors. As we saw in the passage of Sarbanes-Oxley, many companies could not bear the cost of regulation and thus capitulated in the form of seeking outside mergers, moving offshore, or going private. We think a similar theme will emerge as the costs of the two pieces of legislation become more clearly defined.
• What is the most critical economic indicator that you are looking at over the next month/quarter?
The most critical economic indicator is the relative value of the U.S. dollar in international currency comparisons and relative to a basket of goods and services (inflation). The baby boomers will be suffering from a double whammy of low rates on their savings and increased taxes on dividends/interest. It would be a triple dose of bad news if inflation sparks starts to fly. Housing prices have contained the ‘apparent’ inflation rate, but food, fuel, and materials’ prices have been on an up-slope for some period. The aggressive monetary policy conducted by the Fed will ultimately lead to a diminution of the currency value relative to goods and services.
• What is the most important government/public policy issue/event that will impact the stock market over the next year?
All of the regulatory initiatives will be borne as a cost to the American economy and business in general. It will impact willingness to hire full-time employees and lead to significant tax planning and avoidance. As we saw in the early 1970s, a massive increase in EPA-related regulations did, indeed, help clean up air and water pollution. The unintended consequences, however, were an exodus of manufacturing from the U. S. and into countries that were more focused on economic growth. This is the pure state of economic law as perceived by Adam Smith two centuries ago…..competitive advantage. He wrote that, “If a country can produce something better than we ourselves, better to buy it from them with goods in which we have a competitive advantage.” Unfortunately, we are running out of areas in which we have a competitive advantage. Currently, we have an opportunity to exploit natural gas and become an energy exporter. We can only hope that legislation will not inhibit that potential opportunity.
• What is the biggest issue outside the U.S. that could impact the U.S. stock market?
The largest impact to our economy outside the U.S. is that the euro has not united disparate economies. Perhaps there should be two euro currencies, or disparate treatment of the Mediterranean economies, from those of Northern Europe.
• What are you NOT worried about?
It is my job to worry.
• What is the most important article you read in the past week? Why?
I read several publications each week because, in this extremely volatile environment, we feel it is essential to have extensive knowledge of a myriad of topics. Whether it’s concerns regarding Puerto Rican Municipal Bonds, the events in euro Land, politics, the latest news out of Argentina, the ever present conflicts in the Middle East, the status of economic growth in China, sabre rattling between China and Japan, the fiscal cliff, debt, or currency changes we keep abreast of what is going on in the world. There are just so many catalysts that could set off a wave of buying or selling that it’s important to avoid being blindsided by news events from around the world.