Ah yes, at the end of today’s Leap Year Day, we have finished the month of February. I checked – it is confirmed. We have not fallen into the ocean. Two months down, ten to go.

Oddly enough, as the bears grunt and sniff over supposedly dead parts of the US and global economies, the data in recent weeks – while hidden by terrible headlines – has not been all that bad.

First, The Ugly

No surprise here of course, anything with the word energy in it’s uses, business units or product lines remains radioactive. This even as I suspect some of the big boys are positioning large blocks of shares for purchase of key entities that likely survive the carnage.

The thesis now is that OPEC will starve us out, crush our industry and oil will spurt back up to $100 in no time flat. My thought on this? Fantasy land.

Some of the largest producers have already fed into the very hand we have been covering for many months now. Technology and fracking are far-outpacing the processes OPEC is counting upon.

The latest data show very clearly that a massive (and growing) number of wells are being completed and capped as capital budgets are conserved. But, in the fine print it is clear: “these wells will be capped, productive and profitable for us in the low to mid $40’s.” In essence, it is now clear that returns upwards of 25-30% can be seen for the frackers at about $44 per barrel.

The remake of the industry will have completely different pricing frameworks in the future. Not just from fracking mind you – the death knell for what we used to refer to as the crude industry is being sounded from many channels: wind, hydrogen, solar, electric, new nuclear…and the list goes on.

There is mounting evidence that the tectonic shift we have written about for two years is indeed coming to fruition.

As the title notes – be careful what you wish for….

The Better Data?

Our friend Dr. Ed reminds us of a few things that may have been overlooked.

We should all know by now that the year started a quick mental spiral that the world was ending – again.

As Dr. Ed points out – maybe we consider a do-over?

“This year started out badly for stocks around the world on mounting concerns that the global economy was falling into a recession and dragging the US down too. Last week, we learned that US durable goods orders increased ­­­4.9% during January, the strongest since March of last year. In addition, both real personal income and consumption rose 0.5% during the month to fresh record highs, as Debbie discusses below.

In other words, the new year began with solid economic growth in the US. The Atlanta Fed’s GDPNow now shows a gain of 2.1% for the current quarter, up from the previous quarter’s upwardly revised gain of 1.0%. According to the GDPNow website: ‘The forecast for first-quarter real consumer spending growth increased from 3.1 percent to 3.5 percent following this morning’s personal income and outlays release from the U.S Bureau of Economic Analysis (BEA). This was more than offset by a downward revision of the contribution of inventory investment to first-quarter real GDP growth from 0.2 percentage points to -0.4 percentage points after this morning’s GDP release from the BEA.’

That’s a healthy mix of strong final demand, with some of it coming out of inventories, which augurs well for production, which (by the way) rose 0.9% m/m during January. The Citigroup Economic Surprise Index has made a surprising recovery, rising from a recent low of -55.7 in early February to -21.4 on Friday. There’s certainly no hint of a recession (or an “Ice Age”) in these latest economic indicators for the US.

That last line is of course the most compelling. And likely the most disappointing for those bears out in the hunt still.

Black Swans are flapping their wings madly – but one might be better off listening to some of the comments from Warren’s latest Annual Shareholder update.

You can read the whole letter here – but for now, there are a few compelling highlights:

Berkshire Hathaway’s 2015 annual report was a pointed dismissal by Warren Buffett of the growing refrain that the U.S. economy would fail to provide a better lifestyle for future generations than it has in the past.

As the 2016 presidential campaign kicks into high gear, high levels of debt, stagnant earnings and income inequality are frequently mentioned by candidates.

“It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do,”

“That view is dead wrong: The babies being born in America today are the luckiest crop in history”

Buffett highlighted data that showed U.S. per capita growth is six times higher currently than it was in 1930, the year of his birth. Those gains are the byproduct of productivity and efficient work he goes on to state.

“U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more,” Buffett added. “This all-powerful trend is certain to continue: America’s economic magic remains alive and well.”

The U.S.’s surging entitlement spending and its seemingly intractable debt have stoked widespread concerns about insolvency, and the inability of the federal government to meet its future obligations. Buffett, however, was hearing none of it.

“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start,” the billionaire wrote.

So In Summary

Who do you think it is best to side with as we glance ahead into the mystic future?

The nervous nellies, the doomsday gang, the Black Swan hunters and the bear camp…along with all those who were selling feverishly just days ago before a few days of bounce?

Or….people who have built wealth for decades – through all the good and bad?

People who seem to be out of touch during “tough times” or who don’t seem to get “how bad it really is…”, people who understand that to get to the top of the mountain on this chart below – where long-term rewards are solidified – needed to go through all those terrible periods as well to arrive.

More later –

Make sure to view charts below and make sure you watch the video on Fear above…

While very frustrating now, it should all come in handy when we look back on this “ugly start to 2016” a few years from now together….laughing at how afraid we were of the dark future.

The top chart shows you (with red dots) that we have made it through a myriad of really bad things over the last 200++ years of market action. The one lone blue dot? Well, it is where we are now.

The Mind Game?

No one knows the future. No one knew all those other times we were equally petrified that the world was going on along a pathway much different from what we feared at the time.

If you had known, you would have consistently bet the ranch during all those other times over the last couple hundred years when the world was ending (see those red dots again).

And you would have been treated well for it – as an investor – not a trader.

The second charts shows a more close up view – just the last 60 years or so. from the Eisenhower Recession in ’58 up through the lost decade of the 70’s, the test of the secular bull breakout back in late ’83, the “collapse” in October ’87, the banking collapse and real estate losses of the early 90’s recession, the Clinton years “double dip fears”, the Russian currency crisis in ’98, the bear market lows of tech ini 2003 and the lows of the financial crisis of 2009.

Yet, here we are again – afraid, drinking up all the doomsayers have to offer and ignoring anything to the contrary.

Ah well. Oh, the green dots on the second chart you might be asking?

Those were the times that the masses felt good about stocks and the future. In fact, they felt great.

And that one lone little purple dot all by itself way up in the right hand corner of the chart?

Oh yes…well that is where we are right now…once again drinking in the anticipation of doom.

Sorry – I agree with Warren – Our very best days are ahead.