by Archie M. Richards, Jr., CFP^®
September 24, 2001

It's those R words. The military is preparing for a rumble, and the economy's in a recession. There's no harm in watching the rumble, but for the good of your investments, forget the recession.

Decisions about U.S. recessions are made by a private organization, the Business Cycle Dating Committee of the National Bureau of Economic Research. Make that the BCDC of the NBER, for short. The President of NBER is a Harvard professor, and the group hangs out in Cambridge, Massachusetts.

The press thinks a recession is an economic decline for two consecutive quarters. But the NBER thinks it's "a significant decline in economic activity." This leaves room for poetic license.

The NBER does not identify the beginning or end of a recession until at least six months after the fact. It uses no forecasts, but relies on economic statistics about the past, statistics the government goes on revising for months.

If you hold cash out of the market awaiting the recession's official end, you'll be way too late. The beginning of a recession isn't recognized until at least six months after the fact. The market usually starts rising before the beginning is identified. And the market always starts rising months before the end is identified.

Everything is set for a fantastic bull market. Miraculous technological advances, ever-improving economic policies, the imminent decline of terrorism, a generally accommodating monetary policy, and maybe even lower tax rates soon. It's all there. The bull market could start any minute now and probably won't end for ten or twenty years. The time to buy stocks is always when you get the money. The best time of all to buy stocks is right now, when nobody wants them.

The world's leading supplier of factory automation systems is Rockwell Automation (ROK). Over a century old, Rockwell has sold off all its businesses except industrial automation. Its systems can control a two-ton robot, transform a mound of metal into a car, or turn a biochemical soup into a gene.

Until recently, machines were accompanied by mechanical, hydraulic, and pneumatic components, like those under the hood of your car. Computer systems that could control machines were too bulky for factory floors.

But those slow mechanical systems are giving way to special computers imbued with complex software. Without disrupting operations, Rockwell's equipment can take control of a plant one sensor, motor, machine, and pump at a time.

The computers interact with sensors, alarms, actuators, and machines. They absorb enormous amounts of data, process complex relationships, send directives to factory units and machines, send operational information to plant-floor managers, and forward performance data to executives.

There are over 300,000 industrial companies just in the United States, all of them different. Automating them one by one requires deep, industry-specific expertise. No company has more of it than Rockwell.

Machines outnumber people. By the end of the decade, there should be at least a billion computer systems that control machines. The silicon office came first. Now comes the silicon factory.

Providing the bulk of your money is allocated among index funds of different sectors, buy Rockwell Automation. Now 12.20 (down from 49.45), the stock has a dividend yield of 4.8 percent and a PE of only 6.

When elderly patients are dying in pain, many doctors refuse to prescribe morphine because it's addictive.

Let's go over that again. Elderly and dying, but the doctor refuses morphine because it's addictive. Do you get the feeling that healthcare is askew?

Not only that, medical professionals persist in undertaking heroics to postpone death. Ninety-two years old, but the dying patient is on the operating table instead of painlessly holding hands with members of her family.

Doctors fear that if they don't try everything, they'll get sued by scumbag tort lawyers. Besides, Medicare forks over the money for heroics no matter what the cost. A quarter to a third of all Medicare payments are spent on the last thirty days of life.

A quarter to a third on the last thirty days of life.

Maybe we should rethink this dying business. Maybe healthcare is so distorted and costly because tort lawyers and government are so deeply involved.