Don't assume that the country's economy mirrors the devastation in Las Vegas, a prominent Wall Street adviser told local investors this week.
"Las Vegas is not the United States," said Steve Leuthold, founder and chief investment officer of the $4.5 billion Leuthold Group of Minneapolis.
The city has a service-based economy that relies on consumer spending, he said -- and consumers are reluctant to spend money because of the recession.
The Strip is encountering increased competition from new casino companies around the world, and the real estate values in Southern Nevada have dropped, he said.
Leuthold spoke to clients of the Investment Counsel Company at the Red Rock Resort on Tuesday and explained why he remains bullish on the stock market for the next several months.
Businesses are investing more in plants and equipment than they were at the same stage in three of the last four recessions, he said.
Steel production in the United States is up 80 percent over eight months, and more autos are being made here, he said.
Leuthold rejected the argument by analysts who say investors should expect lower returns over the next few years -- the "new normal," as money management giant PIMCO calls it.
"The economic expansion is obviously under way," Leuthold said. "The fact is unemployment is coming down (nationally)."
Companies that provide businesses with temporary workers are reporting a boom.
"Corporations now hold more cash than at any time in their history," Leuthold said. Cash represents 19 percent of corporate assets, and he suggested that companies will put that money to work by expanding operations or buying other businesses.
Interest rates will increase, Leuthold said, but he criticized media pundits who don't understand that stocks often increase while interest rates are rising.
He also is optimistic because hourly pay and benefits costs for manufacturing employees in the United States have come down from being the fourth highest in the world in 2002. Two years ago, American manufacturing workers were ranked 16th-highest in compensation, Leuthold said.
Leuthold sees a trend of foreign companies building manufacturing and assembly plants in the United States.
Citing another reason for cheer, he said stocks in the Standard & Poor's 500 Index are getting 40 percent of their profits outside of the United States.
"This is a wonderful development as long as you don't see tariff wars develop," he said.
Research director Douglas Ramsey said stocks in advanced foreign countries are more undervalued and have even more room to climb than domestic stocks.
While optimistic about the next several months, Leuthold said he wants to see how the federal government deals with its growing debt before trying to forecast stock market prospects farther into the future.
"We want to see how this huge amount of debt that's been built up is going to be handled," he said. "It's almost certain that your taxes are going up."
Contact reporter John G. Edwards at email@example.com or 702-383-0420.