First Quarter Ends Strong As Investors Ignore Yield Curve Worries!


You usually have to wait for that which is worth waiting for. Craig Bruce

We currently live in a society where everything is questioned. Nothing, no one and nobody, is given the benefit of the doubt. Let’s start off with everyone’s favorite, the always truthful and honest politicians. All across the globe, if a high ranking politician says something about any subject, you can lay ten to one odds that the opposing party will immediately come out and say whatever they said is completely false. Here in the United States, heaven help the Republican who might see a Democratic point of view, or vice versa. Look at what is happening across the pond, in the UK, where Theresa May was willing to resign if she could get an end to the Brexit mess. Nope. Her own party won’t even cooperate when she says, yup, I want out, just let us be finished with the Eur ozone, never mind the opposite one. In sports, in every major league, the turnover among head coaches and general managers has never been higher because you have fans and owners who know that there must be a better way. In the corporate world, most executives are looking out for the always alert activists who take positions in companies as a way to influence strategic direction, and more importantly, find a way to outperform indexes. Many shareholders are impatient as well, as pity the board and management team of a company that doesn’t lay out specific business metrics for shareholders to look at when they evaluate corporate performance. All in all, across society, if you are in a leadership position, you better be ready to explain what you are doing and why you are doing, and do it in a way your constituents will believe you on the merit of the strategy. If not, well, let’s just say there are going to be more than a few questions asked.

The reason I bring this up is because equity investing often requires extreme patience, and not just of the one, two, or three year time frame. Who doesn’t want to buy an asset and get a return of 30% or more in a month? Once every blue moon it happens, and you smile, be happy with your fortune, but should probably realize this is an anomaly and happens quite infrequently. Many investors get a quick gain on a stock and say, I’m taking the gain because they are so hard to get, I don’t want to give it back. The reasoning is logical, to a degree, but much depends on the quality of the business and what growth could be ahead of it. Maybe the biggest mistake of investing is selling a stock where the penetration rates of the existing business are very low. If a company is gaining traction and has minuscule market share in a massive market, you want to own that business, especially if it is a high quality one. Instead of making 20% on your money, you might make many multiples of that and more. Once you sell a stock that goes on to appreciate many times from when you sold it, you realize that taking a profit on a quick gain can be a major error. Cold hard experience makes you see the error of your ways, especially if there are significant amounts of capital involved. You can rest assured you will be questioned about your actions either way, so these are not decisions that should be taken lightly, not that you would do that.

In the markets this week, the first quarter ended on a fabulous note with all major indexes having returns well in excess of 10% for the first three months. Equities even shrugged off the dastardly inverted yield curve that so many investors and members of the press continue to hyperventilate about. The fixed income market is where all the freaking out is taking place, especially in combination with the mess that is Brexit. The dollar strengthened against most major currencies, and oil held its own even after a buildup in inventories. Apple had their big announcement of new products in media and a credit card with Goldman Sachs, but you have to wonder if any of it will move the needle on a company with a market value of nearly a trillion big ones. On the earnings front, Restoration Hardware missed it’s number and guided down, while Ollie’s Bargain met it’s own estimate. Fat Brands (owner of Fatburger, which is not the greatest burger by the way- my opinion, go with In N Out) missed as well, while Yogaworks stretched out and missed too, must have been the downward facing dog. The CEO at Wells Fargo, Tim Sloan, made Elizabeth Warren’s day and resigned, which reinforces the long held belief of mine that the first name of that bank should be Smells, not Wells (sorry Mr. Buffet, the truth hurts).

Speaking of Senator Warren, she has ideas about changing the requirements of boards by requiring at least 40% of all the seats be represented by workers. Mrs. Warren also would tax the highest earning citizens by having a yearly tax of 2% on all net worth over $50 million. Fellow Democrats have their own ideas about how to try and reverse the disparity in wealth across our country. In many cases, it involves something related to the capital allocation policies of corporations, from a limit on dividends to getting rid of or eliminating stock buybacks. There is lots of academic research regarding dividends and buybacks and the effect on companies and shareholders. Dividends and buybacks hit an all time high in 2018, over 2.5 trillion dollars worth. 2.5 Trillion, with a T. That’s a big target to aim for, right? For existing shareholders, in many cases, the dividend and buyback might be the only reason to hold on to a stock that hasn’t appreciated at all. Now even that is being questioned and wondered about, which is quite consistent with where society is at. Patience certainly is required.


Thank you for reading the blog this week, and if you have any questions about investing, please email me at This email address is being protected from spambots. You need JavaScript enabled to view it..
Yale Bock, Y H & C Investments, its clients, and the family of Yale Bock have positions in the securities mentioned in the blog,  Investing in securities involves risk and the potential loss of ones principal.  Past performance is no guarantee of future results.  All investment decisions should be considered with respect to ones risk tolerance, return objectives, liquidity needs, tax considerations, and one's overall financial situation.  The fact that Yale Bock has earned the right to use the Chartered Financial Analyst in no way means or guarantee performance better than market indexes.