Lingering Trade War Hits Equities As Europe Strengthens, OPEC Lifts Production-
Clarity is the most important thing. I can compare clarity to pruning in gardening. You know, you need to be clear. If you are not clear, nothing is going to happen. You have to be clear. Then you have to be confident about your vision. And after that, you just have to put a lot of work in. Diane Von Furstenberg
One of the day to day delights for many people is when you go to the store and buy the latest high tech gadget, a toy for your child, or a household appliance that might make life just a touch easier. However, it seems there is one obstacle nowadays that can makes this pleasure turn into an annoyance, at the least, and even worse, can cause injury. Yes, the now cumbersome and complex packaging on many items has made opening them an exercise in futility. You have a three inch item with a 5 foot box, or a one foot item with a fifteen pieces of wrapping. No sense of proportion whatsoever, none at all. The plastic or shrink wrap, along with the way a box is put together, in many cases, causes fifteen minutes of detailed reading and analysis, followed by the attempt to use your hands to open it, which leads to even more frustration. Out come the scissors or fork or sharp item, whatever the case may be, and then, low and behold, the plastic is seared, and you might even wind up with a jagged edge. On occasion, those sharp points cause cuts. Not good. Really, does it need to be this difficult? I must say, in my opinion, the best packaging comes from Apple. Simple, minimal instruction, easy to follow, and quite efficient from a time perspective. The takeaway for evaluating businesses is important in that clarity, efficiency, and purpose are quite valuable and of the utmost priority.
When you identify and research any kind of profit seeking enterprise, there are usually moving parts to consider. What is the growth rate range and what might it depend on? How might margins improve and over what time frame? How will capital be deployed and what kinds of returns should be expected? So these variables have different potential outcomes, and over a long period of time, slight changes can lead to dramatically different results, especially when you have larger entities to consider. Given the uncertainty and difficulty, and when you add in that capital is usually scarce, in my mind a high priority should be given to situations where a business is simple, easy to understand, and straightforward. Peter Lynch, the famous white haired Fidelity fund manager, used to say you should be able to describe the business in ten words or less. As more of my hair starts to turn Grey, probably from opening too many packages with poorly considered wrapping, clarity and simplicity becomes increasingly attractive.
Over the last week, the markets took a tumble on more antagonistic trade policies from the largest global economic powers, led by you know who. My ex-UCI professor and Trump Economic Advisor, Peter Navarro, offered his opinions on the tariff issue (here you go if you are interested). Disney raised the bid for the Fox assets it is in competition for with Comcast. Starbucks pre-announced a flat quarter in terms of transaction volume while investors tired of a stagnant stock price (though the dividend was increased 20% and the buyback went up as well). The Federal Reserve announced the first part of CCAR (known as the Comprehensive Analysis and Review) for the largest banks and next week will come the goodies, meaning how much shareholders can anticipate from larger dividends and buybacks. In Europe, the June PMI came in at a four month high, helping some of the banks across the pond. The Supreme Court decided states can mandate sales tax for businesses which don’t have physical presence, so online retailers like Amazon, Wayfair, etc, will have to compete on a more level playing field with the brick and mortar locations. Yup, OPEC did the deed and raised production restrictions just a tad, but oil prices went up. In case you missed it, legendary PIMCO bond fund guru Bill Gross apparently was more than a little upset with his ex wife, and decided to spray the house he had to give up with a decidedly unpleasant aroma (flatulence flavored). Lovely, Bill, just lovely.
Politically, the war of immigration rages on as long time conservative George Will penned an op-ed declaring patriots should vote for Democrats as a protest for where President Trump has taken the Republican party. Democrats are interested in breaking up California into three pieces. Both of these situations make it clear that the major political parties have unity issues. It may be that the party which can solve their fissures has a better chance in the midterms, but many believe it will depend on the big T. On a personal note, like the rest of the country, I was saddened to learn the noted conservative columnist Dr. Charles Krauthammer died this week. He was a great writer and thinker and his clarity of thought and wisdom was always treasure to learn from.
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.