2nd Qtr GDP Hits 4.2% As NAFTA Waits on Our Friends Up North, Plus Argentina Issues!
It's the little details that are vital. Little things make big things happen. John Wooden
I consider myself an adventuresome but pretty basic person. I like reading about everything, learning about all kinds of subjects, traveling and seeing different things. Small pleasures like a good piece of pizza, visiting with family or good friends and enjoying their success, reading a great book, hearing an old song, or a great sunset can be moments of satisfaction. Each person has their own little joys which make them feel better. Unfortunately, our society moves so quickly because of the ability to access information at any time, sometimes little things don’t get the recognition for the value they provide. That certainly holds true with investing, specifically, in smaller companies.
It is hard to remember, but twenty years ago, Amazon started out as a tiny entity, and it now has over $200 billion in revenue. Warren Buffett began his company with a hundred dollars of his own money (100k of his investors) and it now is worth over half a trillion bucks. There are thousands of stories of minute companies becoming larger companies over time and benefiting their investors. If you are investing, a nice thing about smaller companies is there are so many more possibilities to choose from. As an example, let’s say you are interested in an emerging industry, like you know, something hot. Well, there is nothing more exciting these days than marijuana, ganja, hemp, like smoking a dub dude. Personally, not for me, but whatever gets you going. There are probably a hundred pot companies or more that you could invest in right now, and many have made investors quite a bit of dough over the last year. Whether the businesses are sustainable and will survive is crucial, but that is where research and analysis comes in. As your capital (and mine) is scarce and precious, I think it is important to find areas which are personally interesting as you are much more apt to stay abreast of a company when it interests you. The same thing holds true about management as well. Yes, you want highly qualified people, but most management teams have all kinds of impressive academic credentials. Remember, the guy who bankrupted Enron was number one at Harvard Business School, Jeff Skilling. When I listen to conference calls, or read transcripts, I look for people who do what they say they are going to do. It may not be successful, but by executing their plans it increases confidence and establishes credibility for investors like myself. If their plans are fundamentally sound and smart, in time, there is a good chance the business will head the direction management says it will.
Smaller entities take lots of patience, think five years or more, and you should probably have those stocks in your taxable account. In some cases, you will be wrong, and you can use the loss for tax purposes. Nobody bats 100 percent with investing. In sum, John Wooden was right about a lot of things, and that includes paying attention to the small stuff.
In the markets this week, the U.S. economy continued to hum along as 2nd quarter GDP growth came in at 4.2% because of consumer strength. Trade negotiations with Mexico came to a successful conclusion, and now we wait to see whether or not Mr. Trump and Mr. Trudeau can figure something out, eh? On the earnings front, Best Buy, Dick’s, and Salesforce all suffered a bit with tepid guidance, while Ulta Beauty soared on a new agreement to provide Kylie Jenner cosmetics. Kylie, she of the plump lips, has become an overnight financial guru with a huge social media presence and a business in lips kits that very few would have predicted would go bonkers. Of course, she started small. HP and HR Block also reported and very few paid attention because their market share has been taken by competitors.
Internationally, the big story remains trade issues between the US and the rest of the world, especially China. However, the real action is in emerging markets, and this week it was in Argentina, where Mr. Macri needed to ask the IMF for a 50 billion dollar loan, which will be contingent on major cuts in government spending. The Argentinian peso has been cut in half over the last year (from 18 to the dollar to now nearly 40), and interest rates in Buenos Aires now reside at nearly, hold on now, 60%, up almost 15% this week. The country is home to the best beef in the world, and actually may have a huge shale complex as well. Might be time to head south for a good steak, but keep it small, as you know good things come in tiny sizes.
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