Market Rises As Powell Retreats, Macy’s and AA Warn, Oil Issues, and Here Come the Banks!


Attention to detail can't be (and never is) added later. It's an entire development philosophy, methodology, and culture.      
Marco Garment

There are organizations all over the globe that have a long track record of success. In fashion goods, Hermes has long been a considered a great entity, as has Tiffany’s. In the industrial sector, up until the last few years, GE was considered a well run company. Boeing in the aerospace space (sorry for the pun, I know, pretty bad) is a very high quality organization. T. Rowe Price and Fidelity are highly regarded in the money management profession. In sports, the New England Patriots are considered the best organization in football, as are the Golden State Warriors in basketball, though the latter has only recently been dominant. One of the common characteristics of excellence across enterprises is attention to detail. Obviously, in a consumer product company, think of something like an Apple, the importance of little things cannot be overstated. In the now nit-picky world of I want it when I want it, how I want it, when I want it, think Verruca Salt in Charlie and the Chocolate Factory, businesses have to be able to deliver to a very demanding customer. A company like Boeing, where people’s lives depend on the planes being impeccably designed and manufactured, the imperative goes without saying or even thinking about. Unfortunately, not all companies or industries are focused on attention to detail. Good enough works for a while, until it doesn’t. As an investor, we want to own those companies where the little things always matter, almost in a way that is hard to comprehend. The people who do understand the obsession are inside, on the front lines, where these little detail matter. Investors do well when the companies they own go many quarters, sometimes years, meeting and exceeding investor expectations. For a while, a management team can play the game of lowering estimates so they can beat them when results get reported. Not very creative, and not a recipe for investors to believe in the long term growth prospects of a company. So, when you are evaluating a company, you might strongly consider looking at their product lines to see whether the little things are addressed. The same thing is true with their customer service. If their employees aren’t helpful, or don’t bend over backward to service customers in a pleasant way, it says a great deal about that company, and conversely, if they do, it speaks volumes as well.

Along those lines, the last week was quite interesting on Wall Street as there really was not much news. Federal Reserve Chairman Jay Powell had an entertaining interview with David Rubenstien of the Carlysle Group where he softened his tone on interest rates and enthusiastically embraced data dependency. I know you were concerned about his preordained stance of two rate hikes in 2019, so we can all breathe a sigh of relief. If ever there were a group that needed a little help with customer service, the airline entities would be it. American Airlines warned that they won’t be able to raise price as much as they thought, and the entire sector took it on the chin. When an industry is in the situation where their mods operendi is how much they can raise prices, you know it is not a good sign. Macy’s reported solid numbers but warned on future results because of consumer weakness. In the oil sector, both Shell and Husky announced they are selling smaller refineries and gas stations because of changes in their corporate focus. Both of those situations are interesting because of the price differentials in crude sourcing in the central and western parts of Canada and into the Rocky Mountain and Midwest regions. Those areas have seen their pricing structures collapse because of the inability to transport the production in an efficient way. There are simply not enough pipelines and rails to get it out of the Baaken and Western Canada. As we said, details matter in everything, and the oil market is no different. In healthcare, the JP Morgan conference was home to the announcement of a merger between Bristol Myers and Celgene. Some on Wall Street now believe Bristol will become a takeover candidate as well, so keep your eyes peeled on the pharma area. I mistakenly thought the larger banks would report on Friday, sorry about that, they will tell all this week (Citi, JP Morgan, Wells, and Bank of America). Delta will give us numbers in the next five days, as will Netflix on Thursday so there is plenty to pay attention to. I am sure you will be watching, as will I.

In politics, an area where the only thing that currently matters is the camera, the government shutdown rolls on. Democrats, with House Financial Services Chairman Maxine Waters (consider that absurdity), appear to be leaning to nominating the current media darling Alexandria Castro Cortez to a spot on that committee. Never mind the many other House Democrats who are far more experienced and deserving of such a post, why bother? On the Republican side, the general feedback from those bastions of impartiality, MSNBC, on the shaky (laughable?) performance of Mr. Schemer and Mrs. Pelosi in their response to the Donald’s address on the border situation, leaves at least a little hope for optimism. Some observers think he clearly came off as sober and responsible,. Of course, in today’s political environment, where there is only contentiousness and partisan bickering as far as the eye can see, the idea one could have some optimism is probably unrealistic. Fortunately for those of us in the private sector, there are plenty of entities that give us reason to smile, especially those who are attentive to the little things.

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.