Being on the front lines every day talking with investors just like you, it never ceases to amaze me how much you appreciate Dick Young and how he has made you a more comfortable and successful investor. He made you self-reliant. He helped you beat inertia. How? You basically had no choice. You needed to know what he was thinking every month. He got your attention, which reminds me of an interchange we had when I first started working with him back in 1998. My job was to talk with prospective clients, learn about their situations and see if there was a way we could help. Prospects would … [Read more...]
Archives for October 2017
What Long-term Capital Management and the Fed Have in Common
Investing is as much art as it is science. That probably isn’t music to the pure quantitative investor’s ear, but was it not a quantitative approach at Long-Term Capital Management that almost took down Wall Street in the late 1990s, and was it not also a quantitative formula that allowed brokerage firms to take on too much risk during the housing bubble? Quantitative investment analysis can be a useful tool for investors, but it should not be the only tool used to craft portfolios. One of the mistakes often repeated by quantitative investors is not adequately accounting for their own … [Read more...]
The Dow and the Leaders
On this chart you can see what has come to be known as the “Trump Effect.” In dark grey and light blue you can see the performance of the Dow Jones Industrial Average and the Conference Board’s Leading Economic Index after November 2016 when Trump was elected. In red and dark blue you can see the performance of each of those indicators in the ten months leading up to the election. All the series have been rebased to 100 for comparison. Originally posted on Youngsworldmoneyforecast.com … [Read more...]
Buffett’s Flying J Invests in the Energy Revolution
“A sucker is born every minute, and Warren Buffett just proved it. He agreed to spend an undisclosed sum of his shareholders’ money to buy a controlling stake in Pilot Flying J, the truck-stop chain that sells food, coffee and diesel fuel to truckers”, writes Holman Jenkins, Jr. in his WSJ column. “After all, aren’t truckers about to be replaced by robots, and diesel by battery power?” Not so fast he continues, “The sucker in this scenario, we add, is anyone who believed such futuristic forecasts in the first place” Changing gears, I had a discussion about natural gas this week with a … [Read more...]
What’s Gone Wrong with the Tesla Model 3?
Deliveries of Tesla's newest sedan, the Model 3, have been slow to pick up. The reason why wasn't known at first, but it turns out many of the pieces were being made by hand. Tim Higgins reports: FREMONT, Calif.— Tesla Inc. TSLA +0.37% blamed “production bottlenecks” for having made only a fraction of the promised 1,500 Model 3s, the $35,000 sedan designed to propel the luxury electric-car maker into the mainstream. Unknown to analysts, investors and the hundreds of thousands of customers who signed up to buy it, as recently as early September major portions of the Model 3 were still being … [Read more...]
The Calmest Market on Record
MarketWatch reports here that the S&P 500 is on the verge of its longest streak of going without even a 3% correction. Why are markets so quiet? An excess of global liquidity in the face of an improving global economy is probably the primary cause, but business sentiment and investor sentiment have also clearly gotten a boost from a more business friendly administration. Enjoy the quiet while it lasts. Stability has a tendency of breeding instability in financial markets. Mark Decambre reports: Just eight more trading sessions sans a 3% daily drop—a fairly normal occurrence even in a … [Read more...]
Is Kroger About to Dump its High-Margin C-Stores?
Kroger appears to be poised to sell its convenience store chains in order to put more focus on its grocery business. The C-stores are a high margin part of Kroger's sales, but Kroger indicates it wants to put more emphasis on online sales. Heather Haddon reports: Selling the convenience stores could deprive Kroger of one means for reaching its goal to capture more of the roughly $1.5 trillion spent in the U.S. each year on food and consumables. The stores generated $4 billion in revenue last year and have delivered more than five years of identical store sales growth. Convenience stores … [Read more...]
The Profound Implications of a Shifting Advertising Landscape
This has profound implications for all sorts of businesses. The old way of building brand value is no longer as effective. Moving to shorter formats needs a rethink on how to communicate a brand’s message quickly, he added. “You may not be able to tell much of a story [in six seconds] but you can come up with a sticky image. It’s like a video billboard or a print magazine ad. When you do a good one, it’s like a magic wand touching you.” Advertisers’ new-found willingness to experiment with different formats reflects a recognition that many things are competing for a TV viewer’s attention, … [Read more...]
How it Feels to be Rich like Bezos
What makes Jeff Bezos tick? You. From the very beginning Jeff Bezos has always been about the customer. And that ethos flows through the company like a package from your computer to your doorstep. To Bezos, if the customer isn’t satisfied, what’s the point of being in business? And the Smith house is satisfied. At times it feels like an Amazon fulfillment center with all the boxes. How does Amazon do it? Driving past the gargantuan Amazon building in Fall River, MA, going 70 mph, it literally takes several seconds. It’s sheer size is breathtaking. It looks like it belongs in another … [Read more...]
This is a Fixed Income Strategy that Should Be Avoided
The reach for yield in fixed-income markets continues full-steam ahead. The latest junk issuer to tap into investors desire for income at any and all costs comes courtesy of Tajikistan. Tajikistan just closed on its first ever international bond issue last month. Never heard of Tajikistan? Tajikistan is a tiny landlocked former Soviet republic with a population of about 9 million people. The Tajikistan bonds are rated B- by S&P and come with a coupon of 7.125%. Junk bond issuance in the developing world is already up 60% over last year’s total and we still have three months to go. This … [Read more...]