“Imagination is more important than knowledge. For knowledge is limited to all we now know and understand, while imagination embraces the entire world, and all there ever will be to know and understand.” - Albert Einstein
Steve Jobs, Bill Gates, Henry Ford, Sam Walton, Elan Musk. All are considered visionaries because the public looked at the products they offered and adopted them in mass. In some cases, the technology was new, different, and better than the existing mouse trap. In other situations, it was purely a function of price. In either scenario, these leaders had a different viewpoint about how the future would look and it turned out to be accurate. The takeaway is that in many parts of society, especially in competitive fields like business, sports, and politics, the ability to peer into the future and see what could be is a crucial part of leadership. Over the course of the last week, we have seen examples of this play out.
For instance, in the industrial arena, General Electric and Honeywell reported their earnings and projected lower growth projections for 2017. The leaders of these giants noted the drag on earnings from the energy complex, especially GE. Both are considered leaders in the heavy industrial sector so their perspective is viewed as credible by institutional investors. In the technology arena, Netflix, led by its seesayer Reed Hastings, had a strong outlook and blew out expectations for new subscribers. Microsoft, now in the capable hands of Satya Nadella, blew past estimates on the strength of its cloud performance and shift to emphasize data services to large enterprises. Note the theme of seeing consumption change among viewers for video and large companies wanting more flexibility of technology usage. Microsoft also is part of the next issue involving seeing ahead, that of deal making. If you recall, they are in the midst of closing the purchase of LinkedIn, also founded by a unique visionary, Reid Hoffman.
Over the last five days, three very big corporate transactions have all been rumored close to being finalized. The first would be ATT buying Time Warner in an $80 billion dollar deal. Apparently it may be done this weekend, though Apple may potentially be involved. Time Warner, the owner of treasured properties like HBO and CNN (and several others), is clearly a crown jewel company. It is why AT &T desires it as it can secure one of a kind content. Detractors believe the $200 billion in debt would be a big problem, as will regulatory approval. Putting on the investment banking and analyst hat, the combined company could handle the debt load. The big question is going to be the politicians, as always. They might make a call to Mr. Malone, as he tried this years ago and decided you have to split distribution and content.
The next potential blockbuster deal is in the chip area, with Qualcomm buying NXP Semiconductor in a $35 billion dollar deal. The key is Qualcomm sits on $30 billion in cash overseas, and figures it can use the cash because NXP is Dutch based. It’s always about the cash, baby, always the cash. Finally, in the fashion world, it is rumored Coach may merge with British icon, Burberry, to create a $20 billion fashion powerhouse. The currency weakness of the pound makes that one more attractive, and there would be plenty of potential to streamline the supply chains and duplication of departments. Both deals look imminent, especially the Qualcomm merger.
Here in Las Vegas, the chances for the Oakland Raiders to become the Las Vegas Raiders are considerably greater as the Nevada legislature passed the tax changes to make the financing possible. Now, how the revenues and profits are split and getting the required number of owners to approve the move remain the next steps. Both are very much possible, especially if the owners decide to peer into the future to examine the travel, lodging, and gaming possibilities.
Finally, in the dreadful debate between our two lovely presidential candidates, it was more of the same as neither person is impressive at all, especially with respect to thinking about the critical future issues our country faces. At this point, what matters is how the things turn out in both houses of Congress, especially the House of Representatives. I would imagine Hillary wins by 8, the Senate flips Dem, and the Republicans keep the House by 5 or so. Of course, maybe I am seeing things with rose colored glasses. Nobody ever accused me of, ahem, having vision. Thanks for reading the blog this week and if you have any questions or comments, please email me at
Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.