If you are a man of dependability, you are worth more than if you were clever.
—Roy L. Smith
In most cultures, religions, and countries, families grow up with a basic principle of reliance on ones elders. Each generation depends on the previous one to provide, instruct, guide, and help make the best of ones circumstances. A well functioning society is composed of people, structures, and institutions which are dependable- think police, military, schools, hospitals, doctors, lawyers, and even, ahem, the government. When these entities wobble because of inconsistent or even, heaven help us, non existent attendance or competence, people lose faith. It is why there is such a lack of trust in these entities today.
From an investment point of view, a similar line of thinking is applicable with respect to stock market performance. When a company reports earnings every three months, if it meets or exceeds its ‘guidance’ quarter after quarter, year after year, as an investor, you gain confidence in the management team and business. Conversely, if every quarter smells like rotten eggs, meaning you wake up to a 25% write down or reduction in future profits, you tend to, shall we say, lose some enthusiasm. From a portfolio structure point of view, it is why utilities are considered widows and orphan stocks, you know people will pay their electric bills, right? Even further, it is probably useful to think in terms of decades, like Buffet's quote, ‘If you don't’ want to own it for ten years you probably shouldn’t own it for ten minutes.’ Anyway, I bring this up because of a very useful video on CNBC was of an interview with Bill Belicheck, the Hall of Fame football coach of the New England Patriots. Naturally, he spoke of his lessons and above all, he mentioned, you guessed it, reliability. Imagine that.
In the markets this week, the overwhelming theme was one of volatility as earnings reports were all over the place. In one session, two heavyweights, JNJ and IBM disappointed investors with weakness in the top line. IBM is a massive position for Mr. Buffett, and it has recorded 20 straight quarters of lower revenues. It shows you how difficult investing can be, even for the best investor who ever lived. Mr. Buffett will hang in there, you can depend on that, anyway. The next day, Qualcomm and railroad giant Norfolk Southern reported very good numbers, and the market loved the fact our Treasury Secretary, Mr. Mnuchin, made strong suggestions about the probability of a tax deal. You might recall only last week the same individual pushed back those same chances. Can’t depend on that one, can we, but the market sure liked it. In the oil markets, all investors seem to receive is more and more pain as the weekly inventory numbers showed a lower than expected draw down. In the media world, Bill O’ Reilly was canned by the Fox Network after 15 years in a row of the number one program on cable. Pretty dependable , I’d say, but it may turn out his firing only helps Fox attract bigger ratings, though the replacement is very similar, the boyish but bulldoggish Tucker Carlson.
Tomorrow, France will hold it’s preliminary election for President in order to narrow down the field to the final two candidates. The worst result would be for the left wing and extreme socialist candidates to be the finalists (Marine Le Pen and Jean-Luc Melenchon). The optimal outcome would be for the center right and left moderates, Fillon and Emannual Macron, to be the two finalists. I wouldn’t depend on that either. Right now, it looks like Macron and Le Pen are neck and neck, but almost one third of the population is undecided. Very reliable these Frenchies. Next week, back to the earnings game with a flood of companies reporting. Count on it.
Finally, I thought I would share with you a funny story given by Sam Zell during a speech he made about Latin America during the 2008 crisis (Money talks, Bullsh*t Walks: Inside the Contrarian Mind of Billionaire Mogul Sam Zell, Ben E. Johnson, December 10, 2009. Portfolio) Mr. Zell is a great investor and chairman of multiple public companies all over the globe. His nickname is the Grave Dancer for his accomplishments in real estate (clearly buying at the bottom). His one large error was buying the Tribune Company during the downturn in advertising, but the assets have now rebounded, other than the newspaper companies. Anyway, I thought I would share this with you, and pardon the inappropriate descriptions:
‘It reminds me of a story I wanted to share with you, and unfortunately it’s a very sad story. It’s a story about a bus accident. This bus was driving through the mountains, and it went off a cliff, ended up in a ravine, and everybody died. The police came. They went to the scene of the accident. They looked at the roads, and there were no skid marks. They looked at the weather, and it was bright and sunny. And they just couldn’t figure out what happened. So they went down in the ravine, and here is this bus steaming and a total wreck and all of these dead bodies were lying around. And they still couldn’t figure out what happened.
Then they noticed that among the wreckage was a monkey and it was alive. They looked at each other and said, “We don’t have anything else to do, why don’t we ask the monkey?”
Police: Were you on the bus? (Zell nods yes)
Police: Do you know what happened on the bus? (Zell nods yes)
Police: What happened? (Zell mimics drinking from a bottle)
Police: They were drinking? (Zell nods yes)
Police: What else was going on? (Zell mimics smoking marijuana)
Police: They wer smoking dope on the bus? (Zell nods yes)
Police: What else was going on? (Zell gyrates his hips)
Police: They were fornicating on the bus? (Zell nods yes)
The policemen looked at each other.
Police: What were you doing while all of this was going on? (Zell mimics driving the bus)
The point of the story was to highlight the excess of enthusiasm in the capital markets at the time. Clearly, we know Mr. Zell is reliable for capitalizing on those mistakes.
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.