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Retail Reports and Economy Reopens as Investors Perk Up!

Fear doesn’t exist anywhere except in the mind. Dale Carnegie

If you go through the most difficult circumstances imaginable for a human being, military service in a fighting capacity probably ranks somewhere at the top of the list. If you are familiar with history, you know that many lives are lost in war, often numbering millions. Yet, individuals are often enthusiastic about joining their country’s armed services. Maybe it’s love of country that drives them, maybe it’s finding a cause that is bigger than one’s self. It could be belonging to a family which has multiple generations which have served. Whatever the reason, people are able to overcome their fears to help their country in confrontations where lives are at risk. Relative to war, the current environment in the globe is pretty tame, although it is certainly a challenge in other ways.

There is plenty of fear in the world about catching the virus from the general population. One of the issues the country faces is living with the stark reality the Corona-virus will be with us for the foreseeable future. Statistically, less than one quarter of 1% of the global population has caught the disease. In the United States, it’s a little over one third of 1%. The mortality rate in the United States is currently at 5.90% of those who have caught the disease. From a probability standpoint, fear is quite high relative to the most probable scenario, which is that the vast majority of citizens will be fine. Still, the world needs a permanent solution. Many companies are working on vaccines, plenty with vast financial resources, but that does not guarantee the world will find a cure. Until the world has multiple vaccines, and maybe just as important, an efficient way to manufacture and distribute billions of doses, the virus is part of the global outlook. Consequently, accepting this reality and taking the steps necessary to have a functioning society while the infection is present is what is practical. We know the common sense measures: social distancing, protecting the most vulnerable (nursing homes), avoiding large crowds, washing hands, proper protections (masks, pep, facilities), expanded testing, and contact tracing (technology). Almost all states have implemented these measures and are now reopening their economies, as they inevitably must do. Some states are making it easier than others, as discretion is left to the governors of each state about how to proceed. In quite a few states, the statistics in these states don’t match the rhetoric and policies being forced on their citizens. My own opinion is that fear is being used by several governors to help promote their political agendas. Ultimately, time will tell, but the economic hole being dug in these states hurts the states citizens far more than a politician who has a guaranteed paycheck. Fear can be a powerful emotion, and when an elected government official in a decision making capacity uses it, well, many fall people fall in line without thinking through alternative points of view. In the same regard, let’s turn towards the investment environment.

When markets fall severely, like in the brief ten day period of March, it becomes much more difficult for those who own assets to continue to own them. The volatility heightens, and those who have acted in a way which leaves them vulnerable are forced to sell. Compounding this, we also have the reality that governments forced businesses to close. It’s hard to make money when you are closed. In addition, entities who have an interest in continued selling begin to appear to explain why things will only get worse. They may even proclaim there is no hope in the foreseeable future. People get scared of further losses. In combination, it is understandable that fear is pervasive. A few weeks ago, even the best investor who ever lived, Warren Buffett, showed he was quite cautious about how he was approaching things. The caution is warranted, and one must be sober about evaluating your portfolio or any potential addition. However, like almost any situation, there are two sides of a coin. Plenty of investors see this as one of the few occasions there is value to be found in the market. Much depends on your mental framework and your willingness and ability to evaluate and take risk. If you are at a stage of your life where you cannot afford to take risk, then you don’t. I have listened to many investment professionals who cannot get their head around the current situation, so they don’t want to make any moves. Totally understandable. From my own perspective, the past can be used to see the situation for what it is, which is a very uncertain time. Uncertainty brings potential opportunity, but you have to hunt, and you have to be willing to put your fear aside. Carnegie’s words are very much applicable.

In the markets last week, the retail heavyweights reported their financial results. Generally, they went pretty much expected as the difficult environment helped Wal Mart and Target, whose basics and on line capabilities proved popular with a fear bound consumer. Home based retailers Home Depot and Lowe’s posted strong numbers, but Covid-19 expenses hurt HD. Best Buy beat while Kohl’s and HP Enterprises missed, so you can see that each entity has their own unique challenge and opportunity. In almost all cases, guidance has been withdrawn for the rest of the year. In that light, many companies are in the same circumstance of essentially rebuilding their business from a standing start. Analysts have essentially written off the rest of 2020 and are peering towards 2021. Of course, there is that little event in November which the world is paying attention to as well.

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Thank you for reading the blog this week, and if you have any questions about investing, please email me at information@y-hc.com.
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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

Markets Stumble as Powell Warns On Asset Prices!

The Best Horse Doesn’t Always Win the Race. Race Horse Emporium

The month of May is known for the Triple Crown horse races. The most important contest is the Kentucky Derby, held in Louisville, KY at Churchill Downs. It usually draws well over 100,000 spectators. The next jewel in the series is the Preakness, which takes place just outside of Baltimore, MD. Finally, the longest and most difficult test is the Belmont Stakes, which is held outside of New York. The Derby is a one mile and a quarter in length, the Preakness a mile and one eight, while the Belmont is a mile and a half. The extra quarter of a mile in the last race has separated many would be triple crown winners from those who only manage to win the first two of the races. There have not been that many horses which could win all three of the races in succession. Only thirteen champions have managed the accomplishment, in well over one hundred years of racing. In many years, there are three different horses which win each of the triple crown races. It goes to show you that the initial quote about racing is very much applicable. With this in mind, let us turn to the investment world and see why this matters in our universe, too.

In his famous interview many years ago, Charlie Munger compared investing to the parimutuel betting world at a racetrack. Essentially, his message was that like wagering on horses at a racetrack, identifying quality horses can be done, but in almost all wagering cases, the odds of the horse winning reflect the superior animal. The same holds true in the capital markets. With digitization and algorithmic trading, machine learning, and plenty of other technological innovation, there continues to be a great deal of capital which jumps on trends and companies which reflect those temporary situations. Yes, we know Amazon is well positioned, thanks, and you are going to pay dearly for that. It is reflected in the price. Over the last few months, a massive amount of capital has been allocated towards enterprises which are believed to benefit from the corona virus. Conversely, those that are seen as suffering the brunt from the economic devastation are sold. Let’s look at some specific examples. On the winning side, the dominant providers of internet based commerce cannot be bought fast enough, and no price matters. Amazon, Shopify, Wix.com, Wayfair, and the always solid Microsoft are most notable. Count the oil sector, travel, airlines, financial’s, and commercial real estate entities as those which will suffer. Look at JP Morgan, Goldman Sachs, Southwest Airlines, United Airlines, Simon Property Group, Expedia, Bookings.com, and the pain in Exxon, Chevron, and Shell, and you will see my point. However, if one pays attention to both economic events and history, we know the one constant is change. So, yes, Amazon and Shopify have had great runs over the last few years and months, but investors are only concerned about the future. Could the next three or five years be vastly different than the last five?

No one has a crystal ball, but it certainly seems reasonable to think the energy market cannot stay in the current situation. If one is paying attention to the number of wells being shut down in the major production areas across both the United States and globally, the process of reducing supply is well underway. Anecdotally, with Las Vegas just starting to open it’s economy, there are more cars on the road daily, and I would imagine the same holds true in every state that is opening. Summer is starting, and that means more driving, or gas usage. Air travel is seeing a slight pickup off the bottom as well, although international travel is still non existent. China has seen volumes go up over the last few weeks, so that is also encouraging. However, if we are investing for the long term, meaning longer than two or three hours, days, weeks, or months, the gradual improvement in energy usage should bring prices back into equilibrium. I have seen estimates of oil prices recovering by the end of the year (call it $50 oil, but take that with a grain of salt). On the travel and leisure side, New York, Las Vegas, Hawaii, Southern California and Florida are the major markets to pay attention to. Florida is probably furthest along in opening as most of major counties are open or planning to in the next few weeks. Vegas casinos and hotels will open at the end of the month. In the case of California, it looks like the end of June should see some freedom, while New York and Hawaii are signaling the end of the June at the very earliest, and probably a lot longer (dig a deeper ditch, sure, dig it deeper). The banks remain cheap, but try running any kind of economy without financial institutions for lending, borrowing, payments, or custody. In sum, I always enjoy the challenge of picking the winning stock (horse), and the current prices offer interesting ‘odds’.

In the markets last week, Fed Chairman Jay Powell warned of the severity of the current situation. Mr. Powell may become the key player in the congressional discussions regarding another stimulus package over the next few weeks. You see, the very states which are most adamant about not opening their economies are the most broke-New York, Illinois, New Jersey, California, Nevada, and Hawaii. The western states have turned to the Federal Government to borrow a trillion dollars to fill their budget holes. This week Nevada Governor Steve (I’ll let you know when I let you know) Sisolak announced the state is in a financial emergency. California’s Governor Gavin Newsome is only facing a fifty billion dollar deficit, in addition to nearly a trillion in unfunded pension liabilities. The other states are as bad or worse off. If you are manager of a bond fund, and an underwriter like JP Morgan or Goldman Sachs comes to you with a prospectus of a debt offering of, say, five to ten billion dollars that is backed by a state’s tax revenues (70% of which are sales or income tax related), I suspect you aren’t interested in buying unless the interest rate rewards you for the much higher risk you take by owning those bonds. In fact, why bother as your client’s hard earned capital is at stake? Of course, this is why Mr. Powell becomes important. The Fed can now buy municipal debt, and if nobody else wants it, well Jay is always a team player, right? Keep in mind that the discussions between Speaker Pelosi and Majority Leader McConnell will revolve around issues like insurance liability protection for businesses, additional financial help for all citizens (including small businesses), and help for the individual states. One last thought, I don’t know, Mr. Trump could use his experience as a deal maker in requesting concessions from Mrs. Pelosi, maybe something about opening up the economy or help with sanctuary cities, the border, or aid for the energy industry. Mr. Trump, after all, has to sign any agreement. Anyway, May is almost over, and the Triple Crown won’t be run this year, but maybe Del Mar will go off as planned in late July. If so, I’m looking forward to finding a good horse with nice odds. Are you in?

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Thank you for reading the blog this week, and if you have any questions about investing, please email me at information@y-hc.com.
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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

NASDAQ Goes Positive, Malone’s Deal, Berkshire’s Meeting, and Political War!

The Builder- (Author Unknown)
I saw a group of men in my hometown.
I saw a group of men tearing a building down.
With a heave and a ho and a mighty yell,
They swung a beam and a sidewalk fell.
And I said to the foreman, “Are these men skilled
The type you’d hire if you wanted to build?”
And he laughed and he said, “Why no, indeed.”
He said, “Common labor’s all I need.
For I can tear down in a day or two
What it took a builder ten years to do.”
And I thought to myself as I walked away,
“Which of these roles am I going to play?
Am I the type that constantly tears down
As I make my way, foolishly, around?
Or am I the type that’s trying to build with care,
In hopes that my team’ll be glad I’m there.

In order to invest, it is important to be an optimist. With yesterday’s news that over 20 million citizens in the United States were laid off in April and the unemployment rate sits at just a shade under 15%. It is a difficult time in the country. Thousands of people have lost loved ones, many more have contracted a difficult illness. There is no known vaccine. Medical procedures in vital areas across the health spectrum have been postponed because of the priority of anything Corona Virus related. These delays are taking a toll on citizens who need that medical attention. States are just starting to open their economies, but in many cases it is at a snail’s pace. It is possible that the current plans to reopen economies take much longer because the virus continues to infect our citizens. Many people, and put me in the front of this line, are outraged at the infringement and blatant disregard for people’s constitutional rights, along with the unfairness, vagueness, abritrary, and capricious ‘guidelines’ set up by power hungry and party loyal governors. Many industries have come to a complete halt, and some are going to have a very difficult time coming back if the current plans to reopen are enacted. One such area is restaurants and bars. Here in Nevada, they are not able to open yet and even when they can, it will be at most 50% capacity. For most owners, that is not a formula that will allow for a profit. In addition, we all are aware of the current political environment and what is at stake in less than six months. You better believe both political parties know this, too. Uncertainty reigns supreme, which is what investors hate more than anything. Why would an investor be positive, now?

I am sure you may have heard this saying, “Buy low, sell high.” Now, part of the art of investing is buying something that can grow for a long period of time. In the optimal case, you may not want to sell because you can reap the benefit of what you own for years. In some cases, future generations benefit from buying low. These are hard to find and unique situations, but large amounts of wealth are created this way. The ultimate case would be owning Berkshire Hathaway. Berkshire turned people across the country in multi-millionaires because of the businesses Mr. Buffett acquired (both in their entirety, or in non controlling pieces). Mr. Buffett’s annual meeting was last weekend, and it was different than any other time I have seen Buffett. He was quite cautious, and believed sitting on cash was appropriate because nothing in the market was ‘compelling.’ So, put Warren in the camp of a long term believer of stocks, as always, but not a current buyer. He was a seller of his entire position in airlines. Another creator of massive amounts of wealth, John Malone, also was involved in the market last week (a 24 billion pound deal). His Liberty Global merged it’s Virgin Media holding in the UK with Telefonica’s cellphone leader O2 to create an entity with nearly 50 million customers and 40 billion of revenue. The deal was quite efficient as it took advantage of Virgin’s tax assets, used the capital markets to issue debt at rock bottom rates, preserved cash for their own future uses, and created the most formidable competitor in the UK for all telecommunications services. Malone was a buyer, so clearly not everybody finds the future so uncertain.

If you look at specific areas of the market, energy, travel, lodging, casinos, airlines, and financial s are all viewed negatively. Energy had a good week as investors believe demand loss is at it’s trough. All of these areas face questions about demand recovery, and in what time frame. The financial s had a solid week as any improvement in the economy will be seen as a plus. Opening qualifies as a start. One other point I would mention is that unemployment statistics are grim, yes indeed, but stock markets are based on profits. The largest companies in the world are now dominated by technology firms- Apple, Microsoft, Amazon, Facebook, Google. All produce profits of anywhere from 25-100 billion a year. None have seen their businesses fall off the table. By the way, the technology heavy NASDAQ is now positive for the year. Investors care about earnings, cash flow, and growth, unemployment, not so much.

Finally, I led off the blog this week with ‘The builder’ poem because I believe many people across the country have spent lifetimes building their businesses and lives. Over the past few months, quite a few have seen it all crumble because of actions by politicians which I believe are incredibly destructive. In the case of Las Vegas, the city spent the last ten years rebuilding from the financial crisis and over the last two months, the Governor’s ill conceived “plan” will make the next few years quite difficult for our citizens. On that note, the question at the end of the poem remains pertinent for anyone going through today’s difficult circumstances.

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Thank you for reading the blog this week, and if you have any questions about investing, please email me at information@y-hc.com.
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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

Market Gives Back Early Gains As Amazon and Apple Earnings Disappoint!

The most important factor in survival is neither intelligence nor strength but adaptability.

Charles Darwin

At a time when many retail businesses face serious economic issues, the resilience and flexibility of many entrepreneurs never fails to disappoint. Restaurants, faced with the prospects of no possibility of having open space for a while, have turned to drive up orders and making food for hospitals as a way to fill the gap. Coffee shops now sell liquor, or liquor stores sell coffee and other perishable items. Salons and restaurants are busy installing plastic shields to maintain local distancing requirements when they are allowed to open. You see, the spirit and creativity of those placed in very difficult circumstances bubbles to the surface in their efforts to overcome obstacles, much of which has nothing to do with the virus. Right now, the challenges of being in business are extraordinary, and it can be seen by the soaring unemployment numbers and mounting bankruptcy figures which are piling up by the day. According to an article in the Washington Post (as of 4/29/2020), GobalData Retail estimates the lock downs have forced the temporary closures of 263,000 stores. UBS estimates that more than 100,000 stores could wind up closing by the end of 2025. You can see from these figures alone that business owners will need all their resiliency and flexibility to face the challenge at hand. Survival.

Of course, to have a fighting chance, you have to be allowed to operate. Some good news on that front is beginning to take place. Yesterday, 15 states began lifting their restrictions on businesses. Fifteen more will join the initial group on Monday, so over half the country will be on it’s way to allowing enterprises to move towards becoming fully functional. The leaders in the quest to open their states have been in the south, where Republican governors in Texas, Georgia, Mississippi, Florida, and South Carolina have been the first to rush in and get their states open. In contrast, liberal bastions like NY, NY, Illinois, California, continue to extend stay at home restrictions. The natives in these states are getting wrest less, to say the least. In Michigan, protesters stormed the state capital to protest the lengthening of the restrictions (by a month). In California, Orange County beach cities of Huntington and Newport Beach, places I am very familiar and the core of Republican voters in California, assembled huge crowds protesting their inability to just go to the beach. The freedom was taken away by Governor Gavin Newsome on Wednesday. Questions are popping up all over the country about the infringement of individual freedoms by Governors, including a case in Pennsylvania that the Supreme Court wants more information about. In New York, media star Governor Andrew Quomo is facing questions about his nursing home policies and wasted expenditure of millions of dollars ordering unused equipment. We will see how all of this plays out as the question of public health and safety and the measures being used by the government will be put to the test over the next few months. If you are a business owner, essentially you are being forced to start over. Not an easy task.

Here in Las Vegas, yesterday the group that owns the Station Casinos properties laid off thousands of workers because of the uncertainty of when their properties can open. The largest employers in the state, casino and hotel giants MGM, Caesars, Wynn Resorts, and Las Vegas Sands all are looking at similar situations where they will not open until June at the earliest. Of course, very few small businesses have access to resources like these giants. For this reason, you are going to see more protests as the little guy, the average Joe, the mom and pops, seem to be the forgotten entity in this crisis. Darwin’s advice never looked so appropriate.

In the financial markets this week, the largest companies in the world reported earnings this week. Facebook, Microsoft, Apple, and Amazon led the headlines and generally they were good with the growth in cloud services at Microsoft and Amazon quite impressive. Facebook’s advertising revenues held up well, and Apple came in as expected with services, payments, and wearable s seeing good growth. The big news in the energy markets was the dividend cut by behemoth Shell, which chopped it’s annual payment to shareholders by over 50%. BP, Exxon, and Chevron did not cut their dividends, but all are forced to face with the currently unsustainable prospect of paying out more to their shareholders than their operations are able to generate. The situation is related to oil demand and oil prices. All oil companies are shutting in production (stopping it) because the economics of drilling costs at 30-100 bucks a barrel and selling at $20-25 is not going to work. Over the next quarter or two, if oil demand and the price for black gold heads back to a workable level, the dividends will remain in place. If not, the other big guys will be forced to cut back on their payments, too. As a long time oil bull, it is a tough time as an energy owner. Of course, part of being a shareholder is owning positions when things aren’t peachy keen, and the current environment certainly qualifies.

On the macroeconomic front, job losses of 3.8 million versus 3.5 expected didn’t help investor confidence. In the political realm, the news about General Michael Flynn being essentially set up by the FBI and Justice Department only adds fuel to the fire that will rage around the 2020 Presidential Campaign. Here was a guy who fought for the country for over 20 years and was treated like a criminal by the prior administration. In fact, they went out of their way to put him a situation where he would ultimately serve prison time. Apparently, a big source of their animosity was his disagreement with Mr. Obama on the terms of the Iran deal. Make no mistake, this is the same bunch of people who are asking to run the country again, with the only difference being Mr. Biden would be in charge. Yes, if this sounds like partisan argument, it is indeed. Mr. Flynn deserves better, and this will be another log on the fire of a very contentious campaign over the next six months. Make sure you have plenty of water and are able to easily adapt, as it is going to be a long, hot summer.

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Thank you for reading the blog this week, and if you have any questions about investing, please email me at information@y-hc.com.
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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

Oil Goes Negative and Recovers, Market Flat for the Week!

“The greatest danger in times of turbulence is not the turbulence—it is to act with yesterday’s logic.” —Peter Drucker

As someone who has been involved with businesses for over twenty years, I admire the entrepreneurial spirit of those who risk their hard earned capital. Not only their money, they risk their valuable time to try and create the best life they can for themselves and their families. Large businesses don’t get big without first starting and going through the growing process. Most business endeavors don’t make it past three years, which shows you the free market is brutally efficient. If your plan is ill conceived, poorly financed, or operationally deficient, over the long term it is very difficult to survive. Still, people all over the world find a way to make their businesses prosper, and it is a testament to their spirit, creativity, will, and ability to adapt to changing circumstances. Let’s consider the current joy across our great land, that being the quarantine across ninety five percent of the population.

As the month of April ends, each state makes it’s own determination about how to best proceed to manage the process of allowing citizens out of their houses and economic activity to resume. Naturally, there are guidelines from the Federal government about criteria to consider before opening. They involve downward trending numbers of infected citizens from the virus, a shrinking number of fatalities, available hospital rooms and equipment, testing capacity, and continued adherence to common sense measures like social distancing. Naturally, how each state approaches the question depends on a variety of factors, and you guessed it, one of those factors is political affiliation. The current trend seems to be pretty clear in this regard. Republican leaning states want to take the restrictions off pretty quickly, see Georgia, Texas, and Mississippi as examples. Those states will be opening very soon, or have already opened up in a restricted way. On the other side, Democratically controlled areas like New York, New Jersey, California, Michigan, and our state here in Nevada have adopted more restrictive policy. The economic implications of the virus for private companies has been dramatic, as over 22 million unemployed workers have filed for benefits in the last four weeks. The famous quote that is most apt applies: A recession is when your neighbor gets laid off, a depression is when you get the ax. The vast numbers mounting up and the non existent economic activity have all kinds of reverberations at various levels of government, especially state and local. Many states are constitutionally obligated to balance their budgets, others not so much. With far fewer revenues coming in, city and state debt obligations, employment for public sector employees, and pension obligations increasingly get put under pressure. It means job losses, potential debt defaults, and renegotiating pension payments. You know times are tough when governments cannot pay their own people. Along those lines, Senate Majority Leader Mitch McConnell suggested states which haven’t been financially responsible the last decade ought to declare bankruptcy. The exciting as paint McConnell brought ire from state governors, but he does have a point. Not that the Federal government is financially prudent either. In fact, you could make the argument that government at every level finds a way to mess up everything they touch. Wait, plenty of people already have. Let’s take a look what took place here in my home state of Nevada as an example.

On Monday of last week, Governor Sisolak held a press conference to give us his plan for how Nevada would open up our economy. Mr. Sisolak is a Democrat who has deep roots with the teachers and culinary unions. He also is a willing recipient of contributions from our hotel and casinos. With over three hundred thousand people unemployed in our state, there is serious economic pain taking place. Moreover, with bonds financing all kinds of projects from convention centers to football stadiums, a reduction in taxes from hotel rooms and gaming could put those obligations in question. Mr. Sisolak has already indicated government workers are being furloughed. The next question becomes the funding of unemployment benefits. So, you would think Mr. Sisolak would be eager to open up our state, right? Wrong. The message the public got was, after a half hour of bureaucratic babble, we will tell you when we tell you. Thanks so much.

Our leading proponent of opening the state is the Mayor of Las Vegas, the esteemed Carolyn Goodman. She is the wife of ex mayor, Oscar Goodman, a famous lawyer for all kinds of enterprises. Mrs. Goodman proceeded to go on CNN and get interviewed by Anderson Cooper. How did it go? Not so good. When your flag bearer for expanded economic activity comes across as potentially intoxicated or under the influence of one of the corona virus medications, the public isn’t inclined to back your argument. So there you have it, government representation at it’s finest in the great State of Nevada. You can see why I much prefer the entrepreneurial spirit of businesses, can’t you?

In the market this week, it was full of news about earnings, oil, and other interesting items. Amazon reportedly used data about orders from vendors on its marketplace to turn around and create products that compete with those vendors. Mr. Bezos, a brilliant business person who has built a juggernaut that is better positioned than maybe any other, has a pattern of questionable ethical activity. Leverage potential city awards for tax advantage? Check. Working conditions for employees in where houses potentially hazardous (corona-virus)? Check. Using size of publishing operations against smaller operators? Check. Journalistic consistency, accuracy and credibility of Washington Post? Check. Yet, Mr. Bezos is fawned over by the business press for Alexa, Amazon Prime, and same day shipping. Turning to energy, on Monday the May futures contract for WTI expired with a negative 37.63 dollar price, interesting in that a negative price had never previously occurred. Oil remains under pressure because of demand destruction, but prices on futures recovered over the rest of the week. I wonder about the notion that our leading technology firms are considered above reproach on a moral basis. If you look at the problems of Amazon, Google, Facebook, and Microsoft (think data, privacy, anti trust breaches, etc), why should the oil industry be demonized while technology leaders get a free pass? Next week, the largest integrated oil firms will report horrible earnings, and the outlook will be poor as well. Their comments on dividend sustainability (cuts) are probably the feature headline. The week will be full of reports from leading companies in consumer related areas, so that will be a focus, too. In the meantime, stay safe and I hope you are thinking about the future, as Mr. Drucker so eloquently advised.

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Thank you for reading the blog this week, and if you have any questions about investing, please email me at information@y-hc.com.
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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

Banks Boost Reserves, Some States Ready to Open, and Next Week’s Earnings Preview!

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” Thomas Jefferson

With a three week total of unemployment claims reaching over 22 million, citizens in our country have a right to be a little irritable. In combination with over ninety percent of the country forced to stay at home unless they participate in an essential business or activity, let’s just say the natives are more than a little restless. Of course, if you have lost a family member or are suffering from the virus, economic questions seem trivial. The issue of balancing the measures needed to treat, test, monitor, and control the spread of the virus versus the economic costs and personal restrictions of these tactics are causing extreme reactions across the United States. Where do I stand?

Well, based on Mr. Jefferson’s quote, my thinking is pretty clear. From simply a numerical perspective, the idea 99 percent of the population has their ability to earn a living and have their personal freedoms taken away for a problem that applies to less than one percent of the citizenry is, how shall I say this diplomatically, highly questionable. The public health concern does have to be addressed, and rightly so. When President Trump held his conference call with the ‘Task Force’, business leaders expressed to him that citizens won’t have confidence to resume normal activity without believing they won’t suffer health consequences. Providing enough testing and having them quickly processed has to be the priority over the next few weeks to get the country ready to open. Pardon me, those states that want to and are able to open, I stand corrected.

Here in Las Vegas, the question is front and center as our Mayor, Carolyn Goodman, is skeptical of the Governor’s sanity. Mr. Sisolak, an emotional fellow who is quite chummy with the teachers and culinary unions (along with the MGM and Station Casinos brass), believes health care experts and data should guide the way. Of course, with tax revenues from gaming and hotel rooms evaporating, I suspect Mr. Sisolak will come around fairly quickly. This example is a microcosm of what is taking place in states across the land. Whether you believe in Mr. Jefferson’s point of view, two hundred years ago his forethought remains distinctly impressive.

On the earnings front last week, the four largest banks posted earnings which were dramatically lower than a year ago. The results were impacted by huge reserves taken for future credit losses. Those reserves amounted to over twenty billion dollars, and last year at the same time the reserves totaled a little over four billion. Still, the banks made billions, as always. Meanwhile, their stocks remain unchanged from ten years ago, even though all pay nice dividends and have bought back billions in stock . Clearly, an unloved group. The economy needs to recover for sentiment to improve in this sector.

Another unloved bunch remains energy, with investor psychology at all time lows. The Saudi’s and Russians agreed early last week to a ten million barrel production cut, and the market saw it as a day late and too small of a cut. The bigger issue is demand destruction, and when does demand start to recover? Mr. Putin and Mohammed Bin Salman (MBS) have misread the market and now face reduced prices as far as the eye can see for their only revenue generating product. The pain is being felt in the Permian, Baaken, Western Canada, and anywhere oil is produced. When the economy opens, demand will slowly recover, but how quickly is anyone’s guess. Consistent with this view, Mr. Munger gave his thoughts on the current predicament in an interview in the Wall Street Journal. Essentially, Charlie and Warren are playing defense and letting the cash build up. They are in no hurry to do much, and I mistakenly thought Mr. Buffett would have the whole world knocking at his door. This does not seem to be the case. Still, with $100 billion to play with and more coming in the door by the second, the idea Berkshire is going to sit tight is interesting. Maybe buying back their own stock offers more for their money? We will know in time.

Next week will see plenty of earnings reports from major companies like Visa, TD Ameritrade, E-Trade, 3M, Intel, Amazon, Verizon, AT&T, Netflix, and American Express. Very few will offer much guidance, especially in the consumer related areas. It remains a unique time across the globe. If you are like me, a return to an open society cannot come soon enough. Stay safe.

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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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

Queen Elizabeth’s Speech, Markets Look to Recover, and Pharma Works for A Vaccine!

When life seems hard, the courageous do not lie down and accept defeat; instead, they are all the more determined to struggle for a better future.
Queen Elizabeth II

The United Kingdom has a long history of providing leadership to the world. The most famous example was the legendary Winston Churchill, whose will and iron clad refusal to deal with Adolf Hitler, ultimately led to the defeat of Nazi Germany. Today’s circumstance is quite different because the issue at hand is a virus which has spread across the globe, causing illness and death. All over the world our supposed leaders, including those in our country at the federal, state, and local levels, did not prepare for the problem, even though they knew of the situation in November of last year. Every day over the last few months we are treated to the same thing- some politician getting up and saying there are no beds, there is no equipment or masks, there are no ventilators, and things would only get worse. We got unilateral decisions about staying in our homes, which currently still exist. Not only that, as citizens, we should not expect things to ever get better. Great, way to inspire us and give the masses hope. Interestingly, there are times when leadership arrives from places one least expects it. Enter the ninety three year old Queen of England.

Last Sunday, the leader of the UK gave a four minute speech where she thanked her citizens for their unselfish contributions all across the kingdom. She mentioned the lovely participation of the children and kids who have such spirit throughout the land. Finally, she tied the whole thing together by telling her people the country will overcome the challenge with a quiet and steely resolve and move on to greater heights in time. It did not get a great deal of attention, but I am confident it helped people feel better about the path ahead. The next day, the UK got word that Prime Minister Boris Johnson had to go into intensive care because of the virus. It appears he is improving and is now out of ICU. In difficult times, and make no mistake, the modern world is in uncharted territory, we find out who are the pretenders and who are people that lead the way. Queen Elizabeth is one such leader.

Elsewhere, here in the United States, over 6.6 million people filed for unemployment this week. It brought the three week total to over 17 million. By the end of April, it is expected the number will surpass thirty million. Not good, not good at all. Under the best scenario, government financing through the broad assortment of plans by the Federal Reserve and Treasury, will provide adequate financing for businesses, workers and citizens to bridge the gap until the economy is allowed to open. Once it does, it will be a slow process to recover, potentially taking up to a year or longer. Customers don’t just show up because a business is now open. Of course, you have to be allowed to open to even have a chance for a customer to show up.

The question of how long the country will wait before it opens is based on models of the illness and how it is spreading in each state. Many of the models which are being used across the globe have shown to be inaccurate in their initial predictions. Quite a few have seen their numbers revised downwards in a big way, leading observers to question the extreme remedies currently taken. I believe this is very much justified, and further begs the question as to how can one trust these actions when they are based on faulty figures? On the health care side, it is important to note the efforts being made by the pharmaceutical industry to come up with a vaccine as soon as possible. Major drug manufacturers like Johnson & Johnson, Gilead Sciences, and others are in clinical trials to find a cure. Over the last four years, the leading critic of the industry has been Bernie Sanders, along with his fellow Democratic colleagues in Congress. His criticism is based on how much money the drug makers earn. It is at a time like this to recognize why these businesses are so important to society. Without them, will we have a society that could even function without a cure to this virus? At the very least, it wouldn’t look anything close to what we are used to. Personally, it was nice to see Mr. Sanders have to stop his campaign to become the Democratic nominee. Unfortunately, it seems as Mr. Biden will adopt many of the policy stances that Bolshevik Bernie believes in. Some things don’t change.

In the energy markets, OPEC+ met and came up with the logical decision to cut production by at least 10 million barrels a day and probably much more. Most estimates show supplies need to be cut by a minimum of 20 million per day to have any chance of balancing markets. Of course, when airlines start regaining customers and travel slowly starts to begin, the number of barrels being used will go up dramatically. In the oil patch, there is so much pain that their lenders, the largest banks (Chase, Wells, Citi, Goldman, Morgan Stanley) are preparing to take control of those companies that default on their loans. Most of this will take place in the shale areas, where the reduced value of the reserves doesn’t warrant more capital from lenders. All of this will play out over the next year. Like the rest of the economy, those who are strong probably are going to wind up with crown jewel assets.

Speaking of strong, Mr. Buffett sits on $120 billion, about 70 of which he can use for acquisitions. I suspect he has been looking quite hard, and is talking to all kinds of companies. Other well capitalized enterprises are also on the prowl, and now is the time when those who have liquidity and are leaders in their industries are going to consolidate the weaker companies. Investment banks are going to be quite busy over the next year, so look for deal activity to start to pick up after the next quarter passes. Meanwhile, I am sure plenty of readers have been doing the same thing, looking for opportunities from a volatile market. I hope you are succeeding in that endeavor, and more importantly, staying safe.

Thank you for reading the blog this week, and if you have any questions about investing, please email me at information@y-hc.com.
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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

March Job Losses Hit 700K, Nearly 30 Million More Projected By May!

There is nothing either good or bad, but thinking makes it so.     
William Shakespeare

The United States is staring in the face at a very difficult economic period. With the March jobs report showing losses of over seven hundred thousand (limited to the first two weeks mind you), April will be a bloodbath with job losses approaching 30 million. If you are not familiar with economic history, this is far more than the great depression. Given these figures, many stock market analysts are predicting equities could crumble again with losses approaching fifty percent or more from the current level. Grim, very grim, indeed. Of course, perspective is always important, especially if we are talking about equity (stock) value. Remember a few short months ago, the artist known as WeWork was valued at over a hundred billion, and now, given that it’s largest financial backer Softbank has backed out of an equity infusion, Wework might be more aptly named, Nomorework. Pardon the gallows humor, but I am trying to point out that equity value needs to be backed by more than air, clicks, users, or non financial metrics. In the difficult economic environment we have just begun, the difficult question for security analysis is considering what kind of predictability there is in demand?

How can one offer up a model when people are not even let out of their homes? Each investor is left up to their own means to consider how long these restrictions will hold? The question is related to the approach of Federal, State, and local governments and how the efforts to stem the pandemic work? It appears the approach has been more Jefforsonian than Hamiltonian. It has been, and will be, every jurisdiction for itself. Under that method, one would think states will look at the number of mortalities relative to those infected, the progression of the numbers infected, and compare those figures to China, Italy, Spain, New York, and other global jurisdictions. You would think that as testing becomes more widespread, if you or your business gets tested, you can function as long as you pass the test. Kind of like high school, pass your class, go to the next grade.

In all seriousness, if you look at the financial pressure the citizens of large cities like New York, Las Vegas, Detroit, and New Orleans are now under, state and local governments are looking at financial disasters of their own with no tax revenues coming in the door. As soon as it is practically possible, politicians are going to want to open their economies. Once that happens, employment can will ramp up and demand for everything comes back. As an investor, your perspective on how long this will take and over what time frame is crucial. If your time horizon is longer than 18-24 months, the idea everyone is going to be locked in their homes for eternity doesn’t seem realistic. If, however, the next two years is really important to your financial health, you might have a different view point. Shakespeare wasn’t my favorite subject in school, but Willie had it nailed on our current dilemma.

Speaking of quandaries, if ever there was a group that deserved it’s predicament, it is the major airlines. Yes, the bastion of storage fees, long lines, delayed and canceled flights, cramped conditions, and personable customer service. Domestic and International airlines are all in a world of hurt with bookings down 90-95%. Historically, airlines have been the worst investment industry to allocate capital to. Over the last decade, with consolidation, investors believed the massive demand of travelers and earnings power, helped by baggage fees, warranted investment. Even Warren Buffett threw down his hard earned scratch. He bought over ten percent of two airlines, Delta and Southwest. That is, until this week, when Mr. Buffett reconsidered and sold plenty. Hmm, you have to think that the terms of a loan, or other capital infusions by the government, will be plenty dilutive to existing shareholders. As Mr. Chanos remarked in his interview with CNBC, the airlines should be raising capital through the equity markets. Government loans or anything that would essentially wipe out shareholders with government participation (preferred equity or warrants) makes no sense. The other industry which deserves what it currently has on its plate is the cruise industry. With all major cruise lines not domesticated in the United States, they pay zero in taxes to the United States.  Mr. Carnival lined up money with a private equity group at terms that were not so wonderful, I believe 12% or so. A match made in heaven, private equity and the cruise lines. I am sure the private equity groups will be quite attentive to the health procedures so badly in need of improvement.

Elsewhere, low and behold, in the oil market, the always self congratulatory Donald is trying to play matchmaker with the Saudis and Russians. His goal is to help raise the price of oil by guaranteeing production cuts from those countries. You would think logical operators would have figured out that demand destruction of 20 million barrels per day isn’t consistent with increased output. Instead, they flooded the market and oil broached $20 bucks per barrel, with some believe it is headed to 10. More joy. The actor known as OPEC+ is now scheduled to meet virtually next week to discuss the situation. The market got excited with Donald’s efforts and bid up oil prices during the last few days of the week. Without demand improvement, or at least letting people out of their houses to start, oil is going to be hard pressed to get off the deck. On the earnings front, light news with RH (used to be Restoration Hardware), Dave and Buster’s, and Constellation Brands all beating estimates. Next week we will start earnings reports with investors awaiting news about virus affects. No estimates or projections will be offered as all guidance will probably be withdrawn. Sadly, it seems it is now all corona all the time. On that note, I hope you are staying safe and healthy and enjoyed the blog this week.

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Thank you for reading the blog this week, and if you have any questions about investing, please email me at information@y-hc.com.
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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

Stocks Bounce But Market Faces Serious Challenges!

Happiness is good health and a bad memory. Ingrid Bergman

Given the risk to people across the world from the spread of the Corona virus, it is important for every individual to take care of their own health. In this context, health is considered physical well being. Related to physical well being is one’s state of mind, and financial health is crucial as well. The current situation is putting tremendous strains across the world on all of these kinds of health. The individual who goes out in public for a brief shopping trip puts themselves at risk of contagion. One of the difficult parts of this virus is one could be infected and not show symptoms for up to five days. In the meantime, the person believes they are in normal health, and comes into contact with others, potentially infecting them. It is why the virus has spread exponentially. It also is part of the the reason for the public quarantines in many parts of the country. The other difficulty is the lack of medical professionals and facilities available to treat those who become ill. It is making things quite difficult for people across the world. How does one approach this tough predicament?

From my perspective, the next few months are going to be spent taking care of yours and your closest families health. Most likely, you will have minimal social contact, eat well, exercise at home, get a good night sleep, and try to reduce stress levels with normal routines. If you are fortunate enough to work at home, then you are all set. If you have to go into work, extra care with cleaning one’s hands, sanitary wipes, and social distancing are all rules one must pay very close attention to. So, the focus is navigating the current environment with one’s health preserved. With respect to the current financial situation, it is clearly a very uncertain time. With markets down 25%, even after a nice rally this week, the next few months will focus on the corona virus to see if there is any kind of improvement in terms of the number of people infected, mortality rates, and when the country can start the process of reopening the economy. The financial pain for many individuals is just starting, a direct result of shutting down economic activity. Let’s take a look at the gruesome numbers.

Last week, unemployment claims totaled 3.3 million, the largest jump in history. The prior record was 695,000 in 1982. Yesterday, the President signed a massive, 2 Trillion dollar spending bill that was passed after a week’s worth of the usual nonsense in Congress. Given that the crisis is at it’s outset, there is much concern that a few months of shutting down activity will cripple many businesses and individuals. Approximately 70% of total US GDP is based on the service economy. Nearly 15% is related to travel, leisure, lodging, and food and beverage. With all of these industries effectively shut down, most analysts see any kind of recovery to pre Corona levels taking at least a year. Not the most encouraging news, and there is all kinds of uncertainty in those predictions. If one looks at China as a guidepost, after a strict quarantine, economic activity has improved. Of course, there is little certainty on whether or not the virus will break out in China again. As most readers know, I grew up and live in Las Vegas. The city has been dramatically impacted by our governor’s order to shut all non essential businesses for a month. 200 thousand casino workers are employed by the casinos, and many have been furloughed and laid off. Plenty of pain here in Sin City. Another industry which is in crisis is energy, specifically the oil and gas sector.

In what some are calling unprecedented demand destruction, it is believed that potentially 20 million barrels (on a base of 100 million barrels per day) has been vanquished. The spring and summer driving season in the US will see some pickup, but until the virus issue is handled, jet fuel consumption is pretty much wiped out. With airlines cutting flight routes by 90% internationally and dramatic chops to domestic trips, oil demand will take time to recover, let’s call it through the end of the year at minimum. Not helping matters is the tussle between Saudi Arabia and Russia about production cuts. All OPEC producers are dependent on higher oil prices for the vast majority of their countries revenues, so $30 dollar per barrel oil is not a sustainable economic environment. It also does not work for our domestic shale producers. Many have higher extraction costs, ranging in the $50-60 per barrel level. The shale industry is shutting down rigs and laying off workers by the thousands. Not good. So you can see, the next quarter, maybe two, possibly three or more, are going to be, ahem, challenging, at least in the energy patch. For those companies that survive, the ability to consolidate the weaker entities will provide plenty of possibilities.

If we are long term investors (we are), difficult economic environments bring low stock prices. Beaten down stocks for long term investors are what you wait many years for. The market has been incredibly volatile, and there is reason to anticipate they will remain so. Last week, markets saw a significant bounce. They may retreat back to the prior low, or even below that point. Many high profile investors see this as an unprecedented chance to put money to work (Ackman, Cooperman, Rogers). My thinking remains the same as it has been. Focus on the companies you want to buy and understand why you are buying them. Know what price you think is a good one, and be patient. Make sure it fits into your portfolio. Chances are you will get your opportunity. Remember, if you are committed to having market exposure for longer than a twelve or eighteen months, the short term is not your priority.

A few other things I thought I would comment on. First, one of the world’s scourges, Mr. Putin, showed his true colors by comparing autocratic Russia to the free western countries as a way to highlight Russia’s strength in handling the Corona Virus issue. It will be fascinating to see how this plays out, but make no mistake, Mr. Putin and Russia will remain a thorn in the world’s side as long as he is on the global stage. Next, given the challenges our country faces with the virus issue, now is a time for the supposed leaders to show what they are made of. Throughout history, when the United States has faced serious challenges, the spirit of the country has shown through. We are seeing the same thing today, as many individuals, businesses, and government leaders are working together in a constructive way. The rest of the year will be a serious challenge for all involved. I am sure our country will meet it head on. Stay healthy.

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Thank you for reading the blog this week, and if you have any questions about investing, please email me at information@y-hc.com.
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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

Equities Slammed As Corona Virus Shuts Down Economy!

Ides of March

The Ides of March is the 74th day in the Roman calendar that corresponds to 15 March. It was marked by several religious observances and was notable for the Romans as a deadline for settling debts.

The world’s economy has been disrupted by the Corona Virus. One third of the entire population in the United States has been told they have to stay home. Businesses are ordered shut. Travel is essentially eliminated, along with related lodging and food services. Realizing the dramatic reduction of economic activity, investors have reacted by selling everything. Every asset class is included, meaning stocks, bonds, gold, silver, oil, other commodities. Painful. Very painful. In fact, the drop is the quickest and most severe for the market since the Depression. If one remembers our economic history, the Depression was caused by too much leverage of those participating in the stock market. Interestingly, the same may be taking place with the current selloff.

In looking at the situation, the obvious root of the problem is the elimination of any possibility of a functioning society in some of the largest segments of our twenty five trillion dollar economy. You can see from some of the videos of New York, Seattle, and my hometown of Las Vegas, the streets are empty. In Manhattan. The Strip. Until people can go back to work, investors are going to find it difficult to take the risk of owning a financial asset that is not tied to something which generates income. Instead, they look to bonds. However, the bond market has long been dominated by our friends at central banks across the world. Yields have been anchored near 0, or in some countries, they have been negative. Owning bonds with these interest rates rates leaves the owner with little compensation relative to the risk of owning something risk free, like a Treasury bond issued by the government. So, bond fund managers decided to be really clever, and leverage what they own by borrowing lots of money as a way to create more return. Remember, bond yields only go down, and bond prices only go up. That is of course, until investors see more risk of owning a government issued bond. Clearly, the U.S. economy, it’s citizens and businesses, need help from it’s long dysfunctional government. With the leaders of the United States now talking about a stimulus package in the neighborhood of one trillion dollars or more (some analysts thinks that will not be near enough), the US financial position will be adding to it’s current deficit of over a trillion per year. Without mentioning our unfunded liabilities (let’s conservatively estimate them at $50 trillion), the pertinent question is how can bond yields stay at near zero? The answer, quite obviously, is they couldn’t.

As such, I suspect those very intelligent and creative bond fund managers who borrowed against their holdings had the trade go against them. The same could be said for any entity that used leverage against their assets. Many custodians offer equity loans for those individuals who want to borrow against the positions they own in their portfolios. So, as has historically been the case in prior selloffs, leverage is exacerbating what is already a tough trading climate. How long will this last? Nobody knows, and anyone who thinks they can accurately tell you is just guessing. We know that markets look ahead, maybe six to nine months. We know the selloff has been fierce and difficult for those who own assets, especially equities. Leveraged sellers get rid of what they must, regardless of the quality. Nothing is spared, including owners of quality stocks. In fact, those assets are the hardest hit because they are liquid and able to be traded. Punishment does not begin to accurately represent how difficult the last week was. The numbers behind the week are difficult to look at as the market was down 17%. In five days. Every day has huge trading swings which clearly don’t give any kind of accurate representation to economic fundamentals. The obvious question I keep getting asked is when do you step in to buy? The answer is based on the specific circumstances of the client (risk tolerance, financial situation, liquidity needs, dependents, beneficiaries). We know that tax requirements are being pushed out at least four months, so that should be considered as well. You don’t need to buy everything, or anything. You should buy what you want to own and know why you want to own it, and be prepared to own it if it goes down plenty more. The most important idea here is the quote from Mr. Munger,

” This is the third time Warren and I have seen our holdings go down, top tick to bottom tick, by 50%. 

I think it’s in the nature of long term shareholding of the normal vicissitudes, of worldly outcomes, of markets that the long term holder has his quoted value of his stocks go down by say 50%.  In fact, you can argue that if your not willing to react with equanimity to a market decline of 50% two or three times in a century you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations.”

Finally, the country’s current dilemma shows there are structural problems in both health care and the market which have become quite glaring. On the health care side, the lack of beds and hospitals is related to outdated laws which haven’t been modernized in many states. Too much reliance on China for critical ingredients or inputs in important products like drugs, masks, gowns, ventilators, and respirators. In our markets, we have stocks of hundreds or thousands of companies trading which currently aren’t allowed to do business. In most instances, the prudent course would be to suspend trading in that company. Investors won’t have any luck with that as you pays your money, you take your chances. The last month has been tough for any equity owner, myself included. I understand it’s a difficult time, and might get more so. However, as this month proves yet again that March is when debts get settled, if you stay calm and focused on what opportunities may be popping up, many years from now you may have fond memories of this legendary time.

If you would like all blog posts and newsletters from Y H & C Investments, please

Thank you for reading the blog this week, and if you have any questions about investing, please email me at information@y-hc.com.

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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

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