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Lingering Trade War Hits Equities As Europe Strengthens, OPEC Lifts Production-

Clarity is the most important thing. I can compare clarity to pruning in gardening. You know, you need to be clear. If you are not clear, nothing is going to happen. You have to be clear. Then you have to be confident about your vision. And after that, you just have to put a lot of work in. Diane Von Furstenberg

One of the day to day delights for many people is when you go to the store and buy the latest high tech gadget, a toy for your child, or a household appliance that might make life just a touch easier. However, it seems there is one obstacle nowadays that can makes this pleasure turn into an annoyance, at the least, and even worse, can cause injury. Yes, the now cumbersome and complex packaging on many items has made opening them an exercise in futility. You have a three inch item with a 5 foot box, or a one foot item with a fifteen pieces of wrapping. No sense of proportion whatsoever, none at all. The plastic or shrink wrap, along with the way a box is put together, in many cases, causes fifteen minutes of detailed reading and analysis, followed by the attempt to use your hands to open it, which leads to even more frustration. Out come the scissors or fork or sharp item, whatever the case may be, and then, low and behold, the plastic is seared, and you might even wind up with a jagged edge. On occasion, those sharp points cause cuts. Not good. Really, does it need to be this difficult? I must say, in my opinion, the best packaging comes from Apple. Simple, minimal instruction, easy to follow, and quite efficient from a time perspective. The takeaway for evaluating businesses is important in that clarity, efficiency, and purpose are quite valuable and of the utmost priority.

When you identify and research any kind of profit seeking enterprise, there are usually moving parts to consider. What is the growth rate range and what might it depend on? How might margins improve and over what time frame? How will capital be deployed and what kinds of returns should be expected? So these variables have different potential outcomes, and over a long period of time, slight changes can lead to dramatically different results, especially when you have larger entities to consider. Given the uncertainty and difficulty, and when you add in that capital is usually scarce, in my mind a high priority should be given to situations where a business is simple, easy to understand, and straightforward. Peter Lynch, the famous white haired Fidelity fund manager, used to say you should be able to describe the business in ten words or less. As more of my hair starts to turn Grey, probably from opening too many packages with poorly considered wrapping, clarity and simplicity becomes increasingly attractive.

Over the last week, the markets took a tumble on more antagonistic trade policies from the largest global economic powers, led by you know who. My ex-UCI professor and Trump Economic Advisor, Peter Navarro, offered his opinions on the tariff issue (here you go if you are interested). Disney raised the bid for the Fox assets it is in competition for with Comcast. Starbucks pre-announced a flat quarter in terms of transaction volume while investors tired of a stagnant stock price (though the dividend was increased 20% and the buyback went up as well). The Federal Reserve announced the first part of CCAR (known as the Comprehensive Analysis and Review) for the largest banks and next week will come the goodies, meaning how much shareholders can anticipate from larger dividends and buybacks. In Europe, the June PMI came in at a four month high, helping some of the banks across the pond. The Supreme Court decided states can mandate sales tax for businesses which don’t have physical presence, so online retailers like Amazon, Wayfair, etc, will have to compete on a more level playing field with the brick and mortar locations. Yup, OPEC did the deed and raised production restrictions just a tad, but oil prices went up. In case you missed it, legendary PIMCO bond fund guru Bill Gross apparently was more than a little upset with his ex wife, and decided to spray the house he had to give up with a decidedly unpleasant aroma (flatulence flavored). Lovely, Bill, just lovely.

Politically, the war of immigration rages on as long time conservative George Will penned an op-ed declaring patriots should vote for Democrats as a protest for where President Trump has taken the Republican party. Democrats are interested in breaking up California into three pieces. Both of these situations make it clear that the major political parties have unity issues. It may be that the party which can solve their fissures has a better chance in the midterms, but many believe it will depend on the big T. On a personal note, like the rest of the country, I was saddened to learn the noted conservative columnist Dr. Charles Krauthammer died this week. He was a great writer and thinker and his clarity of thought and wisdom was always treasure to learn from.

If you found the blog interesting, entertaining, or just like reading about investing, get every blog post, newsletter, and article written by Y H & C Investments by submitting the following information-

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 Chartered Financial Analyst in no way means or guarantee performance better than market indexes.

T Gets Time Warner, The Fed Raises, Disney vs Comcast, and OPEC’s Meeting-

“When everyone zigs, zag”
Stephen Anderson

As we begin the start of summer, travel season is in full swing. Many take airplanes, but if you don’t have to go through the full cavity body search at a heavily congested airport, another form of travel is the good ol’ gas guzzling automobile (for you greenies, excuse me, environmentally concerned folks, a hybrid or electric vehicle is the preferred mode). If you live anywhere on the west coast, like I have my whole life, you may have experienced the joy of a nice traffic jam, especially in Southern California. As a quick aside, I can recall sitting on the 710 freeway in Los Angeles one Sunday afternoon for over two hours and not moving three feet. Lovely. Anyway, in making the journey from Southern California to Las Vegas by car, you know the travel time should come in around four or five hours, depending on pit stops. Of course, we are assuming no traffic issues. Now, if you are talking about a three day weekend and leaving Southern California at say, 5 pm, add two or three hours minimum to the time. Spending seven or eight hours in a car can be quite uncomfortable, especially if you have long legs, and not so great even if you don’t. So, thinking about traffic patterns, especially with services like Google maps and Waze available, is a high priority for travelers. You don’t leave on Friday afternoon from Socal to go to Vegas, maybe you leave Thursday. Let’s not leave Vegas Sunday night to come back, maybe we try Sunday real early in the morning. Basically, you are trying to zig when everyone else is zagging, or conversely, zag when everyone is zigging. Zig when they zag, zag when they zig. When it comes to investing, the same strategy is appropriate. When the rest of the world hates something, it affects the price. When everyone loves it, usually after results improve, you can be darn sure it will impact value. Buy hated stuff, sell loved stuff. Real simple to say, not easy to do.

There were a few major events in the markets this week with the Fed raising interest rates by a quarter point and indicating probably two more are on the way for the rest of the year. The ECB will stop buying bonds back by December, while the Japanese Central Bank will continue on its spending ways. The biggest news came with the approval and major court win by AT&T being allowed to buy Time Warner with no conditions. The deal closed yesterday. The implications of the case are quite large as the media area will probably undergo an orgy of dealmaking, benefiting the largest investment banks every step of the way. The first battle started the second the ink settled on the AT&T case when Comcast raised it’s all cash bid to buy the crown jewels of the Rupert Murdoch empire. Handicapping that one is interesting as the higher cash deal by Comcast probably will not outdo the Disney bid. Disney will certaintly have to raise the all stock price, most likely by adding some cash. Mr. Murdoch’s near 20% holding and 37% voting stake probably dictates taking the Disney offer because of tax and dynasty benefits. Other shareholders might prefer the cash today because of the time value of the cash and not wanting exposure to any stock, but you never know. I think the best that Comcast can do is raising the price for Disney. Other content players should also benefit as Google, Amazon, Facebook, and other tech giants start looking to snap up available sources of differentiation. Speaking of Facebook, I suspect Apple’s new operating system and controls are going to make life a lot more difficult for Zuck and company, as will a heightened look at data privacy in Europe and here in the good ol US of A. On the earnings front, it was a light week as Adobe met their number and raised but the stock still sold off.

Next week, OPEC will meet to decide on whether to relax production cuts or not. Russia is pushing for it big time, while the Saudi’s are probably luke warm. The trio of Iran, Iraq, and Venezuela, and what a threesome that is, desperately want higher oil prices to help with their, shall we say, domestic issues. It appears the middle ground is a cut of 500K to 1 million barrels, but one never knows with this group. Politically, Mr. Trump continues to antagonize the rest of the world with tariffs, Democrats with his natural charm and understated opinions, and fellow Republicans with his own view of where the party should go, meaning doing whatever he says. Still, compared to the prior White House occupant, a doormat deluxe, it is not even close. If ever there was a zigger when others were zagging, Mr. Trump would be the prime example. Enjoy your zig, or zag, whatever the case may be.

If you found the blog interesting, entertaining, or just like reading about investing, get every blog post, newsletter, and article written by Y H & C Investments by submitting the following information-

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 Chartered Financial Analyst in no way means or guarantee performance better than market indexes.

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