On Monday, August 5, the Dow Jones Industrial Average was off over 1,000 points. Investors were in a snit. Investors sometimes get that way. This time, with the days of 0% interest rates and a wide-open Washington fiscal spigot behind us, their by-product, ruinous inflation, had been taking its toll. To get this inflation to a manageable level, the Fed had raised interest rates several times in 2022-2023 and had kept rates fairly high. Now, as August 2024, got underway, the Fed was being blamed for harming the economy.
Continue reading ““S-O-Y-H””Category: Uncategorized
Walgreens and the Dow…”A Blessing in Disguise?”
Four years ago, with ExxonMobil flat on its back at $40 per share, the Index compilers at Dow Jones decided that, after 92 years, the time was right to say goodbye. Salesforce was chosen to replace Exxon in the Dow Jones Industrial Average, and why not? Salesforce was an entirely reputable New Economy stock, and, after all, anything involving fossil fuels was a guaranteed loser. In the midst of this drama, we wrote “Exxon Mobil and the Dow… ‘A Blessing in Disguise’.” Now, with Walgreens getting the boot (February 26), the time is right to resurrect and re-work that earlier piece.
Continue reading “Walgreens and the Dow…”A Blessing in Disguise?””La Pomme
“The IBM case was the Antitrust Division’s Vietnam.” – Robert Bork
“Apple is worth nearly as much as Tesla, Meta, Berkshire Hathaway, United Health, and Visa – the sixth through 10th most valuable American companies – combined.” –Forbes; June 30, 2023
On January 17, 1969, the last day of the Johnson Administration, the U.S. Department of Justice filed an antitrust suit against IBM. The suit was filed under the Sherman Act and claimed that IBM was trying to monopolize the market for “general-purpose digital computers.” There followed six years of discovery and 700 trial days over seven years after that. The latter involved 87 live witnesses, 860 deposition witnesses, 104,400 trial transcript pages, and 17,000 exhibits. On the government side, the case spanned the terms of five Presidents, nine Attorneys-General, and seven Antitrust Division chiefs. On the defense side, the lead firm was Cravath, Swain & Moore, some of whose attorneys worked on nothing else for 13 years. And, after those 13 years, the U.S. Department of Justice abruptly declared the case to be “without merit” and dropped the charges.
Continue reading “La Pomme”November 2023 —
Anything to Do?
Yesterday…all my troubles seemed so far away. Now it looks as though they’re here to stay.
“Yesterday,” Beatles (1965)
Well, here we are in yet another crazy, mixed-up world with a list of troubles seemingly without
end and seemingly here to stay. At home, we have a work force reluctant to go back to work,
persistently high inflation, an ultra-high federal debt load, and a governing class looking like
two armed camps. Overseas, we’re dealing with two large-scale wars, either one of which could
become a much larger conflict. What’s the investor supposed to do in the fall of 2023? Always a
good question, and we once again were reminded of another time and place and another set of
highly unpredictable outcomes.
September 2020. A good friend and client asked one of us about the upcoming presidential election,
specifically how that election might impact her portfolio and what, if anything, she and we
should do about it. The lengthy email response? Not much that clients and other friends of the
Firm haven’t heard before from us, but a few things you might find interesting. Naturally, we’ve
done some editing of the original email, and, in the immortal words of Jack Webb, “the names
have been changed to protect the innocent.” Anyway, here goes. The subject is the 2020 election,
but to make a few points, as you’ll see, we go back to 2016.
Anything to Do?”
Silicon Valley Bank —
The Jury is Still Out
“mor·al haz·ard … a lack of incentive to guard against risk where one is protected from its consequences.”
– Oxford Languages
“A billion here, a billion there, and pretty soon you’re talking about real money.”
– Everett Dirksen
Haven’t we been here before? The SVB matter in particular has brought back a lot of bad 2008-2009 memories: swirling rumors of bad credits on the balance sheet and inadequate bank capital; bank stocks cratering on Fridays because of weekend uncertainty; shotgun marriages over the weekend; shareholder wipe-outs on Monday. Wasn’t Dodd-Frank supposed to take care of such drama, among other things,
Continue reading “Silicon Valley Bank —“5%
“‘Never’ is a long time, Marian.”
– Shane, in the movie of the same name, 1953
November is in the rearview mirror. With 11 months down and one to go, 2022 so far has been an unusual year, to put it mildly. First and foremost, the prices of both stocks and bonds have moved together to the downside. Most investors never have experienced such a phenomenon and in fact have clung to the belief that such a phenomenon never could happen. Never is a long time, however. The historical data in the investment world can be overwhelming, and what the data say is that stock and bond prices can and do move to the downside together about 5% of the time. Two thousand twenty-two has been one of those 5% times. Two thousand twenty-three? At the macro level, we suspect that the more traditional relationship between the two markets will reemerge, and are encouraged by a number of factors. At the micro level, the Value style of investing has been the place to be this year by a wide margin, and we expect Value’s outperformance to continue for quite some time. Onward and upward.
Continue reading “5%”“Well, here’s another nice mess you’ve gotten me into.”
So sayeth the great Oliver Hardy to his equally talented sidekick, Stanley Laurel, in countless classic films. With only a few minor changes, the same could be said to those responsible for our macro-economic well-being. Sure, as we stated often, no playbook for the post-COVID economic recovery existed, so missteps were inevitable. But some were not. Washington’s massive and ongoing fiscal largesse in recent times and the Fed’s monetary spigot, now turned off but wide open for far too long, amounted to pouring unneeded fuel on the inflationary fires. The Fed now is responsible for putting out those fires, but when will the Fed get a handle on the problem and at what cost to the economy?
Continue reading ““Well, here’s another nice mess you’ve gotten me into.””We’ve Seen this Movie Before
“History doesn’t repeat itself, but it often rhymes.”
– Mark Twain
What exactly is the best, or at least the most well-known, barometer of U.S. Large Company equity performance? The answer: Despite its many faults (more about those in a moment), most people who routinely traffic in such things would point to the S&P 500 Index. So, with the S&P currently hovering at or near bear market levels (a decline of 20% or more from the Index peak), the breathless anchors at CNBC and elsewhere would have us believe that the sky is falling in Chicken Little fashion. OK, the 2022 sledding has been a bit rough, and the reasons, e.g., inflation, rising interest rates, are not to be taken lightly. But, the math behind the S&P 500 suggests that the Index isn’t always the best indicator of what’s going on out there. In fact, there is another Large Company stock market in 2022, and so far the sky over that stock market has not been falling. Some background…
Continue reading “We’ve Seen this Movie Before”April 2022 – That Was the Month That Was
A challenging April finally is in the books, and, on top of that, here comes the Fed in May. The monetary spigot has been wide open for too long, and the last couple of COVID relief checks probably were gratuitous in most cases, all of that to go along with numerous supply chain disruptions. So, too many dollars chasing too few goods. In other words, classic inflation at an uncomfortably high rate and the sense, as we moved through April, that solving the problem will require more than a quick Fed fix with only a modest rise in interest rates.
Continue reading “April 2022 – That Was the Month That Was”“S – O – Y – H” (II)
February 25, 2022
So, they’ve gone and done it after all. The Russians have taken the next step in the re-establishment of the old Soviet empire, and invaded the rest of Ukraine. Worldwide equities, which already were facing interest rate headwinds, now have very real geopolitical problems with which to contend. In an investment sense, how should we react?
March 9, 2020. We clearly are not dealing with some sort of flu bug – in an effort to contain the spread of a lethal virus, economies everywhere are shutting down. The public health and financial implications are unknown, and U.S. equities are under considerable pressure. Then, as now, we confronted the “how should we react?” question by penning “S-O-Y-H,” and we once again submit the following portion of that earlier March 9, 2020, Perspective to your attention.
Continue reading ““S – O – Y – H” (II)”