Cyprus, Lulu's Lulu Of A Problem, And The Russia-China Energy Deal

Spring approaches rather quickly and the great thing about financial markets is there is always something to pay attention to. The focus has now been the situation in Cyprus, where the banking system will collapse without a European Union loan. Cyprus is trying to find ways to meet the EU requirements, and has considered various measures to meet everything the EU wants. The leaders of Cyprus are considering creating levy's on deposits of over 100,000 euros, and other similar kinds of measures. As of this writing, there has been no resolution to the banking problem in Cyprus. The reason why this is significant is because if there is a run on the banks in Cyprus because of whatever the politicians decide to do, it is very possible the same thing could happen in Italy and Spain.

Italy and Spain are critical to the stability of the European Union, so what happens in Cyprus has major consequences in Europe, and therefore, everywhere in the world.

Last week, Starbucks held their annual shareholder's meeting and as always, it was a blend of entertainment, information, and learning for anyone who attended or watched it. Howard Schultz always is prepared, and Starbucks is very well positioned for continued growth for as far as the eye can see. One never knows what could happen in the global economy, but the strategies and operations at SBUX are very strong.

An ex-SBUX executive is Lululemon CEO Christine Day, who had a major problem on her hands last week. Lululemon had to recall yoga pants it sold because of holes in the back side when people bent over. The company is offering refunds to buyers of these products, and the stock got beat up pretty good. Lululemon has been a very good company to own as far as stock performance over the last five years is concerned, and it just goes to show you good businesses and management groups still have their issues. There are two kinds of businesses, those that have problems, and those that are going to have problems.

I find it very interesting that Hewlett-Packard and Best Buy have started to see better performance from their shares. Many have written these organizations as dead because of their operating problems over the last year or so. I still think both will survive and very well could potentially thrive, though I think Best Buy has a much simpler task at hand than HP. However, HP has a couple of strong businesses and is a huge enterprise with a whole lot of staying power. I also think Meg Whitman knows what she is doing and has had a great deal of success, so she is not someone I would bet against. In the same domain as HP is Dell, which is essentially going up for auction this week. If Michael Dell loses his own company because he did not want to pay too much, it might serve him right.

In the energy world, the most notable development was the agreement reached between Russia and China about future energy production from Russia being delivered to China, in exchange for some financing help. Rosneft and Gazprom dominate the energy industry in Russia, and China desperately needs those sources for its emerging growth.

If ever there was a company which I think is on the wrong path, it would be Microsoft. Windows 8 has been a bust, but they are still trying to solve the problem.

The cloud is for real and it will continue to change how business is done for quite some time.

Thank you for reading the blog this week, and I hope you are enjoying the spring weather, wherever you may be.

Disclosure: 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.