You just have to be opportunistic, and try to figure out what creates value—where the bottom is, what creates incremental value, and in what combinations.”
John Malone
When you study history, you find that many industries, especially those which required physical activity or skilled labor, offered apprenticeships for young workers as a way to learn from seasoned, experienced hands. I am sure you are familiar with guilds in iron working or carpentry as an example. There are plenty of others you can probably imagine as well. In the modern world, internships at investment banks are the version of apprenticeships for aspiring investors. However, investing capital is different than trying to create or evaluate a good deal, restructure a company to create more value for its owners or potential buyers (depending on the deal), or merge competitors into a one unified entity. As Mr. Munger says, nobody was born a good investor. So, if you didn’t go to Wharton or Harvard and get an MBA, and don’t happen to land one of those highly prized internships at an investment bank, you are forced to your own devices to find out how to invest. At this point, many people become familiar with Warren Buffett. Clearly Mr. Buffett is the greatest investor ever, but there are lots of great wealth creators out there, and the more of them you can discover, the greater your knowledge repository to draw on. For many readers, you have long read about my familiarity with John Malone.
In case you were not aware, from the early 1970’s until the early 1990’s, Mr. Malone oversaw the number one performing stock on any exchange anywhere in the world (after starting in very difficult financial circumstances at TCI Cable). Over the last ten years or so, while not doing that well, Liberty shareholders returns have bested the major indexes. So, there are worse people to become familiar with than this acclaimed billionaire. Over the last week, I went to the annual Liberty Investor Day, as I have done for the last five years or so, and it is always a good experience. There are the usual presentations about each business by the many Liberty controlled companies, and what has become the legendary video which management produces that pokes fun at various parts and people in the Liberty Empire. The most memorable part of this years event was when a highly regarded technology analyst asked Mr. Malone about how he felt about not pursing any potential sale with Charter Communications (NASDAQ:CHTR) last year? Mr. Malone’s terse but calm answer was essentially that he does things with only one entity in mind, that being Liberty shareholders, him being the largest one. As such, if your time horizon is not as long as his (think decades), there is a disconnect. He then gave the wisdom that stock prices of his company go up when people see a business favorably, and down when they don’t and he just reacts to what the situation is. It is not the worst thing in the world to keep that in mind, eh?
Elsewhere, investors came to the conclusion that global growth is slowing when both Germany and Japan had worse than expected GDP results. In conjunction with that, Theresa May had cabinet members quit after trying to negotiate final Brexit terms with the European Union. In the commodity markets, oil prices continued to retreat based on the slowing growth thesis. In the US, Maxine Waters decided to let the investment world know where she stood when she inherits the post of House Financial Services Committee chairperson. Maxine said the free pass for large banks by easing regulations was finished. Clearly, a fellow Democrat might mention to Maxine what the political reality is in the Senate as well. Anyway, as if they did not have enough negative sentiment towards them, large banks took it on the chin this week, along with the rest of the market. Maybe it was the fires in California, maybe the slowing growth idea is reverberating, or maybe people see technology valuations as just way too high? Whatever the case may be, since the end of September, investors mood has turned dour. Maybe Thanksgiving will, shall we say, lighten the mood?
Finally, we should mention the tragic situation in California with the fires and the loss of life, homes, and animals that it has taken place. It certainly makes you realize the fragile nature of the world that we live in. Fires, hurricanes, terrorist activities, cybercrime, well, there are plenty of difficult things that can happen which make today's environment quite unpredictable. All the more reason to find wisdom wherever one can, including long standing figures in the investment world. There is a link to Mr. Malone’s interview with David Faber at the bottom of the page, in case you are interested.
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.