Anyone who travels by car from Southern California to Las Vegas is familiar with the long, winding, roads and desert landscape. As part of the three hundred mile road, there are a few small towns you can stop at, to, shall we say, relieve oneself, or potentially find something tolerable to eat. One such town is a little hole called Baker, famous for having the largest thermometer in the world. The only other noteworthy segment of the town is it is the home of a dining establishment called, interestingly enough, 'The Mad Greek.' Apparently, the food is quite good, and some friends we know make it a point to stop there during every road trip. For our purposes, however, we would like to call attention to what is most applicable, at least from our point of view, to the accurate representation of what has, and continues to, plague the global investment environment. In case you have been eating a gyro which temporarily caused some amnesia, my reference point is the little pipsqueak of a country known as Greece, which certainly is causing investors worldwide to go mad.
You see, as we all should know, the Greeks are busted, belly up, broke. The country cannot pay its creditors, and the bills come due at the end of the month. The only reason why it is at the end of June is that their creditors agreed to have Greece lump all of its payments into one payment at that time. Of course, the key point is, IF they could pay. As Mr. Lincoln once said, that is the nub of it.
The Greeks had indicated they would make the June payments until the day before they were supposed to be made, when their fine leadership said, 'So sorry, let's wait till the end of June.' The Greeks bought themselves some time, and now $1.70 billion is due to the IMF in a few weeks. The Greeks then came up with their own plan and presented it to the IMF, which promptly told our mad friends to 'Get Realistic.' When you are a creditor, you set the terms, a key point the liberal Greek leadership does not quite understand or will not accept. So here we are yet again, six years into the mess, our attention turned to a group that probably is more qualified to be in the Mad Greek in Baker than the focal point of the global economy. Mad, indeed.
How this all plays out, nobody knows. Bond yields rose sharply last week in Europe, and then in our markets. Rumors swirled about potential deals, and the equity market soared, then burned on Friday when reality - hint, hint - set in. Retail sales and inflation expectations were better than expected, so it appears the economy is starting to firm up, from non-existent growth to a smidgen, tiny, incy wincy, little bit. With lift off (of interest rates) still expected in September, there will be plenty of data to digest during the next few months. Earnings season starts in about a month, and we will know more on the corporate profit front during July. Volatility has picked up some, but volumes remain muted. Summer is usually a slow time, but with the Greek show over five years and ongoing, it is not hard to see how this gets resolved any time soon.
Elsewhere in the markets, Wingstop had its IPO last week and the stock soared 60%. As a maker of some great chicken wings with unique flavors, make sure to bring some antacids if you eat there, or decide to nibble on the stock. Restoration Hardware (NYSE:RH) reported fine results, and the purveyor of home furniture saw its stock jump almost 5% this week. One thing about Restoration - they do a superb job of merchandising their wares. In addition, the private equity group that took them private and then brought them public again has made a killing on the deal. If you are familiar with their pricing, I am sure you are not surprised.
In the technology part of the universe, Twitter (NYSE:TWTR)'s CEO Dick Costelo decided he was burned out and resigned. I am sure it is not possible, but perhaps all of the stock sales over the year and one half tenure as a public company just flat wore him out! I would be confident Mr. Costelo sold over $100 million of shares during the last year. By all accounts, Costelo did a good job of starting to get Twitter to become a profitable operating entity. Also, the specific technology Periscope has the potential to be game changing for Twitter. Still, co-founder Jack Dorsey has a big hurdle in trying to have Tweetybird compete with Facebook (NASDAQ:FB), Google (NASDAQ:GOOGL), Yahoo (NASDAQ:YHOO), and others to help maintain a nearly $25 billion valuation.
The deal environment continued unabated, and rumors persist Dish (NASDAQ:DISH) will try and buy T-Mobile (NYSE:TMUS). Stay tuned. In my little neck of the woods, a company I have been paying attention to is Leapfrog (NYSE:LF). They reported results after delaying them for quite a while. When you lose $100 million in a year, well, that is not good. When you then say you will lose another 100 million again next year, you can only imagine how that went over. Especially when you only have 125 million in cash (no debt). Nope, we don't own it, and we ain't buyin it. You have to look, though, you have to look.
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