Market Sags On Fed Minutes, March Soft Jobs Report

All I need is a sheet of paper and something to write with, and then I can turn the world upside down. -Friedrich Nietzsche

When I was a young boy, my mother tried her best to make us (me and my twin brother) read. He was naturally more inclined to do so, and became quite a historical scholar. I gravitated more to math, leaning towards sports and pretty girls (what young lad doesn’t right?). Anyway, as my immersion in the financial world became close to obsessive, it became quite important to spend a great deal of time reading, especially financial filings. With the onset of spring, now is the time for investors to start receiving the stream of annual reports, which arrive almost daily.

Some are eagerly anticipated, like Berkshire Hathaway’s in the first week of March. I like to read almost every shareholder letter I can to get a sense of how management teams communicate with their owners about current operations and future plans. Some of the best letters are written by CEO’s you have never heard of but have made their owners plenty of dough. As so eloquently stated above, words can have a dramatic impact, especially for shareholders.

The week was interesting in financial markets as the March jobs report came in a touch soft yesterday. Volatility was evident when the ADP number came in quite strong, the market shot up nearly 200, and then reversed suddenly when the members from the Fed and Paul Ryan started talking interest rates and pushing back possible tax legislation. As soon as the pols (dodobirds) start yapping, it is time to click the sell button. If you are so inclined, you might take a good hard look at the annual shareholder letter from Jamie Dimon, the legendary CEO of Chase.

Dimon helped create the massive Citibank with Sandy Weil, got canned because of a run in with Weil’s daughter, and then took the head job at Bank One when it was in the dumps. Two years later, Chase bought Bank One with Dimon getting the top job. He opportunistically bought Bear Stearns and Washington Mutual during the financial crisis, and has created the most powerful bank in the world (100 billion in revenue, 25 billion in net income, #1 in nearly every business line). It is well worth your time to hear Mr. Dimon’s thoughts.

In the deal world, investors were pleased with the acquisition of Panera Bread (NASDAQ:PNRA) by JAB Holdings, a private equity group which also owns Krispy Kreme and a few other coffee based companies. Some are even getting a little delusional thinking JAB can challenge the mighty green apron. Don’t go sippin that cool aid. If you have ever owned the stock of a holding company, you know that they typically trade at a discount to the underlying pieces.

Such was the case with Liberty Ventures, which owns a few businesses along with shares of Charter and Liberty Broadband (20% owner of Charter). Naturally, Mr. Malone and Maffei did a deal to eliminate the discount, buying the largest cable and second largest telecom provider in Alaska. The deal rationalized the Ventures and QVC capital structures, is tax efficient in a number of ways, and sets the table for these equities to become asset backed (previously they were tracking stocks). You can see it is a bit complicated, but such is life as a Liberty shareholder. You can guess what happened to the stocks.

Looking ahead, next week will begin first quarter earnings reports with the big banks taking center stage late. Oil seems to be benefiting from turnaround season ending and the expectation of increased gas usage from spring and summer driving. It would not be unreasonable to think the fellows at OPEC will extend their production cuts another six months, either. Retailers also will be closely watched to see if there is any change in consumers penchant for avoiding the mall and staying at home to, click click. All things considered, there is much to investigate and read. Let’s hope the writing is first class, like my readers.

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.