'The great successful men of the world have used their imaginations... they think ahead and create their mental picture, and the go to work materializing that picture in all its details, filling in here, adding a little there, altering this a bit and that a bit, but steadily building / steadily building.'
Robert Collier quotes (American motivational author, 1885-1950)
Well, after the March jobs report showed non farm payrolls increased only 126 thousand, versus the expected 245K, the recently accepted idea of a persistently strong dollar now has to come into question. Going further, the impending interest rate hikes upon which much speculation has been made, will come into question. At the very least, if Mrs. Yellen sticks to her thesis of being data dependent, the profound job market weakness in this report would suggest 'Lower for Longer' remains the probable winner as far as interest rate hikes are concerned.
You can also begin to question the idea of dramatic euro weakness, in spite of the implementation of their version of quantitative easing. With U.S. interest rates probably staying muted for longer, the differential between Europe's rates and ours most likely will narrow. As such, those who believe our bonds remain a better yield option than in Europe may have to rethink their thesis. All in all, the bad jobs report may be a one time outlier which can be attributed to season factors like bad weather, but investors are going to be watching all future data very closely for further corroboration of where the economy stands.
Microsoft (NASDAQ:MSFT) turns 40 next week. Mr. Softee was one of the great wealth creators during the last generation. I saw where an investor who bought 100 shares of Microsoft at the IPO in 1986 would now be sitting on holdings, with dividends reinvested, of $1.8 million. There is much to be learned from Microsoft as it has all the characteristics of a company which grew from a small entity into a corporate behemoth with over $50 billion in sales. For investors, if you find one of these in your life you have clearly done well. Microsoft like situations, where you have a company which splits 9 times in 40 years, typically occur when a company captures the majority of market share in a growth expansion which lasts for decades. Apple (NASDAQ:AAPL) would be another example, currently riding the wave of mobility computing with smartphones and tablets. If you find one, just one, only one, pretty please, just one, you are set. Not easy, but remember, it just takes one, and there are many of these kinds of examples (JNJ, Exxon, Proctor & Gamble, Coke, Pepsi, etc).
In other corporate news this week, we learned Charter Communications (NASDAQ:CHTR) is buying Brighthouse Networks for over $10 billion. Liberty Broadband Srs A (NASDAQ:LBRDA), led by John Malone, will own 25% of the votes after helping structure the deal. It is contingent on the regulatory approval of the Comcast Corporation (NASDAQ:CMCSA)-Time Warner Cable Inc (NYSE:TWC) purchase as well. The Charter structure keeps in place all of the benefits which Charter had when Malone bought majority control a few years ago. It uses cash, stock, and debt, and maintains all of the tax loss benefits which Charter has, nearly $10 billion worth. Structuring deals which takes advantage of all the assets possible without tax leakage is an art. I wonder who the leading practitioner of this specialty is?
In stark contrast to structuring as efficient a deal as possible, US negotiatiors agreed to a 'framework' of a deal with Iran regarding the latter countries nuclear possibilities. Iran is a country which is the leading sponsor of world turmoil and terrorism. It actively funds terrorist organizations like Hamas and Hezbollah. It has helped create terror groups in Syria, Libya, Iraq, Lebanon, Yemen, and other countries in the Middle East and Africa. Rewarding ones enemies and selling out your allies is the trademark of the current administration. You could also make a strong argument it potentially is endangering people all over the world because it could put in place the mechanism for the leaders of Iran to potentially eradicate the planet. Iran's leadership has actively chanted 'Death to Israel' and 'Death to America' for years. When they use the term, the 'Great Satan', guess who they are referring to? Boon Pickens had the best quote about the deal. 'Those who want a deal real bad usually wind up making a real bad deal.' On that lovely note, I hope everyone has a great Easter and Passover.
DISCLAIMER: 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.