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October 23, 2019

Talk is Cheap

According to a recent Wall Street Journal article, people talking on their cell phones is a thing of the past. In fact, during the spring of 2019, a survey indicated that only 45% of people used their phones to make a voice call over the previous week. Think of that, less than half of cell phone users were using their phones to speak with each other. Now compare that with the incredible recent market action of Apple, which has risen over 50% this year, and is now well over a trillion dollars in valuation, and just got an upgrade to possibly go up another 30%. Apple has become the most valuable company in the world in large part because of the iPhone. For investors, huge success sometimes comes from the less obvious paths that great companies take to satisfy the need of their clients.
October 9, 2019

Route Zero through the Beltway

The year 2019 may go down as the year of zero for our nation’s capital, Washington, DC. It begins (and ends in his mind) with our President, as he continues to bait and bash the Fed chairman about getting interest rates down closer to zero. He is certainly not the first president to want low rates but definitely is the most outspoken. Speaking of outspoken, as the opposition begins to mount their presidential challenge in 2020, the talk is again zero, zero cost tuition, zero cost healthcare for all, and zero gas emissions. Not to be outdone, the hometown Redskins, jumping on the bandwagon, have a legitimate chance to have zero wins by the end of the year. Alas, Wall Street cannot miss a party and late last week the large discount firms embraced zero commissions. The Skin’s can’t go less than zero, can they?
August 27, 2019

The Race to Zero

Today we are going to talk about negative interest rates. In Japan, Germany, and France, to name the three big ones, interest rates are negative, which means their central bank will charge you for the privilege to hold and use your money. Currently, there is approximately $17 Trillion (with a T) invested in negative interest fixed income. So, you give me $1000 today and I agree to give you your money back in ten years, less about $5 per year as a cost to the investor. Amazingly, and for now, investing in ultra-low or even negative bonds has worked. If you buy a bond with negative rates, you just need it to go a bit further in the red…If this is a hard concept to get your arms around, you are not alone, because it has never acted to this extent in economic history. The talk is all about inverted yield curves and trade wars, but the huge, worldwide bond market is ground zero, and the race is on. Or should we say ground “less than” zero.
July 31, 2019

Platform Style

Platform is a business model that creates value by introducing two independent groups, typically consumers and producers, for a financial transaction. The companies that embrace this model, like Amazon, Airbnb, and Facebook, can rapidly scale their business in ways a traditional business (with pesky store fronts, inventories, etc.) cannot. This is how Airbnb in just 11 years could grow to 150 million users, in over 65,000 cities, offering 1.9 million listings at any given time. When looking for investment ideas, be sure to consider both the pros and the cons of the company in a world that is embracing the Platform like it was 1977.
July 12, 2019

Fun With Numbers

New York City has the highest population density of any US city with 27,000 people per square mile. Now that is a fun fact. For stock investors, numbers can be fun too, especially when markets are trading at or near all-time highs. The Dow closed above 27,000 for the first time this week and Wall Street loves round numbers. Not to be outdone, the S&P 500 traded above another round number, 3000, this week as well. To put it into perspective, a little more than ten years ago, at the Great Recession bottom on March 9th, 2009, the Dow and S&P were trading at 6,547 and 676 respectively. Cheers to the bull while it lasts!