When the famous ESPN commentator Dick Vitale was once head coach at the University of Detroit, he had a nickname for guys on his team who were tall and looked good, but could not play a lick-
"All-Airport". As President of the United States, Barack Obama should be nicknamed the "All-Airport President" because while appearing to play the part of the country's leader, when one evaluates him using any kind of objective criteria, he fails on nearly every level. Anyone who has been involved in leadership of a business, organization, or athletic team knows credibility is the vital ingredient to making an entity operate well. Barack Obama currently has the big goose egg in the important c-word area in both the foreign policy arena and on the domestic front.
When the Soviet Union sent military forces into the Crimean portion of Ukraine, it validated many of the arguments long time opponents made about Barack Obama. For five years, his critics have criticized him for not confronting aggressive leaders from Iran, Syria, and now Russia. Those who have found fault also believed he should have been far more supportive of democratic interests during the Arab "Spring" and during the killing of American diplomats and military personnel in Libya. In none of these prior situations was anything done to stand up to those who might harm U.S. citizens and members of the armed forces, destroy U.S. assets, or potentially hurt U.S. allies. Now, the United States faces a very different globe in terms of how the rest of the world views us.
In the Civil War, General McClellan was in charge of the Northern Army, which held a far superior manpower position when potentially fighting the Confederate Forces, led by General Lee. Eventually, Lincoln said about McClellan he had a case of "The Slows", because he would never confront the enemy. It appears as if President Obama and General McClellan have the same illness.
On the domestic front, the brainchild known as Obamacare continues to plague the country, and with it, all members of the Democratic party. Another genius of our government, and a politician who makes many ill merely by appearing on the television screen, is Senate Majority Leader Harry Reid and key Obama ally. Reid recently commented that all of the hardships reported by people about the Affordable Care act were complete lies. The delusional nature of Mr. Reid is indicative of the arrogance of the current administration regarding their attempts to cram down on the country's citizenry it's beliefs about how large parts of the economy should be operated. It also is the best example within the country on why Barack Obama has a large credibility problem, and one which he will wear like a cheap suit for the rest of his presidency.
Like nearly every situation which involves confrontation, it is always instructive to pay attention to the economic aspects to gain a better understanding of the root of the matter. In the Ukraine, a major issue is how oil and gas from Russia is piped through the country to end up in Europe. Almost 25% of all gas used in Europe comes through the Ukraine pipelines and is supplied mostly by Russian national gas company, Gazprom. The Western European countries and the United States are trying to help Ukraine pay for debts piled up in past years and owed to the Russian company, something in the neighborhood of $30 billion. Our group has come up with a whopping 1 billion in loans to help the Ukrainians. Europe is badly hamstrung in the dispute because it needs the gas supplies.
This brings us to Mr. Obama's energy policy, all of which are centered around green and renewable energy. As anybody who is familiar with global energy markets can tell you, oil, gas, and coal will be the dominant sources of energy for many years to come. At best, in five years time renewable and green energy will make up 5-7% of all energy sources. Essentially, by not having a good working dialogue with the oil and energy industries, in fact, one could argue the current administration is downright hostile to those groups, President Obama has taken a huge strategic advantage of improving energy production in the United States and turned it into a wasted asset. Russia's government is nearly completely dependent on energy revenues from Rosneft and Gazprom to fund their government. Any kind of market share shift towards the United States and North America in oil and gas is crippling to Russia. If you unshackled the energy industry with the regulatory constraints it is littered with, it potentially could very much shift the political dynamics all over the globe, especially with countries like Iran, Libya, Venezuela, Egypt, and Russia, who ain't exactly our best friends. Instead, Mr. Obama is more concerned with what time happy hour is. Great.
In the financial markets, an interesting event occurred involving Bitcoin, the digital currency. The largest global exchange in Japan for Bitcoin went belly up, and another exchange failed yesterday. At one point, one bitcoin traded for over $1200. The current bitcoin price is $640.5 so some investor's might find it to be a bargain. No comments from the management on that one.
In another interesting area, a few business development companies have commented they believe we are at the peak of the credit cycle now, with far too much capital available chasing too few opportunities. Business development companies are interesting creatures because they borrow money in the capital markets, and then make investments in the debt of either venture capital type companies or small to mid market businesses. If a company gets sold or the debt gets repaid on time, everything works out well. If not, well, the BDC has to refinance their debt or sell assets to repay whatever may come due. When these companies say we are at the peak of the credit cycle, you have to know debt is probably going to get more expensive in the near future.
Over the last week, the equities market has vacillated based on the current status of the situation in the Ukraine. As spring is nearly upon us, I am sure many retailers are eagerly looking forward to a bit of nice weather as it would not be surprising to see the eastern and middle parts of the country really happy to get out after a very tough winter. I hope some of the nice weather here in Vegas will make its way to the rest of the country.
Finally, today an interesting situation took place during the House of Representatives hearings regarding improper action by the IRS (Me Thinks You Doth Protest Too Much) It speaks to the dysfunction in the government, and when you have the IRS targeting specific non profit groups based on political affiliation, there certainly have to be questions raised about abuse of power. Worse, when people don't want to answer questions about uncovering what took place, the government has serious problems. Mr. Cummings, me thinks you doth protest too much. Thank you for reading the blog this week, and let's hope for some better weather.
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.
No comments:
Post a Comment