Recession is Built In, the T-Hause, and Facebook gets the London Olympics-

July 4 has come and gone, and the summer Olympics in London are rapidly approaching. Summer is usually a more relaxed time, and the record hot temperatures across the United States have literally put a little fire under most people. In stock markets across the world, trading volumes are usually light and this year is no exception. In looking at the volumes over the last few weeks, the average volume is half of what it might be during the fall or winter. As a result, the volatility is more pronounced. With the profit warnings from Cummings, Nike, AMD, and the bankruptcy of Patriot Coal, investors are very nervous over the possibility of a global recession.

From my perspective, in many ways, the world economy is already in a recession. Unofficial unemployment in the U.S. is already 15%, and that does not include the underemployed. In many mature European countries, you have official unemployment rates hovering well above 10% and youth unemployment above 20% and in some cases closer to 50%. Stock markets have done very little for 15 years, and bond yields are incredibly low. Many believe the continued low interest rate policies of the Federal Reserve are the proper medicine to fight deflation. Many disagree as well, sighting a persistently sluggish economy and lack of jobs and hiring in the private sector. I think most people are sick of the finger pointing and want results, not excuses or blaming the opposing political sides. If people want bickering, they can look at their young children and teenagers and get enough disagreement to last a lifetime.

Let me include a shameless plug for a new business I am a part of, the T-Haus:(www.californiathaus.com).



I have been drinking loose leaf tea since my sister in law Jacci Aronson introduced it to me last December. Drinking tea has become a wonderful daily habit for me and I thoroughly enjoy preparing a different tea each morning and evening. If you have any gift needs or would like to try drinking loose leaf tea, you might go to the site and call Jacci for more information. She will certainly provide you plenty of information to make the experience enjoyable. (If you have any interest at all, just enter your email address and you will be added to our mailing list).


Social Media is just so powerful and it is helping change the business landscape very quickly. Those who embrace it will prosper, those who don't will fall by the wayside. Here is a nice piece about a fashion related startup- http://techcrunch.com/2012/07/11/social-media-for-the-fashion-conscious-chicisimo-chalks-up-800k-in-angel-funding/

The Olympics are going to be integrated with Facebook. Lots of people doubt the company, but I am not one of them-http://www.nytimes.com/2012/07/11/business/media/nbc-and-facebook-announce-facebook-partnership.html?ref=business

Nice article about how to help achieve your goals-http://www.businessinsider.com/five-steps-for-achieving-your-goals-2012-7

Finally, I know it is hot, hot, hot, so make sure you drink plenty of water, or tea- hint, hint, to make sure you stay hydrated. Have a great rest of the week and weekend.

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 charterholder.
Here are some Seeking Alpha articles Yale Bock has written about specific companies.

Summer Slowdown, A New Tea Store, Who Need's PC's, and the London Olympics-

Over the weekend, Greece citizens decided to elect a government that is more responsible than a completely idiotic party. Well at least they did not decide to do the stupid thing, however slim the margin was. In fact, many argue the best thing for Greece and Europe would be to have them leave the European Union. I know this, I am pretty confident Germany is fed up with all things related to Greece, and at this point so am I. I find it amazing there are those who believe the fault lies with Germany because they enabled poor fiscal habits by the countries in Southern Europe. Still, Germany finds itself in a tough position as 42% of its exports are to the rest of Europe. If you think Germany wants to see the Euro fall apart, you are badly mistaken.



In the United States, again we see the same old calls for more monetary stimulus to counteract a possible slowdown in the economy. Hello, do these people ever operate in the world? Do they not know the summer is always slower? People do take vacations, slow down, take it easy, you know, that kind of thing. Today, Federal Reserve Chairman Ben Bernanke decided to extend 'Operation Twist' until the end of the year. Great, continued record low interest rates at the long end of the bond curve. It has really worked so far, hasn't it Uncle Ben? He would argue it has, as the economy is not in recession, or even depression. I suspect until the election in November, we are at a stand still, in the economy, in the stock market, and politically, whether we like it or not.



The NBA Finals continues this week as the Miami Heat have jumped out to a 3-1 game advantage over the Oklahoma City Thunder. As always, playing smart and not making mistakes are usually the path to success, and this series has been no exception. Turning the ball over and not making open shots are not winning recipes.
The Olympics is less than a month away, and I am very excited to see them. I think England will do a great job as a host and the world will be captivated, as always, by the pageantry and great competition. Apparently, tickets are very hard to get-http://www.bloomberg.com/news/2012-06-20/olympic-tickets-sell-for-20-times-face-value-on-secondary-market.html



I recently started drinking loose leaf tea and really enjoy the experience. There are many different kinds of flavors, with a great majority of them potentially very good for you. Many kinds are high in anti-oxidants, which have a number of positive health attributes. Apparently, Starbucks agrees with me as they are opening a store in Seattle which just sells tea-http://seattletimes.nwsource.com/html/businesstechnology/2018473295_tazo20.html



Finally, it is interesting to see more and more of the world move away from personal computers. I love the Ipad, and if Intuit ever makes a Quickbooks version for it I am in like flynn. The PC is probably not going away any time soon, but it will be nice to have more options than to be stuck with Microsoft products, which I think are awful. Here is an article about a move to virtual pc's-http://www.businessinsider.com/this-company-just-yanked-out-500-pcs-to-get-windows-7-from-the-cloud-2012-6

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 charterholder.

Here are some Seeking Alpha articles about specific companies.

How to Identify Winners, Beating the London Whale, and an Interview with Mitt Romney-

Success is not easy, and it is not supposed to be easy.  The whole world admires and embraces winning, and people are rewarded for it, in many instances, far more than they should be.  Failure is not tolerated, and in society today, ridiculed.  However, what most people don't quite get, is that success is born from failure, if a person can learn from their experiences.  So how does one identify people or businesses, or entities which are going to be successful?  What qualities should you look for?
1)  Leaders who are bold and not afraid to lose.  It is easy to find people at the top who are always hedging their bets.  Hedging is a good strategy, especially if you have large gains.  However, to be a big winner, you need people at the top who have a bold plan about what they are going to do, and how they are going to do it.  One such leader is Howard Schultz, the CEO of Starbucks.  I can remember listening to a presentation by him when their stock prices was way down in the dump.  Their strategy was impeccable, and they knew exactly what they had to do.  Not once did their strategy change.  Over time, the company executed and the performance spoke for itself.  Shareholders get rewarded, and the success is played up in the press.  Schultz and his team learn from their mistakes, and are applying those lessons to all areas of the business, in countries across the globe.  If the stock gets pounded again, believe me, I buy a lot more.



2)  Leaders who embrace the challenge, and stick with the task all the way from start to finish.  Many people hope they get an opportunity with a successful business or organization.  However, most often, the real big chances one has are in situations which look very bleak.
I am very familiar with the head coach of the Oklahoma City Thunder, Scott Brooks.  Mr. Brooks has a background which anybody can and should admire. He was not drafted out of college, played a year in the CBA, and made the Philadelphia 76rs when they had Charles Barkley and Maurice Cheeks.  After playing 10 years or so in the NBA, he wanted to coach and had to start by being an unpaid assistant in something called the American Basketball Association.  He landed a job with the Denver Nuggets as an assistant, and then moved to Seattle to work for PJ Carlesimo.  The team then moved to Oklahoma City, and Carlesimo was fired twenty or thirty games in after losing every game by nearly 20 points.

Brooks is given a chance to coach the team as an interim coach, which he embraced.  The team wins 20 or 25 games that year, and the franchise rewards him with a 3 year deal to coach the team permanently.  OKC wins 50 games in his first year, and has now made the Western Conference Finals two years in a row.  Mr. Brooks takes advantage of his opportunities, and they have a heck of a chance to win the NBA championship.  He played young players like Russell Westbrook, Kevin Durant, Serge Ibaka, and James Harden and has stuck with them, sometimes suffering losses which were difficult.  Now the team is poised to reap the rewards of those lessons, possibly for a very long time.  A big thing Brooks has done is to emphasize the essential habit of trying to improve each day.  If you get better every day, over the long term, it adds up to tremendous improvement.
 

3)  Leaders who are building for the future, as well as executing today.  You should look for organizations who are strong today, but have large ambitions for how to go about growing in the future.  I look for companies who are investing in the largest countries in the globe- China, India, Brazil, Russia, Indonesia, etc, as a way to grow for the future.  You want companies or leaders who place a large emphasis on positioning for the path going forward.  You want to see what plans are in place, and how the group is executing versus those plans.  Many talk about their plans, but you don't want talk.  I want to see action- partnerships, agreements, new stores, new products, goals for next year, three years, five years, etc.  A great example of a company which invests in the future is IAC Interactive- led by Barry Diller (yes, full disclosure, my clients and I own shares in IAC).  Diller is investing in the future, and has his hands in a lot of pots, across the globe.  Will they all work out?  No, but he does not need them to.





Nice story in the NY Times about how JP Morgan got unseated by a smart trader-
http://www.nytimes.com/2012/05/27/business/how-boaz-weinstein-and-hedge-funds-outsmarted-jpmorgan.html?pagewanted=1&_r=1&ref=business

Great Interview by Peggy Noonan with Mitt Romney-​http://online.wsj.com/article/SB10001424052702304707604577424642695167400.html

Mobile Shopping is a huge opportunity-​Mobile Online Shopping Holds The Real Opportunity In Mobile Payments

A massive difference in global gas prices-​http://www.bloomberg.com/video/93419911-where-in-the-world-is-the-cheapest-gas.html

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 charterholder.

Here are some Seeking Alpha articles about specific stocks written by Yale Bock.

Facebook Flops, Steve Nash Invests, Fixing California, and More!

So the Facebook IPO came and went on Friday, and the stock closed 25 cents higher than what it opened at $42.00.  Buying IPO's means you are taking ownership of a piece of a business which is being sold to you by the original founders, early investors, and investment banks whose job it is to sell the shares.   Some of the sellers of Facebook include Goldman Sachs, Morgan Stanley, early Paypal and Ebay investor Peter Thiel, and the earliest founders of Facebook.  In the market, there is a buyer for each seller whenever a transaction occurs.  So, a thinking person asks, why am I buying this company at this price, and what am I getting for my dollars? 

Also, who is selling the stock and what might they know about the business that I don't?  On the day, there were over 570 millions shares traded of Facebook stock.  Usually, it is very interesting to see where IPO's trade 3,6, 9, and 12 months after it goes public.  Google had a very successful IPO, one which I thought was vastly overpriced.  Of course, Google acquired a bunch of businesses like Youtube which were very smart.  Not saying Mr. Zuckerberg's creation won't be as successful, just that time will tell on how things play out.


The stock market continues to sell off because of fears about Europe.  The sell off reminds me of 2008 in that it is a slow motion train wreck which builds during each day, and passing week.  Ultimately, there is a climactic event like Lehman crashing.  In this case, it may be Greece or other countries leaving the European Union, and then the bank runs which follow.  If you are an owner of stocks, it is a time when your holdings lose market value.  However, in looking back on 2008, it also is a time when you get presented with opportunities to buy companies at prices which you would have never thought possible.  Are we there yet?  Depends on how you see things and what companies you are looking at.  Saw an article in today's NY Times about how selection of companies does not matter.  Maybe not, but Warren Buffett might not agree with that premise, and he has done pretty well.

Steve Nash, the great NBA player, has gotten into the investment world through venture capital and angel investing.  Great player, and hope he does well-http://www.forbes.com/sites/kurtbadenhausen/2012/05/16/steve-nash-brings-his-nba-skills-to-the-boardroom/


A nice editorial written by a proponent of capitalism of what is wrong with California and how to fix it-http://www.bloomberg.com/news/2012-05-16/yes-there-s-a-case-for-staying-in-california.html


Interesting viewpoint on treasury bonds, which I think are the worst investment anyone could ever make today.  Time will tell but right now, seems like I have been wrong for three years-http://online.wsj.com/article/SB10001424052702303360504577412553217790184.html?mod=WSJ_hp_LEFTTopStories

Finally, a very good article summarizing how serious the Greek situation is-http://seekingalpha.com/article/602951-thoughts-from-the-front-line-dr-frankenstein-s-europe

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 charterholder.

Here are some Seeking Alpha articles about specific stocks written by Yale Bock.

Can We Please Get Serious?

Boy oh boy, it has been one heck of a week. So, lets do some commentary on the state of affairs, shall we? Last week, President Obama announced his support of legalized marriage for gay citizens. Let's think about what the United States currently is facing as far as its financial situation is concerned. We have 50 trillion dollars in unfunded liabilities in social security and medicare. The country is running deficits in the trillions, approximately 2 trillion per year. California, the 7th largest economy in the world, announced its fiscal deficit is $16 billion (it thought it would be only $9 billion), and the governor wants to raise income tax rates for those who make over 250K per year to 13%, on top of the federal tax rate of 35%. Something like 35 out of 50 of the states are running fiscal deficits. We have the GSA administration scandals, the Solyndra loans that went bankrupt, we are still dependant on foreign oil, and what is our leader concerned with? Yup, marriage rights for gay citizens. Are you serious? I guess Mr. Obama is leading with respect to his viewpoint on human rights, but from a financial perspective, he takes a pass on every tough issue. Just my opinion, and everyone is entitled.

Last week, Jaime Dimon of JP Morgan Chase announced the bank is on the hook for at least a $2 billion dollar write off for a bad hedge, and it may be more. As a shareholder of Chase, I am very familiar with Mr. Dimon and his leadership abilities. He was hired from Bank One, which he took over and turned around. I can recall a few years ago reading the whole risk management section of the Chase annual report and spending a few hours digesting it. When you have to learn risk management for the CFA exam, you find whatever you can to help you pass the test. You get one shot a year at passing, and you don't want to take it again.

Anyway, risk management is not easy and there are lots of issues to cover. You have operations risk, business risk, financial risk, trading risk, position risk, currency risk, allocation risk, and you are relying on others to oversee each section. Just as important, the goal of any business is to make money, not just limit risks. Banks have to take their deposits and put the excess cash somewhere, usually in loans or securities. To the extent a bank makes good loans and good decisions about the securities they own, a bank should be a profitable business. Indeed, Chase is very profitable, to the tune of $20 billion or so a year, depending on a host of factors. Banks do make mistakes, and usually it involves leverage, or borrowing too much money, especially short term money. The media and politicians are going crazy over the bad hedge with renewed calls for more regulation. California is the most regulated state in the country, and we see how that is working out. You cannot regulate good judgement or morality, but why bother trying to tell a publicity seeking politician that.

So the market has been scared to death because of the never ending European debt crisis. It looks like Greece is going to leave the European Union and revert back to their own currency. Well, get it over with, and if they need to get rid of Spain, Portugal, and Italy, they should take care of all of them at once. It won't be easy trying to work out the mess, and it looks as if many citizens in the old countries are starting to pull their money out of the banks. Again, these countries have regulations everywhere you turn, so how is that working out again? For those of us taking a beating in the market, my strategy is to put my head down and keep buying stuff I own which is getting cheaper by the day. I know it is risky, but you can have all the treasury bond you want, I will keep buying BP.

Nice article in the wsj comparing Chris Christy and Jerry Brown. I admire Christie's backbone, but he should be quiet about Warren Buffett. Still, compared to Jerry Brown, not even a contest- http://online.wsj.com/article/SB10001424052702304371504577404503988018824.html

Yes, I am a republican, but if ever there was an article to show how hypocritical the president is- http://online.wsj.com/article/SB10001424052702304371504577404540474095790.html?mod=opinion_newsreel

I know, hard to believe, but the much maligned Groupon finally turned a profit. Growing like a weed and profitable now- time will tell how things turn out for them-http://www.bloomberg.com/news/2012-05-14/groupon-reports-profit-as-overseas-growth-boosts-coupon-business.html

Great article about a health care startup- http://http://techcrunch.com/2012/05/15/healthinreach-merges-with-pricedoc/

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 charterholder.

Digital Displacement, Patience, and Next Week's Agenda-

It was a very eventful week in the stock market last week, as investors started with gloomy news from France and the Netherlands with respect to their political results.  On Tuesday, Apple crushed it, and on Thursday, a slew of companies reported, including Starbucks and Amazon.com.  The market viewed Amazon's results very favorably, not so for Starbucks.  Interesting interpretation, and in time it will be interesting to see how those companies fare.  I would imagine both will do very well, as both are strongly positioned to benefit from the growth in the global digital economy.

In looking at the displacement by digital goods against off line competitors, I recently was talking to my brother about whether or not satellite and cable companies are going to be losing customers.  He believes they will, and I have changed my mind and come around to thinking he is correct.  The key is to have content which is unique, and can be distributed by the owner in any number of ways.  Controlling the distribution method now means little when you can go straight to the internet or a mobile device and download it directly.  It won't happen overnight, but three years from now you could see a vastly different picture about how people consume content, with most of it probably directly from the provider.

One thing which I really enjoy as an investor is sticking with companies when they have subpar or mediocre performance, and even adding to the position.  In many instances, it takes a few years of sticking with the company, but when performance turns around, you really benefit from your patience.  It is not easy to do, however, what can really help is when you get a nice dividend so you get paid to wait.  An existing situation like that would be Johnson and Johnson,  BP, or HP- full disclosure, I own them all.  All recently raised their dividends, and if they start to grow just a little bit quicker, well, lets just see what happens.

There are going to be a slew of earnings reports this week, so I look forward to seeing how the market digests them. Lots of media and technology companies report, or at least a number of those that we own.  Here is a nice story on how the Gap is reinventing itself-http://www.nytimes.com/2012/04/29/business/a-humbled-gap-tries-a-fresh-coat-of-pep.html?_r=1&ref=business

April 2012 was a tough month for the stock market industry as investors fled in droves-http://www.bloomberg.com/news/2012-04-27/equity-fund-redemptions-in-april-are-largest-in-17-years.html

Looks like the entire venture capital industry is facing a bout of Schumpter's Creative Destruction (about time)-http://techcrunch.com/2012/04/28/the-seven-forces-disrupting-venture-capital/

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 charterholder.

Here are some Seeking Alpha articles about specific stocks written by Yale Bock,

Apple Crushes It, Concerns In Europe, Groupon New Leadership, and Zuckerberg Upsets Wall Street!-

It is only two days into the week, and already the see saw mentality of the financial markets is on display. Yesterday, the market sold off on the political ramifications of new elections in France and the Netherlands. It seems as if austerity is not loved by Europeans, as if that is a surprise.

Ten minutes ago, Apple reported huge numbers, again what a shock. The company has been a machine for 10 years, and if you walk by a store in a mall anywhere in the world, you cannot get in. If you want to download a cool application for your son or daughter, they are the first destination. Hard to see this changing any time soon. As for the topsy turvey nature of Wall Street, ditto. If you have a hard time with volatility, this is a tough market for you. Try and use it to your advantage- or as they say, roll with the punches.

Nice to see things on the political front slowing down. I am sure Mitt is out pounding the pavement for donations, as he should be. In looking at our government, we have Medicare warning they are going busted sooner than they thought. We have the GSA scandal where tax payer funds are used for conferences for an entity designed to make sure tax payer funds are used correctly. We have the Secret Service hiring prostitutes when they go outside the country. We have a Senate which has not passed a budget in three years. Not going to even bring up the huge deficits we consistently run. Any wonder why people are a little fed up?

Groupon had a material deficiency in their accounting- which is a terrible operational no no for a public company. Most professionals say when you see that, you sell- no questions asked. Some think Groupon is going to be a bankruptcy candidate. I strongly doubt that, especially with Howard Schultz as a director. http://www.bloomberg.com/news/2012-04-24/groupon-is-said-to-seek-new-directors-after-revenue-restatement.html

Here is some more information on the concerns from Europe and the selloff yesterday- http://seattletimes.nwsource.com/html/businesstechnology/2018049439_apuswallstreet.html

Wall Street is upset at Facebook's Mark Zuckerberg- http://www.nypost.com/p/news/business/facebook_deal_surprised_bankers_HHuWwRbV6DE55tIpScowxI#ixzz1rkSom1uw

I hope everyone is enjoying their spring and looking forward to the NBA Playoffs. Naturally, there will be some upsets, but the teams that defend and do not make mistakes are usually going to be around at the end. It also helps if you have a great player who can bail you out from time to time.

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 charterholder.

(If you are interested in seeing the latest Seeking Alpha articles about specific stock picks from Yale Bock and Y H & C Investments, click the following links)

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