Yale Bock's  Instablog

I hope everyone has a super Father's day. I am sure most people would agree that their father had a major influence on their lives, and that holds true for myself as well.

I believe the single biggest issue facing any business today is how to incorporate digital information throughout the enterprise in order to best meet it's goals. There are some critical insights to consider when thinking about the digital age. First, all information is capable of being shared, quickly and easily, to massive numbers of people across a multiple spectrum of platforms. Anything related to a product, or company (like a tweet, like, video, blog, web post or article) can be shared quickly and easily with a staggering number of possibilities. As such, the amount of information which is being generated is exploding, almost exponentially so.

In the very near future, even more data is going to be collected from an ever expanding number of items. Cars, appliances, phones, tablets, phablets, small equipment, large equipment, medical devices, watches, and maybe even glasses will all be capable of collecting and sharing information. You might think it will be very difficult to control all of this information, however, it will probably become even easier as your phone or tablet will be able to direct the functions of an entire household. It is already taking place, and the shift will become more pronounced as time passes.

With the recent revelations regarding government monitoring and data collection by the National Security Agency (NSA), industry will have to be far more diligent in protecting consumer data as privacy concerns are sure to become a hot button issue for the general population. Certainly, the public needs to be protected, and first amendment liberties are still part of what makes our country different and unique. Obviously, data security is going to be critical for any operation which is involved with collecting, organizing, analyzing, and trying to make use of the massive amounts of information which are being collected on a daily basis.

If you try to understand why the digital age is so critical for businesses, especially public ones, it starts with the simple ideas of trying to grow revenues, cash flows, and profits as quickly as possible. Digital information makes it possible to expand into new markets, product lines, geographies, and potentially create new businesses in a much quicker period of time. You can see this with events like flash sales, or an app which might get downloaded 100 million times (or more) in a year. Companies take collected information, and use the data to spot trends for growth and create products which fit those growing patterns. As an example, Amazon.com uses algorithms to make personalized suggestions to existing users for products they might be interested in. The company currently does almost $65 billion a year in sales, and nearly 25%, or $16 billion, comes from those emails which say 'Hello Joe, you might be interested in this book.' Obviously, the next level of this would go something like- 'Hey, Joe, your friend read this or used that product, so maybe you might want to give it a shot?' Applications like Shopkick or Foursquare use location based monitoring to help attract customers, and many industries are developing unique uses for existing digital technologies as well.

The use of technology is also being applied across the most complex supply chains in nearly every industry you can imagine. The uses for digitization are only beginning to be applied but you have to believe they will grow in imaginative ways for companies to become more efficient. The challenge for all enterprises is to distill and analyze the available data into forms which are productive across all areas of a company. By doing so, costs come down, and the power to make informed decisions is spread to users at levels all over an organization.

The way I see it, though, the biggest area where digital technology can help businesses is in the ability to attract customers by using all of the different connected platforms to build an ever larger customer base. As the user numbers grow, data is then sorted to personalize communication and further develop a focused relationship with people all across the various digital properties and devices. The best companies in the world will continue to build their digital expertise and attract ever larger and larger numbers to their brands.

Large technology companies are being forced to help the government with data collection- http://www.bloomberg.com/news/2013-06-14/u-s-agencies-said-to-swap-data-with-thousands-of-firms.html

Iran had elections yesterday and they elected a moderate hard line fundamentalist- if there is such a thing-

Stanley Druckenmiller is a heck of a money manager and thinks markets offer less advantage for him today than ever before-

Thank you for reading the blog post and I hope you have a happy and healthy Father's day and week!

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.

With yesterday's passing of Memorial Day Weekend, summer has officially begun and for those of us who are beach lovers, now is the season of great pleasure. Baseball, hotdogs, apple pie, and Chevrolet- oops, sorry, that was from a commercial a long time ago. Anyway, usually this is a time when things slow down on almost all fronts. Business hours are shorter, more time is spent with the family, and plenty of people are traveling. Out here on the West Coast, people spend a lot of time driving to areas where they want to relax. In many cases, it is to the beach or a lake, or going sight seeing, or hiking, or just for general leisure time. Make sure you put on the sun screen as it is starting to warm up out there!

In the financial markets, the summer usually means lower trading volumes and higher volatility. Interestingly enough, what has been striking over the last six months is the definitive calm in financial markets. As an example, if the equity markets close up today, that would make it twenty consecutive Tuesday's where the stock market closed higher than it began, I think an all time record. What could change this situation? The most glaring areas of the world which could affect U.S. stock markets would be Japan and Europe.

In Europe, the problems have been with us for going on five years. In Japan, the government's movement to get rid of deflation could have a dramatic impact on businesses all over the world. A lower Yen against all major currencies changes the fate of many manufacturers, and don't think other countries will sit still and watch their domestic companies become less competitive while Japan's fortunes improve. Many economists believe Japan's exporting of deflation spells trouble all over the globe. Certainly, for all investor's, paying attention to the currency wars is mandatory.

Still, here in the United States, there are plenty of tailwinds to help propel the market forward. The large secular trends of more oil and gas production, a rebound in housing, improving consumer confidence, and record low interest rates are a soothing balm to equity owners. If you include a robust merger and acquisition environment, as well as a full back log of equity IPO's ready to make their public debut, the stock market is currently on a tear. Which brings me to the current darling of the market, the electric car manufacturer Tesla.

Tesla has seen it's stock price nearly double in the last month. It has used the strength of the stock issue more stock and raise capital. With the money it raised, it paid back it's government loan and borrowed money at record low rates for a longer period of time. Elan Musk, the founder of Tesla, has been very opportunistic in using Wall Street and the U.S. government to help him build his company to the current position. Still, he faces the prospect of competing year after year with Mercedes Benz, Porsche, and Toyota (Lexus). In addition, he has made plenty of enemies among dealerships across the country by not including them in his organization. It will be interesting to watch Tesla and how it fares in the future in the very competitive and demanding high end car market.

More Tesla-http://www.bloomberg.com/news/2013-05-28/tesla-rises-past-100-level-for-first-time-mover.html

Gold premiums are starting to come in-http://www.bloomberg.com/news/2013-05-28/gold-premiums-tumble-from-india-to-hong-kong-as-demand-wanes.html

Tablets are overtaking PC's and Labtops-http://blogs.seattletimes.com/microsoftpri0/2013/05/28/idc-tablet-shipments-to-beat-laptops-in-2013-pass-all-pcs-by-2015/

For all the talk of Google strength in mobile, developers choose Apple first-http://techcrunch.com/2013/05/28/google-play-still-missing-top-app-titles-from-ios-many-of-which-are-games/

Thanks for reading and enjoy your summer!!!

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.

Summer approaches rather quickly, and the world is heating up with quite a bit going on. In the financial markets, earnings season is winding down while stocks continue their ascent. Fearless forecasters continue to attribute the exceptional performance as a result of the race to debase by central banks. Students of finance know that record low interest rates help risk based assets because of a lower discount rate. However, the other key point is equities are more valuable when their underlying profit is higher. Without question, corporations across the world are generating more revenues, creating more cash flows, and bringing home more on the bottom line than ever before. The other significant factor is the multiple investors are willing to pay for cash flows or profits, and that is a subjective issue. All in all, if global economies see better growth, it is logical to assume equities become more valuable. Just how valuable is the key question?

If you are invested in any kind of resource based asset, especially gold related issues, the answer to the previous question would be they are now worth less. However, with gold, demand is still very strong for the glittering metal, especially in China, India, and Australia. The paper asset has been selling off, but the physical item still has plenty of buyers.

Oil has seen prices come and go recently, but if growth starts to pick up anywhere in the world, especially in North America, one would expect 'black gold' to strengthen. Elan Musk, the founder of Tesla may disagree, especially after selling his 21,000 cars electric cars last year, but the world runs on oil, and will for a long, long time.

One thing I want to focus on is trying to evaluate management based on how they prepare for the future. No matter what business a leader is in, very few groups have an unlimited number of assets. In fact, there is a good chance there is a limit on how many resources you have at your disposal. Within this constraint, most leadership entities have at least two primary objectives they have to accomplish. First, operate as efficiently as possible to have revenues become cash flow, operating and net profits. Second, they have to invest for the future to help grow the business. The best management teams do both simultaneously. Many do not.

With the transformational role digital tools are playing across nearly every part of society, it is crucial for management teams to invest ahead of the curve in these vital areas. Mobile access, different payments possibilities, all areas of the cloud and infrastructure, human resource development and administration, funding and financial operations, marketing, and customer service are just a few of the critical operational segments which are being dramatically changed on a daily basis. The companies which apply technology to become more efficient, and invest for future growth are ones which will succeed and continue to do so. Those that do not will eventually suffer the consequences.

The Obama administration is now stuck in the middle of not one, not two, but three different domestic scandals. Between Benghazi, the IRS mess, and the hornets nest stirred up by the Justice Department and the Associated Press (an attack on the freedom of the press), let's just say how can anyone not be surprised? There will be excuses, and justifications, and denials, and of course, finger pointing back at the other side. The bottom line is the fish rots at the head.

What is working for the current administration is his supporters really do not care what he does, or how he leads. Also, the stock market is going strong, and consumer confidence is high. Bill Clinton rode these two themes for a long, long time, and I suspect this jockey will do the same.

Yahoo, under the bold leadership of Marissa Meyer, is thinking about buying Tumblr. I have to give her credit, Mrs. Meyer is the first leader at Yahoo who has shown an assertive approach to using the vast assets at their disposal. http://goo.gl/82XvE

The White House warns the other side against a fishing expedition. Rich. http://goo.gl/3dOwV

A good leadership interview with NIC's CEO Harry Harrington. I have owned this company for going on 20 years and remember when Mr. Harrington was the COO. Boy, I am getting old!!

http://goo.gl/GKGuL

Thank you for reading the blog, and stay cool!! I hope you have a great week, and if you have any thoughts or comments regarding the blog, please post them!

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.