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.

On Friday, May 10, 2013, the financial world was informed that the lead columnist at Barron's, Alan Abelson, passed away at the age of 87. I started reading his column when I was maybe 23 years old, and read it every Saturday for nearly 25 years. It was the first and only thing I would be interested in when I dragged my sleepy self out of bed. Alan Abelson turned me, and many thousands of others, on to the joy of finance with his wisdom, wit, and great writing. In sports, there was Jim Murray. In personals, there was Dear Abbey. In political opinions, there is George Will, Maureen Dowd, and Charles Krautheimer. In finance, there was only Alan Abelson, and there will never be another like him. I never met him, but he was a dear friend and I will miss him. I already do. May he rest in peace. http://goo.gl/EcdwZ

Today is Mother's day, and I hope everyone has a great day. My mom is not one for celebrations, and trying to find her gifts she will enjoy is, shall we say, a challenge. I very much continue to look up to my mother as an inspiration for her love, spirit, guidance, and intelligence. Most people probably can say the same about their mom's, and each one is unique. I hope all the mom's out their enjoy their day!!

Well, the stock market has had a nice run over the last few weeks as earnings season is winding down. Over the last week, the Ira Sohn Conference, which benefits pediatric cancer, was held in New York. It has prominent investors recommend individual companies and the press pays a lot of attention to who picks what.

Here in Vegas, the SALT conference was held with many famous individual, in all areas of subjects, as speakers and attendees. I was not one but I do pay attention to these events. One never knows what piece of information is available which can add be helpful in some way.

On the political front, two interesting pieces of information were disclosed last week. First, tax receipts will be significantly higher than previously thought, so the U.S. budget deficit will not be as large as was feared. Democrats will feel emboldened and push for more spending. Republicans will not go for that. More gridlock is probable, as if the washington wallflowers could do even less.

The second interesting tidbit the public was privy to was the revelation the IRS targeted Tea party organizations in 2012. Great, our supposedly non partisan government tax collections group was politically motivated. Who would of thunk it? There is gambling in this establishment? My own thought is any faith of honesty or credibility in government was so far gone that this information only reinforces that notion.

A major problem in the world is the inability of the public sector to learn how to manage its finances. It then turns to Wall Street, which sells them swaps, which have a long history of blowing up. Here is another example of it-http://www.bloomberg.com/news/2013-05-10/denver-pays-wall-street-216-million-as-swaps-fail-muni-credit.html

Starbucks has an ambitious plan to remake its food offerings-http://seattletimes.com/html/businesstechnology/2020956981_laboulangexml.html

Here is a nice story about an app specializing in business cards. Apparently, it is very popular in Asia, where much ceremony is predicated on this ritual-http://techcrunch.com/2013/05/12/camcard-a-card-scanning-app-thats-dominating-asian-markets-reaches-50m-users/

Finally, thank you for reading the blog, and I hope you have a great week!!! If you have any comments or questions, 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.

Disclosure: I am long [[SBUX]].

In all areas of life, the best leaders display their excellence over and over again. High profile areas you see this is in business, sports, and politics. Other places which are not so prominent would be as parents or in the classroom. The topic of leadership is studied, analyzed, and debated to no end. I think one of the common characteristics of great leadership is clarifying what the purpose of the task is and then get everyone pulling in the same direction to achieve the goal. We were having dinner with friends the other night and our guest was a world-class swimmer, rower, and runner. He told us entertaining stories of his time as a college rower and the teams he was on. Only one of those groups had a winning record, the rest did not have a victory. All of the teams had talented individuals on them, but only one group was successful. You see this very often in sports, but you also see it in business.

Over 90% of all start-up companies fail within 3 years. Many large enterprises which were once thought to be unassailable fall by the wayside. For example, Enron, Kodak, Blockbuster, and Circuit City, are all names from recent years which have gone out of business. It does not matter what kind of business you have, the leaders have to anticipate the future and create plans to try to position their enterprises in areas where they can prosper. In addition to planning, without good execution a great plan is worthless. Execution in business occurs on many different levels:customer service, merchandising, marketing, human resources and skill development, finance, etc.

In a domestic setting, leadership from parents comes in all kinds of ways. First and foremost, setting a good example, instilling values and work ethic, and providing positive guidance are crucial. Too often in society today, failure is magnified and success minimized. Ultimately, having clarity from the top about what is trying to be accomplished, and a singularity of purpose from everyone involved is common trait of good results in many areas of society.

Financial markets are in the midst of earnings season and this past Friday, the jobs report was much better than expected. What is always interesting about markets is how people view the current environment in a different way. In this week's Barron's, legendary investor Leon Black commented he is selling everything not tied down and refinancing whatever he can. Market participants seem to disagree with Mr. Black as there are plenty of buyers for almost every kind of financial asset.

I would be remiss if I did not bring up the Berkshire Hathaway annual meeting, held yesterday in Omaha, Nebraska. Having gone to the meeting before, it is certainly a unique event and many people go for a variety of different reasons. I went because I wanted to hear Buffett and Munger opine on finance for 8 hours ( I know, I am a bit of an odd duck). The refreshing thing about those two guys is they walk it the way they talk it. Everything I have ever read from Buffett and Munger was consistent with what they say at the annual meeting.

This year, noted short seller Doug Kass had the opportunity to ask questions to Buffett. He brought up succession, valuation, the role of Buffett's son on the board, and Buffett's motivation for results. In addition, Kass tried to hustle Buffett for an investment, which I found to be very tacky. I guess you have to know guys from the financial world are always trying to sell something. If you read the answers Buffett gave to Kass's questions, you can see why Buffett is where he is as his answers were intelligent, direct, logical, and non offensive. Leadership on display right before your eyes.

The world is changing right before our eyes. If you look at what is transpiring in the world with respect to energy, the massive growth and sustainability of production in North America changes the economic and political equation all over the world. One group of countries which faces a sea change is the Middle East. To understand energy, you have to focus on demand first. The growth in demand in energy is all based on the large countries in Asia, China and India specifically. Their continued use and growth of energy will be constant for many years because of the low penetration of cars there. As more and more people buy and use automobiles, their energy use will keep expanding. From that perspective, OPEC countries are in good shape to continue supplying oil and gas.

However, currently the biggest energy consumer is North America, which is quickly producing more and more energy, and as a result, becomes less dependent on OPEC oil. The wild card in the energy situation is Russia because it has more energy in its country than any other country, except Venezuela. Russia's big problem is extracting the resources from the ground. Russia is logistically far better positioned to supply China energy products than Middle Eastern countries. Russia is reliant on energy revenues to fund their government, as are the OPEC countries. Energy is a national security issue and should be taken very seriously by any individual or investor. The private sector in energy is the growth engine allowing more production to take place in the U.S, and Canada, and potentially Mexico. If the politicians just keep their hands off of the engine, there is a very good chance of a dramatic change taking place in this crucial area.

U.S. companies are borrowing money at record low levels, this time in Europe- http://www.bloomberg.com/news/2013-05-03/microsoft-at-t-cross-atlantic-for-euro-rates.html

Many investors think Twitter should be used to help make decisions- http://techcrunch.com/2013/05/04/people-are-speaking-markets-are-reacting-fears-are-falling-and-hackers-are-gonna-hack/

Disney is on fire- the stock has had a massive run, and Iron Man is raking it in- http://www.bloomberg.com/news/2013-05-04/disney-s-iron-man-3-on-track-for-sales-of-up-to-170-million.html

Finally, summer is approaching and the weather is starting to get hot. I hope you are enjoying the weather and staying happy and healthy. If you have any comments, questions, or thoughts about the blog, please post them!!! Thanks and have a great 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.

Disclosure: I am long [[BRK.B]], [[DIS]].

If ever there was a very interesting week in the world, last week certainly was it. As my focus is the financial markets, the headline stories have to be the fall of both the price of Gold and Apple's stock below $400 per share. In many ways, the fall of the price of these two assets is what makes the financial markets so interesting (full of potential or sorrow?) for so many people.

First, let's start with gold and try to summarize the situation from both long and short side. On the long side (the one which believes the price of the metal will go up), the yellow metal is an alternative to fiat (paper) currencies. If one looks around the world in almost every region, other than maybe China, the Central Banks have been in a contest to see which one could issue more of their currency than the other banks. Viewed from a supply standpoint, creating more supply only makes the current circulation less valuable, holding everything constant (a big assumption). There is only so much gold in the world, and the only way more is put in circulation is from companies which mine it out of the ground. Even with those companies, there is a finite supply in the earth which they can extract. Under these conditions, gold bugs believe the large budget deficits of most (all?) mature countries, as well as the unprecedented monetary stimulus the world has engaged in, dictate a rise in the price of gold. Other reasons gold should see a rise in value include a persistent demand from China and India (43% of all gold bought comes from these two countries), as well as central bank buying to diversify currency holdings.

On the short side (which believes gold will go down), the main argument is it is not an asset which produces a cash flow which can then be discounted to create a valuation for a cash flow stream. No matter what asset one analyzes, the fundamental worth of an asset is their discounted cash flow stream. Without one, trying to value it like other asset classes yields a worth which can be based on non traditional methods. Historically, these kinds of problems take place when bubbles arise, like in the Tulip mania in Holland. All over financial markets, the rise of the price of gold, and the subsequent beating it has taken over the course of 2013, makes these issues very pertinent. So, where do I stand?

As in many situations all over the financial world (and other areas), much depends on one's perspective. Some believe that with the growth rate in China slowing down (expected 7.9%, actual 7.7% yoy), commodity demand is waning, leading to a deflationary environment. I find that argument a really bad one. China is only part of the global economy, but a big one at that. A slowing China does not mean a deflationary world, but many have jumped to that conclusion.

My own view is in the long term, let's say longer than the rest of 2013, gold has merit because printing more money historically leads to inflation, and they yellow metal is a good inflation hedge. Gold is nice insurance in case problems arise with military conflicts, or if people are generally scared of world events. The hard part of owning gold is the lack of an income and cash flow stream. Security analysis is based on cash flows, and without one an investment case is pure theoretical.

In turning to Apple, you have the opposite situation. The company does have defined cash flows, and oh, have they been impressive over the last 5 years. However, investor sentiment has turned very negative, and last week a warning from supplier Cirrus Logic thrashed the stock even more. This week brings their anticipated earnings report on Tuesday, and the results will have a big affect on how the market performs on Wednesday. Apple has more cash than any company, but the major issue is how much cash will it generate in the future? If it is anywhere close to what it did last year, and that grows at 5-10% per year, a buyer today will probably be very happy 3 years from now. As an investor, this is the fundamental question one faces with almost every security you look at.

During Monday of last week, the world also had to witness the unfortunate terrorist incident at the Boston Marathon. I really feel for those whose families lost love ones on a day which should be a celebration of their attitude, effort, and accomplishment. Those who continue to attack our country because of its unique values only create a stronger opponent which will not yield to such violence.

Next week will bring a ton of earnings reports, and the market will be very interesting to watch. Gold, Apple, oil, and plenty of others bear watching, and you can bet the whole world will be paying attention- you know I will.

Thank you for reading this week, sorry it has been a while, and I hope you have a good weekend!!! If you have any comments or questions about 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.

Disclosure: I am long [[AAPL]].

One of the interesting things about business is the different ways companies go about trying to attract customers. When a business has a large customer base, they have created a valuable asset. I think one of the major mistakes any owner or management person can make is to not understand the critical importance of attracting customers. Here is a simple idea- without customers, no business survives. Most starting entrepreneurs fail because of the inability to attract customers. What is great for all potential owners is we are now living in an age where it is more cost-effective than ever before to be able to reach customers because of the internet, social networking, and mobile devices. You can see that by seeing the growth of services like Facebook, LinkedIn, YouTube, Etsy, Instagram, Pinterest, etc. These companies have been built-in a relatively short period of time. Conversely, look at the episode of what is taking place at J.C. Penny's. The company is over one hundred years old and is now facing the grim task of rebuilding a tarnished brand. Much of the problem was created in the last two years because the management did not think about the importance of their existing customers. Yes, the customer base is older and more discount oriented, which are long-term problems which need to be addressed. Still, when sales are down 25-30%, the issue is you have alienated your buyers. Without customers, no business exists. Not a hard lesson, but many ignore it, at their own peril.

Another key takeaway from the JC Penny's fiasco is the retail business is an investor's graveyard. Over and over again, when you look at retail companies, you see how volatile their results are. It is often feast or famine, with hot concepts doing well for a few years, and then flaming out when their concept becomes less attractive compares to a new one. Very few management teams can continue to build a retail businesses over a long period of time. Those which are fortunate enough to do so can create very large companies and can generate a lot of value for shareholders. However, to do so is not easy, with plenty of obstacles lying in the way of ambitious organizations.

Well the market got another surprise in the Herbalife drama. KPMG, the company's auditors, decided to resign from those responsibilities. Investor's typically do not want to see auditor changes, resignations, or any sniff of an accounting related problem or discrepancy. Accounting is the so-called, language of business, and I am not talking about tax accounting. Without a good knowledge of accounting, any investor puts themselves at a big disadvantage to those who understand it thoroughly. You want to give yourself every opportunity to do well in the market, and understanding business accounting is a great place to start.

Friendships are very important in life as there is nothing like spending an enjoyable evening with people you respect and like. Friends can add a different viewpoint, a unique perspective, or world experience which add clarity. Just as important, a good friend can lend support and reassurance when people can get nervous about something which could adversely affect ones life. Support networks are crucial for anyone, in any city, in any industry, dealing with any of life's invariable questions. You cannot have enough friends, and I very much appreciate mine and the wisdom they provide.

The more I read about the venture capital industry, the more I question the wisdom of investing in startups. It seems there are lots of people who are investing in start ups these days, but the odds dictate very few of these investments end up providing attractive returns. With poor odds a probable outcome, investing in start ups is not for the faint of heart. Facebook and Twitter are alluring, but very seldom does the large pay off actually take place.

Here is a nice article about price optimization software for supply chain efficiency-http://www3.cfo.com/article/2013/3/applications_pricing-price-optimization-software-saas-cloud-zilliant-shaw-industries-gartner-strategy

The window for initial public offerings is wide open and there is a long line waiting to list-http://www3.cfo.com/article/2013/4/capital-markets_ipo-supply-initial-public-offering-filing-pricing-jobs-act-renaissance-capital

Both JC Penny's and Macy's won and lost in the Martha Stewart case this week-http://www.bloomberg.com/news/2013-04-12/macy-s-loses-bid-to-broaden-ban-on-penney-s-stewart-sales.html

Thank you for reading this week, sorry it has been a while, and I hope you have a good weekend!!! If you have any comments or questions about 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.

Spring approaches rather quickly and the great thing about financial markets is there is always something to pay attention to. The focus has now been the situation in Cyprus, where the banking system will collapse without a European Union loan. Cyprus is trying to find ways to meet the EU requirements, and has considered various measures to meet everything the EU wants. The leaders of Cyprus are considering creating levy's on deposits of over 100,000 euros, and other similar kinds of measures. As of this writing, there has been no resolution to the banking problem in Cyprus. The reason why this is significant is because if there is a run on the banks in Cyprus because of whatever the politicians decide to do, it is very possible the same thing could happen in Italy and Spain.

Italy and Spain are critical to the stability of the European Union, so what happens in Cyprus has major consequences in Europe, and therefore, everywhere in the world.

Last week, Starbucks held their annual shareholder's meeting and as always, it was a blend of entertainment, information, and learning for anyone who attended or watched it. Howard Schultz always is prepared, and Starbucks is very well positioned for continued growth for as far as the eye can see. One never knows what could happen in the global economy, but the strategies and operations at SBUX are very strong.

An ex-SBUX executive is Lululemon CEO Christine Day, who had a major problem on her hands last week. Lululemon had to recall yoga pants it sold because of holes in the back side when people bent over. The company is offering refunds to buyers of these products, and the stock got beat up pretty good. Lululemon has been a very good company to own as far as stock performance over the last five years is concerned, and it just goes to show you good businesses and management groups still have their issues. There are two kinds of businesses, those that have problems, and those that are going to have problems.

I find it very interesting that Hewlett-Packard and Best Buy have started to see better performance from their shares. Many have written these organizations as dead because of their operating problems over the last year or so. I still think both will survive and very well could potentially thrive, though I think Best Buy has a much simpler task at hand than HP. However, HP has a couple of strong businesses and is a huge enterprise with a whole lot of staying power. I also think Meg Whitman knows what she is doing and has had a great deal of success, so she is not someone I would bet against. In the same domain as HP is Dell, which is essentially going up for auction this week. If Michael Dell loses his own company because he did not want to pay too much, it might serve him right.

In the energy world, the most notable development was the agreement reached between Russia and China about future energy production from Russia being delivered to China, in exchange for some financing help. Rosneft and Gazprom dominate the energy industry in Russia, and China desperately needs those sources for its emerging growth.

www.bloomberg.com/news/2013-03-22/china-s-xi-strikes-breakthrough-oil-deals-w

If ever there was a company which I think is on the wrong path, it would be Microsoft. Windows 8 has been a bust, but they are still trying to solve the problem-

http://www.businessinsider.com/windows-8-update-windows-blue-leak-2013-3

The cloud is for real and it will continue to change how business is done for quite some time-

http://techcrunch.com/2013/03/23/grow-to-dominate-in-2013-or-watch-someone-else-do-it/

Thank you for reading the blog this week, and I hope you are enjoying the spring weather, wherever you may be.

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.

Disclosure: I am long [[SBUX]].