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Yale Bock is the President of Y H & C Investments, a Registered Investment Adviser based in Las Vegas, NV. My educational background is a B.A. in Economics from UC-Irvine, a MBA from UC-Irvine, and have earned the right to use the Chartered Financial Analyst designation. I have been managing... More
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Y H & C Investments
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  • Wall Street's Universe, Tesla, Big Oil, And More-

    We all know Wall Street lives in its own universe, it is a given, but increasingly now more than ever. If ever there was a time in the financial markets where there is a disconnect between reality and price, the current environment is it. As a prime example, recently Wall Street analysts decided Apple was doomed because their new I-phone was not priced lower and the company did not sign a deal with China Mobile. Even further, the company was criticized, and the stock sold off, in part because they are seen as not innovative and have not introduced a new 'cool' product in a few years. So guess what? Over the last weekend, Apple sold 9 million I-phones, shattering any previous weekend sales number by a wide margin. Wall Street gets it right a great deal of the time, but to think they don't make mistakes would be wrong as well. The key point is to try and identify those mistakes, and potentially profit from them. It is easy to say, hard to do.

    If you want even more evidence of the delusional forces which are currently in place in the equity markets, just investigate the market price of Tesla Motors versus nearly any stock in the energy complex, especially the major integrated international oil companies. Tesla is now valued at over $20 billion and operationally has had one cash flow positive quarter in the last four. It would not be surprising to see this situation last for the rest of the year, however, Elan Musk better sell millions upon millions of electric cars over the next five years or this could be a repeat of the internet bubble tragedy. Just a caveat, I have been wrong about TSLA since it was priced at 50 bucks a share, so take that for what it is worth (it is now at 182 and change).

    Meanwhile, the biggest oil companies in the world are being given very little respect by the market. Yes, big oil has some issues to deal with right now, but upon careful investigation, the environment might be starting to improve in this sector. In Brazil, the largest oil companies passed on bidding for a new block available in conjunction with the state run oil company, Petrobras. In Nigeria, a few major international companies are selling their ownership stakes in their blocks. Even further, all over the globe countries are discovering they need the expertise which big oil provides in order to get these precious and valuable resources out of the ground. Usually, it involves deep water discovery, so finding trained and competent people who want to work at state salaries to potentially risk their lives is not in the cards. As a result, these trained professionals, who are rare and very much in demand, are typically going to be employed by the biggest oil companies in the world. Human capital and specialized skills are going to go where they will be compensated well, treated fairly, and given incentives to be rewarded when they do a good job. This would be dramatically different from a state run enterprise, where questionable practices, if not out and out fraud and cronyism, are the typical modus operandi.

    In conjunction with these human capital problems, large international oil companies are now thinking very long and hard about what projects they are going to spend billions of dollars on. You can be sure that where those projects are located, who they are partnering with, and how the rule of law is implemented are going to factor into their calculations. The current situation in the public markets where these massive international oil companies are valued at historically very low multiples is not going to sit well with their management teams and board of directors. They all have long histories of creating quite a bit of wealth for shareholders and I am sure they believe they will continue to do so for quite some time. Elan Musk and Wall Street might not necessarily currently agree, but I suspect when we revisit the issue in three to five years time, how investors see these companies may be dramatically different.

    Elsewhere in the financial markets, Facebook recently received several upgrades from investment banks and the stock has rocketed higher over the last few months. Twitter publicly announced, in a tweet interestingly enough, they are going to go public. In addition, the massive internet giant Alibaba is going to go public on a U.S. exchange as opposed to somewhere in Asia. In the meantime, investors are looking at the debt limit and budget negotiations, the incompetence of our politicians, as well as the initial implementation of Obamacare, and have adopted a very cautious approach- unless of course, they own Tesla.

    If you ever want a sense of how dominant the I-phone is- http://www.businessweek.com/articles/2013-09-25/listen-up-apple-haters-iphone-sales-eclipse-microsoft-and-amazon#r=rss

    The new JOBS act enables crowdfunding in all sorts of different areas- especially startups-

    http://www3.cfo.com/article/2013/9/credit-capital_jobs-act-general-solicitation-crowdfunding-morrison-foerster-form-d-securities-exchange-commission

    If you think being a CFO in a private equity job is a picnic, uh, think again-http://www3.cfo.com/article/2013/9/job-hunting_private-equity-jobs-john-touey-salveson-stetson-recruiter

    Thanks for reading the blog this week, and enjoy the lovely fall weather. If you have any comments, thoughts, or questions 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.

    Sep 25 4:41 PM | Link | Comment!
  • No Taper, No Compromise, And No Idea?

    In what can only be seen as a very interesting non event, the Federal Reserve decided not to reduce it's purchasing rate of fixed income securities. Wall Street was absolutely convinced this was the month when the so called, 'Taper', would begin, along with the inevitable rise in interest rates, especially at the long end of the yield curve. Surprise, shock of shocks, helicopter Ben decided, nope, not me, I am not going to be the guy who gives investors bad news. In some ways, it is not surprising because it is well known Mr. Bernanke is leaving the administration as head of the Fed. Why should he leave on a sour note? Why should he take the risk of potentially causing a rise in interest rates when the economy continues to grow at a very slow rate? As a result, no taper, and whatever the long term consequences are, well, let someone else deal with that mess.

    It is apparent both in the political and financial realms, there is no room for middle ground. On Wall Street, the dominant mood is either euphoria or despair. The political atmosphere in Washington is similar because both parties absolutely will not look to find ways to compromise with the opposition. Absolutism is the rule which typically has won out, especially over the last 20 years.

    Going into the last ten days of the third quarter, the country faces several issues which are going to require a solution. First is the passage of a budget and extension of the debt ceiling, which has to get done by October 1, 2013. Republicans are looking to defund Obamacare, and will try and use the issue as leverage with Obama in the negotiations. Should be a lot of fun to watch, eh?

    Next, the selection of who will be the next Federal Reserve Chairman is also undecided. The odds on favorite turns to Janet Yellen, after ex-President of Harvard Larry Summers withdrew his candidacy. It is apparent that politically, Summers would never have been confirmed in the Senate, so he fell on his own sword. The only question about Yellen is she has no previous relationship with President Obama, and could be seen as not the President's person. It is not a lock that she will be the choice, but it certainly does look that way.

    Finally, as we get ready for earnings season and the fourth quarter, a reasonable question to consider is if the economy is improving, why not remove government assistance and let it stand on it's own two feet? As we move toward the end of the year, market participants are going to focus on this very question. It will be interesting to see how the Federal Reserve approaches policy for the rest of the year, but I suspect, as is the case most of the time, the prudent man knows more surprises are in order.

    Bitcoin is all the rage, but most businesses don't think it is ready for prime time-http://www3.cfo.com/article/2013/9/it-value_bitcoin-digital-currency-ripple-zipzap-alan-safahi-expensify-ari-zoldan-quantum-networks-mt-gox-sc5-martti-malmi

    Earnings calls are important for both investors and companies, but they certainly could be made more efficient-http://www3.cfo.com/article/2013/9/governance_mckinsey-gaap-earnings-call-sec-expeditors-international-

    Amazon.com is a great company, but even they face problems once in a while-http://www.bloomberg.com/news/2013-09-18/staples-radioshack-yank-amazon-lockers-from-stores.html

    Thanks for reading the blog this week, and I hope you 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 charter holder.

    Sep 18 4:25 PM | Link | Comment!
  • Verizon-Vodaphone, More On Lawyers, Syria, And The 5 Year Anniversary Of Lehman!

    The investment world was informed last Saturday that Verizon would be buying out the 45% stake of the Vodaphone- Verizon Wireless partnership which was owned by Vodaphone at a price tag of approximately 130 billion dollars. The rationale for doing the deal now is that bond yields are now rising, so it would be more expensive to do the deal later next year. In addition, both parties had an incentive to end the partnership now so they could pursue their strategic interests unencumbered by the other side. For Verizon, they now have total control of Verizon Wireless, an entity which is the largest of it's kind in the U.S. and generates annual cash flow of nearly $30 billion. The figure is certainly enough to pay down very quickly whatever debt is used to fund the purchase of the Vodaphone stake.

    For Vodaphone shareholders, they will receive a nice cash award- nearly 5 dollars per share, as well as Verizon shares. Vodaphone now will have a big war chest to put to use in Europe and Africa in the pursuit of better growth. It remains to be seen how they will use the capital. Some believe they will look to cable assets, while others maintain the telecom area in Europe and Africa is the priority. We will soon find out. In Europe, the deal provides a tremendous boost to many shareholders of Vodaphone as they can use the cash, and many will ultimately wind up selling the Verizon shares early in 2014, when it is expected the deal will close.

    The acquisition is one of the largest corporate transactions to ever take place. More importantly, it may set off a wave of consolidation in the global telecommunications, media, and technology industries. Given the massive scale of many of these companies, like AT&T, Yahoo, Verizon, Google, Apple, Vodaphone, Amazon.com, Comcast, Time Warner Cable, Cox, Liberty Media and Liberty Global, it would not be surprising to see large 50-100 billion dollar deals continue. If so, the investment bankers will be kept busy for quite some time.

    The more I read about the lawsuits which get filed on behalf of disgruntled shareholders the more I get disgusted with the legal system we have in the United States. Over the last two weeks, a shareholder filed a suit against the Verizon board claiming the Vodaphone transaction was not in shareholders best interest. John Malone and the Sirius Satellite board was in court defending itself from a similar suit from Sirius shareholders, who were rescued by Malone and Liberty Media when the stock was at 16 cents. It is now at $3.50, and if Malone did not extend them a $530 million dollar bridge loan, the shareholders would have been wiped out by their other alternative at the time, Charlie Ergan from Echostar, who would have put them in bankruptcy. The shareholder contention is they did not get a takeover premium from Malone and the board at Sirius did not do its required job.

    The next legal situation which gets more interesting by the day is with BP, where the company agreed to a settlement on specific terms, and now the basis of those agreements are being misinterpreted by a new claims administrator. The new person responsible has staff members who have been found to have a financial interest in the claims of clients who were represented by law firms the staff members had a ownership stake in (the sum is 9 million just for one law firm). If we add to these situations the time consuming nature of almost any part of our legal system, the documentation and time costs required by nearly any settlement, not to mention the emotional grief people go through on nearly any case, the country needs to completely revamp the legal system. Yes, I know, the lawyers will hate me. They already do. Big wet kiss to the lawyers, they need it.

    U.S. involvement in Syria certainly looks like it is not a popular decision in the country, nor around the globe. As of this writing, it is doubtful at best the House of Representatives will vote to support some kind of military action against Syria. President Obama will address the country on the issue tomorrow evening. The potential ramifications of a military strike are enormous. Russia is heavily invested in Syria, and as China is now increasingly dependent on Russia for oil supplies, both have blocked any attempt by the U.S. to get United Nations support for an intervention in Syria. If weapons are used against Syria, retaliation against Israel, the United States, Europe, or all is certainly possible, not just by Syria, but by Iran, Russia, and their assorted proxies. To say this is a complex situation is mild at best. The important question to consider regarding U.S. leadership (from behind?) is after two years of doing nothing about the civil war in Syria, now the United States wants to step in because chemical weapons are being used. You have to wonder what we have been doing the last two years, don't you?

    Finally, the equity markets have continued their uptrend on better economic results from different countries in Europe and China. In addition, the August jobs report turned out to be weaker than expected, so many believe a September tapering is not in the cards. The month of September is historically the worst of the year, but I have found it typically turns out to be nearly not as bad as people fear. It is also the five year anniversary of the Lehman Brothers bankruptcy and global sell off. At the time it was painful, but for those who took advantage, as of this moment, it might have been the greatest buying opportunity we will ever see in our life. Time will tell.

    Thanks for reading the blog, and I hope you have a great rest of the week. Please post any comments, thoughts or questions you might have!!!!

    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 VOD, VZ, LMCA, AAPL, BP.

    Sep 09 3:17 PM | Link | Comment!
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