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Summer's Coming, Investing Ahead Of The Curve, And Obama's Mess!

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.

The White House warns the other side against a fishing expedition. Rich.

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!!

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.