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CCM Blog For The Week Ended June 15, 2018

Summary

Observations and commentary for the week.

Helium Market. http://www.irdirect.net/prviewer/release/id/3122403

I came across this article from a couple of weeks ago connecting big tech names like Google to helium. I was familiar with helium’s use in the latest disk drives. And while the chemicals sector has been a focus for years and I like Airgas and Praxair’s “free” input stock, I learned a couple of facts from the article.

Rising Rates, Trade Wars, and HUGE M&A. The trade wars are heating up. The Fed raised its funds rate to other banks by another 0.25% - now at 1.75% - 2.0%, With the two more expected rate increases before year end, we could exit 2018 at 2.5% Fed funds. The US increasing tariffs, as well as the retaliatory hikes by other countries, could be a shock to the market and economy, ultimately lifting inflation. It might be a good time to consider a Costco membership. Lastly, AT&T and Time Warner were approved for their $85B merger. Comcast and Fox are now expecting to complete a $65B merger. And Disney could reenter the mix and we could have a bidding war. I recognize these two deals are in the same media and telecom sector, but I also see it as another sign of market exuberance. Not to mention that AOL/Time Warner is often cited as a peak event of the tech stock crash in 2000.

Short Positions. CCM’s short positions have appreciated as of late. Catalysts and outcomes that we predicted, and were often correct on, did not bring the market reaction we expected. It is reinforcing discipline and CCM is trimming long positions to offset this risk.

Miscellaneous. Starting analysts at Wall Street investment banks will now learn Python (software coding language) as part of their orientation and training. The important language for Americans to learn has shifted from Japanese to Spanish to Chinese and now to Python.

Thanks for reading. Carlos Sava, CFA, CPA