Wednesday, March 28, 2018

Berkshire Hathaway annual report 2017

Our annual report arrived today.  The extensive shareholder's letter of the past has been turned into three pages.  They concisely point out a few investing thoughts.  The firm is sitting on mountains of cash and could but almost anything, even a country, but Warren Buffett has always focused on one place(the U.S), one accounting regimen.  That and nothing else today focused on the GE rumors. 

With a short report, there were no zingers for the press to focus on: but a couple could be:  Referring to his investment colleague, "Both Charlie and I believe it is insane to risk what you already have and need in order to obtain what you don't need".  Or referring to a CEO who wanted a deal "the speadsheets  never disappoint".  Comments on expand on this.

His huge holdings of American Express and Bank of America remain, each advantaged by prior purchases.  Coca Cola remains a long term position.  Finance being Buffett's expertise, Wells Fargo and U.S. Bancorp are among the top four equity tradeable positions.  BKB is so much more that that with multiple owned companies.

Annual report still worth reading...

"The Edge of Seventeen", a film

This is a film about high school students, presumably meant to attract a young audience.  Finding it last night on Netflix and, looking not be terrorized by Trump, it was given a try.  Following somewhat in the "Juno" tradition, it develops into a well done contained bit of entertainment, which does not try to be more than that.  Strange as it may seem, there were many connections.  Teenage girls are remembered and the perils of isolation are part of the story.  If expectations are not high, this becomes a superb distraction.  The feel good ending was completely expected.  That's a necessity for this genre.  The general quality of the acting in this one was far above average.

Sunday, March 25, 2018

Observations about Bank of America, and more market talk

The recently received 2017 Annual Report of Bank of America tells some stories, some intended and some maybe not.  The report is a throwback to annual reports as they traditionally were before brevity was favored after 2001 and austerity became the rule after 2008.  There is an opening 32 page glossy section of photos and happy talk.  Page 2 is a full page portrait of  CEO Brian Moynihan.  In this section there are 15 photos of women and 3 of men.  Investing and lending for lofty goals is a theme, as is sustainability and environmental issues.  This is a document that promotes ideals and the Chairman more than it does the financial performance of the firm. It goes unsaid that they can  choose to do this due to better performance and a significantly higher stock price after being in the doldrums for years.

What are the observations?  The photo of the CEO is a  red flag.  It is not a photo of a leader meeting with clients or talking to employees.  It is just his full page mug.  Supporters inside the firm would say that his leadership requires this, and that the PR, ad, and design firm folks recommended it.  Of course they did, because their real job is to intuit what the person that pays them wants.  Choosing to do this speaks of hubris, no way around it.  Hubris is rarely a positive.

The focus on ESG values, aka environmental, social, and governance focused investing, is to some extent laudable, but this annual report overwhelms.  "Responsible growth" is the mantra.  It could remind one of the now deposed Jeff Immelt of GE, who projected a saintly presence while managing, or not managing, an increasingly dysfunctional franchise.  There are multiple examples of the goodness of the bank, and to quote one, "I'm in a happy place now because Bank of America saved my life".  Again, it overwhelms.  If this felt like a priority to the company, one or two quotes from credible and well known outside observers or investors would have been a good idea. 

The proxy statement continues this push to greatness.  Proxy statements are traditionally viewed as fact based legal documents.  The section on election of directors has descriptions of each one, as is customary.  Moynihan, as a director, is described as being responsible for leading the "transformation" of the company and "conceiving" the drive for responsible growth.  The description is more opinion based than the norm.

To speak more broadly and project this approach to the large corporate market as a whole, it is a classic hallucination for companies and their leaders to view strong performance as personal achievement while ignoring an environment that allowed it to happen. It has been a positive period for large financial firms.  The best thing a CEO can do is not get in the way.  A sense of celebration and back slapping across corporate America is not a good sign.

Is this another peak market indicator...

Postscript:  a 6/5/07 post here described the annual report of a former North Carolina bank, Wachovia, and the profile of its CEO.  There are parallels.

Thursday, March 22, 2018

Brief observations...

---The identical front page photo of the New York Times and the Wall Street Journal on March 21 was one of Trump, sitting with the Saudi Crown Prince, holding up a poster board showing examples of how much Saudi Arabia has spent on U.S. made weaponry.  Is the message that the U.S. is for sale.

---The "fake news" that H.R. McMaster was on his way out was confirmed as true, as he was replaced as National Security Advisor by John Bolton.  Bolton is a strident right wing nationalist who served as an often unofficial roving global ambassadorial trouble maker in the Reagan and Bush administrations.  A combination of Trump and Bolton should be of enormous concern to all stable people.

---Trump continues with his incoherent trade policy as he announced large new tariffs on Chinese goods to be determined in 15 days.  Why plan ahead?  The media continues to mostly follow Trump's lead of not drawing a distinction between services, where the U.S. is strongest, and industrial and consumer goods which are sourced globally, with Asia being a major trading partner.

---So as not to address that distinction, the Trump nationalists are using "national security" as a crucial rationale for a trade war.  Upon signing today's order, Trump said that this was "the first of many more, many more."  Financial markets seemed to believe him.

Yesterday's comment on snow was premature

It continued to snow yesterday, slowly but consistently until the wee hours.  The plow guy came at 1am  to clean up the driveway and the walk to the front door.  There is a huge amount of somewhat damp snow on bushes and small trees in the yard.  Will there be some breakage?  That's possible.  It's a heavily overcast day now, with snow still flying around that is more likely from roofs and trees than the sky.  Who knows?  This was a morning surprise.  Will today's appointments be possible?  With effort, probably yes if parking lots are cleared.

Wednesday, March 21, 2018

Significant snow day not anticipated...

In talking with a friend from Virginia yesterday who inquired about the impending weather, my response was "it's not cold enough, only a slush storm that will not have much impact as recent mid- days have been in the high 30's."  Perhaps that was wrong. 

The snow is falling here at mid-day and the temperature is at 31 degrees.  The high is now forecast to be 33, and 12-18 inches of snow is the supposed expectation.  That I doubt, but my track record is deteriorating.  Today was planned to be a grocery shopping day to buy things that I wanted.  There is enough food here, but a surprising wrinkle developed.  Yesterday's dinner food was ordered from a pan-Asian restaurant that has always had reliably tasty food if one is in the mood for it.  It had been maybe a month since the last order.  Grilled steak and in the shell shrimp with mixed vegetables, brown rice,  pad thai, and hot and sour soup were excellent.  The portions were such that tonight's dinner and more were in the bag.  Then...

Last night I was climbing the walls on an hourly basis.  Sleep is never guaranteed these days but this was different.  Then the thought arose.  Could the sauce on the steak, shrimp, and vegetable dish have been cream of MSG.  That proclivity of the restaurant had been forgotten.  There is definitely enough food here, but choice is limited now.  The possibility of delivery from another place in this weather is unclear.

It does look like a perfect day to focus on tax returns, if there is ever a perfect day for that.  My father relished doing this type of project but the accounting enjoyment gene did not pass.  Still, after an hour or two of tedium all documents can be found(or deemed necessary to find), estimated tax payments totaled, charitable contributions added up, and the sum of village, county, and property tax payments done.  Will this get done, all bundled up and ready to hand over tax accountant?  Maybe... that's the intention.

Hmm... just looked out the front door.  The snow plow has come by already and piled up snow in front of the driveway entrances.  Does the Umberto's delivery guy have an SUV?

Tuesday, March 20, 2018

Photographs on Facebook continue...

A February 17th post discussed the posting of photographs taking place at that time.  It continues.  With the extensive number of photos taken over the years when traveling or at events, it seems as if this is a way to digitize that past.  Who will ever look at the albums lining three shelves of a bookcase in the guest room and one in the den.  There may well be a better vehicle to do this than Facebook, but this is what is known here.  Photos could be sent individually by e-mail to those who might have interest and that has been done sporadically, but that would be a cumbersome and mostly ineffective approach.  For now FB seems to be it.

The fact that is has a limited reach to my desired audience is unfortunate.  Many close friends never latched on to FB.  At its beginning, it was driven by younger people.  Older age groups followed, but not in mass.  Some of my close friends tried it but were annoyed.  Who wants to make decisions about friend requests?   Why do I want to read trivia and everyone's opinion?  Who has access to this and how can it be used?  Each of those thoughts arose here, but joining in modestly was the approach taken.  Many long time friends had no time for it.  With the effort, or diversion, going on here, encouraging them to piggy back on to someone else's site and find the photos being posted is the best that can be done.

So as mentioned on 2/17, iphone now in hand and albums out, posts continue...

Saturday, March 17, 2018

A Saturday...

The morning newspapers did their job along with a few cups of Cafe du Monde coffee, the usual.  One notable article was the Barron's cover story, "The Costs of Caregiving".  This is nothing groundbreaking but it is a good summary of the possible emotional, physical, and financial stress of caregiving that may not yet have been internalized by many boomers.  Can only experience do that?  Are financial markets factoring in the ultimate impact of this on the broad consumer market?

 The NCAA tournament this afternoon offered no diversion as Villanova and Duke crushed weak opponents.  There was no spectacle like UMBC's win last night.  As they overwhelmed Virginia, the announcers rarely if ever mentioned the full name of the school.  UMBC?  That rail thin 5'7" guard ran the game against the big UVA team.

As has been usual in the last month or two, photo albums and books are being scoured and that leads to posts on Facebook.  This had rarely been my practice in the past, but it is now is a segue into what is already being done, and reinforces an activity that is almost like a treasure hunt.  It seems necessary.

Weekends are a time to assess financial markets and have led to commentary here.  At this point there is not a strong opinion about what lies ahead.  Is the recent volatility just a trader's short term dream, notice that I did not use a possible modifier, that belies a continued strong equity market.  That combined with almost Depression era level interest rates and the year and a half absence of vol suggests that there will be change.  The view here is that the equity market now will be driven by interest rates and foreign exchange, aka the dollar.  That is saying that overall corporate earnings will not be the issue but market valuation levels will be.  The thought remains here is that the market is more fragile that it appears.

Food coming from Misaki soon, a family owned Japanese restaurant  just down the hill that has been in town for 30 years now.  Salmon Teriyaki, brown rice, and New York roll(tuna and avocado) are on the way.  It is hoped that the basketball entertainment will be elevated for dinner.

And that's the story, Good Day.

Tuesday, March 13, 2018

NCAA Men's Basketball Tournament begins...

Some years this catches on here.  Lack of familiarity with many of the teams can be a problem, but if a few teams get on an unexpected roll, the excitement can build.  Upsets that would be liked here are Davidson over Kentucky, San Diego State over Houston, and UNC Greensboro over Gonzaga, the latter being the most unlikely.

Many of the usual basketball powers will be playing, but long time favorites Georgetown(went to college there) and Louisville(lived there in the 70's) are not.  Home area schools Virginia and North Carolina are clearly in the mix. 

Watched a bit of one of the preliminary games earlier and talent was not evident.  Time to check back in.

Sunday, March 04, 2018

Trump vs. Schumer, battle of the litens

The decision(aka intuitive personal reaction based on no information) by Trump to block further funding of the Hudson Tunnel infrastructure spending is unequivocally stupid.  This is the second time stupidity has reined here where parochial politics outweighs national interest---first time by everything wannabe Chris Christie blocking New Jersey's portion of funding two years ago.  Now traditional New York pol Chuck Schumer responds by trying to be the persona of Trump rejection.  His approach to negotiation in the first instance now is the press, the better to build his righteous stature.

While other countries have advanced rail systems and dedicated mostly commercial road networks, the stuck with 1950's innovation.  This can stay political but there is no glory on either side.  Long term programs so f'ing obviously need long term consistent commitment.  A vain idiot in the White House doesn't mean seeing this as a political opportunity.

Thursday, March 01, 2018

Trump implosion beginning...

---H.R. McMaster is out and now an executive for Ford Motors who did something in the Bush administration will become National Security Adviser.  He has no substantial background  This is the most dangerous thing to happen to date in the incoherent Trump foreign policy approach.  McMaster told the truth... another one gone..

---The tariffs are not only stupid but they are self dealing.  Wilbur Ross has huge interests in steel companies.  A trade war will damage the economy.  Something negotiated could have been reasonable, but a one off stance without talks is beyond comprehension in this global economy.

---Melania wants to get back to Mar-a-Largo for her spa treatment and nails.

---Market sell-offs can become self sustaining and could possibly lead Trump, who has zero understanding of financial markets(pure real estate hustler), to take some financial intervention that would make things worse.  His patsy Mnuchin is the worst self dealer in the cabinet and will agree to anything that lets him keep his job.

---Ben Carson's wife bought new office furniture as HUD trims multiple projects for the poor.

The true government unwinding is beginning...

"Unwinding" credit to George Packer.