“Great achievement is usually born of great sacrifice, and is never the result of selfishness.” Napoleon Hill

 

 

Most people are creatures of habit, especially with their daily living responsibilities.  Necessary activities like going to get the groceries, mow the lawn, take out the garbage, and fill up the car with gas (or recharge the battery for electric cars) all have to be accomplished if a household functions with any kind of efficiency.  As part of my daily habits, one such event is filling up the car with gas.  The usual destination is Costco in Summerlin, where the price is significantly lower than other gas stations.  For a long time, like the last few years, the lines to fill up your car were incredibly long, and it was hard to avoid this, unless you arrived at five or six in the morning. Waiting a half hour for a two minute experience has a tendency to get people a little peeved. So the experience was tough, especially when you would go after work, were tired and probably a little hungry.   A few months ago, Costco began working on expanding the number of stations, essentially doubling capacity.  In took three or four months for the work to get completed, but they finished up about a month ago.  Now, no lines, and the experience is quite good, in and out in two or three minutes.  Investing capital can be a little like this, you look for businesses which make sense and fit what you want, but they can face temporary issues which make owning them a bit uncomfortable.  From an investment standpoint, they may have factors which can be impeding their growth and efficiency, but if you see them being worked on and solved, usually it is worth your time to hang in there as the eventual outcome will more than justify the pain of non performance.   

 

Yesterday, the April jobs report showed a gain of 211 thousand, beating the estimate of 185k even though the March number was revised downward.  On the earnings front, Apple sold over $50 billion of product in three months and Wall Street yawned, while Facebook smashed estimates and the lemmings fawned.  Big oil posted improved profit figures but the stocks remain stuck in the mud because of the lingering issue of too much fracking production in United States and lower than forecasted global oil demand.  In a few weeks, the OPEC countries will meet to discuss an extension of their production cuts.  Not too hard to predict they will extend them in an effort to get black gold up.  When countries are running these massive deficits, they need oil prices higher.  When it happens is anyone’s guess.  

 

 

With U.S. markets setting record highs almost daily, the investment community is constantly commenting on the lack of value and some keep comparing the current situation to the 2000 bubble, I would argue inappropriately.  If one does want to identify a bubble, look no further than the Canadian housing situation, especially in the most popular cities of Vancouver and Toronto.  Having gone through a housing bubble in Las Vegas, the ever present warning signs are all there with the average housing price in Toronto nearly 800k and well over a million big ones in Vancouver.  If you look at traditional metrics of price to square foot, locations, historical pricing, neighbor comps, or anything of that sort (ask a realtor for more specifics), the Canadian metrics are in a stratosphere beyond anything of compare.  My Canadian friends and relatives might believe the fifty degree below weather in the winter and great maple syrup for pancakes would justify those prices, but I suspect not.  Of course, other Toronto ans have been saying the same thing for fifteen years, and the housing prices just kept rising.  It took a while for the end of our housing bubble to arrive, and I suspect the same situation exists up north.  Friends, keep your eye on it.

 

In Omaha this weekend, Warren Buffett is hosting a crowd of over forty thousand fellow shareholders to his annual meeting.  Mr. Munger calls them groupies in an affectionate way, and having been a part of the event, it is a unique experience.  The great thing about it is what you read from Berkshire is exactly what you get, which is always what a buyer appreciates.  Of course, the wisdom and wit are attractive, and the returns help too (imagine that).  Finally, I thought I would mention another bubble and a sign of the times.  As an ex basketball coach, I pay attention to the sport and it’s recent happenings.  There is an excellent young player at UCLA named Lorenzo Ball who will be a top pick in the upcoming draft.  Lorenzo has a parent who is quite verbose and declined attempts for endorsement contracts with the largest shoe manufacturers like Nike, Adidas, and Under Armor (he wanted a billion bucks).  Instead, he has his own brand for Lorenzo and they have come up with a shoe with the bargain basement price of, don’t blink, $500 bones.  Just for added measure, they are offering flip flops for a measly $200.  It will be interesting to see what kind of market reception Mr. Ball gets from the paying (or probably more accurate, non paying) public.

         

Thanks for reading the blog this week and if you have any questions or comments, please email me at information@y-hc.com