Price is what you pay. Value is what you get. Warren Buffett

The current complaint from many investment strategists and portfolio managers is securities are highly priced, specifically stocks and bonds (but not currencies like bitcoin, right).  You may have heard such commentary from luminaries like Howard Marks, Jeff Gundlach, and the veritable maestro, ex-Federal Reserve Chairman Alan Greenspan.  Why, even Janet Yellen weighed in with similar thoughts a few months ago, if we can dust off the cobwebs from that long ago.  So, if these distinguished people are so disenchanted with our situation, it might be worth our time to delve into the subject of value.  The definition of value is deserving of worth.  There is plenty of academic teaching which can help people learn about how to value securities, the most prominent probably Aswath Damodaran (NYU) and Bruce Greenwald (Columbia).  Professor Damodaran does a great job of analyzing stocks and his distinction between valuing securities and pricing them is notable (you might try his blog, Musing on Markets).

In everyday life, the quest for value can impact ones life on a daily basis.  There is value in trusting your employer or fellow co-workers.  A clean and secure home and working environment is enormously important.  A healthy meal which you pay a fair price for has great value, versus a large plate plenty of restaurants serve to impress their paying customers (but pay for it in other ways a few hours later).  Nice music has value, especially early in the morning or late at night as a way to relax.  Everyone’s time has value, as there are only twenty four hours in a day for all of us.  Not standing in line is always a treat, especially when one is in between appointments.  Unique and simple merchandising has demonstrable value in business, as does excellent planning.  In nearly any activity, understanding logistics has tremendous value, clearly helped by technology and global positioning services.  Last, but certainly not least, a good book has potentially as much value as anything anywhere.  I am sure you too can think of your own examples of value, unrelated to securities, which impact ones everyday life.  Looking for value is certainly not limited to the investment profession.

As for markets this week, the onslaught of corporate earnings continued with a wide variety of results, as usual.  In the media space, CBS posted a nice number while recent IPO Snap took it on the chin, yet again.  It’s fellow compatriot in the IPO arena this year, Blue Apron, joined them on the not wanted list with a tough quarter, too.  In better news, the unique auction house Ritchie Brothers showed a good resul, as did home builder William Lyon.  In another house, this time of pain, the high end Brazilian steak house Fogo De Chao did meet expectations.  Joining this neighborhood is the always pleasant retail space, where Macy’s, J.C. Penney, and Kohl’s were brutalized by investors disappointed with poor same store sales.  Is there ever a quarter where this is not the case (cannot think of one in recent memory)?  On the macro front, the CPI reading came in light at .1% (.2% expected).  With all the earnings news, and plenty of it good, the question remains, what caused the plunge this week?

Ah, yes, how could we ever forget about the joy which is politics?  The markets reacted to the non-stop bellicose rhetoric from North Korean Leader Kim Jong Un (their idiot strongman) and President Donald Trump (our egotistical strongman), clearly not liking the gamesmanship.  You know the old quote, ‘He may be an idiot, but at least he is our idiot.’  Still, there are distinct differences which should be noted.  First, college students from other countries can come to the United States without being imprisoned, tortured, and left brain dead if they, gosh forbid, make a minor mistake.  Second, the United States has the world’s largest economy, and North Korea has, um, uh, well, very little in terms of an economy (I am being kind).  In fact, 90% of all it’s trade comes from one country, that being, yup, you guessed it, China.   Third, historically, the North Korean leader and his family has consistently made threatening statements towards democratic countries and is actively working to obtain nuclear weapons.  The United States is the military leader of the world, which includes the best private companies and their technology and weaponry, including those related to nuclear delivery.  The biggest issue for investors is the problem is not solvable because of the logistics involved.  As long as both of these ‘leaders’ are breathing and in charge of their respective countries, because they just don’t know how to stay quiet and lead, markets have to deal with their bombastic statements.  Well, at least in the United States we are becoming more accustomed to the daily assortment from Donald, so we can take value from that.  

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

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.