Financial Rumblings (Biz Case)-July 7, 2016

Game of Thrones Script: The Winds of Winter Episode (Season VI, Episode X)

From the Winterfell-Dining Hall.

Slow zoom out from JON SNOW’s face. JON SNOW is sitting at high table. SANSA sits beside him. Representatives from Northern houses, the Vale, and the wildlings are gathered in the dining hall. TORMUND and DAVOS sit among the wildlings. PETYR stands off to the side, watching.

VALE KNIGHT: You can’t expect Knights of the Vale to side with wildling invaders.

TORMUND: We didn’t invade. We were invited.

VALE KNIGHT: Not by me.

JON SNOW stands.

JON SNOW: The tree folk, the northerners, and the Knights of the Vale fought bravely, fought together, and we won. My father uses to say we find our true friends on the battlefield.

One of the houses’ representatives stands.

MAN: The Boltons are defeated. The war is over. Winter has come. If the masters are right, it’ll be the coldest one in a thousand years. We should ride home and wait out the coming storms.

JON SNOW: The war is not over. And I promise you, friend, the true enemy won’t wait out the storm. He brings the storm.

The men begin to murmur. LYANNA MORMONT stands.

LYANNA: Your son was butchered at the Red Wedding, Lord Manderly. But you refused the call. You swore allegiance to House Stark, Lord Glover, but in their hour of greatest need, you refused the call. And you, Lord Cerwyn, your father was skinned alive by Ramsay Bolton. Still you refuse the call. But House Mormont remembers. The North remembers. We know no king but the King in the North whose name is Stark. I don’t care if he’s a bastard. Ned Stark’s blood runs through his veins. He’s my king from this day until his last day.


The most difficult thing for people in power- be they politicians, business leaders, managers, etc. – to realize is when to change their tack against headwinds in order to continue to progress forward toward their goal. The Brexit vote is an example, where those in favor of staying argued points which really didn’t register with the masses: 1) to vote to leave the European Union would be a disaster for free trade within the EU; 2) England’s status as one of the world’s financial centres would be diminished if it is no longer was seen as a gateway to the EU for the likes of U.S. banks; and, 3) the GDP would fall. In essence, the citizens of England who were in favor of leaving the EU were like Lyanna- trying to rouse the political officials to act on what they saw was was wrong with England’s involvement in the EU: lack of sovereignty on immigration and to a lesser extent court rulings that can be overturned by an EU central court; and, the despair that the working class felt as their own financial goals were fading as a result of lack of wage/career growth. In business, the constituency (consumer) cast their ballots with their wallets/clicks/follows, and they vote as frequently as they do in Chicago elections: often.

Business leaders, like lobsters, are often too slow to realize what is occurring before it is too late. Businesses need to be anxious, paranoid, and scan the horizon for new competitors, while making sure the product/service offered is the best; no one buys a crappy product for very long once they realize it is a crappy product and your competitor’s product is better or at least not as crappy as yours. H&M is growing big time, but their quality, or lack thereof, is a bit concerning. It is true that fashion trends change quickly, but, when a shirt fades and the thread in the shirt becomes less taught, it is enough for one to really question the underlying value of an item that will not last beyond the current season. H&M clothing fits a fashionable and value customer, but in order to maintain its reputation, it does need to increase the thread count/quality such that their products do have some longevity- even if it goes out of style.

Business leaders need to be empathic because when they aren’t, they sound just as clueless as those  in the Winterfell-Dining Hall arguing against supporting John Snow in his battles to come. Technological companies can be poor at not understanding their consumers, because often they are mesmerized, like the songs of the Sirens, by the “coolness” of the technology that they are providing. The wireless companies at first had unlimited data plans-which was fine when you didn’t have data hog applications like streaming video, movies, and social sites, but they were slow to address the needs of the consumers when the “unlimited” data plan became too costly to promote; thus the wireless companies started to have tiered pricing dependent upon usage-which also became obsolete due to the increased bandwidth flow because of 4G, etc. Thus, you have Verizon, increasing its prices and having roll over minutes, which is similar to offerings by AT&T. Another complaint that people had was the outsourcing of call centers to outside the U.S., which at times was challenging, which resulted in returning some of those jobs stateside/bettor training.

Winter is coming and like John Snow and Lyanna and the other houses that swore their allegiance to the House Stark, need to be in unison on how to tack to reach their goal of defeating the outside invaders -White Walkers; businesses need to tack to reach their goal of providing the best product/service/value for the consumer, which leads to increased market share and earnings (EBIT and EBITDA).


Financial Rublings (Brexit)-June 24,2016

Date: The day after the UK voted to exit the European Union (AKA Brexit)

I am sure the UK supporters for remaining in the European Union feel how Taylor felt at the end of the “Planet of the Apes” (1968) after he dismounted his horse that is carrying him and his girlfriend, Nova,  and the camera pans across large metallic metal spikes that look like tank traps, and he says,

“Oh my God, I’m back. I’m home. All the time, it was. We finally really did it.” Then he falls to his knees and screams “You maniacs! You blew it up! Ah, damn you! God damn you all to hell.”

The hand writing, or Banksy, that the masses would vote to exit the European Union, was clearly on the wall. The polls seemed to point that the vote would be to stay in the EU, though it would be close; however, there were two polls that did call the exit vote correctly: @OpiniumResearch and @TNS_UK. Those that didn’t believe that an exit vote was in the cards was Wall Street; judging by the 1.3% rise in the Dow Jones Industrial Average the eve of the vote from the 17,780.83 to 18,011.07- they are also probably the the same people that thought that the Warriors up 3-1 on the Cavaliers would win the title. The prognosticators underestimated the tenacity of the foe and were not in tune with the mood of the electorate: status quo must go.

Every nation wants its sovereignty and though the common currency, gave unencumbered access to the EU partners, and the ability to create large trade agreements were benefits, it was outweighed by what the masses felt were the short comings of being part of the EU: not being able to have full control who enters and vet those that cross borders because entering one EU country was a pass to all; having the possibility of national laws struck down by an EU court; and, if the status quo so great, then why do I feel threatened in my financial prosperity and security?

Who’s next in line to leave the EU? I do believe that more countries will chose to exit the European Union, especially if the EU does not address the free rein issue of the public. This was not a large issue before, but given the numbers of of those seeking migration, the pedestrian growth in GDP in many countries, it does create a burden to the countries accepting those migrating-especially, when there is no real plan to incorporate them into the country and the financial burden that they represent.

It will take time some time for the UK, or what remains, if Scotland, etc., choose to leave, but the UK will be fine. The pound sterling has fallen, which was expected:


It will continue to vacillate in the weeks to come as the transition becomes clearer, as the pound loses the strength it had as part of the EU.

My outlook for the DJIA is one that hasn’t changed since August 2015:  the market is overvalued and given the weakness in earnings to come, there is no reason the market should be above 15,386.82 Thus, the market still has room to drop.

Financial Rumblings-May 19, 2016

At the time of this post on May 19, 2016, the DJIA was 17,376.65 , down 149.97 or  .86% from yesterday’s close-which is close to the 17,000 mark I thought it would be in my last post on March 21, 2016. I know, my powers of prediction are incredible- at times, but my reasoning is always spot on.

Today’s free fall appears to be the market’s reaction to the possibility of a rate hike by the Federal Reserve in June 2016.  I believe that the Fed will increase interest rates by a quarter point, though, the earnings in the next few quarters will be challenged.  The Fed is very tired of the market’s skittishness to the possibility of a rate hike, much like a dog that leaps from the couch and scurries to the front door to bark when someone is within 15 feet of the front door.  The market needed to “slow its roll” as the run up to 18,000 was not warranted and realize that a quarter point hike by the Fed would eliminate further action until next year as Q3 and Q4 earnings for 2016 will not foster any warm and fuzzy feelings for another rate hike given these last two quarters will be challenged to meet the growth expected as the top and bottom lines reflect an economy that is challenged.  

Financial Rumblings- February 12, 2016

I’m taking a vacation from my financial musings. I’ll return after the NCAA’s March Madness, well, the second round. Or more importantly, right after the next Federal Open Market Committee (FOMC) meeting: March 15-16.

As of this posting, the Dow Jones Industrial Average (DJIA) is up 244.25 or 1.56% at 15,904.43. I guess we are out of the woods- NOT! The stocks bounced as bank stocks were scooped up, in part because of the Deutsche Bank buying over $5 billion in bonds and WTI oil gained 10% or $2.63 to $28.84 per barrel. This I know will occur in the interim: stocks will yo-yo for a bit as people analyze and over analyze each bit of economic news; talking heads will wrestle with 5.0-4.9% unemployment, yet the feel of an economy that is much worse; economists will explain negative interest rates and the negative/positive impact for the global economy; politicos will focus on the Presidential race and the impact to Wall Street; and, everyone will realize that their taxes will soon be due, but why on April 18th and not on April 15th (answer: Washington, D.C. Emancipation Day).

Until then, like Glenn Frey and the Eagles sung: Take it easy, take it easy. Don’t let the sound of your own wheels drive you crazy.

Financial Rumblings -February 1, 2016

When I lived in Colorado, it was said: If you don’t like the weather, wait an hour. That’s how I view the stock market of late: If you don’t like the direction of the market, then wait-perhaps, not an hour, but a couple of days or weeks.  Last week, for the first time the BOJ adopted a negative interest rate policy, and the market went up. Up to then, the sentiment was very dour, as oil prices were sliding fast, Apple’s outlook wasn‘t very rosy, and economists started to break out their harmonicas for the troubling global economy that lay ahead. But, then, the tune of “Happy Days Are Here Again” started to be played throughout the global markets because of the BOJ news, oil stabilizing, and people just like nuggets of good news- no matter how counter it is to the reality of the landscape.

I still believe the market, DJIA, will dip to the low-15,000’s, by August of 2016, because earnings growth will be deeply challenged by the poor global economy, and in particular, the weak U.S. economy.

For my very short term outlook, by the close on Friday, February 5th, the DJIA will be 16,200, or down 1.2% from Monday’s intra-day 16,396.93. By the end of February 2016, I expect the DJIA to be slightly below 16,000.