Weekly Musing (Sep2019)

For the umteenth time during this presidential reign, I have to say, “What a week!”.  What surprised me was the markets took the probable presidential impeachment in stride, only faltering when Trump decided to fuel trade tensions with China (again) – and this being just prior to the next round of talks.  The topic this time being capital restrictions – neither of which would likely be very successful. For instance, rescinding the waiver allowing Alibaba (BABA) or Tencent (TCEHY) to trade on US exchanges would not change their ways but force them to move their listings to London or Hong Kong.  Noble but not realistic.  Then there’s the issue of the impact on Hong Kong listings … My potential impacts include Yum China (YUMC) and Swire Pacific (SWRAY) which I’ll have to investigate further if this idea gains traction.

I am not alone!  BAML decided to upgrade CHD to Buy citing “strength in their largest business (laundry) and seeing the company’s brand-building efforts paying dividends.”  The one quibble I have with this assessment is the attribution of recent weakness to “value rotation” rather than placing the blame squarely on a short seller (Spruce Point).  Shares were up for the week but still down 5.5% from their September 5th close. This puts last week’s buy squarely in the green. Gotta love it when you are on your game.

Last week’s lament was regarding the lack of novel concepts emanating from the Delivering Alpha conference.  Fast forward a week and one appeared out of nowhere – well actually on the CNBC set. David Zaslav, Discovery’s (DISCA) CEO was interviewed on the launch of a new concept dubbed the Peloton model, aka,  The Food Network Kitchen. Like Peloton (PTON), this offering provides multi-level customer engagement; Subscription, Interactive and Transactional. This type of engagement – if successfully executed – has the potential to attract, retain and increase sales – all while the customer is eagerly forking over their cash.  I chose not to participate in PTON as the dual class and pricing was a turnoff. DISCA pays no dividend so I’m not invested there either. But the concept, if not the companies, is intriguing. 

Thumbing through other news, I ran across an interview with Robert Herjavec regarding his view on interest rates in which he opines, “If I can borrow at 2% or 3% and grow by 10% or 20%, I’m going to take that all day long.”  Well, yes, I would too – and then Eureka!  (yes, I can be dense at times), a rationale behind Trump’s persistent jawboning of the Fed.  I’ve never believed the President’s motives were pure, as people on fixed incomes are disproportionately impacted by low rates.  If a successful businessman such as Herjavec can leverage off of low rates, a leveraged real estate guy – such as the President – should easily profit (or reduce losses) via refinance.  Particularly when other ways to increase business are being scrutinized and licensing deals are drying up.

There are my thoughts for this week.  With both month and quarter end arriving Monday, I’ll be heads down.  I don’t know how it happened but fully 15% of my dividends arrive on two days … the last day of the quarter and the first day of the subsequent quarter.  Next week will be the Monthly/Quarterly recap.

Have a great week!