I’m trying to allocate some time for reflection, and, in a world with too much information, actively discard the unimportant stuff, exercise some quiet, and jot down some facts and thoughts I want to keep.  I’d thought I’d share some. 

Hope you’re having a productive week!


It’s not all bad news

In the quarter Investment Commentary heading to your mail boxes, I choose to focus on what we’re concerned with. Though I mentioned there are positive data and arguments for the bulls, I didn’t really include any.  As I’d like to think about positives (especially on Fridays), I offer these bits of warm and fuzzy economic data. The jobs picture is great. Unemployment rate today of 3.5% is a 50-year low.  These charts below surprise me:

Left chart: At about 200,000 initial jobless claims a month, the U.S. is at a low not seen since the late 1960s.  That’s great news by itself, but it’s a lot better when you realize a fact revealed on the right chart: the workforce has more than doubled since the late 60s. 


Pondering the meaning of negative interest rates

Still thinking about negative interest rates and what it means.  Supposedly some $15 trillion of debt is out there, and with a negative-yield.  That means these borrowers—mostly European governments and Japan—get paid to borrow.  It’s like you have a mortgage but in the end, the sum of all your monthly mortgage payments add up to less than your house purchase price.  Debt is older than money; in fact, there’s a compelling theory that debt created money, and not the other way around.  Money may have been created to unitize and transfer debts (to monetize them).  Anyway, in some 5,000 years of debt, this is the first time humanity is lending and borrowing with a negative interest rate.  What does it all mean and what happens next?  It seems no one really knows for sure. Right now I’d trade my economics degree for accounting.

Just a month ago, the entire German yield curve was negative.  This means the German government could borrow for ANY DURATION OF TIME, AND GET PAID FOR IT.  Now it gets paid to borrow but only if that loan isn’t longer than 15 years.  It wasn’t that long ago that Greece almost collapsed and got booted from the European Union.  Today they borrow for less than the U.S. Treasury up to 10 years. 


For your privacy hygiene

Many of the reasons I like Google’s business model—it’s one of the most powerful and profitable I’ve ever analyzed—are the same for why I fear it.  The value I personally assign to privacy has only gone up over the years. Google and others are in the data business, and they offer valuable services. But it isn’t really free, is it?  Yes, Google helps you get answers, solve problems and even anticipate your needs. But does it have too much data? I honestly don’t know, but here’s something worth trying.  I expect it won’t affect much what you get out of Google.  And all things equal, it’s better for Google to have less information on you.  From the NY Times:

How to Set Your Google Data to Self-Destruct

Google has now given us an option to set search and location data to automatically disappear after a certain time. We should all use it.


Costco’s quarter earnings (I don’t care)

Many of you know I love to reference Costco.  It’s a core holding and a great case study illustrating what we look for in investments.  Costco reported the quarter’s earnings yesterday.  Depending what headline you read, it was a bust or a beat.

I bring up Costco because it’s another example of how the same event can bring about very different headlines and slants. Financial news is mostly noise today. Immediacy and quantity matter, not quality and thoroughness. Many initial headlines and stories are not written by people but by computer algorithms, especially within online financial news.  The stock was down several bucks after the bell when it reported; headlines focused on small misses in sales to analyst’s expectations.  Later in the afternoon, headlines focused on the earnings beat and other information, and the stock was up a percent.

To be honest, I don’t care about the quarterly numbers. This or others. Costco is a special business with significant long term competitive advantages, a stellar management team, and a unique and valuable culture. (And surprisingly few stores out there, so lots more to build.) 

Trust me, you’ll hear more about Costco from us in future posts.  Some things about the business are quite counter-intuitive and might shock you.