A Lesson from Aunt Helen

     Sometimes investing lessons come from unlikely places. This one dates back to 1976 when I had purchased my first home and needed to furnish it with modern conveniences. I was lucky enough to buy a TV from my aunt, whose husband ran a Zenith cabinet factory here in town. He received a new TV every year and was allowed to sell his old one and I jumped at the chance. The TV was delivered by two hung-over flunkies who were supervised by Aunt Helen. She wanted to make sure that: 1. I paid her and 2. that I understood how to use the new technology called remote control. Her words are as clear in my head today as they were that day in 1976. She said "Once you get used to a modern convenience, you will never go back to the old way".  I know it sounds too simplistic but the fact is that I haven't had to get off my butt to change channels since that day. So how does that apply to investing? Any company that brings to market a product that offers an easier, cheaper, or even better way of living has a pretty good chance of success. Just look at Amazon. Now you don't even have to get out of your recliner to shop for your favorite clothes, furniture, toys, or whatever. Most groceries, including Walmart will bring your food right to your door. Netflix has eliminated the need to drive to a video store for renting a movie, even porn is served-up at the touch of a button. So what's next for the laziest generation the world has ever known? My guess is dining on restaurant- prepared food in your own home. Some restaurants such as pizza parlors have offered home delivery for many years but the scale of this trend is about to explode. Who will use this service? Just about everybody, busy mothers, tired workers, hungry stoners with the munchies, and the elderly who don't want to get out and drive. You can bet that this industry will have many challenges like heavy competition, shortage of drivers, safety issues, and low profit margins but it is unlikely to go away once it catches on in a big way. I don't know who will emerge as the winner in this industry but I have already decided to place my bet on (GRUB) Grubhub because they have a dominant position already and are actually profitable. There is no way I would pay the current ask price, so I have placed a limit order for Grub for a lower entry price even though the valuation is sky-high.  The beauty of Aunt Helen's wisdom is that it can be applied to any product, service, or technology that may come our way.

Dog Days

      As I write this, southern Indiana is suffering through a stifling heat wave. With mid nineties temps and very high humidity, any outside work results in sweat-soaked clothes in just minutes. Another guy who is sweating it out is Jerome Powell, the Chair of the Federal Reserve Open Market Committee. He is being grilled by Congress about monetary policy which directly affects our economy and capital markets including the stock market. Jerome is under pressure by our President to cut interest rates because that might cause stocks to rise which is how the Donald gauges his performance as President. I say "might" because a rate cut may signal to Wall Street that the economy is weaker than thought and could actually cause panic selling, an unintended consequence. Even though the President appoints the Federal Reserve Chairman and the Board of Governors, the Fed is supposed to be independent from any political influence. Trump has recently been bashing Powell in tweets and has even threatened to demote or fire him. When asked what would he do if Trump fired him, Powell answered that he would stay on the job because the President did not have the authority to fire him. Stay tuned because this could get very interesting and messy. Typically interest rate cuts are designed to ward-off recessions or even to soften a financial crisis, neither of which is happening. You can bet that Wall Street traders are hanging on every word of Powell's testimony and placing trades based on their interpretation of his answers to questions. Since I consider myself an investor and not a trader, I will do nothing about today's testimony to Congress. In fact I consider myself to be in a pretty good place. I have lightened-up on some stocks as they rocketed-up in June and built myself a war chest of capital for bargain hunting when a downturn does occur. I have built a fixed income portfolio of CD's that don't have a high return but are safe from market swings. The June brokerage statements just came in the mail yesterday and were surprisingly strong. Another plus is that many brokerages have increased their money market returns to the 2% range which actually generates some return for a change. Looking forward, I am interested in snagging some of the "post IPO" stocks which usually sag after the lock-up period has expired and investor enthusiasm wanes. Just because I missed out on past blockbusters doesn't mean I can't get lucky for once. As for today, I will stay indoors and hope my 25 year old air conditioner keeps working.