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The Best of What They Said and I Read Week Ending 8/12/2018

Short excerpts from articles I found interesting.  I may not agree with the author and the following material is not intended as investment advice.

The Economist – August 2, 2018 – Leaders - The Art of No Deal

“In most negotiations, the maxim that “no deal is better than a bad deal” makes perfect sense. If you are buying a car, you must be ready to walk away or the seller has you over a barrel. The way to drive a hard bargain is to persuade him that he must offer you a good deal or there will be no deal at all.  Theresa May has made this commonsense principle the foundation of her talks with Brussels over Britain’s exit from the European Union…The trouble is that Brexit is nothing like buying a car…If no deal is reached Britain will not maintain the status quo of its EU membership, but find its links to the continent abruptly and acrimoniously broken off.”

“…For this reason, the EU has never taken seriously Mrs May’s claim that Britain is ready to walk away from the negotiating table…although the EU’s negotiators in Brussels do not buy it, Mrs May’s slogan that “no deal is better than a bad deal” has struck a chord with the voting public…Polls show that nearly twice as many Britons would leave the EU with no deal as would support a compromise along the lines Mrs. May proposed last month. By this logic, her eventual settlement with Brussels, if she reaches one, will look even more like a bad deal because Britain will have to give more ground. Many voters will thus quote the prime minister’s own slogan back to her, and argue to crash out.”

“It is time to drop the pretence. Leaving without a deal was never a wise option. The government ought to have spent the past two years steering the public through the painful trade-offs of leaving the EU. As we have argued, Britain’s interests are best served by a “soft Brexit” that preserves markets and security. Instead, big-mouth ministers have kept expectations sky high, claiming that the deal “will be one of the easiest in human history” and that “there will be no downside to Brexit”…

U.S. Global Investors – August 10, 2018 – by Frank Holmes

“…Elon Musk is no stranger to making controversial and outlandish comments, and his tweet earlier this week is no exception…the perennial entrepreneur announced to his more than 22 million Twitter followers that he is “considering taking Tesla private at $420.”…should Musk…take the electric carmaker private, the already shrinking universe of investable U.S. stocks will lose yet another name.”

“…the number of publicly listed companies in the U.S. has fallen steadily since 1997. More companies have delisted…than gone public in every year of the past 20 years except one, 2013…the U.S. has roughly 5,000 fewer companies listed on exchanges than you would normally expect, given the country’s size, population, economic and financial development and respect for shareholder rights.  One of the main causes of fewer listings is the explosion in mergers and acquisitions (M&As)…There’s nothing wrong with M&As…The problem arises when there aren’t enough initial public offerings (IPOs) to replenish the pool and give investors early access to new firms.”

“Apple can thank its $1 trillion market cap largely on the fact that there’s less competition now among equities—specifically tech equities. Uber, Airbnb, Pinterest, Coinbase, and many other huge tech unicorns have delayed or put off getting listed altogether.  So why would a company like Uber or Airbnb choose not to seek public funding? We can point to two related causes: stricter regulations on publicly traded firms, and the boom in private equity…Because of these added costs, many smaller companies and startups are opting not to raise funds from public capital markets—or at least to delay it. This hurts Main Street investors. Because they’re generally not able to invest in private equity, they lack access to companies when they might be expanding at their fastest."

Barron’s  – August 10, 2018 – Dow Drops 149 Points as Turkey Takes a Dive – by Ben Levisohn

“The Dow Jones Industrial Average fell 149.44 points, or 0.6%, to 25,313.14 on the week, while the S&P 500 declined 0.2%, to 2833.28, and the Nasdaq Composite eked out a 0.3% gain, to 7839.11. These results were far superior to what occurred elsewhere in the world: The iShares MSCI EAFE exchange-traded fund, which tracks an index of developed market stocks, dropped 2%, to $66.74, last week, while the iShares MSCI Emerging Markets ETF slid 2.3%, to $43.19.”


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