Wednesday, June 29, 2016


The news of course, is all about the Brit vote to exit the EU.  What has been less discussed is the fact that this unwinding will take at least two years, that the vote itself has no legal standing, and that with David Cameron resigning, the new government will actually be initiating the exit from the EU.

We suggest seeing this as a time to buy.  Has the will of the British citizenry, as expressed at the voting booth, suddenly reduced the value of every business enterprise on the planet by 3% to 7%?  I don’t think so.  The type of bizarre, though quite understandable behavior, exhibited in this sell-off, is the antithesis of the discipline embodied in those with that enviable combination of significant financial statements and a peaceful, ordered life.

It is likely that the unknowns stemming from this vote will keep our Fed Open Market Committee, and chair Janet Yellen, from raising interest rates significantly.  The same goes for Germany.  The question may be the timing of the arrival of negative rates.  Negative interest rates are a special challenge for banks, as they would be paying the fed to hold reserves, while at the same time finding quality customers to whom they could lend.

Would banks charge consumers for housing their funds at the bank?  If so, under what conditions?  What balances would be required of consumers, to avoid being charged?  And, how would this disperse holding of dollars, or value, to resources and locations other than banks?  I’m not sure, though in almost every type of change and potential crisis, there is opportunity.

The low to non-existent interest rates highlight the ongoing need and demand for quality cash flow, or what academics might call “risk-free return”.  The concept of “risk-free” appears to be more suited for utopia, than it does as a meaningful metric with which we evaluate anything in life.  Every decision carries both risk and opportunity cost.

For example, some embrace the idea of a secure job.  The facts are though, that the job or position belongs to the employer, not the employee.  The employee simply fills that job, at the discretion of the employer.  Longevity in a position ultimately is a function of the value we each bring to the position.

When we have dollars to put to work, and we are looking for cash flow, we can buy or invest in a number of ways.  These include dividend paying stocks, high yield and high quality bonds, income producing real estate, timber and farm land, business interests, leases, and other types of financial arrangements.  All have their unique characteristics, and their value in any given situation.  None are without different kinds of risk, and a choice to invest in any one means we give up the opportunity to invest those same dollars elsewhere.

This question of the highest and best use of available dollars, of the allocation of available resources, is an ongoing question.  The answer is typically a function of both the raw dollars available, and the facts and circumstances at a given point.

Forty years ago today (this commentary is written on Monday), Teresa and I started our married lives together.  We met as juniors in high school, and married four years later.  We didn’t realize at the time that being married forty years would be such a big deal.  Or that it would pass so quickly.

What I can say is that Teresa, a woman of character and integrity, by her very presence, draws excellence from those around her.  In the wisdom literature is an epilogue known as “The Wife of Noble Character”.  You can read it at
Quote of the week:

“A wife of noble character who can find?  She is worth far more than rubies...Her children arise and call her blessed; her husband also, and he praises her…Charm is deceptive, and beauty is fleeting, but a woman who fears the Lord is to be praised.”
Selections – Proverbs 31