In Search of the Perfect Investment

Welcome to Munich where it’s over 90 and nothing is air-conditioned.

Heh. I got one right. Ladder Capital (LADR) blew out its earnings. I recommended those guys a few weeks ago. We’ve done well. They’re still yielding 8.1% and now, with the higher earnings, there’s plenty of coverage for that handsome dividend yield. No worries.

You can read more here.

When tech stocks were tanking, Ladder was rising.

Apple on Tuesday reported a blowout $11.52 billion in profits for its most recent quarter, up nearly a third from a year earlier. Amazingly, their strength is coming from big sales of their priciest phone, the X. I never thought it was worth the extra money — I have an iPhone 8 plus. But all my entitled friends are thrilled with facial recognition. Saves them punching in their eight-digit ID or damaging their precious fingerprints. My fingers still work. I’m awaiting the faster 5G  phone. We should hear more next month. Tim said they had an announcement in September.

Apple is offsetting some slowing growth of its hardware sales (laptops are down) with an accelerating business charging customers for apps, data storage and other services. Revenue from those services grew 31 percent to $9.55 billion in the quarter. Apple Music screamed past Spotify in the quarter to become the most popular music-streaming service in North America. Neat.

What’s the point of forecasting doom and gloom?

Morgan Stanley says:

The biggest sell-off since February is coming and it’s going to hit the average investor hard.

The market will drop further with technology and consumer stocks faring the worst.

“The weaker earnings beat from several tech leaders and outright misses from Netflix and Facebook were simply additional support for our [defensive] call,” chief U.S. equity strategist Michael Wilson says.

Morgan Stanley says watch for a 10 percent correction.

Wilson reaffirmed his overweight ratings for utilities, energy, industrials and financials sectors, which should outperform in a more difficult market environment, he said.

Of course this nonsense forecast came out before Apple handily beat.

Full disclosure: I’m an old client of Morgan Stanley. They haven’t had a good idea in eons — at least not one I’ve been enlightened on. I have to fight with them on petty stuff, like $30 charges to wire me my money.

I don’t like funds.

This is an old theme of mine. the biggest benefits of most funds is for the people who promote and run them — the benefits are called fees.

Most funds don’t perform well, either. I found this in a February 3, 2018 weekend edition of the Wall Street Journal. I’ve been treasuring the yellowing paper ever since. I even schlepped it to Munich:

Consider quality: Year after year, roughly four out of five mutual funds fail to match the performance of the market they are purporting to invest in. Fund managers keep telling us that this is temporary. It isn’t. For at least 80 years, careful studies have shown that most professional investors underperform.

Moving onto other funds. Ones called “alternative” — whatever that means.

Most start with a great idea — let’s buy distressed something or rather, or let’s buy hot property. Then we fund the fund  — with oodles of investor money — too much it turns out later. Then the managers, desperate for investments, end up filling the fund with junk. I found this gem on Morningstar this week:

In recent years, scores of intermediate-bond funds have sported high-single-digit to low-teens stakes in emerging-markets debt (that includes both U.S. dollar-denominated bonds as well as the much more volatile issues denominated in local currencies).

Abundant opportunities

New York’s Grand Central Station is stuck in a 100-year old time warp. Let’s say you’re me. You arrive in a rush. You have to go to Hawthorne. When’s the next train? And from which platform?

To find your answers, you line up behind dumb tourists asking dumb questions “Do they have taxis in New York? Where can I get one? By the time you get to the front of the line, you’ve missed your train. (It happened to me.)

There are no screens and no computers. Just a ticket window that will sell you a ticket for the next train — whenever it is. But they don’t know. Only the Information Window knows.

Why am I bothering you? Simply to make my standard point: There are opportunities everywhere. In every frustration there’s always an opportunity. In every dumb product, there’s always a better one. And everywhere there are people with money looking for the next great thing.

The joys of travel

+ Someone hacked my MasterCard. Citibank shut if off — without telling me. Thank you Citibank. My Uber ride to the airport bounced.

+ I tried Uber with a Chase Visa card. That didn’t work. Uber blamed Chase. Chase blamed Uber. I caught a taxi.

+ Uber has no customer service phone line. Either their app works or you walk.

+ My Verizon cell phone now has twice the data, at half the price. I was on an old plan. Thank you Verizon for telling me two years ago.

+ My Verizon phone had 37 messages that didn’t show up on the phone. Good software. Hidden messages. Hence my voice mail filled with two short messages. My voice mail was always full.

+ Lufthansa has WiFi on their plane. But it doesn’t work.

+ My seatmate ordered a special meal. Lufthansa forgot to put it on the plane.

+ My seatmate is taste testing the movies for me. She’s amazed at how many foreign movies on the plane don’t have closed captioning. She’s having trouble with the Chinese movies. And the ads. Oodles and oodles of long ads that repeat and repeat. She saw one for Bulgari six times before she gave up and went to her book

+ Lufthansa’s business class seats give uncomfortable a whole new meaning. Fly Emirates.

+ Airports confirm my feelings about the planet: There are far too many people. Do not go anywhere near them during the summer. Far too many aggressive tourists.

+ You can cram three weeks of clothing into a 25-inch Eagle Creek roll-on. Lufthansa has handsome strong flight attendants who will lift your monster into an overhead bin. 25-inches is not “legal”. 22 inches is. But who’s counting? Certainly not Lufthansa. Saves on checking luggage, a generally bad idea. And there’s plenty of room for 25-inch bags in overheads.

The Tampon Tax Repealed

Last month the Australian government passed a bill to axe the tax on feminine hygiene products. Universally dubbed the ‘tampon tax’, the tax was a product of the fact that feminine hygiene products were classified as luxury items under Australian law.

A similar tax still exists in many places, including the UK and some US states.

Why Tariffs are bad taxes. From the latest Economist:

PRESIDENT DONALD TRUMP has called tariffs “the greatest!” He is deploying them liberally, slapping new ones on imports that last year were worth $89bn. Sometimes he talks of tariffs as tools to bully others into taking down trade barriers of their own. At others he seems keen to protect American industries from competition that he perceives to be unfair. And he likes the resulting revenue. So why are economists upset?

Tariffs are taxes, which create a wedge between the price paid by buyers of imported goods and the one foreign sellers get. Narrow tariffs aimed at specific products, such as cars, nudge consumers towards home-made goods and away from imports they might otherwise prefer. (Broader tariffs covering a large share of imports are more complicated, as exchange rates can move to offset some of their effects.) Tariffs resemble sales taxes in that they discourage some exchanges that may be mutually beneficial for both parties. But unlike sales tax, they discriminate between products based on where they are made. They are fiddlier too: different rates apply to thousands of different products. And they encourage lobbying by powerful industries seeking protection.

Tariffs impose costs on the country setting them. They invite foreigners to respond with retaliatory ones of their own, hurting exporters. (When new tariffs break past promises, they also erode trust.) Moreover, tariffs distort the economy, reducing productivity. Though monetary and fiscal policy can keep overall employment relatively stable regardless of trade patterns, discriminatory duties can rebalance the economy towards protected industries, drawing workers and investment away from others. No doubt some American steel-company executives are pleased with Mr Trump’s 25% tariff on imported steel. But domestic companies that buy steel to make higher-value products are miffed.

There are some arguments in favour of tariffs. In poor countries they can be easier to collect than sales taxes, requiring only infrastructure at ports. Provisions allowing countries to impose new ones help garner political support for free-trade deals and act as a safety valve in case of a disruptive surge of imports. And it is possible that in some circumstances, tariffs could help an industry to catch up with foreign competitors by offering temporary relief from more developed rivals. But well-meaning protectionists should take note. Muffled beneath the hurrahs of a small number of winners from tariffs are the harrumphs of a larger base of quiet losers-including other businesses, entrepreneurs and consumers.

Finally the secret to long life

Check out this video. It has all the answers to living to 100 you ever wanted:

Harry Newton. Tech stocks are bouncing back. Ladder is up. Lufthansa arrived on time. I’m safe and well. Now ensconced in an air-conditioned hotel. Maybe the only one in Munich.It’s a fancy hotel. I bargained with the Reservations Clerk and he caved.  Imagine the humiliation of having to pay retail.