Juggling Dynamite

Very important and little-discussed issues are covered in this segment about Tepper’s new book. Anti-trust breakups are coming for monopolies in many sectors, along with new regulations banning or greatly restricting share buybacks as the destructive market manipulation and balance sheet degradation that it is.  A brighter future requires more competitive policies that support the building of strong balance sheets and sustainable business models, not short-term financial gimmicks.

Jonathan Tepper is the author of ‘The Myth of Capitalism,’ about how a handful of powerful companies have come to dominate key industries and many of our lives. He joins @JChatterleyCNN on @FirstMove to argue the case for more competition and free markets. pic.twitter.com/WwLm47Nh8C

— CNN Business (@CNNBusiness) November 19, 2018

On a related note, private equity firms KKR, and Bain Capital have agreed to pay $20m to workers who lost their jobs in the Toys R Us bankruptcy. The move follows a months-long campaign in which former employees pressured some of America’s largest state pension funds to cut off investment in firms connected to the doomed buyout of the retailer.

This is a positive development because it connects the parasitical behaviours of financiers that pick a business clean of cash and income and bury it in debt to fund payouts to shareholders at the expense of a company’s long-term viability and pension obligations to employees.  As with Sears and many other companies, extractive financial gimmicks are the death knell for productive investment, economic strength and social stability.

As cryptocurrencies continue to tank, this cycle’s most deliriously valued ‘FAANG” stocks also took another big whack today, as shown here courtesy of CNBC.

Not surprisingly, as shown below, these much-loved and widely owned names have, so far, fallen more than 20% from their recent 52-week highs.  If past mania cycles are prologue, these stocks might be halfway through their eventual decline, as die-hard fans buy dips all the way down, before abandoning them in horror near cycle lows.

Those of us who have learned through decades of real-life investment cycles to adhere to a value discipline have been out of favour longer-than-average this time, and it has been tedious for some to wait.  But as I wrote here last year Value’s long winter will end in spring again–bank on it.   Great opportunity is coming, and it is very exciting to anticipate.

A great perk of early morning work is seeing the sunrise from our window. You would almost think all was well in Canada this morning.

Unfortunately, Canada’s susceptibility to economic pain and debt crisis are surely higher today than at any point in the past couple of decades.  We have credit abuse and short-sighted, destructive financial planning, along with aging demographics to thank for our woes.

On the upside,  the population is coming to a generational epiphany on what not to do with money and how to diversify an economy away from dependence on fossil fuels and real estate bubbles.   Several countries will be going through this learning process of necessity with us, but there will not be much comfort in the company.  For individuals and small businesses, moving ahead of the pack to lower financial leverage (debt and risky-assets) and raise liquidity, sooner than later, will be key to outcomes through this period.