Thoughts from June 16, 2020

  1. Buffett scolded again…and again…and again.  

It has been a rough few years for Mr. Buffett, but don’t think he hasn’t seen this before.  Is this time different?  This time valuations don’t matter?  Has this generation finally outsmarted the financial markets and established a new higher plateau where prices can only go higher?  Mr. Buffett, heralded as one of the greatest investors of all time, has been through more market cycles than any of us.  He has learned from his mistakes, and he understands and respects the past.  And he doesn’t care what people think.  He will do what he wants.  I would not bet against him.

  1. Royalty Pharma IPO +59% in one day.

Recent IPOs have exploded as irrational exuberance continues to flood the stock market with more speculation than actual investing.  In some ways, however, this one is refreshing.  The company is profitable and pays a dividend, which is unlike nearly any company we have seen IPO in the past 18 months.

  1. Industrial Production “Rebounds” or “Slow to Gain”

It is always amusing to see how the media spins news.  Today, Industrial Production “rebounded” 1.4% after falling nearly 20% over the past 2 months combined.  Most of the media called it a “rebound” (check similar stories at CNBC, MarketWatch, Yahoo, Bloomberg, WSJ).  ING called it “slow to gain” – they are not a media outlet of course and that is at least a little refreshing.  The bottom line with the report is that businesses that make stuff are still not making very much.  A 20% decline followed by a 1.4% gain means as much.  We will be watching this closely over the coming months to really gauge whether manufacturing is coming back with reckless abandon (which is what Wall Street is pricing in) or if we have a new normal, which is what I suspect we will see.

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