The Builder- (Author Unknown)
I saw a group of men in my hometown.
I saw a group of men tearing a building down.
With a heave and a ho and a mighty yell,
They swung a beam and a sidewalk fell.
And I said to the foreman, “Are these men skilled
The type you’d hire if you wanted to build?”
And he laughed and he said, “Why no, indeed.”
He said, “Common labor’s all I need.
For I can tear down in a day or two
What it took a builder ten years to do.”
And I thought to myself as I walked away,
“Which of these roles am I going to play?
Am I the type that constantly tears down
As I make my way, foolishly, around?
Or am I the type that’s trying to build with care,
In hopes that my team’ll be glad I’m there.

In order to invest, it is important to be an optimist. With yesterday’s news that over 20 million citizens in the United States were laid off in April and the unemployment rate sits at just a shade under 15% it is a difficult time in the country. Thousands of people have lost loved ones, many more have contracted a difficult illness. There is no known vaccine. Medical procedures in vital areas across the health spectrum have been postponed because of the priority of anything coronavirus-related.

These delays are taking a toll on citizens who need that medical attention. States are just starting to open their economies, but in many cases it is at a snail’s pace. It is possible that the current plans to reopen economies take much longer because the virus continues to infect our citizens. Many people, and put me in the front of this line, are outraged at the infringement and blatant disregard for people’s constitutional rights, along with the unfairness, vagueness, arbitrary, and capricious ‘guidelines’ set up by power hungry and party loyal governors.

Many industries have come to a complete halt, and some are going to have a very difficult time coming back if the current plans to reopen are enacted. One such area is restaurants and bars. Here in Nevada, they are not able to open yet and even when they can, it will be at most 50% capacity. For most owners, that is not a formula that will allow for a profit. In addition, we all are aware of the current political environment and what is at stake in less than six months. You better believe both political parties know this, too. Uncertainty reigns supreme, which is what investors hate more than anything. Why would an investor be positive now?

I am sure you may have heard this saying, “Buy low, sell high.” Now, part of the art of investing is buying something that can grow for a long period of time. In the optimal case, you may not want to sell because you can reap the benefit of what you own for years. In some cases, future generations benefit from buying low. These are hard to find and unique situations, but large amounts of wealth are created this way.

The ultimate case would be owning Berkshire Hathaway. Berkshire turned people across the country in multi-millionaires because of the businesses Mr. Buffett acquired (both in their entirety, or in non controlling pieces). Mr. Buffett’s annual meeting was last weekend, and it was different than any other time I have seen Buffett. He was quite cautious, and believed sitting on cash was appropriate because nothing in the market was ‘compelling.’ So, put Warren in the camp of a long term believer of stocks, as always, but not a current buyer. He was a seller of his entire position in airlines.

Another creator of massive amounts of wealth, John Malone, also was involved in the market last week (a 24 billion pound deal). His Liberty Global merged it’s Virgin Media holding in the UK with Telefonica’s cellphone leader O2 to create an entity with nearly 50 million customers and 40 billion of revenue. The deal was quite efficient as it took advantage of Virgin’s tax assets, used the capital markets to issue debt at rock bottom rates, preserved cash for their own future uses, and created the most formidable competitor in the UK for all telecommunications services. Malone was a buyer, so clearly not everybody finds the future so uncertain.

If you look at specific areas of the market, energy, travel, lodging, casinos, airlines, and financials are all viewed negatively. Energy had a good week as investors believe demand loss is at its trough. All of these areas face questions about demand recovery, and in what time frame. The financials had a solid week as any improvement in the economy will be seen as a plus. Opening qualifies as a start.

One other point I would mention is that unemployment statistics are grim, yes indeed, but stock markets are based on profits. The largest companies in the world are now dominated by technology firms - Apple, Microsoft, Amazon, Facebook, Google. All produce profits of anywhere from $25-$100 billion a year. None have seen their businesses fall off the table. By the way, the technology heavy NASDAQ is now positive for the year. Investors care about earnings, cash flow, and growth, unemployment, not so much.

Finally, I led off the blog this week with ‘The builder’ poem because I believe many people across the country have spent lifetimes building their businesses and lives. Over the past few months, quite a few have seen it all crumble because of actions by politicians which I believe are incredibly destructive. In the case of Las Vegas, the city spent the last ten years rebuilding from the financial crisis and over the last two months, the Governor’s ill conceived “plan” will make the next few years quite difficult for our citizens. On that note, the question at the end of the poem remains pertinent for anyone going through today’s difficult circumstances.