Week 36: The New Schrodinger’s Cat And M-PESA

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The Markets

The S&P 500 (i.e., the “market”) is down around 5% this year, excluding dividends.  If you own healthcare or consumer discretionary stocks you're probably doing better and if you own commodities or industrials then likely worse.   Gold is down around 8% for the year.

Apparently the market is the new Schrodinger’s Cat, simultaneously forming a “top” and a “bottom” depending on who you talk to.  Market participants remain obsessed with the trifecta of 1.) A Fed rate hike, 2.) China, and 3.) Oil prices.

While hard to find anything that's completely immune to a poorly handled rate hike, low-yield bonds (i.e., investment grade) seem particularly vulnerable.  That said, a modest rate increase may not be so bad for the long-term health of the market.

With the benchmark 10-year Treasury note yielding around 2%, a principal-protected 5% dividend yield continues to look attractive.

Stocks

James T. Ryan, the Chairman, President, and CEO of Grainger (Ticker: GWW) , the 800lb gorilla in the industrial distribution industry, sold around half his shares.  While insiders sell shares for a variety of reasons, such as estate planning, the sheer size of the sale with the stock already down almost 13% for the year, was somewhat curious.

Activism remains alive and well with Nelson Peltz’s Trian Funds able to get Pentair (PNR), a global industrials company, to increase the board size and nominate a Trian representative to the board.

Technology

Mobile payments are all about solving a pain-point.  If you like a "Triple Venti Non-Fat Caramel Macchiato" at Starbucks you may have seen mobile payments done right.

While the media is excited about Apple Pay, I want to draw your attention to M-PESA, a mobile payment system in Kenya.  Around 70% of adult Kenyans have an account, and M-PESA uses simple SMS text messaging technology.  I came across a timely article here.

 

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At the time this report was submitted for publication, the principals and clients of Burr Capital LLC did not own securities in any of the companies mentioned in the report.

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