September 20, 2017

On Tuesday, the S&P 500 was up 0.1% and Toronto was up 0.6%

AutoCanada was up 3.4% to $23.96. Apparently some investors like the company at about $24. I wonder what they were thinking in late Spring, early Summer when it was available for $18?

FedEx was up 2.2%. What I found interesting about that was that yesterday when FedEx released earnings after the close, the headlines indicated FedEx missed earnings expectations and the stock fell in “after-hours” trading. It’s supposed to be the smart money that pounces and trades after hours on news. But the reality is that it usually takes a few hours to digest earnings news. In this case the smart money was not so smart.

After the close yesterday, the Boston Pizza Income Royalties Trust announced some changes involving its relationship to the operating company Boston Pizza International. There may be little impact on the royalty units but the changes are somewhat complex. It does appear that the fund will no longer collect the 7.5% interest on a $24 million loan to BPI as the loan will be “eliminated”. I have long listed this as a risk since why has BPI continued to pay this high interest instead of paying off the loan? But overall the press release seems to indicate the changes are positive for the fund. The royalty units rose 1.% today so perhaps the market judges the changes to be positive. But I would question the ability to understand the changes. I like the fund and it has been a good investment. But it has always been a financially engineered entity and has always been complex.

Warren Buffett said today (or it may have been yesterday) that the DOW will be over one million in a hundred years. What is astonishing about that is that it will only take a compounded gain of 3.87% per year for the DOW to rise from Tuesday’s close of 22,371 to 1,000,000 in 100 years. Buffett also noted that since Forbes started the list of the 400 richest Americas in 1982, some 1500 different people have appeared on the list. Buffet is always coming up with unique figures like that. I never heard of anyone else looking into how many different names were on the list. But Buffett’s point was that NONE of them were short sellers. Buffett has always felt that America will do well over the years and that while stocks can fall over shorter periods of time they will always rise over the decades.

Some years ago I came up with my Rule Number 1: “Always assume that Buffett is correct”, Rule Number 2 of course is “Don’t forget rule number one”.