Sticking with iconic behemoths has been one investment theme that’s made sense to us since the latest financial apocalypse. Limiting one's efforts to multinationals is another. Domestic outfits tie an investor to the devastated US single family housing market, a seemingly bottomless pit, as well as our financially sinking ship of state and the potentially catastrophic inflationary and currency ramifications there.
Coca-Cola (KO) and Bank of America (BAC) both reported second quarter 2011 operations this morning. Their contrasting results bolster the multinational argument. KO boosted operating income by 15% over the prior year, with slow, dependable volume growth most places, plus burgeoning increases in a few (China +21%), and benefited from a notable currency push. BAC lost something under $9 billion on volume that fell 54% year-to-year because of yet another “one-time” charge, this one-timer apparently related to a lawsuit over bundling worthless paper together and saying that bundling somehow entitles worthless bundles to an AAA rating.
KO management pointed out that their company has been increasing shareholder value slowly and steadily for 125 years. BAC hasn’t said much of anything we’d want to pass along for almost 3 now.
Clearly, The American Dream has proven to be fiction, the mortgage contract merely this creepy device that lets you, in effect, rent from the real homeowner, one’s bank, during good times, and grab the price appreciation then too. When things sour, however, you walk away, sticking that real homeowner with a waning asset until time or taxpayer bails the moribund institution out.
Both Great Depressions have shown us that.
If history offers any clue about BAC’s future, remember this. We pulled out of the 1930’s by shipping our unemployed overseas to get shot by Heinie and the Japs.
KO or BAC represent both sides of the iconic multinational behemoth argument. That’s going well now for the iconic multinational behemoths, but what will the future bring?
Is it about over for KO, comparatively speaking? Will BAC finally hit bedrock somewhere around here?
The decision is up to you.
