I miss baseball.
MLB is discussing the possibility of playing a shortened season to no fans in the stands, and that has probably excited me more than any news of the last few months.
Every year, when the World Series approaches the final out, I can’t help but think of former MLB Commissioner A. Bart Giamatti, who wrote:
It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone.
You count on it, rely on it to buffer the passage of time, to keep the memory of sunshine and high skies alive, and then just when the days are all twilight, when you need it most, it stops.
This year has been particularly hard on those of us who rely on the sport “to buffer the passage of time.”
In spite of the increasing sunshine and familiar smells of spring, the global quarantine has made days feel like they’re all twilight.
And in the parlance of Giamatti’s prose, that effectively means our hearts are still broken.
But baseball is metaphor for life in more ways than one.
For instance, every “agony of defeat” has a corresponding “thrill of victory.” And it’s always the latter that initially pulls us in.
For me, that moment happened as a 4-year old kid, watching Willie Stargell launch a Game 7 6th inning home run to right-center field, pushing the Pittsburgh Pirates to the 1979 World Series Championship.
I can remember jumping up and down when Pittsburgh closer Kent Tekulve got the final out – a fly ball to Omar Moreno in center.
I can remember frantically dancing to “We Are Family”– the Pirates’ team motto borrowed from the song by R&B/disco family act Sister Sledge.
I was sold.
In addition, the Steelers, who kicked off the year by winning Super Bowl XIII, also brought home Super Bowl XIV to solidify this West Virginian’s lifelong man-crush on Pittsburgh, situated just 80 miles north of my hometown.
I thought the “City of Champions” would stay that way forever – trophies, parades, Terry Bradshaw and “Pops” sharing Sportsmen of the Year awards on magazine covers.
Source: Sports Illustrated
But as it always does, the “agony of defeat” eventually came calling.
It aged my heroes into retirement, claimed some favorites in free agency, and traded away others – thus forcing the Steel City franchises to rebuild from scratch.
And as the symbolic coup de grace, it ushered the city’s lifeblood – the US steel industry – into permanent decline.
Both franchises would regroup and rebuild. The Pirates fired World Series manager Chuck Tanner after the 1985 season and hired former Chicago White Sox coach Jim Leyland. The Steelers hired young upstart and Pittsburgh native Bill Cowher after legendary coach Chuck Noll retired.
The Steelers started slow, but began to improve, and by 1992, the Pirates actually looked like they would claw their way back to relevance on the back of (someday Hall-of-Famer?) Barry Bonds.
But then, just as Commissioner Giamatti wrote… it breaks your heart.
Bonds’ back may have been strong, but his arm was awful, and his failure to throw out slowpoke Sid Bream in Game 7 of the 1992 NLCS represented the end of an era.
The local consortium that owned the team sold to a series of capital-short, out-of-town newspaper owners, and the franchise would go on to 20 straight losing seasons.
As a former college player and burgeoning statistics nerd, I just couldn’t stomach the front office incompetence. And after yet another decade lost to futility, I finally threw in the towel in 2002.
Now, this is where the investing lesson comes in.
As economist John Maynard Keynes is often quoted as saying, “when the facts change, I change my mind.”
And that’s just what I did.
I cut bait on an investment that was bringing me nothing but heartache, and instead put my free time and emotional energy toward something else.
Years before, it was my lifelong hatred of the Yankees and my love of baseball history that had inspired me to adopt the Boston Red Sox and their cathedral of a field in Fenway Park as my go-to AL franchise.
Well, as a free agent fan at the outset of the 2003 season, now was the time to make it official.
And it was a great season! The Sox finished 95-67, snagged the Wild Card, bested the Oakland A’s in the ALDS, moved on to play the Yankees in the Championship Series, pushed the series to a game 7, pushed that game to 11 innings and…
More heartbreak… dammit.
It’s a Feature, Not a Bug
Having spent 20 years lamenting Pirates losses, I was still excited to have felt like I had some skin in the postseason game for once.
And obviously things worked out pretty well after that.
I even met a girl from Boston in a bar a few years afterward, and told her I just returned from attending my first game at Fenway where I saw – I kid you not – a no-hitter.
We’re married now, and our 6-year old daughter loves the Red Sox just as much as we do.
But the life lesson I took home here is that for every loss, there’s a winner on the other side… and if you can put yourself in a position to succeed, you’ll find yourself there soon enough.
That’s incredibly important to remember in today’s markets – because failure is a feature, not a bug of volatility.
“It is designed to break your heart.”
When all sectors collapsed from recent highs, it wasn’t just the weak companies that were the culprits… strong companies were affected too.
So to put yourself in a position to succeed, you have to be able to find the lion in the buffalo stampede.
Today, I found myself looking through the financial sector, as a whole, down more than 30% off its highs.
Now, given 20% unemployment and zero percent interest rates, making money through lending has been essentially neutered for a while.
In my opinion, that leaves investment and acquisition as the most attractive options for financial growth as the world endures either a recession or depression as a result of the global coronavirus outbreak.
To make investments, I want to see good management, a solid track record, and cash on hand.
And with PNC Financial Services (NYSE:PNC) selling its stake in BlackRock for US$17 billion – at a 7,000% return over 15 years – I think I know what financial team I want to root for these next few years.
In addition to the cash, first quarter revenues are up 5% year on year, loans and deposits are up 11%, and total cash plus liquidity are equal to about 1/3 of its balance sheet.
The bank has a history of making opportunistic purchases in volatile markets, as they did with National City back in 2008, so the BlackRock sale is announcing to the world that this lion is ready to eat.
We should pounce too.
The stock traded below $100 in Tuesday’s session for the first time since October 2016, so it represents a tremendous value here, even though I think the sector still has some headwinds to come.
So, let’s divide an investment into 3 stages and begin by deploying the first 1/3 at market price.
Because I have a hunch that by the time this round of acquisitions is done, this company will bring a World Champion M&A trophy back to its headquarters in Pittsburgh, PA.
Hey, I had to tie it back in somehow.
All the best,
Matt Warder