It’s worth noting that MRI scans have shown that the male brain does not fully mature until age 25 (age 21 for females), when considering that the age of the suicide bomber who strapped an IED to himself and ended the life of 23 innocent concert-goers was 22. This week, our hearts go out to the families of the victims of the Manchester terrorist attack.

We deplore the cynicism and manipulation of any organization or group that would take advantage of the mental immaturity and other psychological issues of a young person to further their own political goals, especially when the pursuit of these goals leads to the death and injury of so many innocent people.

It’s also worth noting that, as someone from a northern European lineage, my attention is caught more by an attack on Manchester, U.K. or on Paris, France than by one on Sanaa, Yemen, Idlib, Syria, or Lyari, Pakistan. Nevertheless, horrendous attacks claiming the lives of many children and other non-combatants occur in these places with crushing regularity. We would hope that rationality and pursuit of a peaceful commonwealth will someday reign over irrationality, poverty, and violence.

Here is a curated list of important stories outside the main headlines that caught our attention this week.

Ford to replace CEO amid investor concerns over company performance (Financial Times). I wrote about Ford several years ago and had a small position in the company, which I closed at a loss. The process by which I realized I had made a valuation error is instructive – especially for investors in firms with captive finance units – so interested readers are encouraged to read through my comments. In my opinion, it is unlikely that switching from Mark Fields to Jim Hackett will significantly boost the value of the firm, but the fact that Hackett comes from the autonomous vehicle side of the business is strategically interesting (don’t feel too sorry for Fields for losing his job, by the way – his payout wasn’t bad). We think automakers’ revenues will be cut in half by the upcoming shift to driverless cars.

Heavy Rains Are Turning U.S. Cornfields Into Lakes (Bloomberg). Midwest farms have received roughly twice the rain of a normal year thus far and corn crops have had to be replanted. There are “softs” ETFs (“softs” means soft – non-metal or mineral – commodities) such as PowerShares DB Agriculture ETF DBA, that are tradable, but without a way to understand value, it is difficult to invest in them. It is hard for me to imagine US corn under shortage conditions, but supply constraints might contribute to food price inflation, especially since corn is used as the primary input in so many agricultural products.

China’s Roaring Old Economy Spurs Sales Boom For Diggers, Steel (Bloomberg). In 2015, Chinese growth was slowing and politicians worried that the country might be headed toward a deflationary recession. In October, the Peoples Bank of China (PBOC) lowered its benchmark lending rate to a record low 4.35%. More recently, Chinese president Xi has been flogging his 一帯一路 (Belt and Road) initiative across Asia and Europe, which, unsurprisingly, is heavy on infrastructure development. Monetary loosening and fiscal stimulus have done the trick – orders for excavators rose to the highest level since 2012, and those for bulldozers, the highest level since 2014. The price of rebar is up 21% this year and has more than doubled since the PBOC easing. There’s only one teensy problem – see the next story for that.

This story originally caught my eye because of our research on and position in Caterpillar CAT. Caterpillar’s exposure to China is actually rather small, and as we mention in our Guided Tear Sheet video series on the company, it has faced difficulties gaining a foothold there.

China Hit by First Moody’s Downgrade Since 1989 on Debt Risk (Bloomberg). The big problem with spending like a drunken sailor on infrastructure projects is the headache it causes the next morning. In China’s case, the headache was a downgrade of its sovereign debt by Moody’s Investor Service – a prominent bond rating agency – on Tuesday evening. Chinese sovereign debt totals 260% of GDP and some of the tinfoil hat-wearing crowd at sites like Zero Hedge have been calling for the imminent collapse of Chinese civilization followed by a domino effect that would pull down economies the world over. In our view, this Chicken Little outlook is unrealistic if for no other reason than Chinese debt markets are not open to international investors. The most likely scenario is what Reinhart and Rogoff call “financial repression” – devaluing the currency in a way that harms domestic savers (sound familiar, American savers?). Everyone makes a big deal out of bond rating downgrades, but from the image below, it’s obvious that the market has been in the process of “downgrading” Chinese sovereign debt (i.e., pushing up yields) for awhile now.

IBM is in a fight to keep up with big spending rivals in the cloud (Financial Times). Since even before Buffett closed his position in IBM IBM, I had been thinking a lot about the company – my investment in which started with a series of short puts and covered calls around $160 / share, and has been made more profitable thanks to averaging down when the stock was in the $120 range.

While it’s been a reasonably good position, the most recent earnings announcement surprised me with the degree to which the company’s Owners’ Cash Profits (OCP) fell. Reviewing my model from March, 2016, the company’s results have been nearer my best-case revenue growth scenario and, after last quarter, nearer my worst-case OCP margin scenario. These two scenarios suggest an fair value range between $170 and $180 per share – though the analysis is dated by now.

My thesis for both IBM and Oracle ORCL is that while public cloud is the right solution for some companies, it will not work for all of them – especially those that require higher levels of security and / or performance. “Hybrid” cloud solutions – something that both IBM and Oracle talk about – seem like the kind of thing where both companies have a “right to win,” but I need to take a fresh look at my valuation for them.

Trump’s barbs at Germany overshadow G7 Taormina summit (Financial Times). Trump’s campaign promise to shake things up is one to which he is certainly adhering. Calling a self-confessed murderous President Duterte on the weekend to congratulate him for his approach to law enforcement, living large with some of the world’s most brutal dictators (who happen to rule many countries in the Middle East), then flying to Europe to disparage and bully our closest post-War allies. I for one am getting sick of winning…

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