With yesterday's passing of Memorial Day Weekend, summer has officially begun and for those of us who are beach lovers, now is the season of great pleasure. Baseball, hotdogs, apple pie, and Chevrolet- oops, sorry, that was from a commercial a long time ago. Anyway, usually this is a time when things slow down on almost all fronts. Business hours are shorter, more time is spent with the family, and plenty of people are traveling. Out here on the West Coast, people spend a lot of time driving to areas where they want to relax. In many cases, it is to the beach or a lake, or going sight seeing, or hiking, or just for general leisure time. Make sure you put on the sun screen as it is starting to warm up out there!
In the financial markets, the summer usually means lower trading volumes and higher volatility. Interestingly enough, what has been striking over the last six months is the definitive calm in financial markets. As an example, if the equity markets close up today, that would make it twenty consecutive Tuesday's where the stock market closed higher than it began, I think an all time record. What could change this situation? The most glaring areas of the world which could affect U.S. stock markets would be Japan and Europe.
In Europe, the problems have been with us for going on five years. In Japan, the government's movement to get rid of deflation could have a dramatic impact on businesses all over the world. A lower Yen against all major currencies changes the fate of many manufacturers, and don't think other countries will sit still and watch their domestic companies become less competitive while Japan's fortunes improve. Many economists believe Japan's exporting of deflation spells trouble all over the globe. Certainly, for all investor's, paying attention to the currency wars is mandatory.
Still, here in the United States, there are plenty of tailwinds to help propel the market forward. The large secular trends of more oil and gas production, a rebound in housing, improving consumer confidence, and record low interest rates are a soothing balm to equity owners. If you include a robust merger and acquisition environment, as well as a full back log of equity IPO's ready to make their public debut, the stock market is currently on a tear. Which brings me to the current darling of the market, the electric car manufacturer Tesla.
Tesla has seen it's stock price nearly double in the last month. It has used the strength of the stock issue more stock and raise capital. With the money it raised, it paid back it's government loan and borrowed money at record low rates for a longer period of time. Elan Musk, the founder of Tesla, has been very opportunistic in using Wall Street and the U.S. government to help him build his company to the current position. Still, he faces the prospect of competing year after year with Mercedes Benz, Porsche, and Toyota (Lexus). In addition, he has made plenty of enemies among dealerships across the country by not including them in his organization. It will be interesting to watch Tesla and how it fares in the future in the very competitive and demanding high end car market.
More Tesla-http://www.bloomberg.com/news/2013-05-28/tesla-rises-past-100-level-for-first-time-mover.html
Gold premiums are starting to come in-http://www.bloomberg.com/news/2013-05-28/gold-premiums-tumble-from-india-to-hong-kong-as-demand-wanes.html
Tablets are overtaking PC's and Labtops-http://blogs.seattletimes.com/microsoftpri0/2013/05/28/idc-tablet-shipments-to-beat-laptops-in-2013-pass-all-pcs-by-2015/
For all the talk of Google strength in mobile, developers choose Apple first-http://techcrunch.com/2013/05/28/google-play-still-missing-top-app-titles-from-ios-many-of-which-are-games/
Thanks for reading and enjoy your summer!!!
Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.
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