It's Party Time On Wall Street-

Wall Street is throwing a party, and it will probably last a good few months, fittingly, through New Years Day.  You see, with the fear of Armageddon gone (a default of U.S. debt obligations), there is little in the way to prevent the stock market from rising through the end of the year.  Yes, naturally, there are the quarterly earnings announcements where winners and losers are determined, but that is the case every quarter.  However, if you look at the check list of potential problems investors have had to grapple with over the last few months, it certainly can be said all of them have been answered in a relatively painless way.  The new Federal Reserve Chairman is thought to be a dove, so monetary policy should be, hint hint, accommodating.  Tapering is off the table, at least for the foreseeable future, because the economy is thought to have weakened because of the government shutdown.  Many money managers, especially hedge funds, are trailing all major indexes, so they are looking for any opportunity to buy stocks which can help their performance.  Bonds are trading at all time highs, and any increase in interest rates will cost an investor money.  Iran is thought to be starting to see the light about their nuclear ambitions, although that has yet to be proven.  Finally, corporate earnings are rolling in, and as has been the case for the last five years, big business is just rolling in profits. Anyone for some refreshments?

 
Speaking of earnings, last week was full of them as Bank of America reported a better quarter because of lower loss reserves, IBM showed weak earnings growth, and Verizon had a very good quarter with a whole lot of I phone additions added to the paying customer list.  Google reported a very good quarter as mobile and broad based advertising strength continue to power the search giant.  Morgan Stanley also reported a better than expected number because strength in the asset management business offset poor fixed income trading results.  Today, it was announced that a private equity group is taking Tellabs private, and Netflix reported a beat on international subscriber numbers.  McDonald's also reported this morning with weaker than anticipated revenue but matched the earnings per share number.  The rest of this week and certainly next will bring a flood of numbers and I would expect most will be pretty good.

 
Al Gore has certainly benefited from the stock market over the last ten years, mostly because of his board positions with Apple and Google.  Most recently, he sold a cable network to Al Jazeera, I believe, for a nice profit.  Anyway, now that Al is an expert in business, he believes international oil companies could be considered the same as some of the investment banks which had problems during the 2008 crisis.  He believes that some of the reserves the oil companies have accumulated will ultimately not be burned and they are due to get repriced (fall).  Earth (tone) to Al, hello, they are already cheap.  Al should also be reminded when he gets on his jet, that the oil companies helped him get from point A to point B.



Finally, had to mention the complete stupidity of Ted Cruz and the tea party in the way they handled their negotiations with other Republicans, as well as the President.  Cruz made himself a hero of the tea party, at the expense of moderate Republicans.  The primaries will be full of candidates in both parties gerrymandering and running extreme campaigns.  As if the country needs more extremism from our elected representatives!!!  Big business is gearing up to move to the center and support more moderate Republicans as they saw how destructive the recent standoff could be for business.  Money is the mother's milk of all politics, and I expect a move to the middle for the Republican party could prove very beneficial.  Time will tell. 

Thanks for reading the blog this week, and if you kind of feel the same way, and would like to share your thoughts, it would be most welcome.

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.

What A Week On Wall Street- Yellen, Debt Limit, and Malone!!!

Oh boy, what an interesting week it has been on Wall Street and in the world at large.  The most obvious event is the ongoing drama in Washington D.C. regarding the debt ceiling negotiations, government shutdown and budget issues, as well as Obamacare.  I would just call attention to the fact that the Japanese and Chinese started to voice concerns about a potential default, and low and behold, both Democrats and Republicans decide well, maybe, yeah, let's negotiate with the other guys.  When you don't have your own financial house in order, you have to listen to your biggest creditors, in this case, the largest owners of U.S. debt, to the tune of multiple trillions of dollars.  If the U.S. were to default on it's debt, the value of those trillions of dollars gets obliterated, so, you can see why the Chinese and Japanese are more than a little "concerned" about our political dysfunction.  You follow the incentive, you get answers about why people do things, according to Charlie Munger.  In this case, as in many before this one, Munger is right on 'the money.'

 

Today, JP Morgan and Wells Fargo reported their financial results for the previous three quarters.  Wells posted strong results, while Chase had their first quarterly loss under Jaime Dimon.  Elswhere on Wall Street, Jos E Banks made a hostile bid for Men's Wherehouse, which was promptly rejected.  The reason I bring this small transaction up is it speaks to the merger and acquisition environment.  Money is still very cheap, and as such, companies are going to look to take advantage of it and do deals, or by borrowing to finance corporate transactions of some sort.

 

President Obama named Janet Yellen to be the next Federal Reserve Chairman, which is what Wall Street pretty much expected.  Yellen has an impressive academic background, with a doctorate from Yale, and she taught 5 years at Harvard, as well as the London School of Economics and UC- Berkley.  She also has been part of the Federal Reserve Board of Governors for quite a few years. However, one thing she should be prepared for, and you can count on this in a big way- Wall Street and the investment world is going to test her from the first second she takes the job.  The boys on Wall Street give nobody a free pass so she will have to prove herself very quickly.

 

With respect to the government shutdown, I found it very interesting the attitude which certain parts of the federal government has adopted during the midst of the crisis.  At the Grand Canyon and Yellowstone National Park, rangers have apparently been told to make life miserable for the general public.  At a Veterans Memorial in Washington D.C, the government tried to erect 2 foot barriers to prevent World War Two veterans from visiting their family members or friends.  Family members of soldiers killed in Afghanistan have been denied immediate death benefits to greet the bodies and luckily, a private organization is paying the tab until the government opens again.  Even more delicious is Congress has decided that it's members get benefits which are not under the jurisdiction of the Affordable Care Act.  The public has given Congress a 5% approval rating, which might be a bit overstated.

 

On the opposite side of the spectrum, the genius of John Malone shown through at Liberty Day yesterday.  One of the great things about being a shareholder of the Liberty family is you know he is trying to help shareholders and he does not sit still, unless of course, he probably should.  Over the last few weeks, the various companies have engaged in a number of very interesting transactions by issuing convertible bonds, engaging in swaps or tax free exchanges for their own stock, borrowing money at 1 and 3/4% for 10 years, and announcing new tracking stocks.  He also invested in a solar energy product with a very high return which is tax efficient due to the tax advantages (tax credits, government guarantees) of alternative energy investments.  From a finance perspective, the guy is great and you only get a few chances a year to listen to him a year so it is always worthwhile to take the time and do so. 

 

They say that the wheels of justice grind every slowly, but eventually justice is served.  In the case of Malone and the Sirius Satellite board versus suing shareholders, the judge ruled completely in favor of Malone.  British Petroleum was awarded a victory when the court of appeals ruled that the fund administrators for the 2010 oil spill has partially erred in the way they are awarding those with claims.  There will be more on the matter in the future, as well as the determination of how oil was spilled and whether BP was grossly negligent or negligent in the way it handled the explosion.  Obviously, a very sensitive subject for many people and it will probably be a long time before a final conclusion to the matter is rendered. 

Here in Vegas, the weather is great and the casinos are open.  As an interesting side note, Y H & C Investments will have a new web site in a few weeks. 

 

Last, I was selected to present at a webinar for the Opal Financial Group on November 14, 2013-
http://www.opalgroup.net/conferencehtml/current/webinar_building_flexible_portfolio/webinar_building_flexible_portfolio.php.


I hope everyone had a great week and will have a super weekend.

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.