A life that is burdened with expectations is a heavy life. Its fruit is sorrow and disappointment.   Douglas Adams


Traveling is typically an interesting experience as it is usually exciting to go somewhere new. Part of the intrigue of traveling is to discover how well your plans work out, or don’t. I suspect you might be familiar with the following situation: You book your flight well in advance (don’t want to get hosed by the airline prices when you wait too long) and pay for what is supposed to be a really fine hotel (think Four Seasons, Ritz Carlton, Wyatt, Sheraton, and Marriott) as you hate staying in places which might be thought of as, well, use President Trump’s comments for a reference. So before you get there, you have these high expectations of how wonderful your stay will be, how tasty the scrumptious food will be, how soft the bed is, and how convenient your planning will make everything for you and your family. Naturally, things don’t live up to your imagination as the service at the hotel is, uh, uninspired, the food stale, the beds creaky, the room old and musty, along with being put next to neighbors who, shall we say, keep you up at night. Those high expectations made it hard to live up to your standards, regardless of how much you were willing to shell out. Guess what? It is the expectations issue which applies quite significantly in the investment world. In fact, it is crucial to understanding why stocks might perform or not perform well.

Next week, some of the largest companies in the world will report their quarterly results and there are elevated expectations for nearly all of them, think Facebook, Apple, Amazon, Microsoft, and Google. Last week, Netflix and Intel destroyed the numbers while Starbucks disappointed. In the case of Amazon and Facebook, because the stocks have more than priced in the good results, they must crush their numbers. Strong management teams have a very good grasp of what kinds of results they guide investors to expect, and typically don’t put up hurdles they cannot jump over. Still, when the expectations are so large that almost nothing but a perfect quarter will send a stock higher, there is risk. Conversely, when investors expect very little, well, you can use your imagination. Consider that when thinking about which situation might be more attractive.

Over the past five days, we were again reminded why currency markets make up a critical component of the business world when Treasury Secretary Steve Mnuchin, and then his boss, Mr. Trump, decided to give alternating views on the relative merit of the dollar. The greenback, known as the world’s reserve currency, has trended down nearly 10% over the last year, and recently the Euro has firmed up significantly versus it. Emerging markets have rallied, as has oil, and all of a sudden, the dollar potentially begins to play a larger factor in central banking policy all over the world. Welcome to the party, J (newly appointed and confirmed Federal Reserve Board Chairman Jay Powell), I am sure you expected the nice greeting, eh? Heavily related to currency fluctuations would also be the NAFTA negotiations which have been taking place over the last few months. Apparently, heavier demands by the Trump administration on what percentage of car and other inputs must come from the US versus Canada and Mexico is becoming a big issue. We saw tariffs on solar goods and washing machines enacted recently, so it appears the influence of Peter Navarro (shout out to the old UCI professor) is starting to take affect. Maybe Professor Navarro can teach our Treasury Secretary, among others, the famous rule that those in charge are supposed to heed when commenting about currencies or Central banking policy: essentially, shut up.

Finally, the Donald conquered Davos this week by acting in a way, interestingly, which might even be called Presidential, let alone diplomatic. Understated, reserved, respectful, the Donald was fawned on by the CEO’s of European corporations who, believe it or not, probably agree with him on plenty of economic and tax issues. You can rest assured they are looking at US tax rates and considering whether their capital might better be spent in the good ol US of A? Let’s see, 35 vs 21, hmm? Meanwhile, JP Morgan and hundreds of other companies are announcing daily investments (billions) in employees, raises, and one time bonuses to help out the plebes. Apparently, according to Larry Summers, Nancy Plosive, and Debbie Wasserman Schultz, it’s all gimmicks and tomfoolery as the crumbs don’t matter to hard working citizens. Time will tell, and we will know more after the withholding rates change, but, as Mr. Adams mentioned at the outset, it could be a situation where the tax plan was expected to be so awful, that with a relatively low bar to jump over, it will be viewed favorably by the masses.

Thank you for reading the blog this week, and if you have any questions about investing, please email me at This email address is being protected from spambots. You need JavaScript enabled to view it.

Yale Bock, Y H & C Investments, its clients, and the family of Yale Bock have positions in the securities mentioned in the blog,  Investing in securities involves risk and the potential loss of ones principal.  Past performance is no guarantee of future results.  All investment decisions should be considered with respect to ones risk tolerance, return objectives, liquidity needs, tax considerations, and one's overall financial situation.  The fact that Yale Bock has earned the right to use the Chartered Financial Analyst in no way means or guarantees financial returns which exceed those of a market index.