Powell’s Gradual Path Soothes Market As S&P, NASDAQ Set Records!
"On an important decision one rarely has 100% of the information needed for a good decision no matter how much one spends or how long one waits. And, if one waits too long, he has a different problem and has to start all over. This is the terrible dilemma of the hesitant decision maker." Robert K. Greenleaf
As this is the end of the summer, last week I took a brief trip to Seattle, a place I always wanted to visit. Seattle is geographically located in the Pacific Northwest, nestled in the Puget Sound region about 150 miles south of Vancouver. I am sure you are aware it is the home of large companies like Amazon, Microsoft, Expedia, and Starbucks (among others). It is also developing into a pharmaceutical and biotechnology home for startups and quickly growing public companies as well. The stereotype of Seattle is it always rains there and is quite foggy, which makes visibility difficult.
In the investment world, a high priority is placed on earnings clarity, also called visibility, which simply means that over the next three to six months, a management team can reliably tell investors we are going to make this much, or in a range of x to y. Investors punish companies when there is little faith that guidance is accurate, or visibility is low. However, this kind of mindset offers opportunity for those accustomed to dealing with the reality that very few businesses can reasonably tell you with certainty their next quarter’s earnings per share figure. If one examines the quote by Mr. Greenleaf which we started with, you realize it is important to become accustomed to making decisions where there you have incomplete information, or getting used to the fog, just like Seattle’s weather.
In the markets this week, Fed Chairman Jerome Powell traveled to the lovely locale of Jackson Hole, Wyoming, to tell the investment community what he has been saying since he became the Fed head. Inflation is contained and interest rates will go up slowly and be data dependent. Investors reacted nicely to strong reports in the retail sector, especially from Target, Lululemon, and Dick’s Sporting Goods. Alibaba reported big growth rates in nearly all lines of business, but fell because of the daily trade bru ha ha with China. Globally, the biggest stories center around the strength of the dollar and the currency issues popping up all over the globe. The Turkish Lira remains on the floor, as does the Iranian rial, along with the Venezuelan bolivar. The prize for the worst situation clearly remains Venezuela, as the government decided to devalue it by lopping off not one, not two, not three, not four, but five zeros off it’s worth. Maybe inflation is a bit of an issue there, along with every other problem you can imagine, starting with the form of government and the lovely leader, Mr. Mudero. In Italy, the coalition government between unlikely allies decided to increase spending dramatically, so the projected budget deficit will blow out, rendering Italian debt, shall we say, less stable. President Trump, known for his caution related to sensitive subjects, decided to opine about the South African government’s policy about land expropriation. The South African Rand and JSE dipped a bit on his remarks, and international investors rightly have to be concerned about this direction. If the government is going to start out by taking private land, why not other assets, you know, like businesses or even financial holdings? Clearly, not much visibility in that country, either.
Finally, I want to thank those of you who emailed, texted, and posted kind words about my dad last week. It is greatly appreciated. I am including a few photos from the Seattle trip last week as the weather was great, as was the visibility.
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 guarantee performance better than market indexes.