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Y H & C Investments BLog

The blog is a personal commentary by Yale Bock on the specific events which may have occurred in the investment or political world. Specific stocks are mentioned, and many readers find this a good way to gain another perspective on the investment world.

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Recent blog posts
 
On July 4, 1776, the Second Continental Congress declared the independence of the thirteen colonies from the country of Great Britain.  It is now a national holiday celebrating, among other things, baseball, hot dogs, apple pie, and Chevrolet (oops)!  You get my drift.  Anyway, like two hundred and thirty nine years ago, it may be time for citizens in the United States to declare that the shackles must come off from another European country.  Instead of Great Britain, however, the oppressive area is Greece.  
 
You see, my friends, investors have probably begun to feel particularly burdened by events there during the last six years.  In the past week, the matter looks as if it will start to conclude on Sunday, with a referendum on whether to accept loan terms from various entities in the European Union.  Some of the conditions we have witnessed during the last few days have been particularly heartbreaking.  Watching citizens limited to about sixty dollars a day for withdrawals from banks is difficult.  Lines at gas stations have been extremely long and it is not easy to purchase medicine.  Clearly, not good, not good at all.   These scenes should give people an indication of how crucially important banking systems, as well as critical natural resources, like oil, are to a country's well being.  Of course, if you are a leader in a country, these are issues to consider before you decide to walk out on negotiations with your creditors.
 
At this point, if you are a wagering fellow, and you have watched what is taking place, it is hard to believe a thinking citizen will vote against staying in the European Union.  It appears very close.  The issue may take another month to play out.  Right now, looking at bond market conditions in the rest of Europe, yields have not moved much.  In a Greek exit, you can bet that will change, as most weaker credits will blow out higher.   If Greece leaves, the important question of whether other debtor nations will begin following the same playbook, (to refinance large sums of debt, or leave the Euro) and if so, when?.  It is the epitome of uncertainty.  Just what Wall Street hates.  Which is why independence from the whole Greek 'tragedy' is what many investors are probably longing for.
 
 
Elsewhere in our markets, a blase job report of 223K keeps the Fed policy of lower for longer on the table.  Still, the overwhelming story of this year in financial markets continues to be the number and size of large merger and acquisition transactions which roll in non stop.  This week alone, we have seen three very big deals.  Aetna is acquiring Humana for $37 billion.  In the insurance space, Ace is buying Chubb for $28.3 billion.  Last but not least, UK insurer Willis is merging in an all stock, $18 billion deal with U.S. based compensation and consultant Towers Watson.  In the last union, tax issues helped drive the sale.  On a smaller note, Paypal is acquiring Xoom, a freshly minted IPO from last year in the money transfer industry.  The deals just keep coming and with borrowing costs this cheap, expect the number to remain elevated.  On Wall Street, now is a good time to be an investment banker.  
 
The other major news this week involved the oil industry.  In general, I am a big fan of the operational skills of large oil companies. The substances they are trying to find are dangerous to work with.   They are engineering based entities which are extremely well run, and have highly skilled people doing important jobs.  They apply technology to nearly every part of their business, and are constantly striving to be as efficient as possible.  The industry is extremely capital intensive, and is under pressure to find ways to reduce costs.  In the current state, with energy prices down 40% year over year, the largest enterprises are chopping expenses every place they can, especially in supply chains.  It is done in an effort to maintain profitability in a challenging market.  At every turn, they are demonized for trying to make money, the same way alternative energy companies or high tech internet based entities do.  As an interesting aside, an employee of BP during the Macondo oil spill was charged with obstruction of justice for deleting hundreds of texts off of his phone.  His appeal is still pending.  Conversely, Lois Lerner deletes 6,000 emails from her servers at the IRS.  Zip.  Hillary Clinton ignores State Department policy and keeps a server at home, and then gets rid of official emails at the State Department.  It remains to be seen whether she will turn over all emails.  What happens?  You guessed it.  Nada.  Most honest and transparent government in U.S. history?  Sure.  Of course.  And the White House one day will be lit up like a rainbow.  Don’t you just love the hypocrisy in politics?  Cry me a river you say?  Fair enough.
 
 
One of energy’s largest companies cut a deal with various parts of the Federal and State governments affected by the Macondo oil spill in 2010.   It involves payment to compensate the different agencies and states for water and environmental pollution.  The total bill for the settlement is $18 billion, paid over 18 years.  The total cost to the entity will now run over $53 billion. If you have been a reader of my blog for a while, you may know which company I am referring to, which I believe is led by an excellent CEO and is world class in every respect.  As for the deal with the government, well, you can see which group is good at math and understands the time value of money versus, say, bureaucratic lawyers of our fabulous administration.  
 
Next week, it will be more of the Greek odyssey and earnings season will begin fairly soon.  I hope everyone has a great July 4th weekend and is safe.  Be careful with the fireworks, not a big fan, thank you.  Anyway, if you have any comments or questions about the blog or investing, please email me at This email address is being protected from spambots. You need JavaScript enabled to view it.
 
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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