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.
What A Great Week In the Financial Markets!
Normally, the middle of summer means light volumes, lack of interest, and non eventful days for weeks on end in the financial markets. Not this week, though, it seemed as if every day was full of interesting situations. Let's recap what took place.
Janet Yellen kicked off the week with her Humphrey Hawkins testimony before congress and set the markets on fire by mentioning sectors of the equity markets which were overvalued. Typically, the heads of the Federal Reserve and Treasury Departments do not make specific comments on the valuation of specific areas or issues in capital markets. It has long been considered almost a tradition where government leaders go out of their way to not comment on what is over or undervalued and to be far more concerned with policy direction and implementation. So, traders and investors were certainly taken aback by Yellen's remarks, and many believe it was way out of line to pinpoint the areas of the stock market which are thought to be stretched from a worth perspective.
Next, Rupert Murdoch made his considerable presence known in the merger and acquisition frenzy by making a bid for Time Warner (TWC). If ever there was a transaction which could have landscape altering implications for an industry, in this case media content, a 21st Century Fox-TWC buyout would be transformational indeed. Time Warner quickly said no to the aggressive Mr. Murdoch, and it is very possible large companies like Apple, Google, Yahoo, or others may step in to get involved with this situation.
On Wednesday, the Seeking Alpha conference took place and Treasury Secretary Jack Lew made comments about the importance of internet security because of the critical importance of the internet to all aspects of the countries industries. He also commented on wanting a new economic patriotism, which referred to the belief of government that private business should not attempt to engage in tax inversion transactions. These situations involve merger and acquisition transactions where a domestic entity buys, sells, or merges a foreign entity it owns at least 20% of and then reincorporates into a foreign country, which typically has a far more advantageous tax posture. By doing so, the domestic company can now potentially have access to large cash balances, which it previously would have had to pay a much higher tax rate on if it wanted to bring it back home.
Nice idea, Jack, but it fails to address the lack of comprehensive tax reform for the corporate sector which has long been needed. Also during the conference, we saw famed investors like Stanley Druckenmiller, Leon Cooperman, and politicians like Chris Christie offer their thoughts on a variety of topics. The highlight of the day was when Carl Icahn and Bill Ackman, who a year earlier made news at the same event by having a public argument which involved name calling and profanity on air, now engaged in a love and admiration fest. Hard to believe that, who would have known, these famed investors are pretty much two peas in a pod on many investment related topics.
Thursday brought the news a Malaysian plane, flight 17, was shot down over Ukraine. It has become more apparent the Russian separatists, using Russian weaponry and trained by Russia, were responsible for the tragic act. It highlights the aggressive posture of Russia and Vladimir Putin, but that has long been known. It also points out, yet again, that the world and United States should have been taking proactive measures to help, shall we say, motivate Mr. Putin into cooperating with the rest of the world by standing down and not backing the separatists. Doing nothing is a policy response which has consequences, just like doing something might lead to a different outcome. Leading from behind, huh? Patton would roll over in his grave.
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.