“The heavens will disappear with a roar; the elements will be destroyed by fire, and the earth and everything in it will be laid bare.”
For those who believe in the bible, the above description of the end of the world is closely linked to the end of a one thousand year period known as the millennium. The current time period on earth is known for the rise of the millennial generation, so the similarity is more than trivial. Based on the weather predictions in our lovely land over the next week for temperatures approaching the 120 degrees level, maybe the world is indeed going to end, as predicted many moons ago. If one is following the financial markets recently, you would certainly consider the possibility of the planet going bye bye. When you have German bund yields going negative at the ten year duration, similar yields in Japan, and the investment community and the world at large focused on whether Britain will dump the European Union, fear is prevalent all over the globe. In many ways, the current financial environment reminds me a little of the internet bubble, only in this situation, stocks are not the instrument which are vastly overpriced. Those would be bonds, of every, length, type, issue, and from nearly every country all over the world. The demand for credit and safety is enormous, led of course, by our all knowing central bankers, who are large participants in buying up debt obligations.
Janet Yellen weighed in this week on the current state of affairs and proceeded to talk about the ‘new normal’, a phrase given to the acceptance of a slowing economy by the good folks at PIMCO, naturally the largest bond fund in the globe. The phrase was rolled out over five years ago, so it is nice to see our Fed head stays current after considering all the data. Anyway, the Brits will decide Thursday do they stay or go. The betting money is saying stay, the polls say leave. If you talk to the good folks from the island, you usually get the feeling the will leave because of immigration concerns. As an investor, my sense is to anticipate a leave and get your buying lists ready. Many analysts believe there is a ton of cash waiting on the sidelines for the flush in order to grab up bargains. One place to look at is in the European banking sector as some of the largest financial institutions in the world are trading at five year lows. Unless the world really does end, at least a few of these have a better than average chance of being around, at least I think so. Of course, owning bank stocks is kind of like the having the world end anyway, based on returns over the last ten years.
Elsewhere in capital markets, Microsoft (NASDAQ:MSFT) agreed to buy LinkedIn (NYSE:LNKD) for twenty six billion big ones. Plenty of analysts are weighing in on both sides on the merit of the deal, and Microsoft does not exactly have a great track record with its history of acquisitions (Skype, Nokia (HE:NOKIA), a few advertising companies) and large write downs. The key issue is going to be synergies and whether migrating the massive job platform of over 400 million users onto the various parts of Microsoft will bring further revenue opportunities and efficiencies. Twenty six billion is a big number, even for a group with 100 billion of cash in their pocket so this one matters to Nadella, Gates and company. Another deal in the red hot cyber security and SaaS space was Symantec (NASDAQ:SYMC) buying Blue Coat Systems for $4.65 billion. With Marketo Inc (NASDAQ:MKTO) being acquired recently, it remains to be seen if leaders like Splunk Inc (NASDAQ:SPLK), Palo Alto Networks Inc (NYSE:PANW), and Fireeye Inc (NASDAQ:FEYE) also get snapped up. Private equity groups remain flush with cash so keep your eyes peeled.
I would be in error to not mention the tragedies in Orlando last week. My sympathies go out to the families of the slain night club victims. In addition, it is heartbreaking to read of the little boy who was snatched at a Disney theme park in Orlando. In thinking about these situations, the Disney one should have been prevented with more security and precaution. The terrorist shooting at the night club also had signs which alert officials would have followed up with. The attack shows you what is lacking from the current leadership of our government, as well as the party on the other side of the isle. An easy compromise would be to ban all semi or automatic assault weapons, and temporarily suspend any immigration from countries where one suspects terrorists might be coming from. It is the responsibility of those who are running these bodies to not make speeches but to do their jobs. I suspect as a country we will continue to expect too much in this regard. Next week will be hot, so stay cool and maybe drink a lot of water, or some other refreshing beverage!!!
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.