Never has so much been made about so little. In stark contrast to the famous quote used by Churchill to describe the accomplishments of the Royal Air Force in defending England from Nazi Germany in World War Two, this weeks agreement by the Euro-zone countries and Greece to extend nearly 100 billion of capital to the Greeks might finally draw the investment worlds attention away from the dysfunction of the Greek tragedy (comedy?)
With the European situation of littering away, at least temporarily, markets in China also settled down, and investors cheered up. Buoyed by the lifting of these issues, the solid results of large money center banks like Chase Corporation (NYSE:CCF), Bank of America (NYSE:BAC), and Citigroup Inc (NYSE:C) boosted U.S. markets. In addition, the increase in subscriber numbers at Netflix (NASDAQ:NFLX) and top line growth of Google (NASDAQ:GOOGL) made the NASDAQ a destination of choice for risk takers. Energy markets reacted to the new romance between the United States and Iran by selling oil on the thesis world supply is only going to increase as sanctions are lifted.
Larry Fink of Blackrock (NYSE:BLK) and legendary investor sat down for a discussion on the risk in the market. Specifically, the love fest centered around how high yield fixed income exchange traded funds (ETF's), could be the undoing of capital markets. Icahn was, as always, like the absent minded professor who makes interesting points in a unique way. Larry Fink came off well prepared and as a consummate professional. There is a reason why Blackrock is the largest money manager in the world with over $4 billion of assets. In the end, they agreed to disagree, although Fink would pick up the bill for lunch. Lucky Carl.
Janet Yellen's went before a riled up Congress and faced a variety of questions about the policies and actions of the Federal Reserve. Specifically, house members angrily questioned her stonewalling of an investigation of an apparent leak in 2008. Apparently, Mrs. Yellen is not so keen on Congress auditing the 'independent' Fed. I wonder why that might be? Republicans control both houses of Congress. Presidential policies the last six years have been, shall we say, a bit controversial, for those in the grand old party. Nah, couldn't be, could it?
In terms of policy, Yellen stuck with the party line. The Fed is data dependent, but given the current state, markets can expect lift off some time before the end of the year. Still, you can probably bet everything will be done to mitigate the amount of 'heat' generated from a change in monetary policy.
As a personal thought, I find it interesting the agreement between the United States and Iran is being sold by the leaders of our government as the best way to stop or postpone the Iranians from achieving their nuclear ambition. The administration never tried to use our country's energy strength as a policy tool to weaken aggressive countries like Iran and Russia. Those countries are nearly completely dependent on oil for their revenues. By inhibiting the methods the U.S. could practically use to make our position stronger, both economically and when negotiating with these nations, our leadership failed the countries citizens. It will be up to the next President to fix a problem which could potentially end the world. I would say the 2016 election is pretty darned important, wouldn't you?
Here in Las Vegas, it is a balmy 105 and the casinos are open. With the last years results from Macau, I thought you would be worried our biggest entities are struggling. Don't worry, they only made $999 million instead of a billion. Thank you for reading the column this week.
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.