Interesting Tidbits After A Nice Week In The Market

Be thankful for what you have; you'll end up having more. If you concentrate on what you don't have, you will never, ever have enough. '-- Oprah Winfrey

Coming on the heels of two drubbings at the end of last week, most observers believed last weekends tragedy in Paris would send global markets tumbling even further. When futures opened down on Monday morning, it appeared geopolitical events would indeed alter the pricing of global assets. However, when the week finished up yesterday with U.S. equity markets having it's best five day session in nearly a year, clearly political events cannot be considered the primary concern of the investment community. Indeed, putting a few bucks in ones pocket usually takes precedent, and if bargains are to be found, well, we might as well be the ones finding them. The search for gains also takes on greater importance as we inch closer to the end of the year because track records matter. When the books close on December 31, 2015, the preliminary result becomes official, just like the race track.

So what caused the change in course this week? Well, one big event investors focused on was the release of the October Federal Open Market Committee notes. It was clearly communicated the Fed is looking at raising interest rates in December, but the rate and duration of the tightening should be lower and slower. Stunner. When Stanley Fischer, vice chairman of the Fed, said in a speech 'We have done everything we can to not surprise the markets,' it might have been the understatement of the century. Still, given the fragile mindset of many investors, I am sure it was reassuring the 10-Year Treasury note will probably stay in the 2-3% for the foreseeable future.

Another data point helping the cause was a stock split and nearly 20% raise in the dividend from apparel juggernaut Nike (N:NKE). With many questioning the retail sector and its prospects, Target Corporation (N:TGT) posted strong numbers that met expectations but were not as strong in the e commerce area. Still, retail has been bludgeoned for quite some time, so any positive information was viewed constructively. A stronger case can be made that an upgrade by Goldman Sachs (N:GS) of Apple (O:AAPL) was more meaningful. As the most valuable company in the world, any sustained move by the beloved I-provider has a much greater impact on all indexes, so when the fellows at Goldman put Tim Cook and his crew on their most preferred list, well, it did not hurt.

November is always a time when some private companies venture out into the public domain. This week was no different as both Square (N:SQ) and Match.com listed their shares. Square is in the difficult payment processing area and is led by Twitter (N:TWTR) CEO Jack Dorsey. Match Group Inc (O:MTCH) sold only 10% of the company with the rest being held by parent IAC/InterActiveCorp (O:IACI). Both popped nicely and give hope to much of Silicon Valley that many Unicorns will eventually be able to move from rich private valuations and capitalize on their global ambitions. Still, Square took a nearly 50% haircut to its private valuation, so you have to wonder about the marks on some of these Unicorns. I am sure their audit committees are paying close attention, and if not, they ought to.

Bill Ackman and Charlie Munger seem to have a little issue. Munger has criticized Valeant, a big Ackman position, for its accounting and ethical inadequacy. Ackman responded by questioning the moral value of Coke (O:COKE), a big Berkshire holding. Ackman has long admired Buffett, so this one probably will fizzle out, but it is worth watching. On the global stage, Macau has been difficult and is turning even more problematic, especially for casino companies which generate the majority of revenue from these properties. We are referring to Wynn Resorts Limited (O:WYNN) and Las Vegas Sands Corp (N:LVS), as I am sure you are aware. Both have taken it on the chin despite being the best operators in this sector. Tesla Motors Inc (O:TSLA) announced a recall of 90,000 of it's vehicles, which only proves, yet again, the car business is not a great business, let alone a good business. In my judgment, the only thing you want to do with cars is go from a to b in them. Investing in autos? Uh, no, but if you have to, try doing it in a way which stays away from the manufacturing side.

In a development which certainly has potential political ramifications, UnitedHealth Group Incorporated (N:UNH) announced they are considering leaving the exchange business because of the heavy losses (nearly $500 million). United is the nation's largest health insurer and if it is having problems, you can bet others are as well. United stated it will evaluate the issue by he middle of 2016 to see if they stop participating altogether. It does not mean the Affordable Care Act is dead, but it becomes very uncertain as to the future of these exchanges. You can use your imagination as to how this plays politically, but like the terrorism and refugee issues, it is not going away any time soon.

Finally, Thanksgiving is in a few days and it is one of my favorite holidays, like many other people. I hope everyone has a great week and enjoys their turkey and pumpkin pie. Stay healthy and happy. Thanks for reading the blog 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.