Investors Fret As Politics Override Bank Earnings!

Men think in herds, not because herds are right, but because they offer security, mutual respect, and a needed sense of certainty. ~Dr. Idel Dreimer

The investment world is often thought of as conservative, traditional, middle of the road, and one that conforms with the norms of society. Increasingly, especially as the digital age continues to transform our world, these staid notions are being replaced with wild extremes. For example, financial advisors have typically been a relationship business based on long time trusted counselors who look out for their clients. Now, however, millenials are changing this idea as they would rather not deal with people, instead preferring automation and software as low cost alternatives to the fees advisors charge for better service (returns?).

Within the possible invesment instrument universe, the change from individual stock picking to index investing has moved billions toward fund families offering the ETF alternative. As for individual equities, the massive valuations given entities like Amazon (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA), versus more established companies like say, Wal-Mart (NYSE:WMT), Target (NYSE:TGT), Ford (NYSE:F), and GM (NYSE:GM), are leading some observers, like myself, to believe these extremes are a bit much, and offering up opportunities in some entities being scorned.

My thinking is that yes, Amazon is a juggernaut and well positioned for continued growth. It’s business model, in my mind, is essentially a replica of Costco (NASDAQ:COST), as 50 million customers paying 100 bucks a year for Amazon Prime is just the online version. It supplements Amazon Web Services as providing the vast cash flow for Mr. Bezos to continue investing in Echo (voice activated services), drones and planes for delivery, automated retail and new book retail locations, and huge investments in India and the Middle East. Still, large competitors like Wal-Mart, Target, Best Buy, and Costco are sitting up staight and fully engaged, to say the least. For those buying Amazon, and Tesla, which faces plenty of competiton and has yet to prove sustainable cash generation, well, better you than me.

In the market last week, both retail sales and the latest inflation reading were weaker than expected, although consumer confidence remains quite strong. The largest banks reported on Thursday, with Chase (NYSE:CCF), Citi (NYSE:C), and Wells Fargo (NYSE:WFC) netting six, five, and four billion respectively. Mr. Dimon noted the consumer and economy remains in pretty good shape. Clearly. Elsewhere, you may have noticed the little issue United had with a passenger, who was summarily hauled off a plane to make way for United employees. Can you believe he has now contacted a lawyer who claims he was mistreated,? I suspect United will settle, although it appears it had good reason to throw the guy off, but the way they handled the situation was thuggish, to say the least. I am sure the shorts are now circling United.

In the activist world, Jana Partners has taken increased stakes in both Whole Foods (NASDAQ:WFM) and Chipotle (NYSE:CMG). I guess Mr. Rosenstien has altered his diet to a bit healthier alternative, right? Probably not, but Barry has a history for sniffing out value and this might be prime evidence. In the rumor mill, plenty of speculation exists about Apple (NASDAQ:AAPL) taking a gander at Disney (NYSE:DIS). I think not, but you never know. Looking ahead to next week, earnings reports will dominate the news as heavyweights like IBM (NYSE:IBM), JNJ (NYSE:JNJ), Bank of America (NYSE:BAC), Verizon (NYSE:VZ), Harley-Davidson (NYSE:HOG), and even Yahoo (NASDAQ:YHOO) tell shareholders how well they are doing (or aren’t).

Politically, the United States actually using it’s vast military capability in Syria and Afghanistan have many observers believing it may be a turning point for foreign policy. Who knew that standing up for the rights of poisoned babies would actually draw praise, or wiping out militants who want to slice people’s heads off might be considered a rational response? I suspect the head honchos in Russia, Iran, and the nutball in North Korea might be viewing Mr. Trump a little differently than his predecessor. It may be the sense of security and herd mentality seems applicable to foreign dictators as well.

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.