Yellen Assures Market As Banks Lead Market Higher

The big things that come our way are ... the fruit of seeds planted in the daily routine of our work. William Feather

If you are like me, you become accustomed to your daily routine. There are a wide variety of tasks you arrange to accomplish over the course of a day, week, month, and year. Many are repeated numerous times and you get familiar with the way things are done at a particular place. For example, most people older than the millennial generation, think baby boomers, typically have done their banking by going into a branch, making their deposit or withdrawal, and then leaving. Now, as banks have cut back staffing, an experience which used to be quite quick can become tedious, and heaven forbid, time consuming and unpleasant. This week, I experienced the joy of depositing checks using a mobile device. Download the app, put in your security credentials, take a picture of the check after you sign it, and boom, all done, and the mission is accomplished. No branch. No waiting. Lovely, just lovely. Even better, from an accounting perspective, the records can be downloaded into any program so your always pleasant debit and credit columns line up. How awesome is that? If you want to read a book or movie, you download the Kindle app from Amazon (NASDAQ:AMZN) and the content shows up in 2 seconds. If you need transportation, it used to be you took a cab, now we have Tuber and Lyft. Clearly, technology has made millions of lives easier with nearly every routine touching the many different pain points of our existence. How does this affect investment considerations, you might ask?

Over the last week, Amazon held their annual summer Prime Day, and it exceeded forecasts. It is now estimated Amazon has 85 million people paying for the annual or monthly subscription fee ($100 bucks and $10 per month, respectively). It took Amazon less than 5 years to accumulate this huge cash machine, probably approaching 10 billion dollars of up front dinero. Similarly, Facebook (NASDAQ:FB) recently announced they have over 2 billion users. Uber, AirBNB, Pinterest, Instagram, and Venmo are all young companies which have amassed massive user bases in short periods of time. The ability of any enterprise to use technology to transform their company, or industry can happen in an incredibly brief period. The observant person watches these technological shifts and tries to anticipate what might work, and what won’t. On a daily basis though, businesses should be getting more efficient, meaning margins improve as more productive technology gets integrated in their operations. Think about the cloud, robotics, artificial intelligence, predictive analytics, these kinds of things. Much publicity has been made about corporate profitability and how current margins are at all time high levels. Some believe they will revert lower to more historical norms. I suspect not, and the lasting efficiency of technology is why. Now, if only they could make airline travel easier, right?

In the markets this week, Janet Yellen testified before congress this week, maybe for the last time. She noted that though the economy has improved and is at near full employment, the process for normalizing interest rates (raising them) will be telegraphed and slow. Imagine that. Target pre announced a better than expected result, good to know they have a pulse and are still attracting customers. Pepsi met expectations led by the always consistent division of Frito Lay. How can you go wrong with snack foods? Late in the week the banks reported big profits but sold off because of Janet’s interest rate forecasts. New SEC chairman Jay Clayton, formerly a corporate attorney representing Goldman Sachs (NYSE:GS) and Alibaba (NYSE:BABA) (among others) made his first public speech. In it, he mentioned the number of public companies listed on our exchanges has been cut in half and desired to have more private companies go public. Naturally, he also told the world how he would be looking out for ordinary investors. Whew, now that is a relief, I knew he was on our side, didn’t you? Uh huh. Finally, on the JP Morgan earnings conference call, after posting a record $7 billion dollar profit, Chairman Jamie Dimon railed how he couldn’t believe the American public had to put up with the embarrassing ‘---t’ emanating from our beloved nation’s capital. He was referring to the lack of any kind of legislative accomplishment regarding all kinds of public policy issues (infrastructure, lending and borrowing, privacy, excessive litigation) and didn’t blame either political party. Did he have to? They both stink, we all know it, have known it, and continue to know it. It is part of the daily routine of living in our country. Anyway, hope you are staying cool as it is a balmy 110 here in Vegas.

Thanks for reading the blog this week and if you have any questions or comments, please email me atinformation@y-hc.com

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.