Believe you can and you're halfway there. -Theodore Roosevelt 

Poor Janet Yellen. The Fed head just cannot seem to get a break.

Lo and behold, just when you think the financial markets have pretty much accepted interest rates will be low for the next century, naturally, the July jobs report came in at a hot 255,000. The number was far in excess of the anticipated 180 thousand economists expected. This came after the Bank of England announced the first interest rate cut in seven years, down a quarter of a percent, which is the lowest recorded benchmark interest rate in that venerable institution’s 322 year history. Hmm, seems like the low interest rate thing has more than caught on, wouldn’t you say?

Nonetheless, Mrs. Yellen now seems to be facing the distinct prospect of more urgency to move in the direct opposite direction of most of her rate cutting brethren at the Bank of England, Bank of Japan, ECB, Swiss National Bank, and the Australian Central Bank. You see, a data dependent Yellen must acknowledge, at the very least, the economy ain’t so bad, and in fact, maybe, just maybe, might be just well enough to start the process of normalizing rates. Say it ain’t so, Joe, oops, Janet. 

The market was full of earnings reports this week and came in all industries, shapes, sizes, and were stocked full of both upside surprises and destructive disappointments.

A few of note include Etsy, Fitbit, and MeetMe, all which were pleasantly good. Nice to see some youngsters feeling their oats. A few more mature entities like AIG, the Boyd Group, Activision Blizzard, Churchill Downs, and Jack and the Box were more of a mixed bag, hit or miss you might say.

One of the distinguishing characteristics of the tell-almost-all season is how companies, which might barely manage to miss the estimate, or even worse, indicate the business is just OK, or, heaven forbid, trending down, promptly see their stock get crushed. You miss a percent on the top line, the equity gets bombed by 20%. Not fun.

So what is a even tempered, rational, discriminating investor to do? First, acknowledge this is how it always is in the public markets, which is why opportunities are consistently available. Second, make sure a portfolio is constructed in such a way where a great deal of exposure to any one sector or company is consistent with your risk tolerance. Charlie Munger famously put all his capital in 3-5 securities. If you have the ability to weather those fluctuations, fine, but usually that requires an iron stomach. For those of us who need a bit more Maalox, probably ten to twenty holdings will do, provided you have faith in the management, industry, and business. Still, hard to get comfortable just waiting for the next bomb to explode in the portfolio. 

Delightful, dumb, delicious, and potentially destructive, Donald Trump announced his economic team of advisers. One such individual who happens to be the only academic of this group is Peter Navarro, a Professor at the University of California-Irvine. Naturally, I bring this up because I took classes from Mr. Navarro in business school. He has written quite a few books about how China continues to take advantage of the United States in trade, shock of shocks. 

Anyway, thanks for reading the blog this week, and If you have any comments or questions regarding it, please email me at information@y-hc.com