Mixing and matching is famous in the garment industry for being useful. Matching is also an important part of nearly ever sport, especially the team sports like football, basketball, and baseball.  For example, good coaches and managers often try to identify situations in football and basketball where a superior player is being defended by a player who cannot guard them because of quickness, skill, height, strength, or some physical attribute. In these team sports, what you discover is if a team cannot defend, especially at the end of a game, it will not win, especially against superior teams. The observant reader might ask, how does this idea of matching apply to markets?

Well, I am glad you asked, and the answer is quite simple.  As an investor in any asset, what you are trying to do, in its most basic form, is to identify situations where the price of the asset being offered does not reflect the economic value. Conversely, short selling involves finding assets where the market price is well in excess of the economic value. Both strategies revolve around matching up market price and the fundamental value of the business, in the case of stocks.  Investment firms employ different combinations of the two methods in order to achieve their specific goals for clients.  One can apply the idea to all kinds of different assets, including startups, real estate and fixed income.

However, I should note one asset class where the idea probably is not going to apply is cryptocurrencies, which happen to have soared during 2017. Familiar names like Bitcoin, Ethereum, Ripple, Nearcoin, Peercoin, Monero and who knows what else, have hit all time highs and show very little indication they will slow down. The reason why matching asset price to economic value will not work is because cryptocurrencies, and currencies as well, do not produce cash, cashola, the green stuff, good old hard CASH.  Currencies can be exchanged, as can cryptocurrencies, but as far as generating cash, nope.  Consequently, those who are engaging in the buying and selling of these cryptocurrencies are engaging in what is so eloquently called, ‘The Greater Fool Theory.’  Yes, digital currencies have a place, and now, more than ever, it is for traders.  As for investing in them, well, for myself they don’t quite match up.  

In the markets this week, Janet Yellen and Mario Monti delivered nothingburgers yesterday at the plush confines of Jackson Hole, Wyoming. Janet and Mario essentially said things are much stronger now thanks to all the adjustments we implemented (actually, it was their predecessor, helicopter Ben Bernanke). On the earnings front, HP beat estimates as did Cree, while WPP met theirs but guided down and took a shellacking from investors.

Smuckers  SJM also forecast softer numbers for the rest of the year, which is kind of interesting, for me anyway, might have to see if that is a match. Amazon made big news with the final approval and closing of the Whole Foods acquisition, and then the market subsequently sold off Costco, Kroger, Target and Wal Mart  It seems Bezos and the boys and girls who run the beast that is Amazon are going to immediately reduce the prices at Whole Foods. Whole Foods will no longer be ‘Whole Paycheck.’  What is the world coming to?

Next week, President Trump will travel down to the Gulf to see how bad the damage is from Hurricane Harvey.  It will take a while for the Gulf Coast refiners to get back up to speed, as will the production platforms in the Gulf of Mexico.  He will also finally begin to promote his tax cut platform, upon which many market participants have their sights set on for a further rally.