The skeptic does not mean him who doubts, but him who investigates or researches, as opposed to him who asserts and thinks that he has found. 

Miguel de Unamuno

When yesterday’s September jobs report came in at an underwhelming 156K (estimate of 175K), the number created a situation where the Federal Reserve Board is now in a no win position.  The majority of board members, led by Janet Yellen, believe in adjusting policy based on current information, famously worded as data dependent.  The soft figure would seem to suggest a continuation of the nearly eight year policy of lower for longer.  Dissenting associates close to Mrs. Yellen, like Stanley Fischer, along with plenty of investment banking, hedge fund, pension fund, and private equity strategists, think now is the time to start raising rates.  Across the globe, quite a few skeptics have become intensely critical of the idea that the central bankers are increasingly active in market dynamics and ultimately, it will all end very badly.  Specifically, the concern with unprecedentedly low rates for so long, and in some cases negative rates, distorts bond markets and creates very difficult choices for participants of other asset classes like cash, Cd’s, stocks, real estate, and currencies.  As earnings season rapidly approaches, all eyes shift to profits with special attention given to banks, oil, and the state of the consumer.

In the capital markets this week, the most noteworthy item has to be the recurrence of a flash crash.  Yesterday, the pound fell to as low as 1.14 versus the dollar, settling at $1.24. Traders blamed algorithmic trading for the issues, though the pound has been under pressure since the Brits decided to leave the European Union.  These kinds of situations create higher anxieties for investors who are already incredibly suspicious of whether any market is actually on the up and up.  

In the merger and acquisition universe, the big deal this week is the purchase of Cabela’s by Bass Pro Shops for $5.5 billion.  Some analysts believe it will also help Dick’s Sporting Good, which has a unique and defendable market position.  Oil continues to levitate higher on belief the OPEC countries will abide by a 700K a barrel per day production cut.  Let’s just say history suggests it is hard to have faith in that one.  Google released a slew of new hardware products in an effort to find a way to become less dependent on search and YouTube.  Some of the products are interesting, though profits might be a whole separate issue.  Gold slumped as the fear of a looming rate increase overpowers the need for owning an asset when the world is falling apart. Remember, it can only end once.

In the underworld known as politics, Mike Pence proved to be up to the task of showing how to engage in a debate by using poise and patience as a way to cool off a hot blooded attacker.  Water extinguishes fire, I think that still holds.  At the top of the ticket, the weekends revelations about personal failures by Mr. Trump with his salacious comments and Mrs. Clinton’s ability to have both public and private policy based on the audience further undermines the credibility of either person to capably lead the country.  It also speaks to the poor decisions of both parties in terms of who was ultimately chosen as candidates to best represent each respective group.  The next three weeks should be, uh, interesting, as far as what new low each will stoop to in their efforts to win, starting with the debate tomorrow night.  Mr. Trump has shown no ability to prepare in such a way which would give any confidence that he will present the Republican party in a capable or professional way.  Mrs. Clinton, on the other hand, will be prepared but her past history and policy arguments leave, ahem, plenty of evidence of corruption and incompetence.  It is a disheartening predicament for the country and one which will be hard to overcome without leadership from other people in government, business, and other areas of society.  Finally, I should mention last week’s Ryder Cup as it was an outstanding competition which brought out the best in both teams.

Thanks for reading the blog this week and if you have any questions or comments, please email me at information@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.