“His bread I eat, his song I sing.” Charlie Munger

During the course of the presidential campaign, the famous economist from the NY Times, Paul Krugman, threw cold water all over the claim by Donald Trump that under his administration,

the economy would ultimately see 4% GDP growth.  As the second quarter GDP number registered a 3.1% reading, maybe Donald was more right than his detractors?  Certainly, the famously liberal Krugman claim of sub 2% economic growth as far as the eye could see has not played out, justifying the quote about economists inability to predict anything accurately, especially recessions, or in this case, better than expected growth.  As the pundits pored over the adminstration's propsed tax reform, it became apparent the broad outline left the details up to the hard working members of Congress.  Consequently, although many believe a tax modification has a good chance of getting done, the American public should be quite skeptical about the chances of anything getting done.  After what transpired with health care, and the inability of Congress to get anything substantive done over the last 10 years, you probably should always take the under in the chances of getting a bill through both houses and then signed.  As the year winds down, there will be. a great deal of pressure on Republicans to put some points on the board, but what the final work product looks like is anyone's guess.  

As October has arrived, next up will be third quarter earnings reporting.  S&P 500 estimates are growth of operating profits at 6%, and analysts are confident most companies should meet or beat their targets.  There is some thought in the investment community that global growth is far stronger than anyone believed, and if that is the case, the recent rise in energy prices may be a precursor of what lies ahead.  The largest energy companies have been spot on in their belief that oil prices will be supported at $50-60 a barrel and have been steadily reducing their costs so as to allow for profitability at even lower oil prices.  In the event oil were to go higher, well, just consider that possibility.  The interesting areas to keep your eyes on remain financials, housing, technology, and energy, but maybe not in that order.  Retail is worth paying attention to as well, because the poor performance in that industry has to have repurcussions.  It may be consolidation, it may be takeovers, or some other kind of financial engineering.  The same holds true in both the media and casual dining industries.  

Anyone who knows me understands I am a sports nut.  So much so I gave up five critical years of my working life to go teach and coach, something I now regret.  Over the course of the last week, Donald Trump's commentary on the NFL players conduct during the playing of the national anthem at the league games ignited a national 'conversation' about the question of respect for the country and it's institutions versus an individual's right to freedom of speech.  At the same time, a two year old FBI investigation rocked the sports world as an executive at the major sports retailer Adidas, a famous and championship winning basketball coach, assistant coaches at major college basketball programs, a financial advisor, and high school basketball players were all implicated.  The scandal has the potential to change all major college sports because of it's far reaching implications in both football and basketball.  These issues highlight several problems our country has long faced and ignored.  First, the importance and compensation awarded in the fields of athletics, entertainment, and music in our country needs to be analyzed and reconsidered.  Why teachers and public servants are not paid at higher rates versus those occupations is relevent in terms of the long lasting affect those professions have on the long term health and growth of society.  Why athletes command 5 year, 200 million dollar contracts is a function of the marketplace and and what it will bear.  In the largest professional sports leagues (NFL, NBA, MLB), the big media companies have paid billions of dollars for the rights to that product in the various forms (television, digital access, etc). With declining ratings, those poorly considered deals are hurting the companies like Disney (ESPN) and CBS as investors see the poor returns in the face of declining popularity, attendance, and now television ratings.  The biggest culprit is ESPN, owned by Disney, which owes the leagues many billions of dollars over the next ten years.  Turning to the NCAA, it gets 80% of it's total budget from the proceeds of it's contract for, you guessed it, the NCAA Basketball Tournament.  Is it any wonder Nike, Under Armor, and Adidas sign schools like UCLA to 10 year, 240 million dollar contracts and then wind up having coaches pay sixteen year olds a hundred thousand bucks to play sports at their school?  You reap what you sew, as the college system has been corrupt for the last 50 years, the only difference today being the magnitude of the dollars involved.  As part of the paying public, in terms of our taxpayer dollars going to higher education, I am quite skeptical of any change long term, but with the FBI involved in the case, you can always hope for the best.

Thanks for reading the blog this week.  If you have any comments, thoughts, or questions about the blog or investing, please email me at information@y-hc.com 

Yale Bock, Y H & C Investments, its clients, and the family of Yale Bock have positions in the securities mentioned in the blog,  Investing in securities involves risk and the potential loss of ones principal.  Past performance is no guarantee of future results.  All investment decisions should be considered with respect to ones risk tolerance, return objectives, liquidity needs, tax considerations, and one's overall financial situation.  The fact that Yale Bock has earned the right to use the Chartered Financial Analyst