No Man Will Make A Great Leader Who Wants To Do It All Himself Or Get All The Credit For Doing It- Andrew Carnegie

Having been an active participant in the financial markets for nearly 30 years, I have experienced the natural volatility which any investor has to endure and learned to embrace it, accept it, and naturally, try and use it to my advantage.  As such, one begins to become a bit unphased, jaded, and maybe even somewhat complacent about anything which could bring a serious decline to the market.  Besides, having gone through 80% and 50% retreats (2000 internet bubble, 2008 housing crash), unless nuclear war breaks out, which the brainchild in North Korea seems he is seriously pursuing, the idea markets are going to suddenly plunge more than that is probably a bit far fetched.  Still, there are certain things which make me sit u p a little straighter, open my ears a little wider, and pay much closer attention.  The other day, I noticed our always agreeable President taking credit for the stock market performance over the last year.  In fact, he mentioned to workers to take a look at their 401k plans and the increased value, as if it was directly related to Donald’s hard work.  To be fair, on his worst day, I believe he is superior to the previous occupant by a factor of a thousand, and double or triple that in comparison to Hillary (just look at the ISIS situation- anybody consider that?).  However, more in line with the sentiment expressed by Rex baby (Secretary of State Rex Tillerson, in case you needed a hint), the idea Mr. Trump is responsible for equity performance gets me alarmed, even a bit concerned.  One thing you learn about stocks is when people who have no business taking credit for something do so, then it is time to get your guard up.  OK, point made, but so what, Donald needs some attention, imagine that, why should it matter?

Really, it probably doesn’t, because corporate earnings are very strong, and even with the Fed raising interest rates 25 basis points, and indicating they will raise maybe three more times next year, the economy is trending nicely upward with 3% growth, and now we have tax cuts headed down the pike.  Make no mistake, a near 40% reduction in corporate tax rates and the ability to repatriate cash from overseas subsidiaries are major changes and will dramatically help the competitiveness of our country.   Doubling the standard deduction amount is going to help a lot of families put more money directly in their pocket as their tax liabilities are headed lower, in most cases.  Democrats can argue about the fairness of this, and right now the general public isn’t very optimistic about this piece of legislation, but in time, at many different levels, the tax cut is potentially a very big deal.  Donald deserves credit for signing it, but the real mover behind it is Paul Ryan, who has been its architect for nearly a decade.  With any other leader heading the White House, you might have a completely different reaction by the general public about this piece of legislation, but not today.  The bottom line is with tax cuts, a strong economy, and good earnings growth, markets have reasons to head higher, but it makes this investor nervous when I see the Donald taking a bow.

Turning to another area of contention, the FCC did the deed and scrapped net neutrality, and oh boy, the world is now going to end.  But, then again, maybe it won’t.  It could mean the large content providers who have huge share of internet traffic, like Netflix, Google, and Facebook, are going to be looking at higher costs for accessing the pipes of the Comcasts, Verizon’s, AT&T, and Charter’s of the world.  The pipe guys would point out, they should pay more, as those who use more of the network should pay more of the costs, which seems reasonable.  Why should grandma and grandpa, who just want their email, pay the same amount as the binge watcher or gamer who streams all night?  Don’t tell that to Bernie, Elizabeth, and Mr. Markey, as without net neutrality, all is lost.

In the corporate world this week, Disney and Fox announced their blockbuster deal where Disney now becomes dominant in the sports and entertainment content area with expanded distribution globally and control of the big streaming unit Hulu.  Netflix remains formidable, but Disney has Mr. Hastings directly in their sights.  Elsewhere, NASDAQ giants Oracle and Adobe reported results with different reactions by investors.  Adobe has become much larger in recent years with entry into interesting software areas and a move to a subscription model.  Mr. Ellison’s beast remains king of the hill in the database domain, but that crown fits much looser with competitors like Sales force making big strides and plenty of other smaller contenders looking to take share.  With those plump margins, it is area many find, ahem, attractive.

As we transition into 2018, I suspect next year is going to be a much harder year to find large gains, especially among those entities which already have full stock prices.  You can add to that list anything related to Bitcoin, as now things like Litecoin, Bitcoin Cash, Ethereum, and a few others have joined the party.  Don’t be surprised if Donald starts taking credit for that as well, although you might have noticed he did not take the stage as Mr. Moore went down to defeat in Alabama (imagine that a Republican losing in Alabama).  Anyway, I hope you enjoy the holidays, and good health to you and yours. 

Thank you for reading the blog this week, and if you have any questions about 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 in no way means or guarantees financial returns which exceed those of a market index.