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Inflation Surprises As CPI, PPI Run Hot, Interest Rates Rise, Yet Market Bounces Back!


Inflation Indicators Strong.

Earnings and Buybacks Bolster Market.

Florida Shooting Is Tragic for the Country.

When you get into a tight place and everything goes against you, till it seems as though you could not hang on a minute longer, never give up then, for that is just the place and time that the tide will turn.     
Harriet Beecher Stowe

When you are the parent of a child, you deal with all kinds of situations where you have to, shall we say, ‘Talk them off the ledge.’ Kids are emotional, sensitive, energetic, and very concerned with what others think, especially their friends. In many ways, being a parent involves playing Sigmund Freud, the noted psychologist. My wife is quite good at this endeavor. As for moi, it is a constant battle to stay positive, correct constructively, and try and apply personal learning's. One of my important rules is to concentrate on tomorrow if today was not so good. There is always a new day, which is what makes life so fascinating. In that light, let us turn to the subject at hand, the markets.

If you last recall where those rasically rabbits left us, the investor class was worried about a whole bunch of things, especially inflation and the dreaded rising 10 year bond yield. On both those fronts, economic data didn’t necessarily cooperate as the CPI and PPI came in hotter than expected. Bond yields shot up a touch, and stocks sold off to start trading sessions early in the week. Low and behold, after the initial drop, equities firmed up and finished the week with a nice bounce. In fact, stocks remain a touch lower than their all time highs. What gives? Well, earnings reports from heavyweights like Cisco, Pepsi, UnderArmour, and Coke were strong, and increased dividends and buybacks are balm to soothe frayed nerves. Supplementing the succor of strong financial s was the drying up of forced selling from misplaced bets on volatility and gosh knows what else. Applying Mrs. Stowe’s wise words to any endeavor is probably good advice, but especially so with financial assets. Sentiment changes not only daily, but these days, hourly, minute, or even second. The pesky algo’s can be triggered by any metric imaginable. As a result, thousand point drops over a ten minute time frame are not impossible, but increasingly, should be anticipated. However, if one focuses on the quality of your holdings, the operational performance, and extending your time horizon, accepting these fluctuations and trying to selectively benefit from them seems like a reasonable course of action. As Scarlett O’ Hara famously once said, ‘Tomorrow is another day.’

Elsewhere, a small company called the Daily Journal held it’s annual meeting this week, and investors pay particular attention to it each year because of one man, that being Charlie Munger. Groupies, as Mr. Munger calls them, from all over the world come to hear Munger opine on all kinds of subjects. One of them was the topic of Wells Fargo. Buffett’s partner believes the regulators should leave Wells alone as they have been through the ringer. Respectfully, I would disagree. Wells, rhymes with smells for a reason, has over ten percent of all U.S. banking deposits and deserves ongoing scrutiny for its operational shortcomings. No reason to let them off the hook any time soon. Other than that, Munger is always worth a watch, and you might take a look 2018 Daily Journal Annual Meeting

Clearly, the big event of the week was the shooting in Florida. My heart goes out to all the victims families and their friends. It is crushing to see the faces of the young people who don’t have another day to look forward to. The finger pointing about responsibility and where the warning signs went ignored mean nothing to those who lost their loved ones. Politically, both parties deserve plenty of scrutiny as there are no heroes there, only grandstanding. The heroes are those who do their jobs every day to try and make sure things like this don’t happen. In any case, it is tough to watch for people who want to see young members of society grow and prosper. Hang in there.

Next week, earnings reports will continue to flow in with the big Kahuna being Wal Mart. Enjoy President’s day weekend.

Thank you for reading the blog this week, and if you have any questions about investing, please email me at
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.

Disclosure: I am/we are long csco, BRK.B.