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Investment Banks Lead Market Higher On Earnings Parade!

Jan. 23, 2021 4:10 PM ET
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  • Investment banks post strong numbers.
  • FICC leads the way.
  • Intel beats estimates but many investors are wary.
  • Liberals look to overturn filibuster in Senate.

‘Time Is Precious, Choose Wisely.’

Understanding the link between outcomes and the choices one makes is an important issue for anybody, and it applies to all kinds of significant situations in life. Clearly, the company one surrounds themselves with will affect what kinds of activities a person is involved with. We should be familiar with the old adage, ‘Birds of a feather flock together.’ Academically, it is why students are grouped into skill levels, so the honors kids are in the same classes, the bulk of the student population in standard programs, and those needing help in ‘remediation.’ Naturally, those that might want to move ahead in the standard group might associate themselves with the honors, and similarly those in remediation might spend time with the broader population. Choosing your peers matters as a kid, and it also can be influential as an adult. The famous coach from Notre Dame, Lou Holtz, used to say the only difference between where you are and where you will be five years from now are the books you read and the people you meet. Networking is typically seen as one of the most important ways to plant seeds for career growth, especially as a young adult, so choosing how you spend your time and who you spend it with becomes increasingly more important as we age. From an investment standpoint, how time is spent and the choices which are made can have a dramatic impact on investment results. Let’s take a closer look at why this is the case.

There are over two hundred countries in the world, and many have stock markets. As of October 2020, there were six thousand publicly traded companies in the United States. The bond market is typically twice as large as the stock market in the United States in terms of dollar value. Between stocks and bonds there are plenty of choices to consider. Each of these asset classes has a wide variety of categories to choose from. Much depends on your circumstance and what you are trying to accomplish. The 25 year old with their first job is going to have a different perspective than a fifty year old who has held many corporate positions. The rise of the Robin Hood, Davey Day trader crowd dramatically increased enthusiasm for individual and risky stocks among individual investors, and at the same time, passive investing has never had more assets allocated to the low cost index approach. Essentially, technology has enabled investors to be able to invest in whatever asset at whatever size and in whatever form you want. In addition, it is quicker and cheaper than ever to click, click, and quickly have ownership of your prize asset, and that has been the case for many years now. I believe where you hunt to allocate capital and the system you use to evaluate those assets is what is crucially important. Spending time on an Argentinian ETF might not be the best use of time, especially if the stock market is not your prime focus. It is better to focus on a specific area of a market, and probably choose a single sector and size you want to really dig deep on. I would also eliminate areas you have no interest in before you begin your quest. In sum, your time is precious so allocate it knowing it’s considerable value.

In the markets this week, the large investment banks, Goldman Sachs and Morgan Stanley, had impressive reports with big numbers in the fixed income and asset management areas. Netflix missed the bottom line number but investors were pleased with its subscriber growth. Elsewhere in technology, Intel posted a big earnings beat but many investors till believe the company is poorly positioned relative to other semiconductor entities. The large regional banks reported on Thursday with southern power Truist posting a nearly 20% surprise. On the macroeconomic front, jobless claims came in at 900k, less than the predicted number of 935k. Probably more important is the rate at which vaccination numbers begin to improve as today, the total number of vaccinated citizens in the United States sits at less than half of what was projected (18 million versus 36 million). The uniter is projecting 100 million vaccinations in one hundred days. Investors will watch that number closely. I suspect the way government works, especially one just getting its beak wet, it will take closer to six months than three months to get to the 100 number.

]Finally, as the uniter begins his term, a crucial item to watch in the Senate is when the Democrats will begin to call for an overturn of the filibuster rule. Senate moderates hold the cards there, especially Mr. Manchin of West Virginia, long a good friend of Senator Schumber of New York. After publicly stating he will not support an overturn of the filibuster rule, Manchin comes from a heavily conservative state where flipping his position would be seen very poorly by his constituents. As always, time will tell, and we know the progressive wing (ultra liberals) is just chomping at the bit to get rid of the filibuster. On that note, I like the Packers and am rooting for the Bills this weekend, but it should be fun watching regardless of how it turns out.

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 CFA designation does not mean Y H & C Investments will outperform broad market indexes.

Analyst's Disclosure: I am/we are long GS MS INTC.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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