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Equities Post Solid Gaines On Reopening Hopes!

May 29, 2021 5:34 PM ET
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  • Gotcha is prevalent in primary school, finance, and politics.
  • Substantive issues take a backseat to sound bites.
  • Leon Cooperman was right to respectfully decline an appearance before Congress.

I'm ready for the 'gotcha' questions and they're already starting to come... - Author: Herman Cain

Anyone who has attended or observed small kids at primary school knows they have a great deal of energy. As a teacher, you always knew that recess was your students favorite time of the day. One of the most popular activities during recess was the game of hide and go seek. Kids always enjoyed hiding from their friends, and when they are discovered, the kids love to yell, “Gotcha!” In the equity world, one of the most important items to pay attention to are quarterly earnings reports and the subsequent conference calls after the release. These meetings usually follow a similar pattern in that the company management teams offer prepared remarks about the business operations over the last quarter. If there are any announced deals or corporate transactions they are discussed. After those are concluded, sell sand buy side representatives ask questions about the outlook over the immediate time frame. As a veteran of the financial markets, I have listened to hundreds, maybe thousands of these calls. Like school kids playing hide and seek, analysts also play their game of ‘Gotcha.’ The pattern involves asking a question which is designed to make a management team uncomfortable about a very small item which could make the company look bad. After all, making an executive look unprepared can have a dramatic affect on the perception of the organization. If one were betting against the company’s stock, well, you get my drift. Experienced and well regarded executives seldom lose their cool over these kinds of questions. In fact, they often answer the query in a way which puts the issue in it’s proper perspective by showing how trivial it is relative to what is important in the business. ‘Gotcha’ is not only a part of primary school education and quarterly conference calls. As you might suspect, the place where ‘Gotcha’ is most prevalent is in the unseemly domain of politics and journalism. On that note, let us turn to last week’s Congressional appearance of the largest banking CEO’s in the United States.

You see, the main event for the media was the questioning of Mr. Dimon (Chase), Mr. Moynahan (Bank of America), Mrs. Fraser (Citigroup), and others by the blowhards in the Senate. Naturally, the home run ‘Gotcha’ moment was Elizabeth Warren of Massachusetts asking Jamie Dimon if he would refund all the overdraft fees during the Covid Crisis. It is unfortunate for the American public that substantive issues are ignored versus the ‘Gotcha’ type video moments and sound bites which politicians play to the crowd for. The constituencies of Mrs. Warren and other Democratic Senators would probably be far more concerned with the state of their job prospects, initiatives on housing availability, retirement funding, school attendance, higher education funding, military preparedness, capital markets availability and competitiveness relative to the rest of the world, and a whole bunch of others which could really matter in their lives. Instead, it’s make the big bad CEO’s look as bad as you can. Never mind that these organizations have been investing hundreds of millions of dollars all across the country in an effort to improve society. Yes, the CEO’s bring that up, and they should. I should also note Mr. Dimon’s attitude towards Mrs. Warren and her question. His answer was, ‘no he would not refund the fees.’ Many saw his answer as callous and uncaring and playing right into the hands of Senator Warren. What these individuals fail to recognize is Jamie Dimon could care less about Senator Warren and her efforts to make him look bad. His constituency is the investment world, and on that score, as of this moment, nobody rides higher or is more well thought of. Another point to consider is how Leon Cooperman, the ex-Goldman Sachs's billionaire investor, handled an invitation from the committee by Senator Warren. He respectfully declined because he believed the invitation was just offered as an opportunity to make him look bad, just as Warren had done with Mr. Dimon. The ‘Gotcha’ strategy has been modus operandi of the attention seeking politicians for a long time and I believe people are pretty sick of it. I for one know I am, but you probably knew that already.

Elsewhere in the financial markets, earnings season has wound down with the most high profile reports coming from Zscaler, Intuit, Nvidia, Okta, Costco, and Salesforce. Most impressed, but the unexpected winner was Dick’s Sporting Goods, which had a big earnings surprise. It has long been a quality company. On that note, I hope you have a great Memorial Day weekend and enjoy watching the kids in the pool. One or two might even say, “Gotcha.”

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 JPM BAC C.

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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