Sunday, September 10, 2017

TLH Market Review - 9/10/17

Well it doesn't seem a couple of hurricanes, missiles, and a Federal Reserve Board missing more than half it's members can slow down the markets.  Well maybe just a little bit.  For our Labor Day shortened week the S&P 500 fell a whopping 8.92 points. That's hardly a heartbeat at this level. Of course that's not to say everything is going great.


There have been chinks in this recovery's armor for years.  In fact considering this recovery is exactly 8 years and 6 months old exactly as I write this, it's been well observed that just about everyone hates this bull market.  During that time we've had quite a few rough patches, or should I say corrections, yet when you include dividends the S&P 500 is up north of 330%. Although let's not forget we are quickly approaching the 30 year anniversary of Black Monday.  Not sure what that is? Just Google(GOOGL) it!

One of the main chinks in this recovery's armor has been the lackluster job growth.  Yeah everyone complains about it of course, but in August the economy looks to have added 146k new jobs.  The number will be revised a few times, but jobs are still jobs no matter how low the number is.

The second chink seems to be the Fed.  They've been the whipping boy for just about everything.  In reality they have a tough job.  They are stuck between a rock and hard place, with Congress being both the rock, and a hard place.  They not only have to juggle overseeing our countries banks, and many other financial markets, but they also get the courtesy of trying to squeeze water out of the rock we call Congress which does nothing to make their job easier.  Maybe that's why we now have 4 vacancies on the Fed's Board.

I think the Fed may have gotten a little bit ahead of itself when they called for 3 hikes this year, and in 2018.  I don't think they expected job growth to slowdown to the point it has.  When you're trying to reduce your balance sheet at the same time which is deflationary to the economy, you really are walking on a tight rope over a canyon. In total the Fed has some $4.4 trillion in assets laying on it's balance sheet.  Add in the ECB's $4.2 trillion and you can see why there is some concern.

Why the Fed's job is to foster maximum employment, and price stability while only having partial control over the monetary system is beyond me.  Congress is the one that needs to step up it's game for employment. Instead of passing more rules, for once they should consider removing all the old ones already around.  It's no secret that compliance costs for all the current rules are a big factor for private sector employment.

Enough lamenting for now. Onto the portfolio

This week we had big news, well big news considering there wasn't much else going, out of MasterCard(MA).  The company released an updated financial outlook this week that got a lot of investors excited. The company told investors to expect net revenues to increase for the remainder of 2017 from the "low-double digits" to "high end of low-double digits". Furthermore the company exacts their Earnings Per Share CAGR to hit 20% until 2018, which is up from a previous "mid-teens" projection.  That was good enough to give the stock a 4% boost on the news to a new all time high at $138.64.  YTD the stock is up a solid 33%.

Of course shares of MasterCards peers also perked up a bit on the news. YTD competitors, and fellow portfolio members, Visa(V) & PayPal(PYPL) are up 34% and 54% respectively. The payment sector has been a great place to be in this year. 

Another item to look forward to is the NFL season starts in full swing Sunday.  Make sure to get your fantasy lineups set for that championship run. After that next week is kind of light on the economic front, but that doesn't mean we can take a break. With most trading desks back to full strength after their summer break it's time for the real action to begin. 

Also let's hope for the best for all our friends and family in Florida as Hurricane Irma comes through, while not forgetting about the struggles of those in Houston. 

Take care everyone

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