Market Wrap-Up for Nov.14 (CSCO, ANF, HD, SBUX, FB, more)

Market Wrap-Up for Nov.14 (CSCO, ANF, HD, SBUX, FB, more)


Wall Street is apparently not OK with the $1.6 trillion in tax hikes being proposed by President Obama in the latest emphasis surrounding the so-called “fiscal cliff” and all the talks that go with it. Again, this topic will be the subject of many rallies and sell-offs between now and the new year.

Looking at some of the movers in today’s tape, Abercrombie & Fitch (ANF) and Cisco Systems (CSCO) bucked the selling and pushed higher following both companies’ earnings results. Fertilizer play Mosaic (MOS) ended lower after management announced production cutbacks from lower demand. Competitor Potash Corp (POT) was also down on the news. Home improvement giant Home Depot (HD) gave back some of yesterday’s pop as some analysts believe most of the real estate rebound we have seen (depending on where you live of course) has already been priced in the shares. I would venture the storm damage and repairs needed on the east coast from Hurricane Sandy could keep a bit of the recent momentum going however. Starbucks (SBUX) made some headlines this afternoon, announcing a $620 million cash takeover of specialty tea retailer Teavana Holdings (TEA). Investors of the coffee retail giant weren’t too excited about the news as the shares fell nearly 3%. The thought could have been for Starbucks to get into the tea market without having to shell out a boatload of cash to buy a retailer that was struggling following its IPO and was trading way off its 52-week high.

Lastly, we couldn’t help but notice the unusually strong rally in shares of Facebook (FB), coming on the day nearly 800 million shares are set to be unlocked (allowing many more insiders to sell their stakes). Only on Wall Street!

Investing Through the Great Divide

Over the last couple of days of dodging headlines of ECB and their biggest economic problem child, Greece, we’re also being inundated with “Fiscal Cliff” stories. Well, add another inevitable topic we knew was on the horizon: how companies will start to embrace the certainty of the Obamacare health program.

We have already heard corporate backlash as well as small business owners (which make up a good part of the overall country’s labor force) talk about how they can not afford the changes coming. Some have even gone ahead with preemptive layoffs and changes to their payroll like forcing full-timers to consider hourly cuts to become part-timers. The media is picking up on all the stories and the reactions of course. All this coverage will stir up emotions of many different mindsets, from business owners to politicians to employees who may be directly impacted by what should have been an improvement of benefits, but may turn out to be a net loss in some people’s cases (layoffs, salary and hour reductions).

Are We Going to be Like Europe?
The Obamacare initiative has all the makings of increased government controls and jurisdiction. From an investment standpoint, this will be a new element of analysis that we will have to give a certain level of credence to.

If the road is indeed headed toward more government intervention (some will call it forced “socialism”), and using Europe as an example of how this may play out, higher unemployment may become the standard. If you look at the unemployment levels in Europe, especially focused on the younger populace (25-34 years old), the reality is stark. I must reiterate the stance that we should all be expecting the employment picture for the next decade or so to be quite brutal, regardless of the numbers the government puts forth.

Being Average Will Get You Nowhere
Doing what may be described as “average work” in today’s world only makes a worker more expendable. Unless you provide an element that others lack (personality can be one), you’ll eventually find yourself on the chopping block many times, likely to be replaced by a less costly replacement.

I bring the subject of career up often because it is the foundation of where our investment dollars come from. Despite the governmental jobs numbers getting better, I believe there are wholesale changes happening in today’s workforce, and with that I see job opportunities to make big money dwindling for the masses — unless you acquire and develop a special skill set that is needed in today’s world. With declining education-based scores in the U.S., many of our younger generations may be on the outside looking in when it comes to global opportunities if there is not enough emphasis placed on schoolwork and education. This needs to come from the home front as much as from anywhere else.

From an investing perspective, you cannot ignore the changes taking place today, especially if you’re looking to achieve great investment results from your dividend holdings. Talking to “regular” folks each and every day can remind you that there are systemic fractures in different areas.

Financial Incompetence is the Norm in Government
The damage from Hurricane Sandy on the east coast highlighted how poorly some power companies have been preparing for breakdowns in their systems. Rather than putting money into upgrading systems that have been antiquated for decades in some cases, money lined the pockets of those running the companies. In some cases, these were state-appointed positions, showing us yet another reason that most forms of governmental controls have major gaps and little to no accountability until problems are front and center.

We all know the games played in municipalities all around the country when it comes to pensions and wages, because it hits us every year in the pocket with rising property taxes and other fees. Reuters just ran a story about the town of San Bernadino, California, where analysts found almost 75 percent of the city’s general fund is now spent solely on the police and fire departments, most of it on wages and pension costs. And by the way, the San Bernadino filed for bankruptcy back in August if you hadn’t heard.

Yep, there are many fires that still need to be put out (pun intended). You see, it’s not really about one event ever being the main factor. There are many smaller factors that when added up paint a picture of much-needed solutions of the permanent kind, not the “extend and pretend” methodology we have all grown accustomed to.

Investing Still in Focus
Besides our global macro views, we still have our regular job to do, and that is to find the areas of the market that still makes sense for new capital, all the while hoping to avoid investment traps and what may fool some as “value” opportunities. As always, we’ll sound the warning bell to Premium subscribers whenever necessary.

Thanks for reading everybody. I’ll see you tomorrow!

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