Believe it or not, the poor start to 2014 is a thing of the past. The S&P 500 (SPX) closed above its December 31, 2013 closing price and set an all-time high in the process. Just two days ago, we were supposedly destined to a massive correction. The best laid plans of bears were thwarted again. The Dow Jones Industrials (DJI) still has some catching up to do. With the exception of the media and individual investors, that index has importance only in nostalgia.
Bank of America (BAC) reported better than expected earnings, as I expected and rallied over 2%. Today’s Fantastic Four of financial company earnings – Citigroup (C ), American Express (AXP), Blackrock (BLK) and Goldman Sachs (GS) are likely to put the cherry on top of that sector’s fourth quarter results.
We should see, especially with the Goldman Sachs report, how relevant the Volker Rule is in practice. In my opinion, we will find out that the Volker Rule which was intended to root out over speculation and investment industry conflicts will not achieve its intended goals. Rather, the financial industry will figure out how to benefit from the rule and investors will pay the price with declining liquidity, widening spreads and increased costs.
For those of you with nostalgia for the 1990s, Intel (INTC) will also report its results. Furthermore, United Health’s (UNH) results might give us some commercial data on how Obamacare enrollments are shaping up. In addition, the weekly unemployment claims data will also hit the market before the market opens.
The key to investing is to start positions small and let them prove your investment thesis. If you are proven correct, you add to positions. If not, your losses are small and those positions can be used to generate cash for the next idea. That investment strategy will help to maximize profits and minimize risk., With that philosophy in mind, over the course of the last two days, I cut a small position in Gamestop (GME) which was in the red and commenced a new position. My latest addition provides exposure to Europe using the Wisdom Tree Europe Small Cap ETF (DFE) and the Invesco European Growth Fund (AEDCX).
Bloomberg’s Betty Liu has just published a new book, Work Smarts. In Work Smarts, Betty helps readers learn to get to the top by distilling the wisdom of some of the most prominent CEOs in the country. I look forward to getting my copy. As it turns out, like yours truly, Betty lives in Millburn, NJ and graduated from the University of Pennsylvania, so she comes from good stock (pun intended).
Today, I am expecting a positive market buoyed by strong financial results. Tonight I have plans to catch The Wolf of Wall Street replete with F-bombs for 179 minutes. We will have to get the refill sized popcorn. So far, the movie has been a winner for Viacom’s (VIA) Paramount Pictures.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long BAC, DFE and AEDCX — although positions can change at any time.
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