Now that the government is back in business and we have ever more debt to payback (thank you Washington), it’s time to focus on company specific matters until the next showdown sometime early next year. In the week just passed, the S&P 500 reached a record high on Friday and the NASDAQ hit its highest point since the tech bubble of 2000. The Dow Jones Industrial Average was held back by heavily weighted IBM and Goldman Sachs on disappointing earnings news, but it too gained for the week by 1%. The Justice Department and JPMorgan Chase have tentatively agreed to a deal whereby the big bank will pay a fine of $13 billion (no that’s not a typo) to settle many of the investigations into mortgage bonds that JPM – and the banks it bought during the financial crisis – sold to investors. If you remember, Chase was asked to bail out Washington Mutual and Bear Stearns from defaulting, thereby alleviating the crisis and avoiding a full-blown catastrophe. Now it is paying the price. Hopefully the next time the Treasury needs JPMorgan’s help, it will look the other way.
Looking ahead toward this week’s earnings, we will get reports from McDonald’s on Monday, followed by DuPont and Kimberly-Clark on Tuesday. Later in the week we will hear from Colgate-Palmolive, Dow Chemical, 3M Co. and United Parcel Service. All are expected to best last year’s third quarter earnings’ results, but revenues and guidance will more likely direct the stock prices.
As thebuttonwoodproject begins in fourth year on Monday, there have been some winners and losers in the candidates I posted for consideration and some premature sales. But on balance there have been more of the former with a few laggards and negatives. But that is to be expected and why diversification is so important. In the words of Peter Lynch: “In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”