The lack of money is the root of all evil

-Mark Twain

Not only is the lack of money a great source of evil and desperation, but it’s how great potential never evolves or dies on the vine.  In the last couple of weeks, we’ve witnessed much of that in the political arena with the departure of Rick Perry and Scott Walker.

Two extremely successful governors at one time or another were projected to have the best chance of moving on to the White House.  They had the track record and the exposure to hit it big.  The success of Texas, beyond oil and the fighting spirit of Walker against several recalls didn’t give them the right stuff.

There were other forces in their way, including the mood of the electorate and the more compelling rivals.  In the business world, it’s called competition.

Then, there’s the demise of Quirky, a –formerly- super hot start-up in New York City that proclaimed to be the premier invention lab.  The company vetted thousands of inventions each week from its community of more than one million people.  It had a cool twist on crowd sourcing and it was on its way to becoming a mega-business.  The company ran out of money like Perry and Walker.  It’s interesting because the company had already raised $169 million bucks from smart investors and business partners.

• A Series $6m
• B Series $16m
• C series $68m, including a big chunk from Andreessen
• D Series $79m, including $30m from GE, which planned to develop and sell breakthrough products

I’m not sure how Quirky even got to unicorn status of a one-billion-dollar valuation, but it’s the kind of private sector letdown that ripples into the public markets.  Coming into 2015, no one expected that the company would have to file for bankruptcy protection.  Of course, the company was so hot; raising more money seemed like a slam-dunk.  It’s a dangerous assumption for political candidates, businesses, and investors.

Killing Unicorns

During the detention in the Forbidden Forest, Harry Potter asked if a werewolf could be killing the unicorns; Hagrid told him they’re not fast enough.

Well, Harry Potter should have known that it’s not about speed, as slow but determined bureaucrats and socialists are stalking unicorns and are ready to pounce for the kill.  Stock market investors should be thrilled Uber isn’t publicly traded yet or stocks would have been a lot lower.  That’s because the most valuable unicorn of them all is under constant fire, taking hits as it tries to conquer the world.

The litigation in California might turn all Uber drivers into employees, while France continues to move ahead with criminal charges.  I am hoping.

Ground Level Capitalism

Even as the stock market continues to struggle, there are positive signs that the economy is still gearing up for greater moments as measured by the pace of private sector mergers and acquisitions.

Deal count in the past week according to Berkery Noyes:

• 7 Education
• 8 Finance
• 4 Healthcare
• 4 Entertainment
• 13 Media
• 25 Software
• 9 Online and Mobile
• 6 IT Consulting
• 5 Misc.

Keep in mind that these small deals (and some really aren’t that small) are part of the chain that cranks the American economy.  There is little press on these deals and businesses or the young lady who will have a breakthrough in her garage today; as long as this part of the nation continues to grind along, we are going to be fine.  In fact, coupled with the fracking miracle, the small and mid-sized businesses have kept this whole thing afloat.

Managing Portfolio

I am always stressing that investors should have a certain amount of cash to put to work.  Unlike those Wall Street firms that assume or act as though each account is a bottomless pit of cash, I get that it’s hard to do so in real life.  The challenge is taking losses when tolerable or riding out paper losses in names unjustly pressured.  Of course, I occasionally get caught flat-footed as with the crash in oil.  Be that as it may, my goal now is to make sure investors are positioned to make a lot of money with the market rebounds.

Make sure to discuss your strategy in detail with your rep.  If you don’t have a rep, send me an email.

The Market

Until late July, the stock market was trading in its tightest range in history before the bottom fell out.  Now, there are daily gyrations that frustrate and scare investors.  Yet since the flash crash, the market has essentially returned to a narrow trading.  For the year, the Dow is only off 8.3%, although it’s been down 10.0% in the last three months.

Yesterday, buyers materialized late into the session to nibble, but most are keeping powder-dry.  On the upside, maintaining 16,400 remains impossible, but below 16,200 continues to be a spot where the buy- on- dips crowd makes its move.

Today the market might open unchanged and then possible hang on for dear life.  Overnight China laid another egg with its PMI reading of 47.0 its lowest in 6.5 years and at one point overnight equity future were getting hammered.  Its the perfect set up however to test the sidelines...see if any money can be seduced either on a pullback or simply out the gate from oversold conditions.

With Janet Yellen speaking tomorrow after the bell the big boys may keep their powder dry but if one were to make investments today it would have to be on the assumption that Yellen will suggest a rate hike will happen this year and the US economy is healthy and ready to shift into a higher gear.

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