And That Was the Week That Was - 6/15/15 to 6/19/15

Joel Anderson |

 

The Week in Major Indices

S&P 500: +1.53%

Russell 3000: +1.58%

Russell 1000: +1.63%

Russell 2000: +2.26%

The Dow Jones Industrial Average: Find a different index to follow, they’re literally all better than this one.

HUZZAH! The Week’s Big Winners

Mega-Cap Stock: Procter & Gamble (PG) – 2.12%

Large-Cap Stock: Coty, Inc. (COTY) – 20.56%

Mid-Cap Stock: DealerTrack Technologies (TRAK) – 57.49%

Small-Cap Stock: Synergy Pharmaceuticals (SGYP) – 81.4%

ETF: Market Vectors India Small Cap (SCIF) – 4.46%

OUCH! The Week’s Big Losers

Mega-Cap Stock: Apple (AAPL) – 0.45%

Large-Cap Stock: Humana (HUM) – 4.82%

Mid-Cap  Stock: Agios Pharmaceuticals (AGIO) – 9.58%

Small-Cap Stock: Avalanche Biotechnologies ($AAVL) – 62.44%

ETF: Market Vectors ChinaAMC SME ($CNXT) – 16.64%

Top Stories of the Week

Court Rules that Intervention by Government Prevented AIG ($AIG) From Becoming Totally Worthless, Was Also Illegal

Actually, the company would have been well short of worthless. Worthless implies zero worth. AIG was headed for way lower than zero value.

Former AIG CEO Maruice R. Greenberg filed suit against the federal government some years ago, insisting that the deal in which the government bailed the company out (ultimately giving the company $182 billion) in exchange for an 80% stake in the insurer was illegal. The suit called for $40 billion in damages and prompted pretty much everyone to think “WOW, that is rich.”

As it would turn out, “this is obscenely tone deaf” is not a sufficient legal argument. On Monday, Judge Thomas C. Wheeler of the United States Court of Federal Claims ruled that Greenberg was right. The Fed did, in fact, cross the legal line when it took control of the company’s stock.

However, in what I would consider to be a pretty hilarious twist, he also ruled that Greenberg and other shareholders would receive no damages. Essentially, the judge ruled that it WAS illegal, but that it was also the only thing that prevented the company from getting wiped out entirely.

It’s All Greek to Germany

Speaking of funny, if you can’t appreciate the humor is a country as responsible as Germany being moored to a country as irresponsible as Greece by their shared currency, you should loosen up a little. Either that or you have a lot of money tied up in European sovereign debt. One of those two things.

The debt dance with Greece continued to play out all week. The Greeks are staring down bankruptcy but refusing to accept more austerity in exchange for the money they need. The European nations doing the lending aren’t interested in giving away more cash without conditions. Bankruptcy would be really bad for both sides, so each appears intent on convincing the other that they’re the more suicidal of the group.

Monday brought a hit to bonds across Europe after the IMF pulled out of talks citing a “lack of progress.” Then on Tuesday, Greek Prime Minister Alexis Tsipras accused the rest of Europe for trying to “humiliate” Greece for trying to, you know, hold them accountable for their astonishingly reckless budgeting practices in the past. Then on Wednesday, Tsipras refused to accept any more pensions cuts to secure funds after a meeting with Austrian Chancellor Werner Faymann. On Friday, Greece signed a natural gas deal with Russia while the ECB increased their emergency funding to avoid an immediate default.

Leaders will meet on Monday to take one last stab at a deal.

“As Long as No One Makes Us Treat Our Workers Like Humans, This Business Model Is Flawless!”

Uber has been flying high for a while now. Actually, I guess it would be more apt to say they were “driving high.” In part because it’s a company that relies on cars, and also because the company has long been plagued by questions of precisely what relationship it should have to its drivers.

Aside from questions of just how thoroughly vetted the drivers are, Uber has also had questions raised about whether or not it could really consider itself a “neutral technology platform” that enables drivers and customers to connect. The lack of entanglements has kept costs low and helped the company rise to its now $50 billion valuation.

Unfortunately for Uber, the California Labor Commission ruled that Uber drivers are, in fact, employees and not independent contractors. The ruling, made on behalf of a San Francisco driver, found that Uber was “involved in every aspect of the operation,” reversing a previous 2012 ruling that the drivers were independent contractors.

If Uber has to start treating drivers like employees, it raises a raft of new costs, ranging from ACA-compliant health plans to payroll taxes, and dramatically reduces the company’s valuation.

Don’t Everyone Get So Excited About the Bad News

In another round of the interest rate tango, equities investors were thrilled to hear that the economy isn’t doing so well. Fed officials announced Wednesday that they would be cutting their growth estimates, a clear sign that they would also be keeping interest rates at near-zero levels into next year.

So, with the perverse incentives inherent in our markets, stocks spiked on news that things weren’t going great.

Does This Mean Pets.Com is a “Buy” Again?

Good news for tech investors! The Nasdaq Composite Index hit an all-time intraday and closing high on Thursday of 5,143.32 and 5,132.95 respectively. That means that it has finally hit the levels it saw some 15 years ago in the midst of the heady days of the Dot-Com Bubble.

Featured on Equities.com this week…

A Look at Some of the Best Jokes About Accountants by Joel Anderson

A Look at Some of the Best Jokes About Lawyers by Ryan Bhandari

As Sam Sees It: A Strategy for Any Stage of the Economic Cycle by Sam Stovall

Pope’s Message About Climate Change Can Change the Worldby Ryan Bhandari

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AIG American International Group Inc. New 65.82 0.90 1.39 5,196,466

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