Mike Lipper’s Monday Morning Musings
SPORTS FANS SELECT CABINET
&
OTHER PROBLEMS
Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018
Go to the Arenas
As we view many contests and competitions, it is clear to us
the mistakes combatants are making. Apparently, the President elect is choosing
his cabinet based on the following three characteristics:
- Personal loyalty to Trump.
- Complaints about what the government does or does not do.
- No experience in running a large federal organization.
I remember from my sports days, both in secondary school and
university competitions, various screams were heard about the details of the
front-line games or the details of a move setting up some subsequent play. All we
knew was that most of the players were inexperienced in their announced
positions. They may have been fortunate in that many relied on what they were
taught in school in those days. For example, they could have taught us that stock
prices could approximate the value of a stock, or a sound reaction to an event.
Today, 80% of the volume of the S&P 500 is passive and
10 stocks make up 39% of its market-cap. One stock is bigger than every other
national stock exchange, except Japan.
Bonds Speak Differently
High grade US Treasuries bond yields have risen 124 basis
points in a year, sending their prices down. However, the prices of medium-grade
bonds have been flat over the same period. This does not speak to the quality
of US Treasuries but instead reflects the demand for them. Time value (the bond’s
maturity) used to be a critical element of the bond market. Today, only 31
basis points of yield separates the 2-year bond from the 30-year bond. (This
may suggest that due to low yields, very few of the current owners of 30-year bonds
are expected to own them for a long time.)
Caution: Keep Data and Date Tied
The Saturday weekly Wall Street Journal roster of stock
indexes, currencies, commodities, and ETFs showed gains for 74% of them. The American
Association of Individual Investors (AAII) showed an increase in bearish
readings, reducing the spread between bulls and bears to 8%, from 21.5% the
prior week. This is a dramatic change. It could reflect a shift in the sample
survey makeup. Alternatively, because the AAII survey was taken early in the
week it reflected the views of the prior week. Overall, this week’s data was
positive every day, suggesting “Black Friday” sales enticed customers for at
least two weeks. That is my preferred guess.
What do you think?
Happy Thanksgiving, particularly those and their families serving
far from home.
Did you miss my blog last week? Click here to read.
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