Mike Lipper’s Monday Morning Musings
Misperceptions: Contrarian & Other
Viewpoints: Majority vs Minority
Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018
Every day through the popular press, pundits in or out of
political positions express views that our current information will lead to a
happy conclusion. Occasionally it will happen and contrarians like me
acknowledge that it can and may happen, but the odds it will happen are only 30%
to 50%, like the odds a favorite horse winning at the racetrack. By definition,
the reward for winning will be the lowest of all horses in the competition. Contrarians
can select a different horse with potentially higher rewards by choosing to wager
against the majority.
Currently, it appears to this contrarian that it’s a
particularly good time to take a contrary view of the intermediate period of the
US stock market. The primary reason for this view is the bullish feelings presented
in the popular press with such shallow thinking.
The US Stock Market is Going Up
The weekend press is full of similar statements because the
Standard & Poor’s 500 Index (S&P 500) rose a small amount on Thursday.
(This gain was given back on Friday when 390 S&P 500 issues declined. More
significantly for the week, 54% of the stocks declined on both the NYSE and the
NASDAQ.)
US Tariffs Announced
The President or White House Personnel announced import duty
rates with a limited number of the countries, which in theory would slow the
growth of the expected rising deficit. (The higher tariffs likely to be charged
on exports from these countries is not known for an obvious reason.) The
President is well versed on restrictions imposed on US exports by each trading
partner, which are labeled as “non-tariff trade barriers”. These include the
following list:
Administrative & bureaucratic border delays
Censorship
Foreign exchange & controls
Import deposits
Capital movement regulations
Licenses
Localization requirements
Standards
Quotas
“Voluntary” export restraints
I don’t know of any summing up of the cost of the above
barriers, or others not identified. I have seen knowledgeable estimates that are
roughly twice the size of the tariffs. President Trump started the whole
discussion about tariffs to get high-level meetings with some of the “right”
people around the negotiating table in order to deal with the “NTB” issues imposed
by various individual countries. As this has not yet happened, I wonder if we have seen a final answer to
both the tariff and non-tariff trade barrier issues.
Markets Are Not Waiting
Businesses and investors must execute global trades and make
investment decisions every day in the absence of firm conclusions to these and
other questions. The US dollar relative to other principal currencies has fallen
about 12% in 2025, with more expected. This week, Barron’s quoted a participant
saying, “The days of the world letting America live beyond its means are rapidly
coming to an end.”
The Wall Street Journal (WSJ) publishes the price movements
of various securities indices and commodity prices each Saturday. This current
week 61% of the prices declined. It appears many purchasers of goods and
services are not demonstrating an inability to act but are instead unwilling to
transact under today’s conditions and outlook.
Please let me know what you are thinking.
PS
Some of our subscribers may have known my brother Arthur, who
passed away peacefully Sunday afternoon. He led a long productive life helping many
people on both coasts and two oceans.
Did you miss my blog last week? Click here to read.
Mike
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