A Good Time to Sell? - Weekly Blog # 910

 

 

 

Mike Lipper’s Monday Morning Musings

 

A Good Time to Sell?

 

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018

 

 Selling is More Important

When an investor, distinct from a trader, asks me if they should sell some portion or all of their holdings, I first try to determine the critical time period in judging the results of the action. If one is persuaded by media voices the answer will usually be tomorrow or at the end of the calendar year. For me, it is when the money is expected to be needed. For example, for my newborn great grandchildren's retirement or the replacement of the new university dorm, it could be a 100-years. Another matrix could be the future low price point needed to protect future funding of a desired goal.

 

Regarding a future low price point, it is important to recognize that prices move in cycles. The important cycles can be labeled as seasonal, cyclical, secular, and structural. It is how I think of the latter part of last week’s drop in prices, where what I follow fell -15% to gains of +7%. To conserve your time and the blog's space I will comment on the year-to-date period for those impressed with media voices and include some other screens as well.

 

The first thing that hit me was the largest average gain of +15.94% in non-leveraged, diversified large growth mutual funds. These gains were driven by the biggest positions in technology stocks. However, they missed out by focusing on securities registered with the Securities Exchange Commission. After many years of SEC registered stocks performing very well, there were some foreign markets that generated much better performance multiples. The leading countries were Ghana +130.25%, Cyprus +94.75%, Luxembourg +74.8%, Greece +71.45%, Columbia +70.05%, Nigeria +65.1%, Korea +61.1%, South Africa +48.02%, China +32.85% and Chile +31.02%. Weekly Barron's performance charts showing 14 European and 7 Asian countries had 7 Asian and 4 European indices gaining. (As an analyst that has followed non-US stocks and invested in some, I believe this is a good time to examine these opportunities.)

 

Most Analysts Focus on Rising Stocks

I glanced at those stock prices not doing so well. For example, the Dow Jones Industrials (DJIA) and Dow Jones Transportation (DJTA) stocks fell -2.739 and -4.88% respectively for the week. Perhaps more importantly, their year-to-date performance results were +6.90% and -5.21% respectively. (This suggests the US goods economy is not doing well. Tariffs could be a problem. Freight movement is down for both the rail and truck business and may forecast Halloween and Christmas sales being behind earlier expectations.)

 

Down Prices = Opportunities

Three industry sectors are showing small declines on a year-to-date basis: Banks -4.26%, Insurance -1.64% and small companies -1.1%. Restrictions on all companies are the same, but small companies may be impacted more due to their staff size. To the extent the current administration reduces some of the regulatory overhead, it cou1d restore a competitive advantage to smaller companies. However, many restrictions on smaller financial and insurance companies appear to make it easier for new entrants.

 

AI, An Unrecognized National Problem

Some are beginning to comment on the absence of large profits from Artificial Intelligence companies due to lack of public discovery of relevant financial disclosure, so I will not. At a recent meeting hosted by the London Stock Exchange Group, one of their headline speakers noted that the challenge for the AI industry was to produce "more with less". It is well recognized that AI is taking over an unidentified number of job functions, reducing the need for human labor. Great! Where are these laid off people going to get jobs anywhere near similar wages? This could be a concern for future Administrations. 

 

The 4th Activist President

Just like Andrew Jackson and the two Roosevelts, President Trump is trying to solve various national problems by changing how they are handled. Some of these attempts will survive the Courts. What I am not seeing is how the restructuring of the economy will work. Looking at the aftereffects of prior activist Presidents, I suspect it will materially change the outlook for investments, something people are not currently focusing on.

 

I would like to know if anyone has any thoughts on what restructuring will mean to their investment orientation.

  

 

 

Did you miss my blog last week? Click here to read.

Mike Lipper's Blog: Tactical Headlines Show Strategic Clues - Weekly Blog # 908

Mike Lipper's Blog: Anticipation Pays; Deliveries May Not - Weekly Blog # 907

Mike Lipper's Blog: Selected and Casual Road Notes - Weekly Blog # 906

 

 

Did someone forward you this blog?

To receive Mike Lipper’s Blog each Monday morning, please subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2024

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.