Mike Lipper’s Monday Morning Musings
Data May Be Signaling Change
Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018
Preface
I came to my desk Saturday morning and was prepared to begin
writing this week’s blog. My thought pattern suggested we were quite possibly in
a pivot period, with market leadership shifting to foreign priced securities
priced substantially below “AI” securities. Then I paid attention to Bloomberg
television, which is on 24 hours a day. I was mesmerized by the news on the
raid on Caracas, the capital of Venezuela. The daring and skills involved were impressive
and the growing implications are disturbing.
Normally, I try to view everything from a global perspective,
as I believe almost all we do has roots in the global world. However, for this
week’s blog I am not going to deal with the longer-term implications of the
successful raid and capture of indicted criminals. It is too early to tell. I
expect these events will create global shadows which I will address in future
blogs. The world listens but does not necessarily follow the U.S
Pivoting to the Data
Last Two Weeks of 2025
Each of the last two trading weeks, including January 2nd,
have had only four trading days of relatively light trading volume. A disproportionate
number of trades were either tax motivated, or position statement driven.
Nevertheless, they share traits with many earlier days of December’s trading,
with more stocks sold on minus ticks than rising prices. It is worth noting
that the popular stock market indices generally rose a small amount. This
highlights the dichotomy in the market between what many believe are retail
driven indices and a broader, slower-moving institutional market. I am guessing
many retirement and other long-term institutions were relatively quiet in the
last part of 2025.
This institutional hesitation mirrors the large
corporations’ labor practices, where many companies spend considerable amounts training
new employees, which they consider assets. They are therefore reluctant to fire
many employees and are slow to hire new workers. Some believe in the “promise
of “AI”, where in the not-too-distant future companies will need less employees
to produce the same or more sales. Consequently, many employers are not hiring
new employees, other than critical replacements.
Typically, corporations begin investing new capital into
their retirement plans in January, be it pension or 401-k accounts. The
institutional advisory community has counted on this flow in the past. My
guess, it may be smaller this year. We will see.
Prices and Inflation
There were two lessons on prices in the Weekend Edition of
The Wall Street Journal, which measures 72 traded items each week. Only 24 prices
or one-third were up, and 48 prices were down. Are we peaking? The second lesson
from these data is that markets deal with both extreme momentary shortages and slower
moving prices, which are more common. One analytical technique I use to
differentiate them is to examine the top and bottom two prices. On the upside
is Comex Silver +142.34% and Platinum +127.57%. On the downside are Orange
Juice -58.75% and Cocoa -48.05%. I believe these four are special imbalances, as
the third extreme prices are the KOSPI composite +75.63% and the Argentine Peso
-28.96%. The gaps between the extremes and third ranking are large. Much smaller
but concerning nevertheless is the one-week industrial prices gain of +1.28% in
the ECRI weekly index, suggesting inflation is not under control.
The Key Link
If there were a single suggestion of a world view of the US economy, it would be the value of the US dollar. The Financial Times headline “Dollar Is Wild Card in 2026”. This UK publication, now owned by the Japanese newspaper/wire service giant, is a traditional critic of the US. The value of the dollar is dependent on two factors, the value of the other major currencies and the price of the dollar. In 2025, numerous foreign markets have for the first time in many years appreciated more than the US. Currencies, like securities, are priced at their perceived future value. Not only is the US government spending more than it is earning through taxes and tariffs, but it’s also expected by many to continue to do so in the future. (Even if tariffs bring in a lot of money, part of the receipts are expected to be paid to citizens instead of being used to pay our debts.) In addition, both President Trump and Chairman Yi have stated they would both like their currencies to decline. Some weakness in the dollar may have been caused by individual and institutional investors selling dollars to buy foreign securities.
What to Do?
Examine whether it is prudent to have 100% of your long-term
investment money in securities that are traded primarily in dollars? Is it time
to pivot?
Share your thoughts, please.
Did you miss my blog last week? Click here to read.
Mike
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