Mike Lipper’s Monday Morning Musings
Failed Expectations
Do Details Count? Zig-Zag Flips
Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018
Was this the week that was?
Last week’s blog anticipated a ruling by the US Supreme
Court on the Presidential use of Executive Orders to impose tariffs on
countries and products. It was further expected that the President would use
substitute measures to accomplish similar goals if he loses the Supreme Court case.
Additionally, there was a belief that the government would be forced to repay the
existing tariffs to the American people (voters). The new tariffs would
probably cause some changes by foreign nations. None of this happened.
Instead, the major topic of conversation at the World
Economic Forum at Davos was Greenland. Discussions moved at lightening or Trump
speed from a military occupation to a not fully disclosed peaceful agreement
with NATO forces by the end of the week. The importance of these dramatic
changes reminds us of what may be topic one in developing future investment
strategies. All of this brief history shows how wrong we can be. What we missed
was the significant price level change that occurred this week.
Critical Price Changes
Starting with the least followed ECRI industrial price index,
which normally moves ploddingly. The index rose to 126.28 from the prior week’s
120.49. The jump raised the year-over-year gain to 6.58%, which is greater than
the various inflation measures the Fed and many others use. I would not be
surprised to see industrial buyers of products add this amount to their resale prices,
after adding an insurance amount to protect their profits against further
prices increases.
One explanation of ECRI prices can be found in the weekly
price chart in the weekend Wall Street Journal, which showed Natural Gas rising
+70.0% and Silver +14.57% for the week. Part of these increases could be for
increased use of these items in the normal course of business. However, I
suspect some of the increased demand comes from trading and/or gambling interests,
either on the long side or from covering short positions. The importance of the
last sentence is that the size of the trading and gambling sectors is growing,
and I believe it’s already quite large.
The third price increase impacts all of us in our daily
purchase of goods and services. It is the value of the dollar. On Friday the
16th of January the US dollar index was 99.395, one week later it was 97.599.
The President has threatened foreign countries if they sell US assets!! (I
personally believe this won’t happen, but it shows a sensitivity to the value
of the dollar, even though Trump and Xi have both advocated for a lower value of
their currencies as mercantilists.)
Warning
I have already indicated how wrong I can be. Please be
careful in developing your own investment strategy and make changes slowly, not
abruptly.
Did you miss my blog last week? Click here to read.
Mike
Lipper's Blog: Is This The Week That Ends Instability? - Weekly Blog # 924
Mike
Lipper's Blog: How Much Longer Can We Avoid Thinking About the Long-Term? -
Weekly Blog # 923 Mike
Lipper's Blog: Data May Be Signaling Change - Weekly Blog # 922
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