Sunday, October 25, 2026

Turning Point? - Weekly Blog # 964

 

 

Mike Lipper’s Monday Morning Musings

 

Turning Point?

 

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

            

 

 

The Way We Think

Our musings are essentially focused on the development of our thinking regarding the future direction of equity investing. Hopefully, this gives an early glimpse of the future, with the end-product being advice on whether to buy or sell stocks. To accomplish this result as an equity analyst I look for clues in the uncertain worlds of commodities, economies and global politics, particularly when they appear to be out of balance.


Too Much Good and Bad

One age-old characteristic is the excess of one force pushing other elements out of normal balance. Shortages and excess productive overcapacity create imbalances that cause market prices to dramatically move over time. Usually, one looks for shortages that drive market prices. Today, I believe we should look at the impact of a factor that is distorting normal balances too much.

 

Debt is the most out of balance concern in the world, particularly in the US. There is a record peace-time deficit and increased public investment in private debt, which has historically been borrowed by governments, universities, charities, businesses, and families.

 

With so much debt, debtors are being forced to raise interest rates to compete for sources of funding, increasing the size of their debt service payments. While this is bad for society, it is not the worst problem. What is much worse is the quality of debt being offered to those who are increasingly less schooled in debt management. A factor likely to lead to sudden default and/or late payments. When these problems come home to roost lenders will be short of the cash needed to meet their own needs.

 

The Crux of the Debt Problem

The critical issue is the borrower’s words proving to be inaccurate, either through dishonesty or naiveite. The borrower’s naiveite is often accompanied by the lender’s naiveite. Shouldn’t the lender be more careful with a borrower who does not have a long history of repayment, or a borrower counting on cyclical cash flow patterns being higher than expected tax payments or debt repayments.

 

I am not suggesting borrowers are totally naïve or impractical. We are in the 8 days of a bitterly fought election campaign, and politicians and media pundits don’t have pristine records forecasting payments and repayments. Market participants are somewhat aware of the problem and are demanding higher interest rates. Are they at the right level?

 

Are There Other Problems?

Investor actions are sending out warning signals. For the last two weeks, many days have seen more shares sold on down prices than up. On Friday, the NASDAQ Composite Index, home of most of the “AI” players, has pierced the 2600 support level it had been hugging. This was anticipated by the American Association of Individual Investors (AAII) with their declining outlook for the next six months.

 

These concerns are all classical market worries. However, there is a new concern that may be quite appropriate. The top economist for Apollo believes that “AI” has not deliver profits beyond the “AI” sector itself. (I wonder how reliable the forecasts of contracted customer revenue for new data centers will be. Will they produce sufficient profits to meet the cash flow needs of the centers and their customers?)

 

Now is the Time to Think About Market Gains

Market declines create opportunities, in some cases large ones. (Warning, Berkshire Hathaway is the largest stock in many of our client and personal portfolios. Consequently, you should be cautious in believing this forward-looking analysis, which could be wrong or take too long.)

 

Warren Buffett and Charley Munger assembled the largest collection of private and publicly traded companies. For the most part they picked well, but some of their investments were mediocre or worse. With new CEO Greg Able, the firm is gradually changing. He noted that some of their independent investments can profitably establish mutually beneficial links. To aid in these efforts he has installed a few executives to build alliances in anticipation of mammoth-sized payoffs in the future.

 

I see Berkshire undertaking a major housing effort that will build a series of differently priced housing communities supported by their own mortgage companies and a large real estate broker. The company will own one of the largest public utility groups, which can utilize nuclear power. Their railroad will benefit from efficient distribution of increased exports and imports. Foreign investments will grow and will be a good hedge against the value of the dollar. Finally, their stock portfolio is likely to benefit from their new investments and their companies in the financial sector, which looks like a sector that will undergo lots of change in the coming years.

 

As usual I appeal to our subscribers to teach me where I am wrong, I am willing to learn.

 

 

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

Mike Lipper's Blog: Penalty for Using the Wrong Indicators - Weekly Blog # 963

Mike Lipper's Blog: Headlines Are for Those Who Don’t Use Their Heads - Weekly Blog # 962

Mike Lipper's Blog: Are Changes Indicative? - Weekly Blog # 961

 

 

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Copyright © 2008 – 2026

A. Michael Lipper, CFA

 

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Contact author for limited redistribution permission.

 

Sunday, October 18, 2026

Penalty for Using the Wrong Indicators - Weekly Blog # 963

 

 

Mike Lipper’s Monday Morning Musings

 

Penalty for Using the Wrong Indicators

 

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

            

 

 

Lessons from History

Louis XIV of France reigned from 1643 to 1715. Examine the “Sun King” and the dramatic changes wrought on France one hundred years after his death:

  • He built the Palace of Versailles and commanded all nobles to live there. Being away from their ancestral homes and lands weakened their political strength and direct control of their lands.
  • He built a very expensive Palace with monuments to himself.
  • He moved the government of the country to the suburbs of Paris, which led to great difficulty in collecting taxes from Paris to pay for his frequent and expensive wars.
  • The separation of the tax base from its expensive ruler was an important contributor to the French Revolution and ultimately Napoleon, who also conducted very expensive wars.

 

Hopefully; the US won’t follow a similar pattern.

 

Which May Be the Wrong Indicators?

Evidently, based on government numbers produced by understaffed personnel, few people in Washington DC believe the US economy is healthy and growing. (We have been cutting governmental research staff for several generations.) Economic expansion is only seen in “AI”, which is in part driven by government funding of wars and medical related expenditures. These expenditures are in part caused by faulty schooling. (We have deserted education in terms of health and morality for a long time)

 

The bulk of the remainder of the economy is not growing. An indigent population of workers is merely replacing those leaving jobs. Many stores and class “B” office buildings have vacancies or are completely empty.

 

The present government believes bombs alone solve problems with countries unresponsive to our desires. Historically this has not worked, except for nuclear bombs which create other problems.

 

Financial markets are increasingly responding to these issues. Last week the following data was put forth:

 

  1. US retail sales grew at only 0.8% compared to an estimated 1.3%.
  2. Sixty-seven percent of stocks traded on the NASDAQ market sold at lower prices last week, with only 18 of 1393 stocks rising in price on the older New York Stock Exchange (NYSE).
  3. The American Association of Individual Investors (AAII) sample survey shows 41.6% anticipating a higher market in six months vs. 38.7% anticipating a lower market. Both numbers are about 1% lower than the prior week.
  4. According to Barron’s, 12 European stock markets rose vs only 3 in Asia.

 

At least some people see a less rosy picture of the US market than those in Washington.

 

How do you see it?

 

 

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

Mike Lipper's Blog: Headlines Are for Those Who Don’t Use Their Heads - Weekly Blog # 962

Mike Lipper's Blog: Are Changes Indicative? - Weekly Blog # 961

Mike Lipper's Blog: For Better Performance: Pick the Right Data - Weekly Blog # 960

 

 

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 – 2026

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

 

 

Sunday, October 11, 2026

Headlines Are for Those Who Don’t Use Their Heads - Weekly Blog # 962

 

 

Mike Lipper’s Monday Morning Musings


Headlines Are for Those

Who Don’t Use Their Heads

  

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

            

 

 

Headlines on your screen or paper are sales pitches for a conclusion, not a review of the data. As we lose the largest asset we have - time, we often accept the pitcher’s conclusion and fail to review the facts, either because we are too busy or the pitcher’s conclusion coincides with our beliefs. Allow me to give you an example using the current state of the economy.

 

The biggest megaphone on the economy is the government, supported by those who have something to sell. These “bulls” either don’t know about the other side or choose to ignore the other facts. It is easy to do, especially when they control the media and sources of data. The government publishes most of the information that most believe. However, let me point out something Apollo said in a large newspaper wrapper, “the overwhelming majority of companies with $100 million in revenues are private”. This statement suggests that these companies have less than robust sales and are barely replacing well-trained employees that leave. My conclusion is supported by this week’s University of Michigan’s Consumer Sentiment Survey, which dropped to 46.3 from 48.1 last month. In New Jersey, layoffs of 50 people or more must be reported. Lately, I have noticed that major Pharma companies, which appear to be financially sound, are laying people off!

 

Publicly traded companies publish financial results quarterly and have financial relations and press support people to get the message out. Executives of public companies get bonuses on the performance of their stock, whereas executives of private companies do not.

 

Another example of an unbalanced series of headlines is the US winning the war in the Middle East. According to some reports we are running out of ammunition, our allies are being bombed, and another aircraft carrier is being placed in position for battle.

 

Debt and its Repayment

Very few people have any direct knowledge of the Great Depression, which was driven by an enormous increase in debt during the 1920s. Toward the end of the period the farm community and the fam banks were overloaded with debt, forcing a Republican President to pass the Smoot-Hawley tariff bill, which was later repealed. Today, US farm debt is at record levels and experts believe it may be undercounted. (Republican strength in the Senate resides within its midwestern senators, who are likely concerned about next month’s elections.)

 

Many governments rely on short-term bonds, the US government more than most others. With the deficit continuing to rise there is also some concern about the two biggest foreign countries holding our debt, Japan and China. We may find it increasingly expensive to sell our debt, an issue that appears to be an unpublished concern of our Treasury.

 

Conclusion

Read economic reports carefully and look for what is missing. Recognize events that parallel our history, they might lead you to conclude that our high rates are not high enough.

 

Share your thoughts so I can learn.

 

 

 

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

Mike Lipper's Blog: Are Changes Indicative? - Weekly Blog # 961

Mike Lipper's Blog: For Better Performance: Pick the Right Data - Weekly Blog # 960

Mike Lipper's Blog: Are We Refighting the American Revolution? - Weekly Blog # 959

 

 

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 – 2026

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

Sunday, October 4, 2026

Are Changes Indicative? - Weekly Blog # 961

 

 

 

Mike Lipper’s Monday Morning Musings

 

Are Changes Indicative?

 

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

            

 

 

Changes of Note

One rule of recon is to note any changes indicative of major transformation in the battle of survival. There are changes that I noted this week. These are not earthshattering, but could be indicative of either major changes, minor interest, or just possibly major importance. I ask my subscribers to reach their own judgement and hopefully share their conclusions with me.

 

The following list is in the order in which I found the changes, not the order of importance or the order of importance reflecting what the future might hold for us as investors.

 

Clues of the Future

  1. Apple* is beginning its pay service in India. (Owned by clients and personally)
  2. The Wall Street Journal publishes two sets of prices that it tracks.  The first is 118 items for the third quarter, with 53% going down. The second covers 72 prices for the week, with 74% falling. (Its significance serves to reinforce the Chairman of the Fed’s comments regarding the importance of shorter periods.) The ECRI reported a 1.6% decline in industrial prices for the week.
  3. Both Nvidia and Tencent suggested that the price of certain long-term chips be used as an index to determine collateral for loans to data centers. (This suggests that debt levels have reached the point where lenders are running out of sufficient capital for loans.)
  4. The yield of ten medium grade bonds tracked by Barron’s has reached 6%.
  5. The costs to rebuild the Mid-East will be large, assuming the war in Iran is over.
  6. Volvo reduced its estimate of car sales in both China and the US. (I have been increasingly thinking that the combination of the USA and China is going to drive the global economy.)
  7. As of now there are only two of five SEC commissioners left. (The US government is missing lots of key people.)
  8. For the week ended Thursday, only five of over 100 mutual fund sectors were positive, led by Japanese funds +1.74% and Dedicated shorts +1.60%.
  9. The Kopernik fund finds value in Chinese pharmaceuticals, agricultural land, and Potash, among others.
  10. Prudential is closing two of its office buildings by consolidating into its HQ and reducing staff. (They are not the only insurance company doing this, which suggests individual life insurance might be unprofitable for others.)
  11. The Financial Times noted that “Mature market governments spend more on interest payments than the world is investing in “AI”, defense, and energy.

 

I am still expecting the next recession, if we are not already in one. There may even be an eventual depression if governments are not very careful.

 

Please share your thoughts with me so I can learn.

 

 

 

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

Mike Lipper's Blog: For Better Performance: Pick the Right Data - Weekly Blog # 960

Mike Lipper's Blog: Are We Refighting the American Revolution? - Weekly Blog # 959

Mike Lipper's Blog: Survival First, Before Growth - Weekly Blog # 958

 

 

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 – 2026

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.