Failed Expectations: Do Details Count? Zig-Zag Flips - Weekly Blog # 925

 

 

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.

 

 

 

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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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We are Never Fully Prepared - Weekly Blog # 845

 

         

 

Mike Lipper’s Monday Morning Musings

 

We are Never Fully Prepared

 

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

 

 

The Lessons of Saturday, July the 13th

One self-appointed mission of the weekly blog is to make subscribers aware of potential negatives absent from the content of various media pundits and financial sources. We are not predicting bad things happening but will offer some contrast to the regular diet of “happy talk” from most other sources. In evaluating the bulk of normal inputs, I think it is useful to consider the possibility that some things will not have happy outcomes.

 

Coming from my real educational experience at the racetrack, where the most favored horses win more often than those with longer odds. The betting returns on winning favorites are smaller than those of longer shots winning. Consequently, a sophisticated bettor will often have a smaller win vs loss record but will walk away from the track with more money by selectively picking horses with higher odds. However, betting on every non-favorite usually produces losses in aggregate.

 

To prevent such a result, one must be selective in taking high odds bets and avoid improbable long shots. Thus, I was totally unprepared for Saturday’s distressing news of an assignation attempt which caused two deaths, two wounded, and most importantly the near death of Presidential candidate Donald Trump.

 

As with many tragedies there are immediate losses and potential longer-term impacts. Luckily there was just one immediate death along with two seriously wounded casualties, as well the death of the assassin. Our hearts go out to the innocents.

 

The longer-term implications are possibly numerous and far reaching. Unfortunately, in America we have periodically had both failed and successful assignations of prominent politicians. Hopefully, we can rid our culture of these tendresses.

 

I do not know if the attempt on the President’s life will have any impact on his choice for Vice President. Furthermore, we don’t know if the American voters will change their choice for President this fall, or if it will have impacts on our foreign friends and foes.

 

The impact on me personally will be to focus on the possibilities rather than the probabilities in looking at the future.

 

Things that Could Change the future

1. The results of the weekly sample survey of the American Association of Individual Investors (AAII) are viewed by some market analysts as a contrary indicator. I find it useful in gaging the short-term views of this group of smaller investors. (The survey occurred prior to the assassination attempt on Saturday.) The change in the bullish swing over the last two weeks was almost twice as pronounced as the bearish swing, 41.7% to 49.2% (+7.5%) vs 26.1% to 21.7% (-4.4%), respectively. Perhaps more significant, the bull score was more than twice as large as the bear score (49.2% vs 21.7%). This could be the result of a difference in the makeup of the sample participants. A difference of this magnitude is an extreme condition and is unlikely to be maintained.
2. Too many investors believe the market can be understood by following the S&P 500, which is a collection of eleven industry groups that move quite differently from each other. Over the last ten calendar years the monthly low points of the eleven industry groups have rarely coincided.
3. The number-nerds have great faith in US government compiled data. In an article in the NY Times, which regularly has errors. The Times produced an article with the headline “US Economic Data Integrity May Be at Risk, a Study Finds”. The article quotes a study by the American Statistical Association proclaiming the risk of future errors increasing due to government departments and agencies being squeezed by budget issues, particularly due to the lack of funding for research. I remember this problem well. In the early 1960s I was a junior analyst assigned to tracking the steel industry. I reported to the Director of Research who came to the bank as an economist from the government. One day I went to him and suggested the steel industry data was worthless in guiding investment decisions. “How could that be, it came from the government”. I suggested the eight companies in the data file were quite different. Some had to ship their products many miles to customers while others had very little shipping costs, causing large differences. Based on this factor alone those companies were better investments, Chicago over Pittsburgh. I consequently created my own subsector groups for selection purposes.
4. The CEO of JP Morgan Chase was traveling on the day it released its quarterly earnings announcement. He usually participates and I felt his input could be more important than some short-term numbers.

 

Two Chinese Inputs Could Be Significant

1. Chinese troops are holding military exercises with Belarus on the Polish border. (I wonder whether this could be the result of Finland and Sweden joining NATO, and possibly Ukraine?
2. Later this month the Chinese are holding the 3rd Plenum, where the following topics may be discussed, with some yet to be determined:

a.  Can officials restore faith in the economy?

b.  How will officials look to forge China into a tech superpower?

c.  Do foreign companies have a future in China?

d.  How will China address growing geo-economic risks?

e.  Can officials fix the government broken revenue model?

f.  How will the Party respond to China’s demographic decline?

g.  How will China try to manage the great transition?

 

 

Are you prepared for the pace and depth of changes?       

 

 

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Mike Lipper's Blog: What I See and Perceive By Observing - Weekly Blog # 844

Mike Lipper's Blog: Preparing for a Recession - Weekly Blog # 843

Mike Lipper's Blog: Understanding the Universe May Help - Weekly Blog # 842

 

 

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Manageable Risk - Weekly Blog # 790

 

Mike Lipper’s Monday Morning Musings

Manageable Risk 

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

 

 

 

Uncontrollable and Controllable

Every day in almost every activity we can increasingly be the victims of bad things. That is certainly true of our investment activities. Short and long-term weather, misjudgments of governments, inflation and deflation, as well as other accidents. Essentially, these are beyond our personal control. We can try to anticipate or at least recognize these risks and attempt to take some defensive measures.

 

Controllable risks can be addressed by our own actions. In our investment actions we should be aware of the various mistakes we could make. Both large and small errors should be avoided, usually by being more patient. In making investment decisions it is wise to remember what our changing attitudes bring into the decision process. This summer may be a particularly important time to recognize that we may have entered a new phase of the market.

 

The Game May Have Changed

If you pay attention to what various pundits in the media, political office, or investment circles are saying, we are either in a "bull or bear" market. Quite possibly we are in neither and have not been in either for some time.

 

Market cycles don't follow calendars or the movement of selected indices. Investments don’t move in lockstep with one another either. My particular laboratory is the weekly performance 109 identified mutual fund sectors invested in equity, debt, currencies, commodities, and combinations of largely publicly traded investments.

 

For a two-year period ended Thursday, 83% of the individual sector averages were negative. The 28 sectors showing gains were led by Japanese funds, Energy and Natural Resource funds, Capital Appreciation funds, Alternative funds, S&P 500 index funds, Short-Term funds, and Money Market funds. (Some stock indices also reached higher price levels in this period.)

 

Two Down Years Suggests a Change

We have quite possibly entered a different phase of the market and economy. We may have entered a period of Stagflation. In the last century there were two such periods, the Great Depression into early WWII, and the mid-1970s to late 1980s. The latter period killed a popular view of buy and hold forever. In both periods there were periodic and unsustained rallies of 20% or more for the indices, and much more for individual stocks. Both periods of stagnation were led by government actions attempting to prolong an aging economic expansion. These government actions hurt investor confidence levels and suggested to the public that the economy was better off left alone in returning to equilibrium.

 

Some investors currently have equity money hiding out in bonds and money market instruments. These investors are itching to bring their equity commitments back up to "normal" level. They view declines as good opportunities, which they occasionally might be, but not often. Investors should not be impatient. If we are in a period of stagflation, averaging in with a small percentage during disparate time periods makes the most sense.

 

Long Shot

We all gamble on the future and have two choices about predicting the future-extrapolation of the present or making changes to it. On a day-to-day basis extrapolation is the most likely. The longer the time period, the more extreme the changes. There can also be periodic Minsky moments of great change.

 

What happened in Russia this weekend was a dramatic event that will undoubtedly change what happens in Russia for some time. The long shot is what could happen in how the US is governed. This is not a prediction, but an examination of what could happen.

 

First, we should understand what happened in Russia this weekend. Russia does not have a large, disciplined, and battle trained army. Consequently, it had to use a number of private armies, the biggest of which was the Wagner Group led by Yevgeniy Prigozhin who disagreed with the leadership of the regular Russian army. He claimed the Russian army told Vladimir Putin that Ukraine was going to attack Russia with the help of NATO. He also complained that Russian forces were killing Russian sympathizers in Ukraine. The feud got so bad that Putin ordered Prigozhin be arrested. This caused Prigozhin to send his troops to within 120 miles of Moscow, before some settlement was reached and the arrest warrant was dropped. It was arranged for Prigozhin to go to Belarus, a Putin friendly country.

 

The key point for the US is that Putin now has less confidence in his advisers. When powerful leaders lose confidence in their people, it is often like a disease or plague potentially leading to isolation. As this plague can impact any dominant, semi-isolated person, it could impact the current White House. There are many observers who say the current "Obama White House" and Cabinet is possibly the worst performing the US has ever had. If the President is re-elected, he will be a lame duck, making him an unattractive boss for any rising politician. Thus, major changes are expected, either for career choice reasons or due to the President's wishes.

 

Changes in interest rates will have a relatively small impact on the economy. Considering inflation is generally caused by excess demand over supply driving prices higher. What is needed are customers willing to pay higher prices for more attractive goods and services. This, however, is not what Washington is looking to do,  so there may be a change.

 

Future Outlook Appears Troubling

• After a trend is recognized investment groups often change their published outlook for the period ahead.
• It has become popular to expect business conditions to get increasingly more stressed, with interest rates rising and loans becoming more difficult to get.
• China, the second largest economy is facing its own debt problems, both at the provincial level and in real estate. The big difference is how they are handling a problem similar to that in the US. They are doing it differently.
• The latest US academic test scores show 13-year old's materially declining in reading and math. Perhaps most damaging is a drop in reading for pleasure, which appears to be at a record low.
• The Chinese central government has outlawed tutoring children in order to create greater equality, although parents and grandparents feel differently. A recent article in The Financial Times shows "illegal'' tutoring thriving, at least in the top cities. Tutoring is viewed as a way to improve a student's chance of getting into better schools and universities and consequently getting a higher paying job. When constructing investment portfolios, you should consider the consequence of a decline in US secondary school learning and a decline in college applications while China and other countries show improvement in preparing future leaders.

 

Conclusions

Investors need to recognize change while continuing to focus on long-term goals.

 

 

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Mike Lipper's Blog: Predictions Suffered Last Week - Weekly Blog # 789

Mike Lipper's Blog: Head Fake, Unrecognized Opportunity, or a Minsky Moment - Weekly Blog # 788

Mike Lipper's Blog: The Course to Explain Last Week - Weekly Blog # 787

 

 

 

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We are Progressing - Weekly Blog # 721

 

Mike Lipper’s Monday Morning Musings

We are Progressing

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

                  

This is a blog on investing and is not intended to express any political views. Every single action we take, including taking no action, is an action. Every single action we take has less of a future impact for those we care for emotionally or legally, be they the next moment, day, week, month, year, or the rest of our lives. With that thought in mind, my focus is on the indefinite time periods for those we hold ourselves responsible.

This blog is focused on an investment period measured in years, comprising multiple market cycles. In sharing my thoughts, I am very conscious that humility is the only guarantee in investing. There will be periods of elation and depression as we travel through the various phases of market cycles.

Point of Departure

I believe markets move within their own cycles. I find it useful to measure from peak to trough for the styles of investing which identify most of what we do. In the absence of detailed knowledge concerning the structure of an investment account, I use three major stock indices for the US equity market. The NASDAQ Composite Index, which topped out last November, contains future oriented securities valued for their growth potential. The S&P 500 Index, which peaked on the 4th of January, is meant to contain the 500 largest and most liquid US stocks traded in the US. The S&P 500 Index is representative of the bulk of long-term US stock investments and is often used by institutions to represent “the market’. The Dow Jones Industrial Average (DJIA), which topped out on the first day of 2022, is a selection of the 30 most representative stocks.

Where Are We?

As a working assumption I believe most US equities have topped out for this phase. What phase we have entered is the question investors are asking. The choices are:

• A minor fall to a support level like the Dow Jones Transportation Index, a key component of the oldest market timing model, the Dow Theory. 
• The NASDAQ Composite Index, which fell beyond the 10% correction level used by the press.
• The S&P 500 Index, which is close to entering a correction phase, to be followed by the DJIA.

As we manage long-term money, which has long-term payout needs measured in lifetimes, I believe we have entered a downward slope with periodic upward trading opportunities. (57% of NYSE stocks and 61% of NASDAQ stocks fell last week.) Hardest hit were growth funds, with the T. Rowe Price Growth Fund falling -4.38%, the worst of the 25 largest growth funds. 

Focus

Instead of focusing on trading opportunities, I am focused on the likely investment opportunities in the subsequent rise in the market after the valley. To get to the happy hunting ground we will have to deal with expected problems. In time order: Ukraine, inflation, and Long COVID.

Ukraine

As is usually the case, the media and politicians are focused on the wrong things. First, the Russian Army has a significant number of conscripts due to return to civilian life who are not battle trained. They would suffer significant casualties, which would not go down well within Russia. If the Russians invade, they are likely to suffer casualties caused by a well-armed and trained army and volunteers. They have a lot to fight for, as shown below:

• The Largest proven recoverable Uranium resources in Europe
• 2nd largest explored Manganese ore reserves in the world
• 3rd largest exporter of iron ore
• 4th largest array of natural gas pipelines
• 8th largest number of installed nuclear plants

To an important degree, Putin has already accomplished his goal of weakening NATO by showing the unwillingness of Germany to take up arms, followed by Italy and a weak US response. So far, the only negative from Putin’s point of view is the push by Sweden’s second largest political party to join NATO.

Inflation

From the White House’s viewpoint, it is pleased the market is doing the job that the Fed was meant to do. The markets most sensitive to short-term inflation are the commodities markets, which are pricing commodities higher in the near-term than the longer-term. Members of Congress are preventing the White House from adding to the problem, by resisting an increase in money supply growth. 

A study of 19 recorded pandemics over 700 years shows real interest rates falling in all cases. However, a complete solution to the supply chain issues has several hurdles to overcome and is unlikely to be solved before the next Presidential election. These include: 

• A shrinking number of petroleum refineries, from 301 in 1982 to 124 today.
• The absence of new mineral production and severely restricted new mine and pipeline volumes.
• Fewer skilled workers and supervisors returning to the workplace due to Long-COVID. 

Long COVID

Long COVID is the inability of some workers to return to the workforce due to PASC symptoms, which stands for Post-Acute Sequalae of SARS COVID. (Cumberland Advisory has a good blog on their panel discussion on the subject.) One study predicts between 10 and 20% of those who get COVID will get the Long version. One must expect other pandemics in the future, and we have not yet come to an understanding the best way to reduce their damage.

Investment Shopping List

While it may be a long-time before a terminal bottom is hit, and more importantly recognized, one should start building a shopping list. There are two categories that appear to be worth examining: common denominators and the not yet dead that are still working.

Common Denominators

At times it is difficult to pick a potential winner out of a crowded sector. I have followed two approaches on this issue. 

1. The first is to find a sound sector manager or fund to make individual choices. The problem is that manager’s need to diversify, resulting in too many choices. The second is to find one or two stocks that capture most of the future expected benefits. Two common denominator stocks in the financial services industry are Moody’s and S&P Global (already owned). Internal developments and acquisitions should capture additional business. These are to be put on the hunting list and should not be bought today, they are already more than adequately priced.
2. The second approach is to look at the non-winners in the current market to see if the sick/dying corpses have elements that will blossom in a new market. I use the multiple of current price to sales as a primary initial filter. Four large companies that could have something to value, in order of their price/sales ratios, are: 

Corning (2.55x)

Intel (2.49x)

IBM (2.15x)

HP Enterprise (0.78x)

HP Inc (0.64x)

I am sure that there are others, and they should be researched.

Subscribers: Please share your thoughts and suggestions. We unfortunately will have some time before we select new holdings   to new heights. However, it takes a lot of time to get to know new names and get comfortable with them, after what may be an unhappy period. 

  

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

https://mikelipper.blogspot.com/2022/02/building-long-term-investment.html

https://mikelipper.blogspot.com/2022/02/changing-focus-in-changing-world-weekly.html

https://mikelipper.blogspot.com/2022/01/things-are-seldom-what-they-seem-weekly.html

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“Things are Seldom What They Seem” - Weekly Blog # 718

 

Mike Lipper’s Monday Morning Musings

“Things are Seldom What They Seem”

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

This is the title of a song by WS Gilbert of Gilbert & Sullivan in the operetta H.M.S. Pinafore. The title seems appropriate to thinking about investing today. In gathering research to reach my conclusion, I excluded positives that led to a bullish conclusion, but not because it’s unlikely. To the contrary, most investors tend to be optimistic, their views are documented by investment and political pundits. Consequently, another similar voice is hardly additive. Seeing potential negatives is not a popular exercise, although it’s useful in bringing balance to one’s views. To be perfectly clear, the vast bulk of my investments are invested in stocks and equity funds for the long-term, even beyond my life. I hope the majority will pay off in total return, comprised of price appreciation and growing dividends. The biggest problem today is that very few investments generate income sufficient to meet reasonable future expenses after inflation and taxes. The inability to meet current and future expenses from dividend and interest payments is a sign of a highly priced market.

Critical International Competition

Our geopolitical discussions are often based on Ukraine or China, with these conflicts placing the Western world at a disadvantage, regardless of our greater wealth. The current administration is playing checkers, where one needs to get up close to the opponent to eliminate one of the opponent’s pieces. The Russian leader appears to be an excellent chess player. The goal in chess is to capture the opposing king, using players that have different capabilities and proximity. Our Chinese competitor believes time is on their side and is building a greater level of self-sufficiency. Both appear to be capable executors of tactics and strategies based on a lifetime of work and success. By comparison, many members of our cabinet and senior staff were chosen based on their identity and political views.

Earlier this week at an investment committee meeting I mentioned that Russia had already accomplished its real mission, sponsoring disunity among European NATO members. Both German and to a lesser extent Italian business leaders wanted to maintain close relations with Russia and China. While I still believe this is the way they play global chess, there is a contrary action on the horizon. One of the main political parties in Sweden, concerned about the fluidity of Russian troop movements, wants to join NATO. With Sweden’s technological strength and good military, it could more than make up for the potential loss of Ukraine. Whether this happens or not, the mere fact that it could, is an example of “things are seldom what they seem”.

Guessing the Future is Difficult

As securities analysts, we used to say the one saving grace of weather forecasters is that they made us look good by comparison. (In terms of weather, I should point out, the less than optimum choice of the date for the Allied landings in France was a correct judgement by Ike, which differed from the German Army’s conclusion.)

Each year, the accuracy of the Congressional Budget Office’s (CBO) budget revenue projections is compared to its past record. In fiscal year 2021 the projection was too low by 15%, three times the normal error rate of 5%. Outlays were too high by 4%, twice their normal miss rate. These projections were calculated after some midcourse corrections in March. The purpose of showing these misses is another example of skilled statisticians falling to Mr. Gilbert’s song title. 

I don’t have similar numbers for analyst misses in terms of sales and earnings for the same period. My guess is the private sector error rate was equal or more than the CBO’s. My concern, particularly for high P/E stocks with double digit earnings multiples, is that errors can start “to be real numbers” This may be particularly true if one wants to invest for periods of ten years or more.

Two Different Voices

This is the season where politicians and corporate managements tell us how good things are and will be with their fourth quarter and annual earnings announcements. Actions by consumers and investors are saying something different, with consumer spending in December slightly below November. It is possible consumers shifted to earlier holiday buying due to fear of shortages, although a recent walk through The Mall at Short Hills, a ritzy shopping center, did not reveal ebullient shoppers. This suggests very little business capital was used to expand capacity vs filling out the supply chain, although there was probably some inventory building on the industrial side. 

In terms of net buying of mutual and ETF fund shares, it was dominated by the buying international funds and the redemption of domestic equity funds.

Views on a Recession

Merrill Lynch market analysts believe the quickest way to a recession is a Wall Street Crash. Jeremy Grantham, a manager that has been early but correct, put out a very dire point of view in a piece titled “LET THE WILD RUMPUS BEGIN”. He portrayed a bursting of the US Extravaganza, taking stocks, bonds, commodities, and housing down to at least their base price levels. Barron’s headlined an article “The Countdown to The Next Recession Already Has Begun”. This article pointed to rising fed rates bringing on a recession in 2024.

We May Not Be Hedged Against What We Thought 

Suppose we have a $1,000,000 portfolio invested 90% in stocks and 10% in long bonds. If any of the thoughts expressed above materialize and stocks and bonds both drop at least 10%, you now have $900,000 portfolio. While you continue to be hedged against a relative decline of one of two asset classes, you are not hedged against the loss of $100,000. If you look at the purchasing power of your money, both inflation and foreign exchange could reduce the purchasing power of your investments.

Working Conclusion

Be prepared for a difficult market that will reset values, possibly for a few years. At the same time, maintain long-term positions for future generations. They will need it, because it is possible the world will restructure in an unfavorable way, but at least they will have a start.    

  

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https://mikelipper.blogspot.com/2022/01/two-critical-questions-weekly-blog-717.html

https://mikelipper.blogspot.com/2022/01/current-causes-of-concern-weekly-blog.html

https://mikelipper.blogspot.com/2022/01/deeper-thoughts-weekly-blog-715.html

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50% Humility & Search for New Money Standard - Weekly Blog # 686

 

Mike Lipper’s Monday Morning Musings

50% Humility & Search for New Money Standard

(Caution: Few may totally agree, but all should view as possible)

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

Top- Down Week:

Two messages from Washington this week; humility and arrogance. This week, the Chair of the Federal Reserve Board in effect recognized the need to show humility. Faced with the COVID-19 Pandemic and excessive lockdowns, the Fed recognized its all-important research/prediction process was significantly inaccurate in judging the economy and inflation. To me, this recognition is much more important than the “Dot Plots” prediction of two rate increases in 2023. As an investor/portfolio manager/analyst and handicapper, I believe “two in ’23 is a bad bet, partially due to the actions and attitudes emanating from The White House. 

There is the just doing the opposite attitude by the current repeat tenants of The White House. In terms of improving relations with China, the stated purpose of the meeting in Alaska, US Foreign Policy was a failure. The same game plan was used in the meetings with the G-7, NATO, and President Putin. The goal of all was to influence the domestic consumption of post meeting press conferences, not to conduct any substantive negotiations. Since the beginning of meetings between adversaries, successful meetings were generally held in private. At these meetings, disagreements between parties were often worked out and largely settled, with the participants being critical contributors in the negotiations, not props for press releases. 

Connected to the discussion with Russian President was a set of clues that would perhaps benefit the Russian economy. By further increasing the price of oil the occupants of The White House are, or are planning to, reduce the production of US energy. This may be why they turned down a critical way to pay for part of the proposed infrastructure bill by indexing the federal gasoline tax. Seems a strange way to address the exploding inflation issue.

Reactions: 

As few if any buyers or sellers offer affidavits as to why they have bought or sold a security, we don’t really know the real cause of transactions. The best we can do is use circumstantial evidence and we have learned how wrong conclusions from such evidence can be. The following is a list of reactions, from the simplest and most current to historical and future generational extrapolations.

1. The traditional slowdown in trading, particularly on Fridays, with summer apparently starting earlier this year.
2. Individual investors and inexperienced wealth managers have focused on the Dow Jones Industrial Average fall of -3.45%, compared to the smaller decline of -1.91% for the more institutionally oriented investment focused S&P 500. The savviest traders who predominate the NASDAQ only experienced a fall of -0.28%, suggesting the DJIA decline was driven by disappointing reactions to media pundits press conferences. This was particularly true on Friday as traders unloaded their positions they did not want to carry over the weekend. Friday's downside relative to upside volume on the NYSE was six times greater than the 2.5 times on the NASDAQ.
3. There were relatively few price gainers for the week, most being tech-oriented growth stocks, with particular focus on internet related firms. These gains were generated in spite of largely Democratic members of Congress calling for the breakup of the large tech companies. Based on history, many smaller companies and users of tech would suffer, potentially causing a switch to growth from value/industrial companies where valuations are one half or less. Value stocks have been performing better than growth for a while. Is it possible that the aggregate market demand switch is saying that growth will produce higher returns than value over the long-term? One could take that point of view based on the expected future actions of politicians and the "Fed". The weekend roster of weekly prices across many sectors showed 86% going down.
4. Some may be seeing the probability of more expensive energy retarding global growth.
5. The rising interest in actual and synthetic gold reflects concerns related to the value of currency. The "gold standard" worked for thousands of years, although that was in a world where physical assets were the primary measure of wealth. The private sector holds gold as a hedge against the historic tendency of governments to reduce the amount of gold backing money. Today, most currencies are not significantly backed by gold or hard tradeable assets. These fiat currencies are increasingly issued by autocratic governments with substantial debts who benefit from inflation. Governments with substantial debts benefit from inflation increasing taxes and reducing the "real costs" of repayment. We have experienced governments attempting to deny ownership of gold in the private sector. Those who own actual or synthetic gold expect the prices of their assets to go up and become the real backing for the currency. I question that we have entered a world where we pay considerably more for services than hard assets. At some point I suspect bundles of service contracts will be the backing for our currencies. These include medical contracts, protection contracts, travel contracts, use of location contracts (homes and facilities) and others including military contacts. (Remember, the American Revolution had European mercenaries. The current administration is removing ours in the Middle East and wants higher compensation for our forces in Europe and Korea.) We are closer than we realize to a service-contract oriented wealth system.

We congratulate all the fathers for their good choices who spent time with their children, grandchildren, great grandchildren, and other relatives on Sunday.

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

https://mikelipper.blogspot.com/2021/06/to-benefit-long-term-investors-invert.html

https://mikelipper.blogspot.com/2021/06/history-good-lessons-not-great.html

https://mikelipper.blogspot.com/2021/05/mike-lippers-monday-morning-musings_30.html

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