TOO MANY HISTORIC LESSONS - Weekly Blog # 786

 

Mike Lipper’s Monday Morning Musings

TOO MANY HISTORIC LESSONS

 

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

 

 

 

Are we looking in the wrong direction?

The most important task for any analyst is guessing the future direction his/her enterprise should take. The standard approach is to review history. The problem with that approach is most history is written by the surviving winners and told to us by scribes who feel the need to make history interesting, clear-cut, and supportive of the commerce of the payor of the scribe. I have played that role. My problem is that for myself and my accounts the picture is not clear, particularly now.

 

Current Picture

Today’s blog is being written on the Saturday of the weekend before the grand compromise of the US Debt Limit/Tax Expenditure Legislation. We should never have been put in this position! Our elected leaders have had full knowledge of the twin conflicts of debts and expenditures for many months. Hopefully a tactical compromise will be announced within days.

 

There is however a more depressing structural problem facing us. These two problems have been with us ever since our leaders first determined what amount to spend for the perceived benefit of the governed and where to get the money. I am sure there are written Middle and Far Eastern texts, but the first I know of came from the ancient Roman Republic.

 

Rome conquered the known civilized world through the strength of its Roman Legions and superior engineering. The money to accomplish this came from taxing citizens, effectively the free residents of the city of Rome. Citizens elected the Senate who then passed these taxes. These senators had political skills, which they used to get the votes for their leadership. They induced citizens to vote for them by providing “Bread and Circuses”, or in other words food from conquered lands and mass entertainment.  As long as the Senate provided these in sufficient quantity, they remained in power. Upon failing to do so they were replaced by emperors who felt the political need to continue some of the “bribes”.

 

To keep the food supply growing the Empire continued its military conquests, enabling them to award the legionaries the captured farmland which benefitted from the Roman roads and aqueducts. However, the fidelity of the farmers declined over time, as did the quality of their military skills. Consequently, the Empire was overrun by the barbarians.

 

The political lesson for today is that bribery works as long as it continues to increase.

 

There is another lesson, this time from The American Revolution. One of the rallying cries of the colonials was “no taxation without representation”. They got around that issue by placing tariffs (taxes) on imports, and later through the power of inflation reduced the future value of the dollar.

 

In an aging world all governments need to address the increasing requirements of the elderly. China is under pressure to raise the retirement age from 50 for women and 60 for men. We have seen the difficulty France is having in attempting to raise its retirement age by just by two years.

 

Two Different Views

In general, the evolving political views of many Americans parallels their investment views. One group wants the government to be funded by taxes on the “rich” to pay for their growing needs. The second group wants to be able to provide for their families and their needs with their own funds, sharing equitably with those less fortunate.  In most cases the first group believes it will benefit as the economy continues to grow. The second group believes it will be increasingly difficult to create sufficient economic growth to meet everyone’s needs.

 

The second group sees the following signals as anti-growth:

1. Labor productivity is growing less than inflation.
2. Well established investment bankers and law firms are selling out, partially due to the views of the dominant partners.
3. The following financial firms, after studying the issue, are meaningfully reducing the number of staff in tech and operations: Wellington, Capital Group, and JP Morgan.
4. Some Private Equity firms are selling positions at a discount.
5. Consumers have shifted their buying habits from Best Buy to Costco.
6. Shortage of landlords.

 

Search for Conclusions

Please let us know your opinion on whether this is a time to buy risk assets to be sold in one to five years.

 

We close this Memorial Day blog with a quote from Theodore Roosevelt “We must dare to be great; and we must realize that greatness is the fruit of trial and sacrifice and high courage.”

 

 

 

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Mike Lipper's Blog: Statistics vs. Influences-Analysts vs. AI - Weekly Blog # 785

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Statistics vs. Influences-Analysts vs. AI - Weekly Blog # 785

 

Mike Lipper’s Monday Morning Musings

Statistics vs. Influences-Analysts vs. AI

 

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

 

 

 

Raw Materials

When my grandfather entered the brokerage business in the early 20^th century there were no named analysts, only statisticians.  I believe the New York Society of Security Analysts (NYSSA) was founded in 1937 as one of the first local luncheon meeting groups. (Many years later I was elected President of this the largest analyst group in the world.)

 

A statistician deals with numbers, usually the limited amount published by companies and perhaps market measurers. Analysts however, as with military and commercial intelligence gathers, guess as to critical non-public information. One of the things I learned in the US Marine Corps was that before undertaking an assignment it is helpful to make a list of Essential Elements of Information (EEI). I was never given enough time to complete the list before moving out to accomplish the mission.

 

Perhaps it is ironic that some of the financial community, through the wonders of search programs on fast computers, are retrogressing to becoming statisticians.

 

The rest of this blog is devoted to possible influences that can lead to investment conclusions not connected by Artificial Intelligence relationships, perhaps because no one has made those connection in written texts. As with EEI, some of the influences do not lead to correct results but should be examined anyway. A wrong connection can prove to be inaccurate, but useful in improving the road to the right solutions. (This is often of great value to Caltech’s later research successes.)

 

Leading to Useful Conclusions

 

Possible US Stock market Direction

1. 83% of 2023’s gains in the S&P 500 thus far come from only 5 stocks.
2. Large market-capitalization stocks now have a preferred position. Year-to-date large-cap mutual funds have on average gained +9.85%, mid-caps +3.28%, and small caps +1.56%.
3. While a greater number of shares on both the NYSE and NASDAQ traded this week at rising prices vs lower prices, there were more stocks going down in price than up in both markets.
4. Do Treasury Bill yields predict inflation averaging 4.29% for the next two years, then dropping to only 3.69% over the next ten years?
5. A number of companies are in the process of meaningful transitions, probably suggesting their past financial statements are not particularly useful in predicting their future earnings power or stock price (Goldman Sachs, T. Rowe Price, and Disney are examples).

 

Where is the US Going?

The future belongs to the youth, as is usually the case. An upbeat hope was expressed for them by David Solomon, CEO of Goldman Sachs, keynote speaker at the NYU Stern School baccalaureate graduation. The brief talk was of interest to me for two reasons. First, it was the commencement for a grand nephew of mine. Second, Goldman Sachs is an investment in my client and personal account portfolios, which have performed well but is going through a difficult period as it restructures. While his comments were directed at the graduates, they also had relevance to Goldman Sachs and those in the investment business.

 

His comments are summarized briefly below:

• Life is a marathon
• Enjoy the hustle
• Good enough, isn’t
• Choose excellence
• Like connecting with people
• Spend time in pursuit of life’s goals
• Work longer
• This generation is going to Mars
• Focus on where to learn

 

A very different view can be gleaned from a survey of young people looking for their first job. The following are characteristics of what they are looking for and the percentage who want it:

• Flexible hours (68%)
• Retirement contributions (34%)
• Mental health benefits (28%)
• Student loan assistance (28%)
• Unlimited time for PTO (27%)
• A 4-day work week (26%).

 

China

1. Household bank accounts = $6.7 Trillion, which is greater than Japan’s GDP.
2. Private companies employ 90% of urban employees.
3. 20% of 16–24-year-olds are looking for jobs
4. The Central Government of China is holding meetings with governments in Central Asia. (The C5 counties of Kazakhstan, Tajikistan, Kyrgyzstan, Turkmenistan, and Uzbekistan. (All former members of the Soviet Union.) These countries are part of the critical rail and truck roads to transport both Chinese products and the natural resources of these countries. However, Chinese suppression of the Muslim Uyghur population in their Xinjiang region could cause problems. I believe the US will be involved with Ukraine for a long time as it is one of the critical players in the Black Sea, which along with the Caspian Sea is the western front for the C5 counties and China.

 

Working Conclusions

Even if you think you are just investing in the US, you are investing globally. Because critical linkages are between people, not texts, we are going to need more and better analysts throughout the world.   

 

 

 

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Insights From a Sleepy Week, Important? - Weekly Blog # 784

 

Mike Lipper’s Monday Morning Musings

Insights From a Sleepy Week, Important?

 

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

 

 

 

Sentries Be on Guard

Both military and investment sentries (analysts and portfolio managers) know that the most dangerous part of their jobs is falling asleep before a major, unexpected change. There is a good chance that on the investment front we are being lulled into not searching for changes.

 

In the last six weeks the S&P 500 has moved under 1% each week. Market analysts call such periods accumulation or distribution, which is when securities move into from weaker into stronger hands. The results of which will become known when the eventual breakout/breakdown occurs.

 

Currently, as is often the case, we are simultaneously experiencing two different markets. For example, the week before last S&P 500 stocks continued to have more distributions than accumulations. Last week on the NYSE there were 6.3 million shares acquired at rising prices and 10.3 million shares acquired at declining prices. This is not surprising as the year-to-date extreme performance spread in the DJIA is quite narrow, from a gain of 4.56% to a loss of -1.33%.  The S&P 500 year-to-date gain of +6.96% could be labeled stagflation. Liz Ann Sounders of Charles Schwab reminds us of two other stagflation periods, 1929-1942 and 2000-2009.

 

At the very same time the year-to-date NASDAQ extreme performance numbers show a range of +19.23% to -0.36%. Advance and decline share volumes are also evenly matched at 10 million shares.

 

Currently, the five largest companies are producing better than average index results in most sectors. Contrast this with the week’s WSJ weekly prices of the 72 security, commodity, and currency measures, where 75% declined. The two worst performers were Comex Silver -6.8% and the South African Rand -4.85%, both hedges against the US dollar.

 

Signs of the Future

In the current market most buyers expect an acceptable year in 2023, and a good one in 2024. Sellers expect to have to wait, at least until after the next presidential election. They are being paid to wait with certificates of deposit yielding around 7%.

 

This week we have seen two estimates for 2024. The 2024 estimate for Social Security COLA is 3.1% (It was 8.7% for 2023). Interestingly, the household survey for 2024 came out with an almost identical 3.2%.

 

Longer-Term

In attempting to predict the longer-term I find it is more useful to rely on recognizing symptoms rather than attempting mathematical projections. The largest contributor to world trade is China, where most high-priced purchases are generated by wealthy young people. Recently, they have cut back materially on their purchases of top-line jewelry. I don’t know if any of these purchases hedge against their own currency in favor of the US dollar. (Due to inflation and out of control government bribes the US dollar should decline on an absolute basis. In terms of the value of the US dollar, according to Michael Cembalest of J.P Morgan, any major change is likely to take a long time considering the US only provides 25% of world trade while being used in 85-89% of foreign exchange or similar transactions.

 

On a longer-term basis a more concerning factor is the growth of Chinese science and technology. They appear to be the leader in the development of fusion for utility purposes. This is happening at the very same time US utilities have become the best performing sector, in part because of the expected increase in load to produce transferable energy to the ballooning “EV” market.

 

Portfolio Management Moves Implied

During this lull in market activity before a new phase begins, all portfolios should be reviewed to put them in the best position for the future. One approach is to examine all present holdings currently priced at a loss. Unless one sees a major increase in the next 31 days, they should be sold and selectively repurchased after the “wash sale” prohibition of 30 days.

 

The losses created should reduce potential capital gains from selling some of the winners you are less than thrilled with. By all means, please consult with your trusted investment adviser and tax consultant.

 

Correction to last week’s blog:

In the Berkshire Hathaway discussion, the correct spelling of the first name of the Vice Chairman in charge of insurance was published as Amit instead of Ajit, our apologies.

 

 

 

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My Triple Crown - Weekly Blog # 783

 

Mike Lipper’s Monday Morning Musings

My Triple Crown:

Berkshire, Coronation, Derby, plus analytical insights

 

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

 

 

 

Berkshire Hathaway Annual Benefits

One of the advantages of owning shares in this unique company, both personally and professionally, is having the opportunity to learn from Warren Buffett, Charlie Munger, Greg Able, and Ajit Jain. The side conversations with a number of deeply involved investors and managers is an added benefit. For me, my wife, and my son Steve, this is truly an educational experience.

 

In terms of Berkshire, the following is a brief list of short-term (one year) comments:

1. The “float” is expected to be higher than in 2022. There should also be earnings from the railroad.
2. They have heavy property insurance exposure in Florida real estate.
3. GEICO will not be getting the full benefit of the switch to fully automate until at least 2024, possibly longer.
4. The stock is selling below “going-concern value”, suggesting it’s a good use of cash, particularly for heirs.

 

Coronation

While the coronation of King Charles III and Queen Camilla is important to many in the English-speaking world, it is also important to those of us entrenched in the investment world. King Charles produced a more modern version of the over 1,000-year-old coronation with all its pageantry and significance. Globally, he should give us hope we can remodel a financial system showing serious signs of disarray, with the inability to produce good value for all direct and indirect participants. Among which are the problems related to regional banks, commercial real estate, government sponsored inflation, inadequate education, inefficient healthcare, and getting the optimum benefits from layoffs. (More on the latter subject later in this blog.) We should learn what we can from King Charles’s discipline, especially his ability to make painful decisions with a clear view of a desirable future.

 

Kentucky Derby

The Kentucky Derby is America’s most famous horse race, which is unfortunate. The entrants in the race are 3-year-young horses with very little experience. This year’s winner, like many others in the race, had only raced 3 times and had only raced once at the Derby’s distance.  As most blog readers have learned, I believe whatever analytical talents I may have, I learned at the New York racetracks.

 

The payoff after both the tax authorities and track takes their share is important in figuring out if a particular horse is worth betting on. It’s a critical element of my handicapping skill, which I carry over to my financial analysis responsibilities. Not surprisingly, Warren Buffett also learned a great deal from attending local racetracks. One can see this when he explains the key to Berkshire’s insurance success, which is getting the right spread between the rate charged and the risk of loss.

 

One of the determents in this analysis is who you are competing against. This was an unusual Derby in that a number of horses were scratched. The betting crowd (the market) was left without a strong preference or favorite, much like one of the five largest market-caps in most sectors. At the track, the odds-on favorites are often 2 to1, or less. In this year’s race the winning odds-on favorite was 4 to 1. This should have been an alert to bettors that there was a low level of confidence in the crowd’s or the market’s choices. Somewhat similar to a number of market periods we have gone through recently. This filter might have suggested giving a more earnest look at horses with longer odds. Opening up the possibility of identifying a horse with 9 to 1 odds who finished first barely beating the second finisher, a horse with 5 to 1 odds. This type of behavior is why I often favor less popular investments, including small-caps and companies with somewhat blemished records. Particularly when there is a change of jockeys or other key managers. The keys to success in this type of thinking is not the win vs. loss ratio, but the number of dollars won or lost. Or if you prefer, Berkshire’s rate vs risk.

 

Analytical Insights

Hardly a day passes without the media reporting on a company with a new layoff. This is not newsworthy because of the number of people being laid-off, but because it’s happening during a period of high employment where there’s a surplus number of job openings relative to the number of people unemployed. Clearly there is an imbalance, or phrased another way, the people unemployed are different that those employed.

 

This condition requires careful and thoughtful analysis based on incomplete data. I suggest disaggregating the layoffs by presumed causes. The following is a list of types of layoffs and their significance:

1. LIFO (Last In, First Out) is usually directed by HR people from an easy date of employment list, without any further consideration. (I avoided one such occasion personally by going to a senior partner of an institutional brokerage firm which had 5 junior analysts. I pointed out that the likely salaries in aggregate were roughly equivalent to that of one aging but knowledgeable senior analyst. Perhaps my logic or guts worked, all five junior analysts were saved. I left the firm for another opportunity soon thereafter. Of the 4 that remained, at least 2 became productive firm partners.)
2. The opposite approach is sorting by perceived talent and keeping the best. In effect create a talent bank.
3. Friends for life. As I moved up, I recognized that some talented individuals did not fit where the firm was going. I suggested they find a better place and they became friends for life.
4. A layoff can be an essential part of a plan to move an operation, disposing of an activity that no longer fits.

 

Good analysts should try to determine which of the four alternatives most likely fits their described motivation. The LIFO layoff is only helpful in improving overall short-term productivity, as it does not make the remaining workers feel good about working for the employer. This may be unavoidable if the company is a union shop with built in official or unofficial rules governing layoffs. If so, the employer has deeper problems. 

 

In Conclusion

I had a good learning week, and I am happy to discuss my views with subscribers. Whether you agree or not, I can learn from you.

 

 

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Fire Drill - Weekly Blog # 782

 

Mike Lipper’s Monday Morning Musings

Fire Drill:

On board ships and in schools, why not in investing?

 

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

 

 

 

Any Smoke?

Implications: US stock index returns are almost normal for the full year if we use the year-to-date performance of the Dow Jones Industrial Average +7.16% and the S&P 500 +8.14%. Even the NASDAQ +18.64% is representative of a good speculative year, perhaps benefitting from short covering. The VIX indicator is almost asleep at 15.76, compared to 30 in past mildly troubling times.

 

There are some whiffs of smoke in the air, including a continuing 2 to 10-year yield inversion spread of 4.08% - 3.45%. Updating one of the oldest technical indicators with a more modern twist. In the latest week the 30-stock DJIA had 20 stocks rising to 10 declining, but the 20 transports split 6/14. (In the original Dow Theory, it was only the rails in the index. Today the number of rails has dropped, and a number of airlines, trucks, and other transportation securities have been added.) This could be significant if the normal buyers of rails, which are freight driven, are looking for future declines. 

Another group that appears to be worried are the CEOs of traditional financial services companies. The latest to announce a 10% layoff from both their investment banking and investment management functions was Lazard. (Mid-market M&A industry revenues hit a 9-year low in the first quarter.)

 

Publishers Note

The popular distinction between a recession and a depression is your neighbor losing his job in a recession and you losing yours in a depression. It can be helpful to explore the possible roads to a depression by focusing on the needs of securities analysts regarding layoffs. In focusing on the way companies handle layoffs, they should first be aware of the lost art of making money from bankruptcies. All too often layoffs are the first act of self-inflicted worsening conditions. Since they don’t teach about surviving bankruptcies today, they are unequipped to adequately analyze layoffs. (I admit the thought came to me in a recent meeting with the Dean of an upcoming Business School, where there are no classes on bankruptcies.) 

While a Columbia College undergraduate I was privileged to take Securities Analysis from Professor David Dodd, who was both an academic and investment partner with Benjamin Graham. David Dodd collaborated in producing the seminal work on Securities Analysis based on their experiences in the 1920s and 30s. It occurred to me that the whole basis for the course was the knowledge necessary for those who’d lived through the depression. This knowledge could be important in the coming era, and I will consequently devote the rest of this blog to the types of things one should look for prior to and during such a period.

 

The Fixed Income World is Different

There are two critical differences between fixed income and equity.

1. The first is the legal relationship. Fixed income is a contractual relationship with an initial investment, periodic payments, maturity, and rank in the order of payments in a bankruptcy.
2. Owners of fixed income securities are expected to be paid a pre-determined amount of interest and pre-payments of principal, as well as a final payment.

If payments are not delivered as promised, the default process is governed by the issuing documents. Things change dramatically when a bankruptcy begins. All debts immediately come due, sourced from the potential sale of all assets. Debts are paid in priority order, as specified in the issuing documents.

 

However, compromises are often made to get agreement from the holders of different classes of claims. This helps expedite payments rather than having to endure long, expensive court hearings. The size of the payments is a function of the price paid for the assets, less the costs of the sale. The cost of the sale includes the cost of highly specialized attorneys, accountants, and other experts.

 

Fixed income securities rights and privileges are senior to common stock rights. Owners of common stock will probably be wiped out, as there is generally no additional money to pay out after the senior debt holders have been paid. However, to avoid long and expensive court battles by equity owners, they will often be awarded a small amount of a subsequent new equity class.

 

What is a Bankruptcy Worth

Up to this time the focus has been on the current appraised value, usually in a quick liquidation. To the extent there is a belief that a “going concern” will survive bankruptcy, a different kind of analysis is needed based on the current use of the assets and their user in the future.

 

Growing up in Manhattan there were neighborhood cigar stores on many commercial street corners. They were good business in the late 1920s and became less good as time went on. By the early 1940s those businesses had effectively died. A chain of these went bankrupt, but their stock went up in price!!! The reason for this was that these stores were on busy corners and had long-term leases. A classic case of being worth more dead than alive.

 

There were a couple of cases of railroads who lost lots of money throughout the depression and went bankrupt. However, a couple of sharp investors saw a similar situation, as the railroads had considerable land along their right-of-way. In the WWII expansion of plants and military camps, these lands and their proximity to the rails became very valuable.

 

The unfortunate attitude of too many of today’s analysts and portfolio managers is that “value” is found on the published financial statements. To them, stock selling at a discount to book value is a bargain. In truth, book value is a collection of unamortized assets not written off. Because of changes in the market for a company’s products, the use of their facilities is less than their original purpose. For example, strip shopping malls in poor locations today.

 

What is not reflected in the financial reports are the developed new products, self-generated patents, a good sales force, key employees, etc. These are the types of assets we look for as investments.

 

The items mentioned in the last paragraph are critical in evaluating various layoffs. To the extent the layoff managers husband these types of assets I am not concerned, but if they are shedding valuable assets I am.

 

 

How Do You Evaluate Layoffs of Owned Stocks?

 

 

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Early Stages of a New Grand Cycle? - Weekly Blog # 781

 

Mike Lipper’s Monday Morning Musings

Early Stages of a New Grand Cycle?

 

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

 

 

 

Travelers Note:

Many who speak of future seminal changes don’t recognize where they are. This is understandable, as it is difficult to identify where we are in the development of trends, let alone where we are going.

 

Whether or not you agree with my perceptions, they may be useful to you in gauging where we are in the progress of time. Please share your views with me. You can’t avoid thinking about the future if you invest in securities. But by not investing at all you are letting others decide you and your family’s fate. No investment isn’t an investment.

 

Reliance on History

The main tool we have in thinking about the future is our perception about our collective past. We selectively use our less than completely accurate perceptions of the past in projecting our futures. While our learned or experienced views of the future can be helpful, they won’t give us a completely accurate map of the future.

 

The worst remembrance that some seniors have is a period labeled the “Great Depression”. In thinking about the future, my analytical training suggests that this is a useful model for the worst that might befall us. We hope we can survive a similar period and therefore we can deal with whatever may come.

 

Where are We?

Remember this question when traveling with young children? We may remember a partially inaccurate statement from a nearby authority-figure making a guess. This was not an attempt to misinform, but a quick estimation of what was known or believed. We do the same today in addressing the future, using a selection of factoids that lead to a satisfactory conclusion. I follow this learned pattern.

 

When I look at the array of information before us today, the following elements are part of my thinking:

• The best single predictor of the future by a mass of decision-making people is the general price trend in various US markets, utilizing the median performance of US Diversified Equity  Funds (USDEF). Measuring from the peak on 2/19/20 to last Thursday, there was a compound gain of +5.93%. (True, from a subsequent bottom on 3/23/20 the gain was +23.31%.) However, for the last 2 years the average USDEF lost -1.14%. These are pretax and pre-inflationary returns. Obviously, retirement capital during this period was not augmented by positive real performance. For the last 52 weeks, results were even worse -6.59%. In the current year through Thursday, 7 out of 108 fund peer groups lost money, with the same number gaining over +10%. I am guessing the median fund probably produced about +5%, adding little to retirement accounts after taxes and inflation.
• Perhaps the most depressing news came over the weekend in a NY Times column titled “Why Money Market Funds are now Leading the Pack”. They are referring to money funds attracting more assets than any other type of fund. This is typical of a bottom, which comes at the end of investment cycle before a new cycle begins.
• These two elements suggest a lot of investors, both individual and institutional, expect a lengthy period of stagflation. We have had two extended periods of stagflation, during the depression and during portions of the 1970s and 1980s.
• Today we are seeing two types of behaviors we saw during the Depression.
• Empty apartments or floors being temporarily used for parties or other short-term uses.
• Broadway shows picturing past happier times.
• Last week 8.8% of NASDAQ listed stocks hit new lows vs. 2.9% for the NYSE. The NASDAQ led the NYSE on the way up and is still up +17.15% year to date. We should consequently expect it to lead going down.
• There are another two Depression era trends currently reappearing. A speed up in the replacement of CEOs and new ways of doing business. Apple* is an example of the latter. They are offering a cash savings account, not an insured deposit relationship. During the Depression, FDR started the FDIC to protect the bank assets of small depositors. While most people thought the accounts were backed directly by the government, losses were socialized by the remaining banks when the FDIC bailed out the banks. (This privatized the loss in the same way JP Morgan did in the 1907 Trust company panic.) Apple’s current move is backed by Apple, the largest company by US market capitalization. 

*Shares in Apple and Berkshire Hathaway are owned in personal and client accounts. Apple shares are the largest public investment owned by Berkshire Hathaway.

• Inflation is caused by excess demand not being consumed by the domestic economy. Throughout history wars have contributed to inflation, as the government spends money not supplied by the domestic economy. Spending on climate change, poverty, and similar expenditures also add to inflation. Short-term interest rates only directly impact short-term borrowing, having only a modest impact on national inflation.

 

Working Conclusion

While it is not absolutely certain we will have a major economic decline, it shouldn’t be discounted.

 

After depressions there is always an expansion to look forward to.

 

Thoughts?

 

 

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Mike Lipper's Blog: 3 PROBLEM TOPICS: Current Market, Portfolios, and Ukraine- Weekly Blog # 779

Mike Lipper's Blog: What To Believe? - Weekly Blog # 778

 

 

 

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