2 Presidential Lessons to be Learned/NASDAQ Clue - Weekly Blog # 673

 

Mike Lipper’s Monday Morning Musings

2 Presidential Lessons to be Learned/NASDAQ Clue

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

 

For Want of a Nail

For want of a nail the shoe was lost.

For want of a shoe the horse was lost.

For want of a horse the rider was lost.

For want of a rider the message was lost.

For want of a message the battle was lost.

For want of a battle the kingdom was lost.

And all for want of a horseshoe nail.

A similar proverb has been coming to us for many centuries, in many languages, showing the critical importance of micro elements on macro events. As a bottom-up analyst I have learned to build macro views from the micro, distinct from many top-down thinkers who believe a macro view is appropriate for investment decision making.

Learning from Past Presidential Mistakes 

Before the current administration attempts to dictate its top-down views it would be wise to review the consequences of prior Presidents’ actions, which had the opposite effect of their intensions and led to severe repercussions for the world, country, and investors. In two cases, the party affiliation of the president did not save him from important mistakes.

FDR

The current administration is described as the most “progressive” since FDR, whose effort to redeploy the population and redistribute their wealth, took a bad recession caused by unsound debt policies and turned it into a long Depression lasting to the needed World War II. (Note, depression is a psychological term and is not designed for an economic period.) The lesson coming from this 12-year period was the central government being as much a part of the problem as the solution. In the eyes of potential aggressors, the US was weakened and would be slow to respond due to a lack of demonstrated political will. (Including, shifting government spending from buying to producing, a weak and outdated military, raising taxes on productive portions of society, and making it illegal for Americans to own gold.)

Richard Nixon

Became an advocate for Keynesian contracyclical spending and closed “The Gold Window”, which prevented  the US from buying gold from foreign nations for dollars and ignited the sharpest rise in inflation in modern times. While he did open the door to China, he saw it in military terms and did not contemplate the commercial plusses and minuses. 

Influences on the Stock Market

There are three mega market concerns: 

1. Economic/political concerns
2. Corporate views and earnings
3. Market structure changes

I am delighted most investors view the market impact in the order listed. As a contrarian, I take the reverse order as more important. Looking for “The Nail…”. A basic rule of investigation is to not believe the owners of the “printing presses”, demonstrated by the Federal Reserve’s terrible record on predicting economic turning points. One of the reasons that their record is so bad is that the Fed and the government use tax data for individual income. (I am sure everyone reading this blog attempts to show the maximum amount of possible income on their tax forms.) 

Corporate earnings releases have become very “plastic”. “Adjusted” financials now take prominence over audited statements in letters from the CEO. In the era of ESG and Diversity, commentary is about wishes and intentions, not current conditions. Thus, I put much more credence in securities transaction reports, even though I am conscious of trades occurring “off the market”. In addition, for historical reasons I have a lot of confidence in mutual fund data. It is from these vantage points the following views are offered.

Current Briefs

1. In the current week ended Thursday, mutual funds gaining more than 10% for the week included: 5 Value funds, 4 each in small and mid-cap funds, and 2 each in Core Commodities and Global funds. While smaller and mid-cap value funds were generally favored, individual stock selection was critical.
2. Six of the top 25 for the week invested in Japan and 8 of the bottom-10 were invested in natural resources.
3. Net fund flows for the week focused on portfolio attributes as well as immediate performance.
4. The JOC-ECRI Industrial Price Index year-over-year is +75%

New York Stock Exchange vs. NASDAQ

1. Volume year-to-date through Friday:  NYSE -25.57% vs. NASDAQ +25.14%                                                                                                                           
2. New Highs, New Lows, Number of Securities Traded

                 NYSE     NASDAQ

New Highs    820        784

New Lows      95        231

# Traded    3419       4322

NYSE is more bullish, but NASDAQ is Savvier, as shown on Thursday with the 400 plus point drop.

What Do You Think? Did I find a nail? If not, what would be?

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

https://mikelipper.blogspot.com/2021/03/mike-lippers-monday-morning-musings.html

https://mikelipper.blogspot.com/2021/03/next-race-winner-weekly-blog-671.html

https://mikelipper.blogspot.com/2021/02/did-something-happen-last-week-weekly.html

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