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 20th 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
- 83% of 2023’s gains in the S&P 500 thus far come from only 5 stocks.
- 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%.
- 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.
- 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?
- 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
- Household bank accounts = $6.7 Trillion, which is greater than Japan’s GDP.
- Private companies employ 90% of urban employees.
- 20% of 16–24-year-olds are looking for jobs
- 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.
Did you miss my blog last
week? Click here to read.
Mike
Lipper's Blog: Insights From a Sleepy Week, Important? - Weekly Blog # 784
Mike Lipper's Blog: My Triple Crown -
Weekly Blog # 783
Mike Lipper's Blog: Fire Drill -
Weekly Blog # 782
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 – 2023
Michael Lipper, CFA
All rights reserved.
Contact author for
limited redistribution permission.
Posts
No comments:
Post a Comment