Mike Lipper’s Monday Morning Musings
Markets Are Time Frame Exchanges
Editors: Frank
Harrison 1997-2018, Hylton Phillips-Page 2018
Who is in Today’s Crowd
The bulk of investors are not currently active. August is
normally a low volume month, but it appears we are not in normal times. There appears
to be less conviction as to where we are going. A reasonable bet is that the
majority of opinions regarding future direction are wrong.
This week we heard two opinions which the media suggested
were in contrast with one another. Fitch lowered its credit rating on US
Treasuries by one notch to AA+ from AAA, while Jaime Dimon stated that no large
country has a stronger credit condition. Actually, they are probably both correct,
the difference is in their function. The Chairman and President of JP Morgan
Chase was reassuring depositors that the US government was currently the safest
place to invest. Fitch as a credit rating forecaster, was suggesting future political
battles within the US could delay the promptness of the US government in making
payments on all its obligations. Both could be correct.
Jamie Dimon is probably correct that US government payment dates
will not currently be violated. (This excludes delays in payments on various
government contracts, which are not funded obligations.) Fitch raises the
question as to when the political process in the future could lead to some
delays. These are important concerns, but it is not the total picture as far as
investors are concerned.
A funder of the US government who will be repaid in devalued
dollars due to high levels of inflation. An added concern is the foreign
exchange value of the US dollar in a world that is increasingly measured in
other currencies. Both geopolitical and economic factors may make the dollar
worth less when purchasing essential items from overseas providers. (Energy,
clothing, critical medical resources, etc.)
Looking beyond the next few years the picture looks less
promising due to aging populations in the US and around the world. Both the US
government and private sector are failing to build up the reserves necessary to
pay retirees likely to have health issues. Historically, the next generation utilizes
their working years to pay for their own retirement and the care of their
seniors. That is not happening now. Many workers currently spend all
they earn and do not focus on long-tern cash generation.
Other Disturbing News of the Week
1. The current President looks to FDR as a great, if not the
greatest, president. FDR believed his greatest achievement was the National Recovery
Act of 1933 requiring competitors to meet and agree to wage rates for their
employees. The higher the better. The act was ruled unconstitutional by the
Supreme Court.
2. The UAW is demanding the “Big 3” give their workers a 40%
increase. (This is the same union that forced the US auto companies and their
suppliers to raise wages, leading to an increase in foreign manufactured car
imports and a decline in US auto exports.
3. One investment adviser called to my attention an article by
Bob Kirby, the great salesman from the Capital Group. His article, written in
1975, showed how each generation fails to learn from the past. Bob earned
enough during his lifetime to endow 5 scholarships at leading universities, hoping
to correct this situation. Caltech was a recipient of one of these Robert Kirby
scholarships.
4. Xi, the Chinese Leader, measures national success in terms of
technical self-sufficiency.
5. For the past week only 2 of the 31 Dow Jones-Standard &
Poor’s market indices were up, these were select micro and internet services.
6. Only 5 of the 72 price indices published by the WSJ each
Saturday were up this week. Three were energy and two were currencies. Wheat
and corn were the two biggest losers.
7. A US Navy Petty Officer was caught supplying detailed
photographs of an attack amphibious ship to a Chinese agent. (One of the many
difficulties facing an amphibious landing on Taiwan is the lack of amphibious
ships and their training. Over 60 years ago I served on such a ship as a USMC
Combat Cargo Officer.)
8. Last week, volume in NYSE stocks declined 59% vs. 62% for the
NASDAQ.
9. Major advertising agencies are cutting their estimates for
the rest of this year because their clients are cutting budgets.
Conclusions
The Fitch credit rate cut was not the only bearish news
that caught my attention last week. The comparisons with the FDR led Depression
is a bit unnerving. What is clear is that while the bulk of the US focuses on
the general movement of the dollar, many in Washington are focused on the
probability of votes, particularly at the top of the tickets.
What are you seeing and believing?
Did
you miss my blog last week? Click here to read.
Mike Lipper's
Blog: Possible Investment Lessons - Weekly Blog # 795
Mike Lipper's Blog: Cross
Winds - Weekly Blog # 794
Mike Lipper's Blog: Two Cycles
Are Worth Watching - Weekly Blog # 793
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