Mike Lipper’s Monday Morning Musings
Picking Winners/Avoiding Losers
Editors: Frank Harrison 1997-2018, Hylton
Phillips-Page 2018
Mindset
Every investor,
speculator, analyst, portfolio manager, and politician’s job is to find winners
and avoid losers. My fundamental training for accomplishing these goals for my
family and others relies on my training at the racetrack.
The first requirement
for success is recognizing where you are and periodically admitting when you are
not right, which is distinct from being wrong. Right now, I admit I have been
wrong. Using the S&P 500 index’s closing price performance on Friday plus a
minimum 3% premium, WE’VE APPERENTLY ENTERED A NEW BULL MARKET.
This assertion is based
solely on the numbers, although there is considerable short and long-term evidence
to the contrary. Nevertheless, one lesson learned from the track is admitting your
mistakes when holding a losing ticket. Learning something from your mistakes should
often make you a winner. Mistakes are both normal and repetitive. The most
valuable lesson is learning how to avoid them in the future.
Current Contrary
Conditions
The latest stimulus
for the market was surprisingly strong Labor Department jobs numbers, which probably
disagree with the household numbers due to an increase in the number of people
working two or three jobs. Perhaps more significantly, there were 601,000 more
government workers than the 257,000 in domestic manufacturing. (Productivity is
difficult to calculate accurately, and it is hard to value its worth. Perhaps
the same could be said about the number of government workers.) Hardly a week
goes by without an announcement by a large employer laying off 10% or more of
their workforce. Those laid-off but receiving some settlement should not
qualify for government pay. There are secondary layoffs which don’t normally
get noticed, such as Abrdn cutting its use of Bloomberg terminals.
Longer-Term Worries
Structurally, we and
the rest of the world are living more expensively. For the US it can be summed
up on a secular basis. Total interest costs are already larger than defense and
Medicare costs combined. An aging population with rising medical
costs, fewer workers, and more expensive weapons, among other things is driving
these expenses.
History does not
exactly repeat itself but does rhyme. Technology changes, but the way people
act rarely does. It is quite possible we have been in a period of low
productivity and stagflation since the COVID years, paralleling the 1930s with some of the aftereffects of the 1940s. Hopefully we will not waste time and money trying to
spend our way out of it, although current leadership around the world seems to be
imitating those back then.
How to Invest
Recognize that the
betting odds do not favor straight-line extrapolation. We individually will
have to move cyclically and at times it will be unpopular with current opinion
leaders. Some suggestions won’t work or will only work infrequently.
Targets of Opportunity
- Hospitals and Health Care will grow bigger, more complicated, and require management skills not frequently present today.
- Market popularity will prove to be expensive and will not last long. The gap between leaders, followers, laggards, and mavericks will be large. It will be difficult to consistently travel with the same people. Few, if any, can effectively work successfully up and down the ladder. Very little will be permanent, and it will come at a cost.
- Two lowly valued sectors, transportation and advertising, could be good opportunities for the talented.
- Also of interest are companies that have intelligently managed turnarounds, either by changing dramatically in size, location, or the makeup of their performance drivers.
Please share your
targets and progress with me.
Did you miss my blog
last week? Click here to read.
Mike
Lipper's Blog: Is This “Bull Market” Real? - Weekly Blog # 822
Mike Lipper's Blog: Worth vs Price
Historically - Weekly Blog # 821
Mike Lipper's Blog: 2 Media Sins Likely
to Hurt Investors - Weekly Blog # 820
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