Mike Lipper’s Monday Morning Musings
Reading the Future from History
Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018
History May Suggest:
- The American People Won the Election
- The Recession has started
The Declaration of Independence was signed on August 2nd,
1776, the US Constitution was passed in 1787, and the last state (Rhode Island)
ratified it in 1790. Today, Rhode Island still remains the smallest state in
the Union. Thus, since the beginning of our nation the rights of our smallest
state have been critical to our progress. One of the many things making the US
different than other republics is The Founding Fathers fear of the tyranny of
the larger states on the smaller states. Consequently, our Electoral College
favors state representation over population. In the 2024 election, even though President
Trump polled more votes than Vice President Harris, the House is almost evenly
split, but he won 36 states and lost only 14, mostly on the coasts or major rivers.
This split is one reason I suggested President Trump will likely
have difficulty getting much legislation easily passed through both houses,
where he only has a majority of about five votes. Of the 14 major issues, only
two can be accomplished through just executive orders.
Actually, many if not most Americans are pleased with the
results of the election. An incompetent government was dismissed before it became
even more intrusive and has been replaced by a new administration with untried
ideas. New legislation will be delayed by a disruptive Congress and a
slow-walking Deep State. Many Americans would like it if the air conditioners in
D.C. did not work, fulfilling Hamilton and Madison desire that government work be
part-time.
Recession Coming?
As someone rowing in a boat with the wind picking up and clouds
darkening, you become relatively certain it will soon rain. The question is, will
you get to dry land before getting really wet?
Evidence of an economic storm on the horizon can be summed
up as follows:
- Stock analysts have been instructed for generations that high quality bonds are more sensitive to economic changes than stocks, at least initially. Currently, yields have been going up (prices down). However, mid-quality bond prices have barely moved at all, something overseas fixed income investors are very sensitive to.
- Most US stock prices declined this week, with just 37.7% of the stocks on the NYSE rising and only 27.6% rising on the NASDAQ. NASDAQ stocks have performed better than those on the “Big Board” for some time and are cheaper on a market to book value basis. This suggests the NASDAQ investor is a more professional investor.
- The American Association of Individual Investors (AAII) weekly sample survey of investors indicates the bullish or bearishness sentiment of their investors for the next six months. In the last three weeks, the bullish reading has risen to 49.8% from 39.5%, while the bearish reading only went down to 28.3% from 30.9%. Market analysts believe the “public” is often wrong at turning points. With that in mind, it is interesting that the bulls gained 10.3% while the bears dropped only 2.2%.
- The weekend WSJ tracks some 72 prices of stock indices, commodities, ETFs, and currencies. This week only 12.5% were up, with Natural Gas up a leading 5.77%. The remaining gainers all rose by less than 2%. This likely indicates sophisticated investors are nervous about what lies ahead.
Thoughts?
Did you miss my blog last week? Click here to read.
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