We Have a Management Problem
Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018
The Founding Fathers Saw it
When unsuccessful in getting George Washington to accept the
title of King they decided to name him President, a person who presides over others
that are powerful. Notice, they did not choose Executive or Manager.
Interesting.
Today, the elected leader of the country comes from the commercial world and governs as a Chief Executive. Interesting. The difference between the two labels is that the presiding officer needs to work with other elected officers and not command his or her views become absolute commands.
Different Styles = Different Results
The largest owner/leader of a private family company has
only the marketplace or regulator that prevents almost complete dictatorial
power. This is reinforced by having family members in the named positions. It
is worth noting, rarely if ever is one of the senior family members hired away
to run a separate public company. Interesting.
One of the realities of managing a successful company is
that senior people are often hired away to run competitive companies. GE, JP
Morgan Chase*, and Apple* are good examples.
* Indicates shares owned in personal and managed accounts.
Interesting
The Selling Problem
Emotionally, selling is much more difficult than buying.
Afterall, buying is an act of new faith in both a stock and the individual
making the decision. At the time of purchase the stock position is the single
best bet the investor can make.
Selling sometimes involves disappointment in the stock or can
be the need for account liquidity. It is like the pain of selling one’s
children or losing a personal extremity, but at the time of sale it is the
least loved stock in the portfolio. Emotionally it is relatively easy to set up
a buying program that purchases a position over time, such as buying a certain
number of shares each month for the next year as one gains conviction. However,
selling is an entirely different mindset as it is painful to lose a limb or a
child, the quicker the better. That may be why more shares have been sold at
declining prices on down days for the last six months. Since selling is more
emotional it probably makes tactical sense to sell over time. Interesting
Reasons to Consider Selling Programs
- The US has the highest inflation rate of all the advanced economies.
- Iran has a functioning economy, despite the bombing.
- There are only 3 mutual fund sector averages that beat the +13.66% 10-year compound average of S&P 500 index funds; Science & Tech +17.82%, Precious Metals Equity +16.77%, and Large-Cap Growth +14.61%. My guess is that it is unlikely these three sectors will outperform the average US diversified fund’s return of +11.16%, nor will they produce double digit gains in the next 10 years.
- The “Hyperscalers” are commodity players that depend on the long-term prices of fuels for their plants.
- The Walmart (stock) Recession Signal +10.89% vs the S&P Luxury Price Average -14.8%.
- Fixed Income strategies in the future won’t follow historical patterns.
- The President has borrowed the most money and runs the government with biggest deficit. They are urging retail investors to buy debt securities.
- Ray Dalio believes in the histories of recessions, concluding we are currently in stage five on the way to six.
- Fitch has noted that the default rate on private debt has risen.
- The ECRI industrial price index has risen to 135.06, which is a +14.21% increase in the last 12 months.
- Note: The job gains for March included jobs for healthcare, which require larger amounts of social assistance and produce less GDP per person.
- Homer Jenkins Jr. noted in the WSJ that “Trump is a lame duck with low appeal and a surplus of voter distrust.”
- We won’t have peace in the middle east until Iran’s sponsorship of death and destruction in the US, UK, Europe, Mideast, Africa, and Asia ends.
Interesting. Be Careful
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