Mike Lipper’s Monday Morning Musings
What Can Go Wrong
Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018
Preface
In preparing to start a buying program using one of the
lessons from betting at the track you should recognize what could go wrong. The
purpose of this blog is not to permit betting, but to avoid wagering on one’s
ego and failing to learn from the experience.
There are four general reasons for not seeing an opportunity
as a trap.
- Not appreciating the goals of the source.
- Inaccurate data or badly displayed data.
- Failing to process past mistakes.
- Too difficult to fathom. (Probably the least in terms of occurrence)
Tocqueville, as quoted by Goldman Sachs who deals well with
errors. “The greatness of America lies not being more enlightened than any
other nation, but rather her ability to repair her faults.” Therefore, I view betting
on horses, securities, politics, people, and many other things, as learning
experiences.
Sources of Mistakes
We all have deeply felt biases. The media and their chorus
of pundits use information to motivate repeat use of their work. Thus, they
transmit their pronouncements in the way we would like to read, see, or hear.
For example, in the latest announcements of the number of people hired, it was
better than many expected compared to the prior, shorter month, with bad
weather. Deep in the article was the fact that it was not better than the same
month last year. Furthermore, if you deduct healthcare and social assistance
workers from the total employed, there has been no growth since 2024. Why is
this important? The latter group receives payments from the federal government,
either directly or indirectly, which will likely have some impact on the midterm
elections.
This is probably a major reason for the various market
indices going up. Using the data for this week only, 2/3rds of the stocks
advanced and 1/3rd did not. Even on Friday, there was little focus on the
number of new unemployment claims, which rose for the week. There was little
coverage of the consumer sentiment survey by the University of Michigan, which hit
a new low.
When companies release layoff numbers, they are vague and
rounded. What disturbs me is that these are some of the most numeric-driven companies:
Fidelity, Deloitte, and Commerzbank, all of which announced cutbacks. For some time,
established financial and auditing firms around the world have been retiring
senior people without hiring replacements. Even some “AI” people have been let
go.
One of the most dangerous items of news is a shortage of an
industry’s goods followed by a new large supply becoming available. Historically,
look at what happened to the price of gold when the size of the Latin American
precious metal was announced. While it made Spain wealthy, it hurt the other
European nations with lots of gold in their vaults. So be careful if quantities
jump up while simultaneously being withdrawn.
What We Should Have Learned?
Perhaps we should have learned from recorded history the
need to negotiate debts payments, date, and rate! Examples include the
Babylonians, William Shakespeare’s “Merchant of Venus”, the expansion and
depression of the 1920s and 1930s, or even the present occupant of the White
House.
Almost every sector in the commercial world has added debt
as their currency for expansion. This is one reason to keep an eye on the
slowdown in ROTCE (Return on Total Capital Employed). Bearing in mind that this
sum does not cover accidents and supply chain issues adequately.
Please let me know what you think I can learn.
Did you miss my blog last week? Click here to read.
Mike
Lipper's Blog: This Weekend’s Learning Sources - Weekly Blog # 939
Mike
Lipper's Blog: Watch Out for the Four - Weekly Blog # 938
Mike
Lipper's Blog: Investors’ Interlude - Weekly Blog # 937
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 – 2026
A. Michael Lipper, CFA
All rights reserved.
Contact author for limited redistribution permission.
Posts
No comments:
Post a Comment