Mike Lipper’s Monday Morning Musings
New Era?
Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018
Evidence
After an extended period of daily market movements below 1%
per day, the most meaningful stock market index fell -2.64%, with the
technology sector falling much more. The 30-company Philadelphia Semiconductor
Index which produces the critical needs for “AIs” explosive growth fell -10.3%,
while the NASDAQ Composite fell -4.18%. (This is not the first decline for a
new technology driven bull market, which was led by railroads, canals, and
undersea cables in 1873. These stocks traded on exchanges in America, London,
and Vienna. In Vienna the market dropped 45% in one day.) Despite the happy
talk from Washington and various pundits, we have seen continued notices of
layoffs from large, seasoned companies, including by Macy and Saks. In New
Jersey, April unemployment was 4.8% vs 4.3% nationally. (It was just announced
that Exxon and Chevron have changed their state of incorporation from New
Jersey to Texas.) What is more significant to me is the number of bank branches
that are closing. Perhaps more significant is the observable factor that attractive,
wealthy women, are not wearing expensive jewelry while shopping or at
performances.
Midweek, the AAII sample survey showed the market outlook
for the next six months being 36% bullish and 37% bearish. (I suspect that if
the survey was done after Friday’s market, we would have seen a bigger total
for the bears). Interestingly, some stocks that typically don’t attract tech
buyers, like Coca Cola* (+3.46%), Moody’s* (0.49%), and even Apple*, fell less
than the market (-1.25%).
*Owned in managed or personal accounts.
My View
Most analysts and pundits compare stock price performance to
past cycles to determine investment policies, much like telling time with a
stopped clock. Seldom in an investment career does it pay to look for
meaningful structural change. One way to do this is to recognize that old
firmly held beliefs, like a flat earth, keep us from falling into the abyss. Like
Columbus, we should seek to find new riches by going against the popular view, putting
faith in a compass over an orderly world view. Similar to Columbus I may be
wrong, but I will hopefully reward my backers with fabulous wealth by
addressing society’s real problem, far too many unproductive people. Not only are
the young unproductive, but there are also healthy seniors not working for
money or the good of society.
Today’s government employment data shows that there are
sufficient job openings for all the unemployed, although the hirers say they
can’t find enough people to meet their needs. Only 61% of our population are
employed. I translate that to mean they can’t find people with the correct
attitudes and education to meet their needs. This is an indictment of both our
schools and homelife. To solve this problem, they should automate wherever
possible, which can mean using “AI”.
For many years I boarded
a 6 AM train with papers to read, reaching the office at about 7 AM prepared
for my first meeting with colleagues or committee members of the New York
Society of Securities Analysts, the trade association of my profession. I was
not alone, I would meet other analysts outside their offices for a bite of
breakfast, where executive committee members were also having breakfast with their
direct reports or others that were on the way up. (This was not the normal day
that the executive committee officially met, but they were still doing
business.) After a full day working numbers and writing reports, I caught the 6
PM train home. I arrived at close to 7 PM and then spent time with my children
going over how they spent their day. Thus, my workday was 12 hours, with some additional
time spent on the weekend. I probably spent some 70 hours a week fighting my
way up the ladder.
The law calls for a 40-hour week, which does not include
lunch. Today, according to the Department of Labor, the average American works
a little more than 34 hours a week and that time probably includes lunch. If
you listen to the young people of today, they believe in a work/life balance of
at least 50/50. No wonder our productivity grows at around 3%, which appears to
be higher than in China.
“Evidently, when Trump visited Xi Jinping last month, the
Chinese president made a pointed reference to the concept of overstretch. A
concept that was put forward over two millennia ago by the ancient historian
and general, Thucydides. Can China and the US overcome this trap? There is also
the risk of war expenditures becoming greater than the rest of the economy. The
current administration, unlike China, is extremely focused on short-term-announcements
impacting the mid-terms. Strategically however, both the President and Xi
Jinping are aware of the seminal work by Rear Admiral Alfred Thayer Mahon, titled
The Influence of Sea Power Upon History.
See what you can do to increase productivity and put more of
us to work for society. Your help is needed.
Did you miss my blog last week? Click here to read.
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