Mike Lipper’s Monday Morning Musings
Searching for Future Long-Term Picks:
Gathering Assets, Reasons to Search
Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018
Inputs from This Week
- The Consumer Confidence Index was 91.4 vs the 94.4 expected. The index was however up from last month’s 90.6.
- The American Association of Individual Investors (AAII) sample survey projections for next six months are Bullish 31.4% vs the prior week’s 42.3%, Bearish 42.3% vs the prior week’s 36.3%.
- Workforce participation of 61.4% is the lowest since the covid readings. (We have made working on payroll unattractive for some.)
- In some European countries the number of air conditioners is small, and some are even being removed. (The founder of modern Singapore stated that the installation of “AC” led to the economic growth, enabling it to become the fifth richest economy in the world.)
Future Investment Problems
- Americans misreading foreign data. The foreign performance of indices and positions is converted into US dollars from the local currency. As the US dollar is currently stronger than most other currencies, it makes foreign investments look more attractive. We tend to forget that most US investors temporarily rent foreign securities. When we sell in declining markets local buyers are often the only buyers and they are not generous.
- When looking at the statics of a company, investors look at where the fiscal headquarters of the company is located, not where the product or service is sold. Consequently, many investors currently think they are investing in the UK, Taiwan, or South Korea. The Financial Times 100 largest companies, which dominate the local British stock market, makes almost none of its operating earnings are earned in the UK. It is my guess that a good many US investors think their rapidly expanding earnings are coming from South Korea and Taiwan, not by what is happening in the US.
- Investors are often attracted to various securities indices due to a handful of the leading performing issues within the index. These companies, at least for a while, perform better than the indices. However, history tells us that it is only a matter of time before the leaders become laggards and detract from the performance of the index.
- One recent concern of mine is that a senior American General in Europe is resigning. He is a four-star general with a very good battle record. I don’t believe it is an appropriate time to reduce our military leadership anywhere, particularly in Europe.
- As a portfolio manager for long-term beneficiaries, I am very conscious of the variability of performance records. Looking at the recent five-year period, only six mutual fund sectors had average performance better than the S&P 500 Index Funds average. For the ten-year period, only Large-Cap Growth Funds and Domestic and Global Science and Technology Funds beat the S&P 500 Index Funds average. Considering the CEOs of many companies don’t last beyond five years, with even fewer lasting ten years, I am particularly nervous about those whose stock prices depend on “AI” products and services. (I wonder how many repeat orders there are for their present products and services.) Many of last year’s leaders are selling below last year’s performance ranks.
Possible Buys
The one major stock group selling below its 2000 price is Healthcare.
I do not know these stocks well and tend to use specialty funds to invest in
the sector. I will probably reach sell decisions without much help from the
industry, but that may be a long time from now. Without a lot of knowledge, I am
starting my learning efforts with Johnson & Johnson and CVS Health. I like
their strategies but don’t know their tactics, managements, and their outlooks
for their critical present and future drugs. Furthermore, I don’t know the
outlook for government regulation. I need any help subscribers can provide.
US Gifts to Others
Those in the US are incredibly lucky, or if you prefer
God Given, considering the benefits/gifts we have received. However, it is wise
to note that some of what we have given to the rest of the world is not always
beneficial, as shown below:
- A constitution that enshrines the rights of minorities.
- An education process that attracts students from all over the world, who return to their homelands and contribute to them.
- A military power that has critically helped defend other countries.
- Innovation, which has produced great things for the world.
Hope you had a good July 4th and life gets better.
Did you miss my blog last week? Click here to read.
Mike Lipper's Blog: What is Pending and When - Weekly Blog # 947
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