Headlines Are for Those Who Don’t Use Their Heads

 

 

Mike Lipper’s Monday Morning Musings

Headlines Are for Those

Who Don’t Use Their Heads

  

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018

            

 

 

Headlines on your screen or paper are sales pitches for a conclusion, not a review of the data. As we lose the largest asset we have - time, we often accept the pitcher’s conclusion and fail to review the facts, either because we are too busy or the pitcher’s conclusion coincides with our beliefs. Allow me to give you an example using the current state of the economy.

 

The biggest megaphone on the economy is the government, supported by those who have something to sell. These “bulls” either don’t know about the other side or choose to ignore the other facts. It is easy to do, especially when they control the media and sources of data. The government publishes most of the information that most believe. However, let me point out something Apollo said in a large newspaper wrapper, “the overwhelming majority of companies with $100 million in revenues are private”. This statement suggests that these companies have less than robust sales and are barely replacing well-trained employees that leave. My conclusion is supported by this week’s University of Michigan’s Consumer Sentiment Survey, which dropped to 46.3 from 48.1 last month. In New Jersey, layoffs of 50 people or more must be reported. Lately, I have noticed that major Pharma companies, which appear to be financially sound, are laying people off!

 

Publicly traded companies publish financial results quarterly and have financial relations and press support people to get the message out. Executives of public companies get bonuses on the performance of their stock, whereas executives of private companies do not.

 

Another example of an unbalanced series of headlines is the US winning the war in the Middle East. According to some reports we are running out of ammunition, our allies are being bombed, and another aircraft carrier is being placed in position for battle.

 

Debt and its Repayment

Very few people have any direct knowledge of the Great Depression, which was driven by an enormous increase in debt during the 1920s. Toward the end of the period the farm community and the fam banks were overloaded with debt, forcing a Republican President to pass the Smoot-Hawley tariff bill, which was later repealed. Today, US farm debt is at record levels and experts believe it may be undercounted. (Republican strength in the Senate resides within its midwestern senators, who are likely concerned about next month’s elections.)

 

Many governments rely on short-term bonds, the US government more than most others. With the deficit continuing to rise there is also some concern about the two biggest foreign countries holding our debt, Japan and China. We may find it increasingly expensive to sell our debt, an issue that appears to be an unpublished concern of our Treasury.

 

Conclusion

Read economic reports carefully and look for what is missing. Recognize events that parallel our history, they might lead you to conclude that our high rates are not high enough.

 

Share your thoughts so I can learn.

 

 

 

Did you miss my blog last week? Click here to read.

Mike Lipper's Blog: Are Changes Indicative? - Weekly Blog # 961

Mike Lipper's Blog: For Better Performance: Pick the Right Data - Weekly Blog # 960

Mike Lipper's Blog: Are We Refighting the American Revolution? - Weekly Blog # 959

 

 

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Copyright © 2008 – 2026

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

On The Way To Casualties & Eventually Riches - Weekly Blog # 918

 

 

 

Mike Lipper’s Monday Morning Musings

 

On The Way To

Casualties & Eventually Riches

 

Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018

 

Current Situation

In the fog of the latest week there were a few possible clues of changes and pronouncements.

• In November, US manufacturing activity contracted for the 9th month.
• After Friday’s close, an emerging market fund rose +4.99%.
• The value of the US dollar has fallen -6.16% year-to-date.
• Financial Times headline: “Wall Street expects double digit gains next year”.
• Apollo provided a glossy wrapper to the weekend Wall Street Journal, titled “What if the old financial playbook is costing you?”
• The Trump boom is comparable to past expansions, but not yet as big a percentage gain of GDP as the railroad boom of the 1880s.

Each of these bullets point to possible clues for the future, which should be examined by long-term oriented investors and their managers, as this blog will attempt to do.

 

The search for Investment clues

• While we have become a service-oriented economy with high dependence on the skills and attitudes of workers, politicians focus more on the manufacturing sector which has more unions and workers paying real estate taxes and buying lots of local supplies. Thus, manufacturing jobs are more important in Washington than in NYC. I suspect the re-shoring of manufacturing will probably be more automated and will have less employees. Consequently, office holders need to worry about ’26 and ’28.
• The real purpose of announcing tariffs was to force meetings with economic leaders to reduce non-tariff trade barriers. This has led to numerous currencies dropping more than the US dollar. (In my view, this is the wrong way to create more prosperity. We should be raising interest rates, so we are able to absorb the likely increase in bad debts, particularly those held by private capital. Higher interest rates will also raise foreign exchange rates, encouraging foreign lands to utilize more of our exports. A richer world is safer and better for us than a poorer one.)  
• The “street” is predicting at least a 10% gain next year. This year the median US Diversified Mutual fund produced a year-to-date gain of +12.55% and an annualized gain of +10.12% for the five-year period, this is at least 2-3% better than the expected net income gain. The difference is the result of other income and stock buybacks. Currently, public polls suggest investors are not happy with the results.
• Bankruptcies are increasing, particularly in non-listed companies. Private capital raises money to invest in the equity of these companies or to buy parts of public companies. Some of the private-capital is sold to investors as an income producing asset, which often requires a periodic sale of some of their assets. In some cases, this has proven to be difficult because some of their holdings experience difficulties. (While there is some trading of assets between privates, the remaining assets need to be sold to listed companies. This may resemble the old game of musical chairs, where one or more of the ‘safe’ chairs are removed after each round. The remaining chairs will be purchased by the public market, so the private market is dependent on the public market in the end. My concern with regulators encouraging retail investors to put some of their retirement money in private vehicles is that they will be buying into troubled situations.)  
• The comparison of the “Trump Expansion” with the railroad expansion of the 1880s could be accurate. It was a period of speculative, and in some cases fraudulent activities. Many new issues came to market competing with existing firms, which led to price wars and consequent bankruptcies. The era ended when JP Morgan and others recognized that too much competition was ruinous, resulting in rigorous rounds of mergers. Much money was lost and many communities lost rail service.

 

Conclusion

We have entered a globally different world. Investors need to study carefully and invest for the long term, periodically choosing not to invest.

 

Thoughts?

 

 

 

Did you miss my blog last week? Click here to read.

Mike Lipper's Blog: Was it the week that wasn’t? - Weekly Blog # 917

Mike Lipper's Blog: Recession/Depression Risk Assumptions - Weekly Blog # 916

Mike Lipper's Blog: Risks Are Rising Thru the Clouds - Weekly Blog # 915

 

 

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 – 2024

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.