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tariff bill, which was later repealed.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, which might lead you to conclude
that our high rates may not be 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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