Are Changes Indicative? - Weekly Blog # 961

 

 

 

Mike Lipper’s Monday Morning Musings

 

Are Changes Indicative?

 

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

            

 

 

Changes of Note

One rule of recon is to note any changes indicative of major transformation in the battle of survival. There are changes that I noted this week. These are not earthshattering, but could be indicative of either major changes, minor interest, or just possibly major importance. I ask my subscribers to reach their own judgement and hopefully share their conclusions with me.

 

The following list is in the order in which I found the changes, not the order of importance or the order of importance reflecting what the future might hold for us as investors.

 

Clues of the Future

1. Apple* is beginning its pay service in India. (Owned by clients and personally)
2. The Wall Street Journal publishes two sets of prices that it tracks.  The first is 118 items for the third quarter, with 53% going down. The second covers 72 prices for the week, with 74% falling. (Its significance serves to reinforce the Chairman of the Fed’s comments regarding the importance of shorter periods.) The ECRI reported a 1.6% decline in industrial prices for the week.
3. Both Nvidia and Tencent suggested that the price of certain long-term chips be used as an index to determine collateral for loans to data centers. (This suggests that debt levels have reached the point where lenders are running out of sufficient capital for loans.)
4. The yield of ten medium grade bonds tracked by Barron’s has reached 6%.
5. The costs to rebuild the Mid-East will be large, assuming the war in Iran is over.
6. Volvo reduced its estimate of car sales in both China and the US. (I have been increasingly thinking that the combination of the USA and China is going to drive the global economy.)
7. As of now there are only two of five SEC commissioners left. (The US government is missing lots of key people.)
8. For the week ended Thursday, only five of over 100 mutual fund sectors were positive, led by Japanese funds +1.74% and Dedicated shorts +1.60%.
9. The Kopernik fund finds value in Chinese pharmaceuticals, agricultural land, and Potash, among others.
10. Prudential is closing two of its office buildings by consolidating into its HQ and reducing staff. (They are not the only insurance company doing this, which suggests individual life insurance might be unprofitable for others.)
11. The Financial Times noted that “Mature market governments spend more on interest payments than the world is investing in “AI”, defense, and energy.

 

I am still expecting the next recession, if we are not already in one. There may even be an eventual depression if governments are not very careful.

 

Please share your thoughts with me so I can learn.

 

 

 

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

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

Mike Lipper's Blog: Survival First, Before Growth - Weekly Blog # 958

 

 

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Fears On a Quiet Summer Weekend - Weekly Blog # 955

 

 

 

Mike Lipper’s Monday Morning Musings

 

Fears On a Quiet Summer Weekend

 

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

             

 

 

Is Disruption Ahead?

A quick late August trip to London to attend a great Proms concert by the Academy of St. Martens in the Fields in London seemed like a good idea to us earlier in the year, as not much happens in late August. As is often the case, I was proven wrong when a few worries raised their scary head this week.

 

Potentially the Biggest Problem

The self-appointed job of this blog is not to precisely predict the future, but to consider issues that may happen which few investment professionals are focused on. My concern for the repayment of debt in a rising interest rate environment is rising. Among my concerns are the sharply increased funding of data centers, wars in Iran and Ukraine, and the budding desire for retail investors to provide funding for new private ventures, both on earth and in space.

 

I do not know the level of care and consideration the corps of young financial bankers and their associates are performing, nor the experience of the investors they are interacting with. What concerns me is that few players have experienced a significant recession, and only a tiny fraction of the buyers of this paper have any knowledge of a depression. Morgan Housel states in his book Psychology of Money, “some lessons have to be experienced before understanding”. Few people appreciate the possibility of some loans not being repaid with interest on time when due. While I don’t know the conditions of every loan made by individuals, companies and governments, I do know that higher interest rates make it more difficult. On Thursday, Guggenheim Partners’ $1.2 Billion loan traded at $0.78 vs $0.96 the week before. (Price declines happen when the market recognizes that repayment of the loan on a current basis becomes questionable. How many other loans will be similar? I remember this kind of paper eventually selling substantially below $0.50 in a brief discussion of bankrupt investments in Professor Dodd’s class in the 1950’s. Graham & Dodd are well known for writing Security Analysis in 1934, one of the most respected investment books ever published.) The ECRI Industrial Price Index rose to 142.74 this week from 141.60 a week earlier. Considering the Index has risen 25.93% on a year over year basis, one would expect to see more distressed loans.)

 

This week, the Secretary of the Treasury more than doubled the purchase of 10-30-year US Treasury bonds on offer in reaction to the 30-year yield rising significantly above 5%. Some have already said that Bessent is putting a Band-Aid over a bullet hole. After declining following the Bessent intervention, rates have risen again. Increased rates are likely to make borrowing more difficult or expensive for the data centers, mortgages, and individuals. Prior to this announcement, the American Association of Individual Investors (AAII) sample survey raised its six-month estimate by 0.8% and its bullish projection by 2.0%. Their bearish projection is now 4.5% higher than their projected bullish guess.

 

Some Other Quotes from Morgan Housel

• Nothing is as good or bad as it seems
• Earth has on multiple occasions been covered with water. (Geology is a good history teacher)
• Snow White made up for 400 losing cartoons.
• No one makes good decisions all the time.
• Wealth is what is left after taxes and expenses you don't see.
• Wealth is accumulated after spending.

 

What do You think?

 

 

 

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

Mike Lipper's Blog: What Could Go Wrong? - Weekly Blog # 954

Mike Lipper's Blog: Are History & Economics Books Closed? - Weekly Blog # 953

Mike Lipper's Blog: Dead Cat Bounce > Last Chance - Weekly Blog # 952

 

 

Did someone forward you this blog?

To receive Mike Lipper’s Blog each Monday morning, please

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Copyright © 2008 – 2026

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.