Expectations Changing? - Weekly Blog # 930

 

 

 

Mike Lipper’s Monday Morning Musings

 

Expectations Changing?

  

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

 

 

 

The Main Motivator They Don’t Teach

Fear is the main motivator they don’t teach you about in pre-kindergarten through Ph. D studies. Primarily, this list is comprised of what can go wrong and what will hurt you, such as going broke, losing a job, or being defrauded. Discussions are informative but not particularly action oriented. What would be useful is a list of expectations, and of prime importance how to recognize them and what to do. These are life lessons which we all need but are not taught.

 

Each of us has our own level of awareness of critical expectations and we are aware of the changes in them. While all aspects of human life are open to change, I am going to focus on the expectations which impact our investment realities. These expectations are easier because they deal in large part with numbers. Numbers, like prices or earnings per share, are precise but mean different things to different people at different times.

 

The difficult part of dealing with expectations is identifying when they change and by how much. For example, a stock price expectation between $103 and $98, or an earnings per share expectation between $0.67 and $0.70. The critical issue is how early, or late investor expectations begin to evolve compared to others. Being early or late is often more impactful than being right or wrong?

 

Are We Changing Expectations?

A recent January survey of institutional investors had 50% expecting stock prices to rise, 39% expecting prices to be stable and 10% expecting prices to fall. An American Association of Individual Investors (AAII) six-month sample survey of investor expectations found 33.2% bullish and 32.9% bearish. Three weeks ago, both groups were about equally sure at 38%.

 

For the week ended Friday, more stocks fell on the NYSE and NASDAQ than rose (NYSE 56% and NASDAQ 53%, respectively). Normally slow-moving industrial commodity prices rose to123.06% from 121.92% the week before.

 

Most important of all, the US and Israel bombed Iran on Friday night. (The timing of the attack was a surprise to most, although the US has been building up its military and Naval forces in the Middle East recently.)

 

For some time, large companies in the US have not replaced retiring workers with new hires. We will see in the coming week if there is a large change in market expectations and whether that change in expectations is long-lasting.

 

 

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Strategically, Time to Think Differently - Weekly Blog # 927

 

 

 

Mike Lipper’s Monday Morning Musings

 

Strategically, Time to Think Differently

 

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

  

 

Warning: Almost No One Will Agree, Nevertheless Consider

My Burden: Hedging

 

After a market week of lots of good earnings and media pundit optimism, it’s time to worry. Individually, before we consider securities investments, we should consider our personal long-term investments. For most of our adult lives our two biggest investments are our homes and jobs. While we believe we know the numbers, we are wrong!

 

We fail to include in the analysis of our residence the true costs that come with the property over time. For instance, we do not include real estate taxes, either paid directly or included in rent payments. If we stay in our homes for ten years, in one place or more, the aggregate cost will probably equal the cost of buying initially. But that is not the actual cost of living in a home. That amount should also include the cost of local organizations we join, as well as the cost of any repairs and maintenance. Thus, the combined cost should be considered, as well as the planned next location, which likely represents a potentially large unhedged risk.

 

As large as the cost of home ownership is, it is hopefully smaller than the next risk. For most of us, our biggest risk throughout perhaps the first twenty years of our adult lives, is employment risk. If we work for one or multiple employers and we are not self-employed during most of our working years, our biggest risk is employment risk. We are living in a fast-changing economic world, where employers disappear as a result of business mistakes, technological change, badly executed mergers, and younger, smarter, better educated, and cheaper competitors.

 

We are Not Helpless

Over time, we can not only help ourselves but also accumulate sufficient capital to provide long-lasting wealth to cover our own lives and hopefully those of our loved ones too. This can be accomplished by regularly spending less than we make through our jobs and investments. Cyclicality is our enemy. As we move up in the commercial world an increasing portion of our wealth comes from accepting portions of compensation that have equity-like rewards and risks. The further you move up the economic ladder, the greater the rewards and risks. Additionally, the higher you go up the ladder, the more cyclical it becomes. Income fluctuates with sales and profits, but also due to changes in politics within the organization. This cyclicality should be hedged to the degree possible.

 

Selection of Investments is Critical

Picking good investments is always difficult. For the most protection, the primary goal should be seeking assets that hedge those investments generating the highest gain. I believe we are on the cusp of a period of major change, not the continuation of “happy talk” optimism. This past week there were dramatic headline changes of direction, but the market as measured by the S&P 500 barely returned to its prior high. Concurrently, the Economic Cyclical Research Institute (ECRI) industrial price indicator dropped to 122.27% from the prior week’s 131.20%. While this was an extremely happy reading of growing inflation, I suspect it was driven by natural gas prices plummeting -21.41% and diesel falling -4.79%. Far too many retail investors follow prices on the NYSE, where 39% of the stocks declined for the week. However, the better performing NASDAQ Composite saw 56% of its prices fall. Also, the American Association of Individual Investors (AAII) weekly sample survey showed the bullish outlook falling to +39.7% from +44.4% the prior week. In the real-world January produced the largest cut in jobs, which have been falling for 8 months.  

 

Conclusion: One Should Hedge

 

 

 

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Recession/Depression Risk Assumptions - Weekly Blog # 916

 

 

 

Mike Lipper’s Monday Morning Musings

 

Recession/Depression Risk Assumptions

 

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

 

 

 

 Future Probabilities

One intelligent betting task at the New York racetracks, where I learned basic analysis, was to guess the rough size of the gap between the betting pool odds and the probabilities. Only if the self-assessed probabilities were significantly larger than the crowd-determined payment odds, was it a sound wager. I try to apply the same approach to investing in stocks around the world. The easy part is determining the payment odds, which are based on two factors. The popularity shown in the market and guessing the quality of the current stock bulls, which is much more difficult. In general, more retail buying equals lower quality. This is not to equate brains with capital, but the amount of research done. There is an inverse correlation between the amount of media pundit space devoted to an investment and the probability of them being correct. That is not to say the pundits are dumb, they are limited by space and time and that limits their ability to handle complexity.

 

Determining probabilities often rests on the number of separate supporting elements. This is difficult because unpopular views normally have fewer supporting elements and are more complex. (If this happens then that will happen or at least improve the possibility of it happening.)

 

I have found that a search of history is useful in searching for probabilities. As there are no axiomatic rules, sometimes something will happen and sometimes it will not. The trick is to try to understand what caused the different outcomes. In dealing with history, we are lucky to have both written and geological records from around the world. From those records it is apparent there are similarities in what drives many critical trends, no matter the place or time-period.

 

Causes of Recessions

No one wishes for a recession, although we should expect one or at least the possibility of one. When a recession does occur, it is generally a surprise, and most are unprepared for it. In the beginning most don’t recognize they are experiencing a period of decreasing ability to make purchases and the ability to promptly pay debts. Hopefully, the economic community recognizes it soon after the nadir of the recession. The academic community only declares “official” notice of a recession after full recovery of lost resources.

 

In every recession I have studied, the critical realization of being in a recession occurs when the level of current earnings makes it difficult or temporarily impossible to repay what is owed on time. The squeeze on repayment is caused by an overly optimistic belief in current earnings and the absence of sufficient reserves. These conditions in turn are caused by imprudent personal, business, non-profit, and government decisions. Other causes are sloppy executions, which cause incomplete and wrong actions. Greed also drives actions without regard to consequences. There also appears to be an increase in fraud during a recession.

 

Causes of a Depression

Depressions are relatively few but longer lasting. For the most part they are caused by attempts to structurally pull the economy out of a recession. Typically, the leader of the government sees that the problems facing society are structural and immediately seeks to fix the problem.

 

In the US we have had four activist presidents who wanted to structurally change how we operate. These are Andrew Jackson, Thedore and Franklin Roosevelt, plus the current occupant of the White House. These leaders attempted to change many things but ran into opposition from the minority who used the Constitution and courts to block the changes. In addition, their actions created other problems for the country and globally after their terms.

 

Curren t Conditions

The following elements suggest there are problems ahead. My lens is primarily fixed on market analysis, not economic analysis. (This is due to belief that the market is primarily focused on the perception of future markets and not how past economic data impacts it.)

• For the past 2 weeks there have been more declining than rising stock prices on the NYSE and NASDAQ.
• For the last two weeks, the AAII sample survey shows only 32.6% and 31.6% bearish for the next 6 months.
• Tech stocks listed globally fell last week.
• Only 25% of weekly prices reported in the Saturday Wall Street Journal rose, the remaining 75% declined.
• Last week through Thursday, my old firm reported that only three mutual fund peer groups out of 104 competitive leagues showed average gains - Dedicated Short +7.80%, Health/Biotech +0.98%, and Indian Regional +0.55%.

 

My Working Wager

Between now and next Presidential election, the odds on a recession are 60%, with the odds of a depression before 2035 at 50%. (Remember the market rises about 80% of the time.)

 

Your thoughts, please.

 

 

 

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What We Should Have Been Watching? - Weekly Blog # 903

 

 

 

Mike Lipper’s Monday Morning Musings

 

What We Should Have Been Watching?

 

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

 

 

 

Lessons from the racetrack and life

At any given time, humans tend to congregate around what is most important to them or what is going to happen. These topics are labeled favorites, both at the track and by psychologists. On any given day at the track favorites win a minority of the races. More importantly, when favorites win the payoffs are relatively small, as the winnings must be shared with a large number who have reached the same conclusion.  Thus, backing the favorite is a low return game.

 

The problem in going with the less popular is their winning ratio is lower, as most people bet on the favorites. Thus, in terms of frequency, favorite betting wins.

 

There is a more rewarding goal, winning more money over time with less frequency but higher returns. This is the choice I learned at the track and apply to investing in securities.

 

This Week as an Example

Using the public media and limited public conversation, their favorite investment topic was the speech by Fed Chair Jerome Powell at Woods Hole, the implication of which was a cut in short-term interest rates. While most investors believe these are probably the most important questions to be asked, I believe there are more important questions with higher, longer-term implications. These can be grouped under labels of concentration and valuation.

 

Concentration

Much has been written about the amount of money invested in seven or ten largely technology/financial stocks. One study shows that the ten most popular stocks in the S&P 500 represent 38% of the total value of the entire index. On average, the ten largest market caps in the index between 1880 and 2010 represented only 24%. However, I question the math or source because railroads represented 63% of the stock market in 1881.

 

This observation is of particular interest to me as a graduate of Columbia College. Around 1880 Columbia had an endowment account restricted to investment in the most secure stocks. You guessed it, lawyers restricted the investments to railroads!! This particular endowment was to be spent on bricks for the campus. Thus, for many years all of Columbia’s buildings were brick faced.

 

There were many important implications that should have been drawn from this case, especially since every single railroad went into bankruptcy years later. However, if you had included political analysis along with legal analysis it was obvious railroads had become too powerful in the country.

 

In terms of political analysis and understanding how the US works politically, people should read a new 856-page book written by Bruce Ellig, a good friend of ours. The title of the book is “What You Should Know about the 47 US Presidents”. The book devotes a chapter to each President, covering the most important laws and regulations of his term. Included in the book is information about the President’s life and personal activities.

 

Valuations

John Auters of Bloomberg believes “valuations are extreme”. Prices in terms of sales, earnings, book value, and dividends are at a stretching point. In a recent survey of intuitional managers, 91% believe the US market is overvalued and 49% believe emerging markets are undervalued. Some 60 years ago I worked for a research-director who believed shipments of boxes were a good economic indicator. They probably still are, and that is why I took notice that they were down -5% in the second quarter.

 

With the federal government pushing to let retail investors participate in private capital transactions, particularly private equity, the health of the market for these longer-term, illiquid investments, could impact the listed market. There are approximately 3100 positions in private capital firms that are unsold. Their retail owners may not see the level of distributions they were expecting, which could unfortunately increase the volume of listed securities to be sold.

 

Long-Term Horizons:

 In the long run equity investing can generate very attractive returns. A dollar invested in the 1870 equity market by the 25th of July would be worth $32,240 in nominal dollars before taxes this year.

 

 As often said, history does not repeat but often rhymes. There are a number of parallels with the market crash of August 1929 to November 1936, and the economic depression that followed from February 1937 to February 1945, which will be discussed in upcoming blogs.

 

 

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DIFFERENT IMPLICATIONS: DATA VS. TEXT - Weekly Blog # 901

 

 

 

Mike Lipper’s Monday Morning Musings

 

DIFFERENT IMPLICATIONS:

DATA VS. TEXT

 

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

 

 

School Solutions

As taught academically, the critical pivots in teaching both economics and security analysis are the numerical changes of a data series. However, as a long-term investor I am much more interested in the mood changes hinted at in textual renditions. While data precisely represents the past, text allows the reader/student to think about one or more different futures. This is why I believe philosophy or similar courses should include both economics and security analysis in their teachings.

 

Below is a brief listing of several data points describing last week (Implications italicized and discussed in parenthesis).

• Year-to-date Stock Transaction Volume: NYSE 7.11% vs NASDAQ 37.30%

(Five times greater in the younger, more speculative market, even if some of the NASDAQ is inventory swapping among dealers. Speculation normally leads to extreme up and down prices)

• Inflation Signals: The ECRI Index tracks industrial prices weekly and it normally moves gradually. Last week it rose +1.70%.

(I believe this was in response to the tariff news at the end of the week. Some market participants believe there will be industrial price increases soon).

• Participants in the AAII sample survey are increasingly worried about a down market in stocks, but others are not.

(Comparing the bullish and bearish projections of last week with those 3 weeks earlier. Bearish projections rose to 43.7% from 34.8% 3 weeks earlier. Bullish bets only rose to 34.9% from 33.6% for the same period, suggesting bears see reasons to be worried while bulls do not. Only one will be right over the next six months.)

• Equity mutual fund peer group averages +10%. Only one US Diversified Fund (USDE) peer group average has generated returns exceeding 10% year-to-date, multi-cap growth funds. Forty other peer groups have generated returns exceeding +10%, although they were less diversified.

(USDE Funds hold more assets than the other peer groups, which suggests being a holder of US equities was not a winning hand for most.)

• Investors need to be careful that the earnings reported are not accounting constructions. The London Stock Exchange Group (LSEG) and I.B.E.S. estimate that the S&P 500 Index will report a +8.3% gain for the 3rd quarter. However, they further estimate that corporate net income will rise only +6.3% for the quarter. Thus, 24% of reported earnings will be attributable to buybacks and other accounting techniques.

(Investors need to understand what they are paying 20x-earnings or more for. Hopefully, operating earnings can be repeated while earnings created through accounting cannot.)

 

Conclusions:

There are lots of reasons to be cautious. Some reserves should be considered a hedge for future down markets. However, this hedge should be viewed as a temporary buying reserve until prices more appropriately reflect the long-term value of accepting normal risk.

To aid future generations of investors as well those today, security analysis and economics need to be taught with a fuller understanding that it rests on the strength of ever-changing language.   

 

 

 

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Fragments Prior to Fragmentation - Blog 829

 

      

Mike Lipper’s Monday Morning Musings

 

Fragments Prior to Fragmentation

 

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

   

 

 

Historic + Military Learning

Some have said, if you scratch a good security analyst a historian will bleed. If you add in two other variables, learning from military training and exposure to the racetrack, you will understand much of my thinking. In fearing World War III, one should start with the German General Staff study of the American Civil War and the Peace efforts prior to and post WWI. Long periods of relative peace can be achieved most of the time if intelligent leaders continue to plan for economic and military hostilities.

 

Since we don’t know what the future will bring, we should study every fragment of information available and track developments that might lead to dangerous conflicts. Few peacetime leaders are equipped to be successful war leaders, and often they make war inevitable. I believe a lesson from one of the various “war colleges” is that war is another way to conduct political change. Our political leaders increasingly use an “anything goes" approach to cling to power, ignoring the vulnerabilities they are exposing for our adversaries to exploit.   

 

In retrospect, it has become increasingly clear that WWI and WWII were inevitable. The threat of nuclear war and some of our world leadership has held off WWIII, hopefully forever. Due to improvement in tactical nuclear and other weapons, there is greater risk today than in the past. We need to review all fragments as they appear and be watchful of those which could harm us.

 

Dangerous Fragments Past & Present

In the 1920s, the general urban population looked askance at criminal controlled bootlegging but enjoyed the local speakeasies. Today’s version of this attitude is the general disrespect for most members of Congress. Although they continue to support their local representatives, or for the younger set, the local ‘pusher”. We seem reluctant to reform our own process of offering debt forgiveness in the hope of gaining votes. They don’t seem to see these stimulants as bribes, much like the circuses that led to the fall of the Roman empire.  

 

Daily Stock Markets React to Central Banks Words

On Thursday, 27 % of the “Big Board” stocks declined, with 38% falling on the NASDAQ. The next day, 64% of NYSE issues fell, with 63% falling on the NASDAQ. The only difference was many traders finally believed the clues given regarding the possible number of interest rate cuts this year. (They paid no attention to the view that the next rate move by the Fed could be up.) Most of the time investors stay focused on their long-term needs and don’t react to politicians and pundits.

 

Fragmentation Becoming More Popular

On many days more stocks go up than down. This week, 21 of the 28 foreign markets Barron’s tracks rose. However, in the US only the momentum index has gained double digits over the last two months.

 

What is the Remaining Upside Left?

While it is popular for market leaders to mention their gains from the  bottom, the payoff for today’s investor is what is left? Jeremy Grantham, Chair of GMO, has generally held a bearish view but has generated good long-term performance for the funds he supervises. He mentions that if one uses the Shiller P/E, the market is in the top 1% of its history. A more significant observation is that many analysts use both P/E and profit margin, which are linked, so they are double counting. (Profits = Earnings, which is the driver of margins)

 

Today’s Parallels with WWI And WWII

Russia is in fighting a war in Eastern Europe, with Western Europe supporting the locals. The US is in a trade war with China and is constraining trade. Our opposition is getting stronger, although we are having trouble convincing people that they need to fight. This reluctance exposes our current weakness to our adversaries, giving them reason to cheer.

 

The markets generally seem to be ignoring the geopolitical hot spots accumulating around the world. There seems to be a perception that we can ignore these problems as they are occurring in some distant land. However, these problems are now surfacing closer to home and their citizens are increasingly arriving at our borders and making their way into the country. The situation is putting significant strain on resources and budgets, at a time when pet projects are already being funded in the hope of attracting the support of an expectant electorate. This spending is unsustainable in the long-term and creates additional vulnerabilities for our adversaries to exploit.  

 

 

 

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Stock Markets Move on Expectations - Weekly Blog # 805

 

Mike Lipper’s Monday Morning Musings

Stock Markets Move on Expectations

Commodities Move on Transactions

Most Economics Relate to Needs

Politics Rotate on Vote Guesses

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

 

Variables

These are among the more significant variables that investors and the rest of society juggle in reaching investment decisions. Most investors focus their attention on only a few variables. Some use just one, like price charts or reported earnings.

 

Perhaps my lack of confidence in understanding the complete details of variables drives me to look for correlations, which is why I ponder many variables. This tends to result in the creation of diversified portfolios of funds and individual securities. Because my clients and I invest to meet a number of different needs, our investments are focused on several time periods.

 

With these thoughts as guidelines, I’ll share a number of factors I am concerned about that leave me worried. I expect the future to include numerous changes, with some coming as surprises. My portfolios are likely to be fully invested, with a willingness to shift elements when I become more convinced of the wisdom of future actions.

 

The tragedy in Israel is too new to take into proper perspective. Thus, I am excluding it from this blog, but not from my mind.

 

List of Worries (Not in rank order)

1. The number of small company bankruptcies is rising, along with general error rates. These are some of the critical connecting points in our society and likely to have larger repercussions.
2. The drop in food consumption at low-end retail outlets suggests budgets are getting stretched.
3. Jaime Dimon’s 100-year prediction of a 3 ½ day work week leaves too much time for troublemaking.
4. Those with advanced degrees have lost confidence in colleges/universities. Students graduating with degrees, including PhDs, have no job opportunities for their degrees. (All the nobility were blamed, and many executed during the French Revolution.)
5. A little more than half of mutual fund peer-group averages have generated losses over the last 3 years. (There is a risk of people refusing to invest.)
6. As developing nations mature, they attempt to import replacement of some of their imports, which reduces world trade.
7. UPS and FedEx often sell at discounts. (Deflation)
8. 75% of the items listed in the WSJ weekend prices declined (Deflation)
9. The S&P Goldman Sachs Commodity Index rose +4% in September. Due to dollar strength, Energy and Metals rose +3.5%, with Agriculture falling -4.35%. There may be some speculative input in these numbers.

 

Critical Questions:

1. What are the indicators you are watching?
2. What do you think?
3. Will you share your thoughts?                                                                          

 

 

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What does your 4.0 Profile Tell You? - Weekly Blog # 763

 

Mike Lipper’s Monday Morning Musings

What does your 4.0 Profile Tell You?

 

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

            

 

 

When one sees a mark of 4.0 it usually signifies academic perfection. As the investment game is different from other realities, so too are our measurements and goals. As much as we try, none of us has established a long-term investment record where each investment in each period produces a satisfactory performance record. We need a different type of measure to produce a learning device to improve performance.

 

These thoughts led to four inputs for investment action. After listing the four, it became clear that each label ends in an “o”. Recognition of these inputs might help sum up the importance we attach to each and explain what type of an investor we are and the performance we generate.

 

The four main inputs are:

• Macro
• Micro
• Politico
• Psycho

 

Macro is the generalized investment thinking of most people. As discussed in recent blogs, most pundits and their dedicated investors are in one of two camps. They either believe or don’t believe that investment gains are being held back by inflation, with changes in the level of interest rates the only way to cure the problem. The second group believes that current performance is due to broader structural problems and basic imbalances. Among these problems and imbalances are the lack of constructive leadership throughout society, including politics, education, the non-profit sector, and businesses.

 

As a life-long student of investment performance I suggest that it is extremely rare that the current generally accepted macro view will correctly predict the future.

 

Micro inputs can be translated into “God is in the details”. Some of these details are derived from audited statements where there are very few mathematical errors. (Other than measuring the wrong things in the wrong way.) As an investor I value incomplete observations of changing elements more. Such as changing of the number of workers doing different tasks, changing the number of customers making spending or selection decisions, or the number of customers consuming specific goods and services. My interest is not the raw numbers themselves, but their volatility and where they fall in the range of past actions. The key is to recognize changes in people’s behavior and try to guess their motivations.

 

Politico also consists of two parts, what is likely to happen and what one hopes will happen. The closer the two are, the less likely the result will occur. Interest at various levels may also influence perception, be it international, national, local, industry, organization, or family. As a practical matter, the interest of greatest impact will likely be the reverse of the order above.

 

Psycho deals with our optimism and pessimism, including the confidence in our personal ability and willingness to make meaningful change.

 

Applying Inputs

As with any composite of inputs, one can treat each equally or weight them appropriately. For example, I might weight macro 2, micro 4, politico 3, and psycho 1.

 

In this situation it would be difficult to select investments that didn’t have strong micro attributes. Politico would also be an important consideration. Both macro and psycho would only be important if micro and politico were not individually selected. Under these conditions I would be unlikely to act on macro influences but would probably make moves if micro or perhaps politico exerted strong directional inputs. In general, I would need more evidence to make major changes to my portfolio based on macro events. (A second level adjustment could be applied to the strength of my belief in each. For example, 90% for micro and 10% for psycho.)

 

There are many other selection processes. Some work better than others under different circumstances. The value of understanding one’s selection biases is to direct focus to what is important.

 

Clues of the Week

Each journey starts with a first step, as does each long-term investment record. Our problem is that we don’t know which week is the beginning week.  Additionally, no long-term record has each week moving in lockstep with the long-term record. That is why we search for clues each week. As with many investigations we look at many clues, some of which will be wrong. I summarize in these blogs the most likely.

 

In terms of forward motion there wasn’t much this week, but it is possible the ratios of new high/new lows, volumes, leading/lagging sectors, and news from beyond the stock markets could be instructive.

1. On the NYSE, new lows were larger than new highs each day. (Only true for 3 days on the NASDAQ.)
2. More shares were sold at declining prices than rising prices in 4 out of 5 days, with weekly volume -2.6% for the NYSE and -6.1% for the NASDAQ compared to the prior year.
3. Of 32 S&P Indices, only the Asian Titans 50 rose for the week. The prior leaders, energy and financials, turned down, while healthcare and tech rose.
4. Personal Savings were +2.3% vs +7.3% a year ago. Steel capacity usage was 73% vs 82% a year ago. A Jeep Cherokee factory to indefinitely lay-off workers in February.

 

Despite the “happy-talk” of inflation peaking and interest rate hikes slowing, investors and consumers are not buying a turnaround.

 

Incomplete Strategy Labels

Pundits and marketeers prefer short, snappy labels for various portfolio strategies. These are typically one-sided as they only describe the purchase side, not the other strategies excluded. Below are some examples of more instructive labels:

• S&P 500 Index - Market-cap or equally weighted
• “Go to Cash”- Freeze the rest of portfolio
• All investors - Traders, investors, taxable or tax exempt (deferred)
• High/low P/E without identifying the date - Price is current when earnings lag. (I prefer to use operating or net cash flow after debt payments.)
• High/low volatility without identifying the period of volitivity -Intra-day, daily, weekly, monthly, yearly.

 

Readers may have their own examples of mis-labeling.

 

 

 

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

Mike Lipper's Blog: Week Divided: Believers vs Investors - Weekly Blog # 762

Mike Lipper's Blog: This Was The Week That Wasn’t - Weekly Blog # 761

Mike Lipper's Blog: Trends: Deflation, Stagflation, or Asian? - Weekly Blog # 760

 

 

 

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