Mike Lipper’s Monday Morning Musings
Current and Future Views are Confusing
Editors:
Frank Harrison 1997-2018, Hylton Phillips-Page 2018 –
Current Sentiment Too
Bearish?
Perhaps it is a COVID
hangover or just the collection of largely negative inputs, but the numbers
appear to be too negative. As a relative long-shot player, the growing number
of largely negative elements suggests crowding, which is normally wrong.
To me, the single biggest
negative for the next year or so is China. Looking at both US and Global Growth,
if China can't grow 5%, can the rest of the world grow 3%. In my opinion, the
key is whether the Chinese government will let its private sector expand at a 5
% annual rate.
Historically, one of the
best guides to US consumer growth is how well Whirlpool (*) is doing. They have
just announced a material cutback in domestic expectations, among others doing the
same.
(*) A very long-term
personal holding that has paid for lots of appliances over the years.
Last week, more US stocks
rose more than fell. While the Dow Jones Industrial Average (DJIA) rose +8.21%,
the more significant S&P 500 gained +4.91%. This suggests more interest from the public/wealth
management retail managers than from institutional money. Traditional market
analysts have been waiting for the latter group to finally dump their holdings.
A possible answer to
global inflation is only likely when severe and growing economic/social
imbalances are addressed. This requires finding appropriate compromises, with
solutions not likely to be acceptable to all. What magnifies the problem is envy,
not the differences between people.
The genius of l776 was
not the beginning of the American Revolution, but Adam Smith's publication of
"The Wealth of Nations". Adam Smith made the point that nations can possess
superior trade talents. They can and should trade with each other, valuing their
respective superior skills. He was in favor of utilizing specialization as the
source of trading profits.
Smith’s view is what made
trade between the United Kingdom and the American colonies work. That is, until
the Home Country wanted the Colonies to pay for their own defense and
administration. Instead of allowing the Colonies to develop more of their own services
and leadership, they imposed the cost of the most expensive army and navy in
the world on them. Failure to allow the Colonies the opportunity to command was
a classic failure of geo-politics.
Geo-politics is the art
of various political forces cooperating to accomplish their own goals. Since
the first development of armed forces, neighboring power centers could either
fight each other or trade harmoniously. Early in the development of the single
land mass encompassing the connected parts of Europe and Asia. Largely due to
the military power of mounted troops.
Asia was conquered by the
Mongol tribes as they pushed both south and west, occupying much of today's
Russia, China, and India. Russia and China pushed back, with Napoleon and
Hitler later trying unsuccessfully to push back further. Ukraine was an
independent and viable state at times, with a significant population of Tartars.
Stalin largely moved the Tartars out when he was in control. Through time Ukraine
developed its own culture and religion. They also developed great scientific
and mathematical skills.
Western European
countries in search of raw materials developed African and Asian colonies.
Germany only became unified later and had few opportunities to acquire foreign
colonies. They accepted Britain's rule of the waves until roughly the middle of
the 19th century. At which time, Then, German Admiral van Tirpitz began building
up their fleet to become the second largest. He along with the German general’s
staff also developed their geo-political thinking, analyzing both the land and
sea battles of the American Civil War.
Although the American
navy fleet was a poor third, President Teddy Roosevelt had it tour the world after
the Spanish American War in the early years of the new century. American
foreign policy pivots on domestic politics, with a strong tendency toward being
isolationist. However, as early as 1890, American Admiral Alfred Thayer Mahan advocated
for the US Navy controlling the open seas by forcing its way into various
seaports and channels. He foresaw the eventual decline of the royal navy.
After "TRs"
presidency, the US isolationist attitude of Presidents Taft and Wilson caused
the USN's budget to be reduced. Furthermore, under Wilson the US stayed out of
WWI until 1916. This probably sped-up the Russian Revolution and reduced the
US' s practical role in the peace treaty. The consequence of which led to the
beginning of WWII and our unpreparedness for the war, particularly with
submarines.
Going back to Adam
Smith's views, you do not need to go through naval and military adventures to
establish sensible trade negotiations, as long as you have the desire and skill
to accomplish them.
Applying these efforts to
Ukraine is of greater importance today than in the past. Ukraine is one of the
key players controlling the Black Sea, the location of Russia's only warm water
port. As a result of the breakup of the Soviet Union, Kazakhstan and a number of
other former Soviet Union independent mid-continent states want to export their
mineral wealth and energy through the Caspian Sea and various pipelines. Additionally,
Kazakhstan has a global airport with good connections to Asia and Europe. China
on the other hand is counting on its rail connections to move freight into
Europe and beyond.
The above history and its
potential impact on the world advocates for the US needing to play a strong
partner role in Ukraine and the midcontinent. Thus, I expect we will be there
for a long time.
Did
you miss my blog last week? Click here to read.
https://mikelipper.blogspot.com/2022/10/fundamental-changes-occurring-weekly.html
https://mikelipper.blogspot.com/2022/10/are-we-there-yet-weekly-blog-754.html
https://mikelipper.blogspot.com/2022/10/begin-to-dollar-cost-average-equity.html
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