Premature: Buying Program to Begin Soon? - Weekly Blog # 931

  

 

Mike Lipper’s Monday Morning Musings

 

Premature: Buying Program to Begin Soon?

 

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

 

 

 

Basic Investment Principle

Investment opportunities are cyclical in both timing and magnitude. Larger gains are achieved after periods of extended declines. Since one does not know the extent of a decline or magnitude, it is wise to use a buying program. For instance, invest no more than 10% of buying reserves at any time. (This assumes you establish a buying reserve in rising markets. Charlie Munger has taught us to buy good companies at fair prices rather than always look for “cheap” prices.

 

Recently, my sister-in-law sent me a copy of a letter from my grandfather to my late brother sometime after he left the Marine Corps to begin his life in the investment business in the mid-1950s. My grandfather, who built his own brokerage firm for more than thirty years, cautioned my brother to always expect periodic recessions and less frequent depressions. He also advised him to not invest against the US, as the country was rich in natural resources. (This is still good advice, but there are times when our government makes our currency risky for a period.)

 

Where are We?

Most investors in defining where we are, do so by looking at where we have come from. The pundits wax poetic about recent data extrapolations, expecting the past to be repeated. My analytical training at the New York racetracks and as a US Marines Corp Officer was to always examine the current situation and expect some change.

 

Today, many pundits and politicians see an improving picture. As a student of financial history, I am conscious that it has been some time since the last recession. Furthermore, it has been 97 years since the Wall Street crash and the 12-year depression. Few people recognize any similarity between that time and our current condition.

 

Trading Alerts-Correction, Recession, or Depression?

The following are a number of alerts from last week suggesting we are entering a period of more declines than increases:

1. Morgan Stanley is planning to cut 3% of its customer-facing workers.
2. 73% of stocks traded down on the NYSE and 67% on the NASDAQ. A pattern which has been going on for several weeks.
3. The ECRI industrial price index rose to 126%, a 4.73% gain year over year. Clearly, the war in the mid-east is inflationary. 85% of prices tracked by the Wall Street Journal each weekend declined, echoing the ECRI results
4. Individual investors and those serving retail investors are not confident in their outlook for the next 6 months. 33.1% are bullish and 35.5% bearish.
5. The S&P 500 index is the best indicator of the market for both institutional investors and wealthy investors. Along with most other indices, the S&P 500 index fell on Friday. If this was the beginning of a recession and the index were to decline to where its rise began, it would drop 28%. If this was the beginning of a relatively mild depression, the drop could be 49%.

 

Advice to Buy Program Buyers

I have found it extremely difficult to buy at the exact bottom, as most declines don’t appear convincing enough. The advantage of using a buy program strategy instead of a one-shot purchase is that you will likely have a collection of winners and losers before the overall market has reached back to its original starting point, assuming you buy 10% each month or quarter. However, that is not the point of the exercise. You should want to hold your position until it has reached the condition of a great company at too high a price, where some trimming makes sense.

 

Please share your thoughts with us.   

 

 

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Mike Lipper's Blog: Expectations Changing? - Weekly Blog # 930

Mike Lipper's Blog: Diversification - Weekly Blog # 929

Mike Lipper's Blog: To Win Long-Term, Learn From Great Presidents - Weekly Blog # 928

 

 

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Preparing for the Future - Weekly Blog # 831

          

Mike Lipper’s Monday Morning Musings

 

Preparing for the Future

 

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

   

       

 

The fundamental job of an equity investor and manager is to grow current assets to fulfill future needs. Since we don’t know what the future will be or when it will be, we should consider a range of possibilities. My training at the racetrack and the US Marine Corps supports viewing the various futures through the various lenses of security analysis. I cannot think of a more difficult set of conditions than those facing us today.  

 

The possibilities range from the outmoded thinking of present world autocratic senior leaders (Biden, Trump, Xi, Putin, and similar) to unknown people with more scientific knowledge, but little management experience. To use an expression from the track, the odds-on-bet for the foreseeable future is that our present leaders will leave the scene relatively soon. They will probably be largely replaced by leaders two generations younger, who think differently and whose mental languages are different than what we have learned. 

 

Allow me to show you a mathematical approach from my world of mutual fund analysis. My old firm continues to report the weekly performance of mutual funds broken into seven investment objectives based on the securities in their portfolios. Most of the assets are in US Diversified Equity Fund investment objectives, which are divided into 18 peer groups. In the first quarter of 2024 there were 5 peer groups where the average performance was double digits. Interestingly, for the ten-year period there were 6 peer groups with double-digit winners. Four out of the six were repeaters. While all 18 performance peer groups generated double digit returns for the most recent 1-year period, only one generated double digit returns for two years two for 3 years, and 13 for five years. This suggests that immediately prior to the pandemic was a good time to invest in the average US Diversified Equity Fund. Accepting below average returns in the short term produced good results in the long term. This further suggests that picking the right year to sell an investment is more important than the right year to buy. However, as with almost every betting rule, the opposite can work. 

 

I believe you need to pay attention to the nature of the period when buying or selling. Investors in the US market should probably recognize that the average performance year is generally single digits, which should be evaluated relative to the performance of peers. Broader considerations should be left to double digit years, like now. Bet against the crowd if you intend to sell in a holding period shorter than five years.

 

Management Structure is Not Optimal 

The President’s cabinet is non-voting and is at best an advisory group. Large meeting tables of decision makers should be avoided, be they for political organizations, business, or non-profits (including educational and medical groups). The groups needing large meeting tables are not likely to produce dynamic results. President George Washington had a cabinet of 4 people, the secretaries of State, Treasury, and War, plus the Attorney General. Our present Cabinet has 26 members, 15 Department heads and 11 Cabinet level officers. 

 

Another Focus Should Be Updated 

 I don’t have the underlying data on our government leaders, but I suspect the majority have not spent operational and/or educational time in Asia or Africa. As a global investor I believe it is essential to correct this to effectively deal with the fundamental problems coming down the road. 

 

PS 

This week there have been a number of articles about the death of Daniel Kahneman, a Nobel prize winning psychiatrist and developer of behavioral investing. His basic premise was that investors are not rational and invest more for psychological reasons than sound investment reasons. This discussion may bring us back to rational decision making with your help.

 

Like most analysts and others commenting on investments, I have done the easy half of the job by supplying my thoughts on the buying function of investing. The much more difficult function is the disposal of investments, which is normal for the investment related committees of the two tech-oriented universities on which I serve. The reason for this one-sided effort is that making a buy decision is relatively easy.

 

By far the more difficult task is deciding to sell all or a part of an investment, which is a much more a personal decision and much more complex. The decision process should deal with some or all of the following topics:

• Likely reaction when other critical investors find out.
• Tax implications.
• Impact of the decision on the rest of portfolio.
• Dealing with beneficiaries.
• Legal aspects.
• Performance results.
• A least 10 other factors

I intend to share my impressions over time, with the thought that my audience of bright, experienced people will share their reactions. The reason I mentioned the groups of bright people I am connected with is that I learn how they approach various investment problems and use this information to address issues we all need to manage.

 

Next week, most of the blog will be devoted to an article produced by a brilliant well-rounded Professor from the Stevens Institute of Technology. The article explores how government actions had an unintended inflationary impact.

 

I am very interested to hear your reactions to this experience.

 

     

 

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Mike Lipper's Blog: American Voters Win & Lose - Weekly Blog # 830

Mike Lipper's Blog: Fragments Prior to Fragmentation - Blog 829

Mike Lipper's Blog: Collateral Rewards, Risks, & Opportunities - Weekly Blog # 828

 

 

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I Can Be Wrong - Weekly Blog # 749

 

 

 

Mike Lipper’s Monday Morning Musings

I Can Be Wrong

 

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

    

 

 

Property of the Territory

As an odds addict, I often make bets prematurely. I am used to being wrong on individual choices but feel comfortable with my weighted choices.

 

The advantage of being wrong is learning from it. As a market-oriented analyst and manager I equate a bear market with a recession.

 

Our clients and I feel more pain when surprised on the downside.

 

In November of ’21 stock price momentum started to slow. This was particularly noted in the growth-oriented NASDAQ market, which hit its historic high that month.

 

Also noted in carefully reading fourth quarter comments from insightful CEOs was a slower quarterly rate of gain vs the prior year. This caution was also noted in early 2022 statements.

 

Much was made of “supply-chain” problems, although it was focused almost exclusively on goods capacity limitations, not services.

 

To me they left out the growing realization that there would be a shortage of competent people to hire. What really caught my eye in the recovery from the pandemic cutbacks was first- and second-line supervisors not being replaced.

 

My conclusion was that leading growth-oriented companies were likely to produce sub-par results for ’22. I did not fully appreciate the goods slowdown impacting the much larger economic services sector.

 

My mistake was labeling the forthcoming environment an oncoming recession. It was clearly derived from stock market price probabilities.

 

A recession is a much broader national and increasingly international phenomena. The accepted definition of a recession results from top-down late-reporting data, with even later corrections.

 

Typically, by the time the academics identify a recession it has already changed, often improved.

 

Politicians choose to focus on the gross economic numbers impacting voters most. Not fully appreciating the indirect impact of market prices on the purchase patterns of almost all voters.

 

I was precisely wrong or premature in labeling the first half of ’22 a recession. Falling stock prices had a direct and indirect impact, probably hurting the average American by about 10%.

 

Current Data Bank of Concerns

• The yield on 2-year Treasuries is 3.398%, which is higher than both 10 and 30-year Treasuries. Historically this is an inflation predictor.
• Market analysts are concerned about reversal price patterns building in major indices, including the Dow Jones Transportation Index.
• Last week, 80.5% of prices fell on the NYSE, but only 71.4% on the NASDAQ. The latter has been a better predictor than the former, probably because the NASDAQ has more professional investors.
• The American Association of Individual Investors (AAII) survey has a somewhat extreme 50% bearish reading for the next six months, often a contrary indicator.

 

Longer-Term Concerns

• One forecaster believes unemployment will hit 6% and inflation will not decline to 4% by 2024.
• Niall Ferguson of the Hoover Institute believes the “World is sleep walking”, similar to the 1970s but worse. Suggesting that instead going into a recession we will experience a multi-year period of stagflation, with low growth, high inflation, and unemployment.
• My major concern is the lack of good leadership from our highest political and commercial elements throughout the world. Two examples are:
• Annual reports no longer stating employees are their most important asset. (When I sold our data business to Reuters, I told them our most important assets were our clients and our people, not our best available data.) This personality focused leadership is an important contributor to the growth of unions, which is not positive for customers and shareholders.
• The war in Ukraine has demonstrated what I learned in the US Marine Corps, that well led small units can effectively beat a larger force relying on massed manpower.

 

Question: How different do you think 2024 will be than today, and are you structuring for it?

 

 

 

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

https://mikelipper.blogspot.com/2022/08/4-5-changes-disruptions-faulty-weekly.html

https://mikelipper.blogspot.com/2022/08/mikelippers-monday-morning-musings.html

 

https://mikelipper.blogspot.com/2022/08/time-to-prune-weekly-blog-746.html

 

 

 

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Building Your Future Winning Portfolio - Weekly Blog # 724

 

Mike Lipper’s Monday Morning Musings

Building Your Future Winning Portfolio

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

Personality Shapes Portfolio Architecture 

One hurdle we give little thought is the modern mass production of clothes, foods, jobs, schools, and financial instruments (portfolios). Staunton Military Academy and the US Marine Corps were contributors to what I am today, but like everyone else I want to be unique. In that search to find myself, both my wife and I have turned to history to learn how others developed their identities. 

Focusing on how others have navigated their successes and failures, I am particularly interested in learning how to minimize losses. Large failures are typical of those who have achieved measurable success. Psychologists who measure the impact of winning and losing believe we feel at least twice as bad from losing. (I believe some of us feel even worse about losses. Losses delay our commitments to successful actions and use up some of our precious time.) People experience both successes and failures and some learn from their defeats, using that knowledge to build subsequent victories. For example, both George Washington and Abraham Lincoln suffered multiple losses before their victories. 

We Alone Are the Senior Architect of Our Investments 

While we may consult with various professionals, family, and friends, we are ultimately responsible for creating our investment portfolio and our lives. I have prepared an a la carte menu for you to choose from that is specific to meeting your investment personality needs. Instead of each alternative having prices or calories as a guide, I list a very rough risk/return identifier. (Through your own experience you can modify my judgements.) 

A la Carte Menu of Portfolio Vehicles 

Type             Risk Orientation

All on a single bet      Favored by entrepreneurs (Henry Ford 

                         was twice bankrupt before success) 

Concentrated holdings    Limited number of large bets with 

                         common risk characteristics 

 

Actively managed fund    Account/fund of less than 50 names 

Passive Index Fund       Fully invested + low turnover 

Combined Approaches      Risk avoidance limits upside 

Personally, I plead guilty to the last choice. Our big positions are centered on domestic and international financial services companies and funds. I use actively managed funds and fund management companies when I do not have confidence in particular companies, but believe their focus is correct. In doing so I use a fund or fund like vehicle as a common denominator play. 

Types of Declines and Expected Influence Structures 

The US stock market has been in decline for some time. In some respect you could go back to 2019 or earlier. The expansion of the NASDAQ Composite since the financial crisis may have ended in November 2021. Using that as a measure we have entered a bear market for at least two days, but it is not yet convincing. Both the Dow Jones Industrial Average and the S&P 500 have entered a correction phase, falling more than 10%. (The media called both the bear market and correction phase but cannot tie it to an economic or market measure.) Nevertheless, this may be a good time to assess the types of market declines and appropriate tactics and strategies: 

Correction Phase - According to S&P, the market is up +9% one year later. 

Bear Market - One year later the market is up +13%. (To the extent that the market indices represent one’s holdings and the account is eventually taxable, it doesn’t make sense to liquidate unless there is a specific problem that questions the future of the company. Most, but not all recessions lead to bear markets, so it is not a specific call for portfolio action. 

The real risk is an activist top-down government taking a normal cyclical decline and turning it into an active depression lasting a couple of years or more. If this is expected, the proper strategy is to cut expenditures as much as possible and shrink the portfolio in terms of capital commitment, but not names. In The Wall Street Journal, Jason Zweig recounts the incidence of Sir John Templeton buying 104 stocks trading for under $1.00, including 34 that were in bankruptcy. This was in 1939 before the US entered WWII. After the war he made a profit on 100 of the positions. (I do not expect a similar experience for the country, the market, or an investor, but the lesson shows the value of long-term investing, staring with low prices on the NYSE.) 

Which is Best Now? 

History does not offer a direct parallel. The closest that I have seen is the 6 months prior to the declaration of WWI. The immediate causes were the weak, isolationist, attitudes of the US government, plus the assignation of the Archduke, which was part of the unrest in Eastern Europe. Our fear is China supplying military goods to Russia as requested. This conceivably could bring a third world war.  

In deciding what to do, I suggest putting both the stock tables and the annual reports down. Evaluate your holdings as companies. Would you like to own all the company and never sell it? Warren Buffett views companies based on whether your children would be buyers of their products or services. 

After many successful years of investment, you may have an oversized highly profitable position and may have large loss positions to “harvest”, if you don’t think they will recover. These losses could be used to bring balance to your portfolio by recognizing the losses and simultaneously reducing some of the overweight positions in your winners. The freeing up of cash from both losers and slightly reduced winners creates a fund for reinvestment at a time when prices are reduced. 

Final thoughts: Understanding that making a series of correct investment turning point decisions is very rare, allow yourself to make mistakes, learn from them, and generally stay the course.

  

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

https://mikelipper.blogspot.com/2022/03/does-decline-influence-recovery-weekly.html

https://mikelipper.blogspot.com/2022/02/successful-investing-expects-unexpected.html

https://mikelipper.blogspot.com/2022/02/we-are-progressing-weekly-blog-721.html

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Successful Investing Expects the Unexpected And The Berkshire Hathaway Solution - Weekly Blog # 722

 

Mike Lipper’s Monday Morning Musings

Successful Investing Expects the Unexpected

And The Berkshire Hathaway Solution

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

This was the week that demonstrated that successful investing is an artform, not a science. Most professional investors entered the week secure in their certified knowledge of investment accounting and regulations. These are essential, but insufficient to avoid losses and capture gains from unexpected changes. An understanding of history, particularly military history, is a very useful tool. Additionally, an understanding of the behavior of beneficiaries of large wealth is also helpful in managing both personal and other accounts.

In the US Marine Corps, whenever possible, each major amphibious landing conducts dress rehearsals. Hitler did even more, he tested his air force and underground “fifth column” tactics and equipment in the Spanish Civil War, which prepared his forces for their “blitzkrieg” attack on the Western front. I find it interesting to compare the personalities of Hitler and Putin. Both increasingly became more isolated from their associates, leading to personalized decision making rather than a more controlled group analysis. The picture that was released showing a meeting with Macron and others at a very elongated table is a sign of his isolation. His mental condition led to the false historical positions in Putin’s speech that started his troops moving. 

The history of US retreats from Vietnam, the Middle East, and Afghanistan, encouraged his view. The view that US and Western European countries would not quickly and strenuously defend against his restoration of the old Soviet borders. None of these analyses are taught in CFA classes or law schools. Thus, the investment community was largely unprepared for the critical change to the real environment we faced this weekend. 

My fellow analysts, in response to the needs of their marketeers, have become scribes of reported results and near-term rumors, where predictions are largely extrapolations of present trends. Rarely are there any predictions of trend reversals, nor the identification of new competitors. Most importantly, they rarely focus on the attitudinal changes of beneficiaries of critical assets.

Probable Changes Coming to Berkshire Hathaway

I have been taken to task concerning my expressed view that after the “saintly investment lives of Warren Buffett, Charlie Munger, and many of their 80 or so operating officers are over, there will likely be a move to breakup Berkshire.  Analysts are thus violating one of the tenants of sound advice, which is to predict outcomes, whether favorable or not.

Berkshire is one of the largest holdings in our family accounts and it has produced very gratifying results for many years. Nevertheless, I perceive a dramatic change in the shareholder population on the horizon. I am extremely grateful that the present management has run the company for the beneficiaries of the present shareholders, rather than generating assets for their own consumption, unlike most public companies.

I suspect that those readers of this blog that have experienced asset transfers between generations and have noted a largely consistent pattern, beneficiaries failing to retain the older generations’ investment advisors and/or investment philosophies. After years of waiting to make their own decisions with “their” money, the first thing they do is sell out of their inheritance. They might be a bit slower if they realized there would be a materially higher valuation placed of their inheritance.

Messrs. Buffett and Munger have built a portfolio of assets with different risks and rewards based on the type of economy. I firmly believe numerous operational and investment assets could be sold to higher bidders, increasing leverage and assuming more risk. Charlie Munger has said that not every asset they own is likely to be worth their carrying value at a particular time. To the extent that individual assets are hedges against other assets, a one-time complete breakup of the company would destroy the hedging value laboriously built into the portfolio. (I am comfortable with this portfolio approach. As an investor in mutual funds, I judge their value based on their overall performance patterns over time. By definition, funds never do as well as their best position or as badly as their worst.)

 In the future, I expect a significant portion of Berkshire stock to shift to new owners. Many of the new owners would likely support an attempt to convert their wonderful inheritance into a bigger pile, showing their departed grantors that the new owners are brighter than those that gifted the money. I DO NOT SUPPORT A BREAKUP STRATEGY, but that will not preclude it from happening.

There is an intermediate strategy which could be a better approach. In the past, Berkshire has not been copied by other companies in the past in advised other investors on how they do things. In terms of of operations and investment and how they manage a holding company to generate free cash flow and tax assets. I am hopeful the same kind of ingenuity that produced the $147 billion “float” can be applied to the company. This might create a holding company like Allegheny Corp, in which I own a few shares. Allegheny owns both minority, majority and 100% ownership in a number very diversified companies, with a goal of building book value. Whether we like it or not, youth will control Berkshire at some point, and we need to recognize it. 

Weekly View

While it is possible there will soon be an end to hostilities, I don’t expect we will see a strengthened position of the Western allies, both in terms of Russia and China. We need to be prepared for problems arising out our past weaknesses.     

  

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

https://mikelipper.blogspot.com/2022/02/we-are-progressing-weekly-blog-721.html

https://mikelipper.blogspot.com/2022/02/building-long-term-investment.html

https://mikelipper.blogspot.com/2022/02/changing-focus-in-changing-world-weekly.html

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Caution Ahead: Emotional Turns Likely - Elections and Coronavirus - Weekly Blog # 644

 

Mike Lipper’s Monday Morning Musings

Caution Ahead:

Emotional Turns Likely-Elections and Coronavirus

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

When the battlefield is quiet, expect to be attacked, is a lesson from the US Marine Corps. For bullish equity investors the low volume of August trading should signal a need to expect change. The most dangerous short-term change is one spurred on by emotions, rapidly bringing into action holders of excess cash or large equity holdings.

The calendar provides two events that could quickly galvanize emotional responses, the forthcoming US election and reports of successful vaccines/therapeutic COVID-19 treatments. Both could mobilize a large amount of almost instant trading from thrilled and disappointed investors. Based on a lifelong study of turning points, I suggest caution on the part of investors who believe in rusty or non-existent trading skills. Furthermore, very soon after the announcement a counter trend could appear, reducing the size of the initial pop and in some cases completely reversing it. As more information becomes available, the implications of the announced event will often become clearer. Even if further information reinforces the initial announcement, the length of time varies before complete utilization becomes evident. Thus, investors will have time to calmly adjust their holdings. 

Profitable courses of action build on some factors present before the headline event, while others will have little to no future impact. Some will advise you of the critical present factors supporting the future event, I am not so privileged. All I can do is briefly list some of the factors that might support the trends post the announcement, including the subsequent reversal moves:

• The biggest investment news of the week was the changing of the components of the Dow Jones Industrial Average (DJIA) and the reweighting of Apple*. The current producer of this most senior of US stock indices is S&P Indices, owned by Standard & Poor’s, who consults with some of the editors of The Wall Street Journal when making changes. On Monday they will delete Exxon Mobil, Pfizer, and Raytheon Technology, adding Sales Force, AMGEN, and Honeywell. In addition, on the same day the weight of Apple in the index will be reduced due to Apple’s four for one stock split. It will be replaced as the company with the heaviest weight in the index by United Health.

Because of the dominance of Dow Jones through its wires and publications, most investors tend to believe that the DJIA measures the US stock market. That a thirty-stock market price weighted index is “the market” with its’ 30 stocks and not the S&P 500, the Russell 3000 or the Wilshire, with its original 5000 stocks, shows the power of the media. Clearly, global indices have even more components. Nevertheless, the DJIA has done a reasonable job of tracking high-priced US stocks. Part of its success is due to dropping components when their outlook appears to be slowing. (Some components comeback into the index after a large merger.)

While most market followers will continue to use the DJIA as a market measure, I will not for the next twelve months. While statisticians will link the new components and the reduced weight of Apple, I believe they have created a new measure. After one year I will see the level of correlation with the S&P 500 and if the gap is close, I will return to using it as a measure. Once again, the editors may have done a good job of changing the components to represent our economy. Over the more than one hundred years of its existence, they have done a good job of switching the emphasis from consumer products, to industrials, to tech and then to high-tech.

(*) Owned in personal accounts

• Record high prices achieved this week for both the S&P 500 and the NASDAQ Composite confirms the view that the American Association of Individual Investors (AAII) sample survey of market direction for the next six months is a contrarian  indicator. For the first time in many weeks the leading bearish prediction fell below an extreme reading of 40%. 
• 79% of the WSJ’s weekly prices rose. This may reflect some shortages, but it also reflects merchants trying to increase prices to make up for forgone profits. Despite many learned economists being quite sanguine on inflation, I expect the Fed to get and exceed its desired 2% inflation target.
• Unfortunately, I expect layoffs will rise for a while. The Russell 2000’s second quarter estimated revenues dropped -19%, with earnings dropping -99.1 %. This indicates to me that smaller companies have kept their staffs to preserve their hard to get employees. So far, third quarter revenues have not risen much. There is a good chance that instead of preserving the work force the focus will shift to preserving the firm. I suspect private firm closings indicate a similar trend.
• The bond market is moving contrary to the stock market. Of thirty-one fixed income mutual funds investment objectives, only twelve gained for the week and they were equity tinged high-yield or pro inflation vehicles. The maturity yield curve tightened, with maturities of more than two years rising.
• There may be more longevity to the current market than appears. Typically, markets don’t peak until they exhaust all available cash and there is a lot of cash on the sidelines today. In addition, there is a lot of capacity to increase margin borrowing.  Remember, margin can be used to support short sales, as well as the more popular long purchases.

Working Conclusions:

• Trading oriented accounts should be prepared to make lots of small moves and be willing to reverse direction when appropriate.
• Capital appreciation accounts should look for bargains by being contrary.
• Capital preservation accounts need to recast their portfolio in one or more other currencies to determine their risk of only evaluating their accounts in dollars. European investments may look attractive for “value” oriented accounts and Asian investments could be attractive for long-term growth investors. Multi-generational investors should develop an understanding of the long-term outlook for selected investments in Africa and the Middle East.

Share your reactions and thoughts with us. 

     

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https://mikelipper.blogspot.com/2020/08/mike-lippers-monday-morning-musings_23.html

https://mikelipper.blogspot.com/2020/08/mike-lippers-monday-morning-musings.html

https://mikelipper.blogspot.com/2020/08/rotating-leadership-likely-on-horizon.html

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