Mike Lipper’s Monday Morning Musings
Not Yet Ready for a long-term Solution
Editors: Frank Harrison 1997-2018, Hylton Phillips-Page 2018
Preface
I was hoping to start a series of blogs on the selection of smart
securities investment strategies for multi-generational ownership.
Unfortunately, the current data does not lead to a positive view. The breakdown
of the twenty-hour cease fire negotiation with the Iranians confirms that this was
a week of data confusion. The historical odds were against progress in the
search for political and economic solutions.
Our Side
The investment mode for the week is captured by the changes
in the American Association of Individual Investors (AAII) sample survey of the
next six month’s market outlook. The bullish outlook improved slightly to 35.7%
from 33.6% the prior week, a gain of 2.1% in a not highly disciplined survey.
What is perhaps a little more insightful is a drop in the bearish measure to
43.0% from 51.4%, a decline of 8.4 %. During the survey week, many pundits were
enthused about the forthcoming ceasefire meeting. (I expect Sunday morning’s
announcement of a failure to get an agreement will materially impact this
coming week’s results.)
The two largest stock market exchanges reflected different
views, with only 31% of NYSE stocks falling vs 53% of NASDAQ stocks declining.
(The NASDAQ market has younger, more speculative companies, with a larger
number of companies reporting losses, including some private debt funds.)
Consumer sentiment was reported to be lowest in 70 years. Moody’s (*) raised the chance of a recession in the next 12 months to 48.6%. One of their executives is quoted as saying “we could already be in a recession”.
(*) Owned in managed accounts.
Iranians’ View
The first thing to remember is that Iran is the modern name
for Persia, which was the dominant political/military power in the Middle East
for hundreds of years. Persia was briefly lost to Alexander the Great and later
to the Ottomans but was never effectively occupied by foreign forces.
The current view of the Iranians is that Trump is losing this war. He is driven to achieve a quick victory to guarantee a positive mid-term
election this year, at least in the House. The Iranians are believers in the
German strategist Carl von Clausewitz’s statement that “war is an instrument of
policy by other means”. Our President went to a military high school, but I
believe he at best learned infantry tactics, not strategy. He did not
participate in the ROTC at University of Pennsylvania. The current Secretary of
War did not have any professional exposure at West Point or VMI and thus was
not schooled in strategy. One of Clausewitz’s beliefs was getting the other
side to give up the will to fight. Unfortunately, since WWII the US has won
wars but lost the peace in getting their opponent to give up the willingness to
fight. The last time we achieved it was through the Marshal Plan, named after
General George Marshal a graduate of VMI who rebuilt the industrial strength of
Germany.
While the potential for nuclear warfare was a concern, the
far greater risk to the US, Britain, Europe, Mid East, Africa, Latin America,
and Asia were already active sleeper cells. At this point we have not yet organized
an effective counterforce.
It is no wonder the weekend discussions did not produce
positive results. Consequently, it may be too early to invest new long-term
money.
These are controversial views. Please exchange your
thoughts. I am always a student and need to learn.
Did you miss my blog last week? Click here to read.
Mike
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Lipper's Blog: Bifocal Analysis: Short & Long-Term - Weekly Blog # 933
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