Long-Term Money Via Telescope, Not Microscope - Weekly Blog # 951

 

 

 

Mike Lipper’s Monday Morning Musings

 

Long-Term Money Via Telescope,

Not Microscope

 

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

 

          

 

Historical Perspective

One lesson from studying history, including geology, is guessing the very next move in a series, which is more likely to be random than consecutive. The news business is an exception, selling a detailed description of what just happened. For example, the weekend chronicles might point out that more stock prices went down than up for the latest week and did so with higher volume. They’ll mention that only 58% of the NYSE stocks declined for the week, including 38% on Friday, compared to the NASDAQ where 64% fell for the week and 55% fell on Friday. Not one of these pundits mention that in the earlier part of this year and most of last year a greater portion of the stocks traded on the NASDAQ rose. More importantly, these stocks were bought much more recently than those on the NYSE. This suggests that both the purchase and sale of the NASDAQ stocks were speculative, not long-term oriented investments.

 

Switching to the telescope for longer time periods. Long-term investors should focus on the changing structure of the US population, where more than 1.8 million people left the workforce (169 million in June 2026 vs 171 million in September 2025). Some of these people trade stocks and participate in the weekly sample survey of the American Association of the Individual Investors (AAII). This week they turned bearish on their outlook for the next six months, with only 29.6% now being bullish, down from 44.9% the prior week. Bearish beliefs have risen to 42.3% from 32.9% the prior week.

 

Investors have generally missed gains in some global and international funds, as well as commodity and alternative funds. To understand the current performance of diversified funds you need to recognize the increased concentration in a limited number of sectors. The history of making money in the stock market often goes along with being lonely during changing long-term future trends.

 

One advantage of devoting time to investing is occasionally seeing some occurrences replay. On Thursday there was the rescheduled White House Correspondents Dinner with the President speaking, which reminded me of my time as chair of the program committee of the New York Society of Security Analysts. I suggested to the President of the Society that we invite President Gerald Ford, the only non-elected president of the US to speak to the analysts. I was given permission to invite him, with the deep belief that it wouldn’t happen. I called the White House and spoke to the lead speech writer who thought it was a great idea, agreeing to speak to the higher authorities. Surprisingly, they were looking at opportunities for the President to speak to the financial community about his “Whip Inflation Now” or “WIN”. I was invited to visit the White House to meet with the speech writer and go over the President’s thoughts on the subject. It became clear that they didn’t really care about my political views, but what jokes would be appropriate. I rejected most of the jokes. Shortly thereafter President Ford came to our meeting quarters on Williams Street. He came with Alan Greenspan and Frank Zarb, who had just joined the Cabinet after a career of turning around several brokerage firms. A topic I would have liked to hear more about. When the President came to the NYSSA, he was the first President since George Washington to speak on “Wall Street” while still in office. He included all the proposed bad jokes.

 

When President Trump spoke to the correspondents this week, he also told jokes that did not go over well. It seems as if Presidents speak about what they want and not about what their audiences want to hear. Like many investors, they don’t learn from history.

 

Those of us who pay attention to future liabilities for clients and ourselves should focus on the long term. What do you think?    

 

 

 

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

Mike Lipper's Blog: Before Focusing on Shorter-Term Reactions - Weekly Blog # 950

Mike Lipper's Blog: Little Occurred During the Trading Week - Weekly Blog # 949

Mike Lipper's Blog: Searching for Future Long-Term Picks: Gathering Assets, Reasons to Search - Weekly Blog # 948

 

 

Did someone forward you this blog?

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

subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2026

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

What Can Go Wrong - Weekly Blog # 940

 

 

 

Mike Lipper’s Monday Morning Musings

 

What Can Go Wrong

 

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

 

          

 

Preface

In preparing to start a buying program using one of the lessons from betting at the track you should recognize what could go wrong. The purpose of this blog is not to permit betting, but to avoid wagering on one’s ego and failing to learn from the experience.

 

There are four general reasons for not seeing an opportunity as a trap.

1. Not appreciating the goals of the source.
2. Inaccurate data or badly displayed data.
3. Failing to process past mistakes.
4. Too difficult to fathom. (Probably the least in terms of occurrence)

 

Tocqueville, as quoted by Goldman Sachs who deals well with errors. “The greatness of America lies not being more enlightened than any other nation, but rather her ability to repair her faults.” Therefore, I view betting on horses, securities, politics, people, and many other things, as learning experiences.

 

Sources of Mistakes

We all have deeply felt biases. The media and their chorus of pundits use information to motivate repeat use of their work. Thus, they transmit their pronouncements in the way we would like to read, see, or hear. For example, in the latest announcements of the number of people hired, it was better than many expected compared to the prior, shorter month, with bad weather. Deep in the article was the fact that it was not better than the same month last year. Furthermore, if you deduct healthcare and social assistance workers from the total employed, there has been no growth since 2024. Why is this important? The latter group receives payments from the federal government, either directly or indirectly, which will likely have some impact on the midterm elections.

 

This is probably a major reason for the various market indices going up. Using the data for this week only, 2/3rds of the stocks advanced and 1/3rd did not. Even on Friday, there was little focus on the number of new unemployment claims, which rose for the week. There was little coverage of the consumer sentiment survey by the University of Michigan, which hit a new low.

 

When companies release layoff numbers, they are vague and rounded. What disturbs me is that these are some of the most numeric-driven companies: Fidelity, Deloitte, and Commerzbank, all of which announced cutbacks. For some time, established financial and auditing firms around the world have been retiring senior people without hiring replacements. Even some “AI” people have been let go.

 

One of the most dangerous items of news is a shortage of an industry’s goods followed by a new large supply becoming available. Historically, look at what happened to the price of gold when the size of the Latin American precious metal was announced. While it made Spain wealthy, it hurt the other European nations with lots of gold in their vaults. So be careful if quantities jump up while simultaneously being withdrawn.

 

What We Should Have Learned?

Perhaps we should have learned from recorded history the need to negotiate debts payments, date, and rate! Examples include the Babylonians, William Shakespeare’s “Merchant of Venus”, the expansion and depression of the 1920s and 1930s, or even the present occupant of the White House.  

 

Almost every sector in the commercial world has added debt as their currency for expansion. This is one reason to keep an eye on the slowdown in ROTCE (Return on Total Capital Employed). Bearing in mind that this sum does not cover accidents and supply chain issues adequately.

 

Please let me know what you think I can learn. 

                                        

 

 

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

Mike Lipper's Blog: This Weekend’s Learning Sources - Weekly Blog # 939

Mike Lipper's Blog: Watch Out for the Four - Weekly Blog # 938

Mike Lipper's Blog: Investors’ Interlude - Weekly Blog # 937

 

 

Did someone forward you this blog?

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

subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2026

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

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.

 

 

 

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

Mike Lipper's Blog: Risks Are Rising Thru the Clouds - Weekly Blog # 915

Mike Lipper's Blog: The Inevitable Recession - Weekly Blog # 914

Mike Lipper's Blog: Biggest Investment Hurdle: Complexity - Weekly Blog # 913

 

 

Did someone forward you this blog?

To receive Mike Lipper’s Blog each Monday morning, please subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2024

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

 

Melt Up Not Convincing - Weekly Blog # 899

 

Mike Lipper’s Monday Morning Musings

 

Melt Up Not Convincing

 

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

 

 

 

Contrary Evidence Also Not Convincing

 

Low Transaction Volume, High Chatter

 

Short-Term Implications

 

1. NASDAQ is breaking up. Up volume is leading, while more prices are down than up?
2. Industrial commodity prices rose during the week, 115.8 vs 114.98 the prior week according to ECRI.
3. AAII weekly bullish outlook is declining, 36.8%, 39.3%, and 41.4% over the last 3 weeks.
4. WSJ weekly down prices seem strange. The worst was Natural Gas -12.71%, but the next worst was a -2.82% negative return. This suggests there were few negative prices. Natural Gas prices remained volatile, being up +7.57% the prior week.

 

Possible Longer-Term Implications

1. Trump used construction costs for an already constructed Federal Reserve building to raise the costs of the new headquarters. Chairman Powell spotted it. Assume for the moment this was a honest mistake, it suggests that the President’s staff is lacking something. There have been similar mistakes, some of which were part of the reason the courts ruled against various executive orders.
2. Charley Ellis’ column on David Swensen in the Financial Times listed some of the reasons for Yale’s outstanding long-term record. A long-term focus meant less liquidity was needed and analysis went beyond financial statements to management policies, and well-placed alumni which wasn’t mentioned. I tried to follow his approach.
3. Most US Presidents have focused on managing the government and society as it was when they came into office. President Trump is the fourth president to make fundamental changes. (The others were Jackson, Teddy Roosevelt, and FDR.) Along with the other activists Presidents, the current occupant of The White House wishes to proscribe new ways of thinking to change our behavior. This is what our founders feared, the tyranny of the majority over the minority. Our Constitution and Bill of Rights have built in checks and balances. Consequently, I believe we are going to see more court actions for the rest of this term.

 

Implications?

I believe it’s going to be increasingly difficult to develop a long-term investment policy as we go through a period of attempted structural change.

 

What do you think?

 

 

 

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

Mike Lipper's Blog: It May Be Early - Weekly Blog # 898

Mike Lipper's Blog: Misperceptions: Contrarian & Other Viewpoints: Majority vs Minority - Weekly Blog # 897

Mike Lipper's Blog: Expectations: 3rd 20%+ Gain - Stagflation - Weekly Blog # 896

 

Did someone forward you this blog?

To receive Mike Lipper’s Blog each Monday morning, please subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2024

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

Expectations: 3rd 20%+ Gain - Stagflation - Weekly Blog # 896

 

 

 

Mike Lipper’s Monday Morning Musings

 

Expectations: 3rd 20%+ Gain - Stagflation

 

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

                             

 

 

 

 

3 ½ Day Trading Week

Normally, in a three and a half-day trading week we expect low volume and muted news of any significance to investors with less intense trading instincts and reduced staff levels. This was not the case this past week. Despite initial unruly Republican Party members in both Congressional houses, the so-called Big Beautiful Bill (BBB) tax and tariff bill passed with few amendments. Significant progress was made on reciprocal tariffs and possible trade barriers. Cease fire agreements in Gaza moved toward peace agreements. One suspects a Russian economic crunch, continued causalities sustained in the homeland, and the US threatening reduced US military aid to Ukraine, could hopefully lead to a reduction in deaths and soon become less of a distraction.

 

Trading Reactions

Led by favorable reactions to the passing of the BBB that were cheered on by The White House, many saw things getting better. These reactions stirred up bullish sentiments resulting in the S&P 500 Index reaching its first high for the year since February. Some even suggested 2025 could be the third +20% gain year in a row, a rare event.

 

Professional analysts and experienced economists are two-handed thinkers who don’t receive the same air or face time that advocates of simple tales do. First, the S&P 500 is a capitalization weighted index with a small number of highly valued stocks recording bigger gains than the average stock. An equally weighted index gained 5% less than the S&P 500. More importantly, at least to me, 9 of the 11 industry sectors in the index underperformed the overall index, with Info Tech and Communications doing better.

 

Economists often turn to the actions of corporate leaders for clues as they feel the stock market is too volatile and occasionally wrong in direction or magnitude. Currently, slightly less than half of publicly traded companies have announced employee layoffs going forward. Considering the cost and time spent getting qualified employees, cutbacks are an expensive strategy companies would like to avoid. Part of their problem is that they can’t find qualified new employees today, which means it is particularly painful to let good ones go. This is particularly true for companies with an aging workforce.

 

The lack of success in finding good new employees while keeping the better aging ones is in my mind not a cyclical problem cured by higher sales levels. It is a secular problem caused by the system we have built, which has failed us by confusing education with schooling. The problem starts in the home, often due to a single adult household, and continues on through early childhood education. The impact is felt all the way through PhD studies, with a system awarding promotions through test taking rather than productivity and intellectual integrity.

 

Historical Lessons

Perhaps we can learn from the past. With that thought in mind I recommend reading this week’s Barron’s article titled “The Coming Stagflation Won’t Feel Like the 70’s” by Joseph Brusuelas. I believe there is another parallel that should be considered, the US with an activist President and an accommodating Congress. Both the current occupant of The White House and FDR came into office seeking to make fundamental changes, but both ran into opposition from the courts. FDR took a recession and turned it into a depression, not by choice but in part due to the impact of stagflation. I do not necessarily agree with Joseph Brusuelas’ statistical projections.

 

What do you Think?      

 

 

 

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

Mike Lipper's Blog: Analyst Calendar: Preparation for 2026 - Weekly Blog # 895

Mike Lipper's Blog: Inconclusive Week Hiding a Big Problem - Weekly Blog # 894

Mike Lipper's Blog: We may think we manage time, but time manages us - Weekly Blog # 893

 

Did someone forward you this blog?

To receive Mike Lipper’s Blog each Monday morning, please subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2024

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

This Was the Week That Was, But Not What Was Expected - Weekly Blog # 861

 

Mike Lipper’s Monday Morning Musings

 

This Was The Week That Was,

But Not What Was Expected

 

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

 

 

 

 “Trump Trade”, An Artifact of History

No one really knows which of the new administration’s critical rules and regulations will become law. Both presidential candidates have announced and unannounced wishes, but both are unlikely to get another term. They will have little ability to help various members of Congress win the ’26 or ’28 elections.

 

Unless there is a one-sided sweep of both Houses for the same party, the odds favor majorities in the single digits. While the rest of the world might think Congressional leaders will be able to command political discipline, both parties are split into multiple groups depending on the particular issue. Furthermore, in the Senate there are members who see themselves sitting in the White House after the ’28 elections.  Looking beyond the intramural games of the next four years, there are two elements of news that should be of importance to those of us selecting assets to meet the needs of longer-term investors.

 

The Declining Dollar

The CFA Institute Research & Policy Center conducted a global survey of 4000 CFAs concerning the future value of the US Dollar. The survey was conducted from 15 to 31 of July 2024. They published their findings in a white paper titled “The Dollar’s Exorbitant Privilege” (This is what the French President called the dollar years ago.)

 

A supermajority of respondents believe that US government spending is not sustainable. Only 59% of US Treasury investors believe the US can continue to borrow using Treasuries. (I remember there was a time when we created a special class of Treasuries for the Saudi Arabia, with an undisclosed interest rate). Neither of the two Presidential Candidates have announced any plans to reduce the deficit and both are unannounced pro-inflation. The respondents expect the dollar to be replaced by a multipolar currency system no later than fifteen years from now.

 

Some investors already recognize the risk in the dollar. Bank of America’s brokerage firm noted this week that 31% of their volume was in gold and 24% in crypto, as a way to reduce total dependence on the dollar. One long-term investor diversifying his currency risk is Warren Buffett. After doubling his money in five Japanese Trading companies, he is now borrowing money in Yen.

 

Berkshire Hathaway’s 10Q

As a young analyst I became enamored by their financial statements, long before I could afford to buy shares in Berkshire. In the 1960s I felt a smart business school could devote a whole semester to reading and understanding the financial reports of Berkshire. It would teach students about equity investments, bonds, insurance, commodities, management analysis, and how politics impacts investment decisions. (It might even help the professors learn about the real world)

 

On Saturday Berkshire published its third quarter results with a relatively concise press release, which was top-line oriented. As is required by the SEC it also published its 10Q document, which was over fifty pages long. Ten of those pages were full of brief comments on each of the larger investments. This is what hooked me, although I could not purchase most of their investments because they are not publicly traded. Their comments were in some detail, covering sales, earnings, taxes paid, expense trends, and management issues. The comments gave me an understanding of how the real economy is working. (Along the way I was able to become comfortable enough to buy some shares in Berkshire, and it is now my biggest investment.)

 

The latest “Q” showed that in nine months they had raised their cash levels to $288 billion, compared to $130 billion at year-end.  At the same time, they added $50 billion to investments. Perhaps most significant was that they did not repurchase any of their own publicly traded stock. A couple of years ago at a private dinner with the late and great Charley Munger, I asked him if I should value their private companies at twice their carrying value (purchase price + dividends received). Charley counseled me that everything they owned currently was not a good investment. As usual he was correct. In this quarter’s “Q” there were a significant number of investments that declining earnings or lost money. (I still believe they own enough large winners on average where doubling their holdings value would be reasonable.) If one looks at the operations of a number of industrial and consumer product entities, they themselves conduct substantial financial activities in terms of loans and insurance.

 

Is Warren Buffett’s Caution Warranted?

Some stocks have risen so high that they may have brought some gains forward, potentially reducing future gains. One way to evaluate this is to look at the gains achieved by the leading mutual fund sectors: Total Return Performance for the latest 52 weeks are shown below:

 

Equity Leverage       61.16%

Financial Services    46.38%

Science & Tech        44.13%

Mid-Cap Growth        41.28%

Large-Cap Growth      40.30%

 

I don’t expect all to be leaders in the next 52 weeks, as the three main indices (DJIA, SPX, and the Nasdaq Composite) have “Head & Shoulders” chart patterns, which often leads to a reversal.

 

Question: What Do You Think?

 

 

 

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

Mike Lipper's Blog: Both Elections & Investments Seldom What They Seem - Weekly Blog # 860

Mike Lipper's Blog: Stress Unfelt by the “Bulls”, Yet !! - Weekly Blog # 859

Mike Lipper's Blog: Melt-Up, Leaks, & Echoes of 1907 - Weekly Blog # 858

 

Did someone forward you this blog?

To receive Mike Lipper’s Blog each Monday morning, please subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2024

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

 

Both Elections & Investments Seldom What They Seem - Weekly Blog # 860

 

Mike Lipper’s Monday Morning Musings

 

Both Elections & Investments

Seldom What They Seem

 

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

 

 

  

Gilbert & Sullivan nailed it when they titled one of their songs in H.M.S. Pinafore “Things are Seldom What they Seem”. This title should be attached to every article that discusses the investment implications of the next election and future elections. Currently, almost all the chatter is about the Presidential election, which also gets exclusive attention overseas. This is naive in the extreme for the following reasons:

1. Whoever is going to be sitting in the Oval Office will not likely be there for another term. Thus, they will likely have limited political power on Capitol Hill.
2. The House must start all tax and spending bills and both parties are split along ideological lines.
3. The Senate, with 6-year staggered terms, requires critical legislation to be passed by 60 votes. They wish to terminate the filibuster rule. Politically, the senate is even more divided than the house. Additionally, a number of senators are interested in having a seat in the White House and they typically have larger financial estates than members of the House.
4. Both political parties believe Washington should dictate what Americans purchase by using grants and tariffs. (Democrats favor “EVs” and labor union produced voters, while Republicans seem to favor tariffs. Our economic history shows that countries supporting consumer choice grow faster and sounder.)
5. With deep divisions on Capitol Hill and changing legislative leadership, including the chairs of committees on the Republican side, it is going to be difficult to get bills passed.
6. The role of the Supreme Court will be critical. The present Court believes it is responsible for determining when cases comply with the written Constitution. This Court decided that a prior court decision on Roe vs. Wade was unauthorized. The issue was not about abortion, but whether the “Warren Court” 50 years ago sanctioned abortion under the Constitution. The Founding Fathers limited the powers of the Federal government to those items specifically enumerated in the Constitution, leaving all other decisions to the individual states.   

 

Possible Peak Two Fridays Past

Some investors are more focused on their long-term investment responsibilities than political decisions. However, too many economists have become mathematicians and too many political scientists have become statisticians.

 

Some of the signs that all is not well:

1. AAII’s weekly sample survey of investor sentiment changed dramatically. Two weeks ago, there was 20 percentage point advantage in favor of the bulls for the next 6 months. In the most current week, this position shrank 7% points.
2. The weekly share volume on the NYSE declined 42,209 shares, while NASDAQ volume rose 3,034,261 shares. (Considering prices fell during this period, the increase in volume is bearish.)
3. Standard & Poor’s tracks 32 indices weekly and only 1 rose last week, by only 0.05%.
4. The underwriting of speculative bonds rose sharply in late September and thus far in October. The sharp increase in underwriting was well beyond the need to refinance existing debt. This suggests savvy speculative bond issuers see higher rates ahead when they need to sell more debt.

 

Question: How do you see interest rates in late 2025, 2026, and 2028?

 

 

 

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

Mike Lipper's Blog: Melt-Up, Leaks, & Echoes of 1907 - Weekly Blog # 858

Mike Lipper's Blog: Stress Unfelt by the “Bulls”, Yet !! - Weekly Blog # 859

Mike Lipper's Blog: Mis-Interpreting News - Weekly Blog # 857

 

Did someone forward you this blog?

To receive Mike Lipper’s Blog each Monday morning, please subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2024

A. Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

American Voters Win & Lose - Weekly Blog # 830

 

         

Mike Lipper’s Monday Morning Musings

 

American Voters Win & Lose

 

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

   

   

    

Probable Real Winner in November

While it is unknown which candidate will be elected President, the probable real winner is the American voter. Unfortunately, victory comes at the price of worse government.

 

In almost every poll taken, it is clear most voters are unenthusiastic about the numerical winner. If the number of unenthusiastic and non-voters were aggregated, they would likely represent the majority of the country. For all intents and purposes, based on todays’ perceptions, the occupant of the White House will be a “lame duck”. The President will have limited influence on those occupying seats in Congress for 2026 and 2028. As most Americans prefer Congress pass very little legislation, they are the likely winners in 2024.

 

However, the voters are also losers. While members of Congress will either wear red or blue uniforms, but in meeting rooms they will split into numerous caucuses. As the number of voting groups goes up, compromises will produce the weakest bills. More importantly, none of the splinter groups will have national campaign chests or the talent of the national committees. Odds are the US structure will look similar to  the less efficient European Parliaments. A factor likely to slow international agreements.

 

Chairman Powell Attempts to Teach Economics

In the press conference following Chairman Powell’s testimony before the Houses of Congress, he indicated that interest rates are unlikely to be the main weapon used to bring down inflation. Furthermore, he said it is possible the “Fed” is likely to raise interest rates under certain conditions.

 

This pronouncement came as a rude shock to those viewing control of short-term interest rates as controlling inflation and the economy. The Board of the Federal Reserve System made it unanimously clear that the causes of inflation are multifaceted and that control of short-term high-quality rates would not control inflation.

 

The rate of inflation is an inexact measure of the rate of change in prices, as there are many influences on the aggregate level of price changes. These influences can be ranked and put into three broad groups, governments, private sectors, and natural forces.

 

Their impact on inflation is not well-understood. Too much attention is focused on government-imposed income taxes. Also important are business taxes, estate formation and related taxes, and regulations of permitted actions. Additionally, State, Municipal, and foreign taxes can also be inflationary. Changes in demographics, climate, technology, and wars also have an impact, which is beyond the purview of the Fed and Congress. While there are a few more narrowly focused inflation measures, they are not generally used in making decisions. Bottomline, inflation should not be treated as a single number of any precision.     

 

News That May Impact Security Prices

1. 16 states still have employment rates below pandemic levels, with New York and California leading the list.
2. We don’t measure the flight from the US dollar correctly, as we don’t include the purchase of Bitcoin, Gold, Manhattan Real Estate, and other hard commodities requiring the exchange of dollars.
3. Narrowing high yield spreads.
4. EPS growth leveraging revenue growth.
5. The ratio of AAII Bullish views to Bearish is near a record 2.2 times.
6. Private Capital is short of opportunities and talented staff.
7. Defaults are expected to grow.
8. Trading liquidity to dry up with a switch to smaller caps.

           

Please share your reactions so we can learn.                                              

 

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

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

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

Mike Lipper's Blog: Alternative Futures - Weekly Blog # 827

 

 

Did someone forward you this blog?

To receive Mike Lipper’s Blog each Monday morning, please subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2023

Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.

Collateral Rewards, Risks, & Opportunities - Weekly Blog # 828

 

      

Mike Lipper’s Monday Morning Musings

 

Collateral Rewards, Risks, & Opportunities

 

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

   

 

 

Motivations

The attempt to be successful and original is hard work, as being an originator seldom leads to investment success. Better results come from striving to be an early participant in an investment idea. Great individual analysts search for a single great idea, usually an idea that few if any recognize.

 

Somewhat later and perhaps deservedly less successful are those who are early recognizers of those with great investment ideas or themes. The second group are collateral players, including public and private pundits working to identify these opportunities.

 

At one point in my professional life, I was a candidate for the first group. I devoted some of my time as an analyst to visiting plants, doing walking tours of workspaces, and attending industry sales presentations or government conferences. In order to accomplish these tasks, I often commuted on the earliest and latest trains. In addition, I also read numerous trade journals, which I no longer do.

 

Today, my “remote” research consists of reading or watching business communications, visiting buyside managers and their analysts, and walking through shopping streets and malls. In effect, my first glance at new products and services is when they are introduced to the buying public, so I am going to be late in recognizing new trends. The only offset I have is my prior experience, having seen many things in the past which may have some bearing on present and possibly future trends.

 

What Are Most Missing

Much has changed in the sixty plus years I have been watching.

1. Disclosure rules have changed.
2. Corporate executives meet investors and analysts in tightly scripted conferences or small meetings.
3. The published data is largely statistical in nature and is focused on the immediate past. Much time is spent on complaints about government restrictions and disclosure requirements. Two examples are the focus on demographics and worker counts. (This is the same trap political pools fall into.) A much more expensive and insightful source of useful information is psychographics, rather the demographics. While two workers may have the exact same job classification, one might be solely concerned about wages and hours while the other seeks career opportunities well beyond the current paycheck.

 

Questions Need to be Asked?

• What are the implications for the four largest net free cash flow producing companies, which reported over $50 billion each? This suggests to me that risk-taking finance and technology companies will be central to funding the future and could be its beneficiaries.

Net Free

Cash Flow

$ Billion

Goldman Sachs           $143 

JP Morgan Chase           87

Apple                     85

Google                    69

• The American Association of Individual Investors (AAII) is often viewed as a contrary indicator at turning points and last week the indicator switched direction. Those with a bullish outlook rose to 30.4% from the prior week’s 23.4%, while those who felt bearish fell to 41.4% from 53.7%. (The size of the switch and timing is unusual.)

• Lessons from the past for possible use in the future? In the 1930s the US shrunk its defense strength below its WWI level, while restricting oil exports from American companies to Japan. It also refused to permit the offloading of a ship of European refugees. (These actions were taken by FDR, whose portrait is the most prominent in the current White House. It hangs in the room where the President meets with current world leaders and US politicians.) 

 

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

Mike Lipper's Blog: Alternative Futures - Weekly Blog # 827

Mike Lipper's Blog: Bullish Chatter Leaves Out Useful Info - Weekly Blog # 826

Mike Lipper's Blog: Caution: This Time Is Different - Weekly Blog # 825

 

 

Did someone forward you this blog?

To receive Mike Lipper’s Blog each Monday morning, please subscribe by emailing me directly at AML@Lipperadvising.com

 

Copyright © 2008 – 2023

Michael Lipper, CFA

 

All rights reserved.

 

Contact author for limited redistribution permission.