Mike Lipper’s Monday Morning Musings
Our Wishes & Perspectives
Editors: Frank Harrison 1997-2018, Hylton
Phillips-Page 2018
Wishes
Our wishes are the most basic of all, that you and yours will be happy
and safe in the new year. The safety we wish for includes your physical,
emotional, and financial safety.
Current and future safety are linked as we transition through the number
of future periods. The number of future periods depends on the number of
futures you are concerned about. As we manage money for people and institutions,
we look both at the near and longer-term impacts.
In reading the rest of this blog, don’t focus on whether or not you agree
with our conclusions. Focus instead on the logic that makes it possible for the
conclusions to materialize.
Each of us is perceptively different, as we have diverse elements of responsibilities,
net assets, and personalities. Consequently, each investor should make his/her own
personal decision. I am interested in learning how you reached your decision, as
I contemplate new topics to write about.
Guides to the Future
Every analyst is in some respect a historian. Since we don’t know what
the future will bring, we search the past for clues about what the future holds.
I find the following three quotes useful when thinking about the future.
“History doesn’t repeat itself, but it often rhymes.”
Mark Twain
“Those that fail to learn from history are doomed to repeat it.”
Winston Churchill
“Too often we enjoy the comfort of opinion without the discomfort of
thought.”
John F. Kennedy
Two Thoughts on the meaning of 2023
It was a discordant year, with the equity markets rising on a weighted basis
(measured by market indices). The economy was flat when inflation is taken into
consideration (GDP through November +3.03% and CPI +3.16%. The number of units
sold was flat, with higher prices and margins). Large and smart employers are
laying people off while sales are still satisfactory.
Split Political Structure in 2024
The current Senate and House are run nominally by different political
parties, with a larger than usual number of members announcing their retirements.
This suggests it will be difficult to see many controversial laws passed. The
Supreme Court will likely continue to question the authority of the
administrative government. It will also be difficult to get an expanded
spending package passed. (Even if something gets passed, the US will join most
other governments trying to tap the bond market at reasonable rates, likely crowding
out commercial and municipal needs.)
There is an invasion on the southern border of the US. Is this an
economic “fifth column”? (During the Spanish Civil War, the winning Loyalist
General referred to his group of saboteurs in Madrid as his fifth column.) They
were more important in capturing the capital than the four military columns he
had surrounding it. (The importance of this war should be important to the US, as
the Spanish War supplied new tactics used by the German Army and Airforce in WWII.)
Millions of illegal immigrants have crossed the US border. My guess is that one military division of 20,000
could be persuaded to follow the commands of a known enemy.
The bulls believe the market has begun a new bull market phase, or at
least a continuation with new leadership. Their bet is on a rotation away from
mega-caps to small-caps. Selected small caps stand a better chance than others,
particularly services companies who can help corporations and consumers lower their
costs through the application of technology and selected imports. Some of these
small companies could be attractive acquisition candidates, providing leadership
to tiring large corporations. The math could be described as 5 (large) + 1 (small)
= 6+4 or a combined 6 that becomes 10. The risk to an institutional sized buyer
in the small-cap market is that these stocks are much less liquid than their
normal large-cap investments. Consequently, they must take a much larger
portion of the available stock.
2025-26 Opportunities
To score the winning shot, one must follow Wayne Gretzky’s dictum of not
skating to where the puck is, but to where it will be. I’m suggesting this is how
you should build a portfolio today, as the present occupant of the White House
will either not be there, or a second Mrs. Wilson will be managing a lame-duck
Presidency.
The biggest change will be in Defense spending, a shift from the faulty
diplomacy of sending unimpressive Cabinet members to negotiate unsuccessfully.
We must reverse the quiet disrespect of our outmoded military, symbolized by
the lack of other nations joining our Red Sea patrol efforts. The declining
value of the US dollar is another indication of the perceived lack of respect for
our current leadership. The money for new defense spending will come from curtailing
spending on social tasks and redirecting it to prepare for a fight in a two-front
war. Thus, I suggest selecting investments to accomplish the goal of protecting
the US and our interests.
Let me hear your thoughts.
Did
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Mike
Lipper's Blog: Dangers “Smart Money” & Thin Markets - Weekly Blog # 816
Mike Lipper's Blog: Searching For Answers
- Weekly Blog # 815
Mike Lipper's Blog: Reactions from a
Contrarian - Weekly Blog # 814
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