Mike Lipper's Blog - 5 new articles

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

A. Michael Lipper, CFA

Contact author for limited redistribution permission.

Comments

Comments

Before Focusing on Shorter-Term Reactions - Weekly Blog # 950

Mike Lipper’s Monday Morning Musings

Before Focusing on Shorter-Term Reactions

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

We should recognize that several topics that arose this week will have longer-term implications and impact results for many years, if not future decades. None of these contributions to our thinking will influence things directly, but some or all may influence our future.

Smoke from the Canadian wildfires has blanketed much of the US. Sports activities were delayed in Philadelphia, and the World Cup game in Miami was also influenced. The important message is that the US is not an isolated country, activities in both Canada and Mexico have measurable impacts on us.

The World Cup competition introduced real America to many sports fans from all over the world. Prior to traveling to the games many people looked at the US as Manhattan below 60th street, a few government buildings in D.C., and some sound stages in California. Costco, Brooklyn, and our national parks have awakened them to the country’s beauty, its friendly people, and a large population of many talents. It also showed athletes playing their game better than those representing America. I suspect by the next World Cup we will produce better results too. The biggest change is likely to be in women’s soccer.

Our media and our President comment on “the stock market” as if it were singular. Furthermore, the direction of the market is aligned with the economy. Increasingly, “the market” is made up of several smaller markets moving differently from each other. For most of this year, important sections of the market have been pointing down compared to a limited number of tech companies going up. The stocks of some of the nation’s leading healthcare companies are selling at 1990 or 2000 prices. These companies are rarely mentioned by pundits or politicians. In future it would be wise for investors to participate in the growth of Asia, and later Africa and the Middle East.

The final US input may be a collection of groups in Congress having only titular relations with the two main parties. The main battle will be in the Senate, which takes 60 votes for most legislation to pass. However, neither party will be able to count on all its members due to some issue specific deserters. This could lead to the only functioning group being a conflicted White House ruling through executive orders in all agencies except the Fed.

Clues To the Future

The Three Jobs

Security Analysts essentially have three jobs. The first job is to avoid being tagged with losing money, or worse, having a negative relationship with a paying client. The second, and most common function, is to be associated with winning positions or clusters of winners. The third job is to successfully support the sales effort of the organization.

What is our Role?

First and foremost, our first loyalty is to our investment management clients. If we are reasonably successful, we then earn the privilege of sharing our views with others through this blog.

We Use this Blog to Shape our Thinking

The price action of common stocks did not give us much help last week. In general, the daily moves were equally balanced between gains and losses. However, the latest sample survey of the American Association of Individual Investors (AAII) had their six-month expectations swinging a bit positive. (The AAII survey does not cover the end of the week, and many market analysts treat it as a contrary indicator at “turning points”.)

Our Biases

We think we do a good job over an extended period for long-term investors. In our longest multi-generational account of sixteen positions, five holdings represent over 50% of the gains. This demonstrates that most of the time we prefer both a small list of holdings and the ability to let winners exceed the SEC’s definition of diversified. Our accounts consist of both common stocks and mutual funds, or the manager’s portfolio. We also own securities that invest overseas, which are appropriate positions for this account, but may not be for others.

Some Hints for Long-Term Buyers

Two very popular stocks, IBM and Space X, which we do not own, declined this week. Both have lessons we believe are important for long-term investors. The fall in IBM was caused by the company’s disclosure that their software, consulting, infrastructure, and main frame computer customers are switching to buying “chips”. While pundits focused on what they were not buying from IBM, the item that struck me as even more important was the decline of items tied to main frame computers. IBM was responsible for selling some 60% or more of these expensive devices. In future there will be some consulting and infrastructure sales, plus an ever-decreasing number of mainframes. Furthermore, they no-longer have the advantage of being the first computer company with “sales engineers”. IBM is not the company that my grandfather loved. The lesson for all of us is that even one-time great companies can have economic difficulties. There is not a single company remaining from the original Dow Jones Industrial Average (DJIA), with the majority of them no longer in business.

At the other extreme, Space X is a business with exciting future products and services which also declined this week, selling below its original public issue price. In our role as portfolio manager we do not invest in highly sought after IPOs.

Despite the problems associated with these two leaders, the number of advancing prices on the NASDAQ exchange were higher than the number of decliners this week. However, on the older New York Stock Exchange (NYSE) the reverse was true 46% vs 59%.

Question: What if anything I have said do you agree with?

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

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

Mike Lipper's Blog: What is Pending and When - Weekly Blog # 947

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

A. Michael Lipper, CFA

Contact author for limited redistribution permission.

Comments

Comments

• View comments • Track comments •

Little Occurred During the Trading Week - Weekly Blog # 949

Mike Lipper’s Monday Morning Musings

Little Occurred During the Trading Week

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

Introspection During a Trendless Market

I have always been curious as to why so many bright investors don’t perform better overtime. These smart people often underperform the defined middle of the market as measured by major indices for extended periods! This appears to be true for both professional and individual investors over their investing lifetime.

One possible answer to this riddle is that market forces at every moment offer choices. Some of these choices contribute significantly to long-term results, while most choices don’t. Excluding luck, which is always an individual factor but not a continuous factor, I believe at most critical turning points the long-term correct decision is less believable to a large majority of investors.

Examining Our Current Choices

Don’t look at future choices in terms of which dictate buy or sell signals, which is what most do. Instead, consider the potential impact of making the wrong decision. Does this suggest that if you make the wrong choice, you will be materially worse off? A possible third choice is to temporarily increase your liquidity and wait anxiously for more information?

The following current choices are before us, to either engage or wait.

Large-Cap Growth Funds – 2026 year-to-date +7.19 %, 5-year +10.25%, 10-year +16.18%.
Small-Cap Growth Funds - 2026 year-to-date +18.80%, 5-year +4.09%, 10-year +11.85%.
S&P 500 Yearly Growth Rate by I/B/E/S - 26Q1 29.2 %, 27Q1 14.3%, 28Q1 17.6%
Erika McEntarffer, former BLS Commissioner Interview comments:

Payroll data is a little hard to predict due to the change in labor supply.
Businesses response rates are harder to reach as US business data is largely an all-volunteer endeavor, whereas in many countries it is mandatory.
BLS staff has declined by 20% in real terms in the last 15 years.

Conclusions

Analysts and portfolio managers must look deeper than published pundit headlines.
The appropriate reaction to some less believable content may be to not only look deeper, but to also slowly commit reserves into developing investment strategies.
Diversification helps reduce the chance of large losses but also reduces the chance of large gains, which are often larger than the losses.

Question: what do you think?

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

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

Mike Lipper's Blog: Too Many Short-Term Worries To Pick Long-Term Winners - Weekly Blog # 946

Mike Lipper's Blog: Is This the Last Hurrah? - Weekly Blog # 945

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

A. Michael Lipper, CFA

Contact author for limited redistribution permission.

Comments

Comments

• View comments • Track comments •

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

Mike Lipper’s Monday Morning Musings

Searching for Future Long-Term Picks:

Gathering Assets, Reasons to Search

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

Inputs from This Week

The Consumer Confidence Index was 91.4 vs the 94.4 expected. The index was however up from last month’s 90.6.
The American Association of Individual Investors (AAII) sample survey projections for next six months are Bullish 31.4% vs the prior week’s 42.3%, Bearish 42.3% vs the prior week’s 36.3%.
Workforce participation of 61.4% is the lowest since the covid readings. (We have made working on payroll unattractive for some.)
In some European countries the number of air conditioners is small, and some are even being removed. (The founder of modern Singapore stated that the installation of “AC” led to the economic growth, enabling it to become the fifth richest economy in the world.)

Future Investment Problems

Americans misreading foreign data. The foreign performance of indices and positions is converted into US dollars from the local currency. As the US dollar is currently stronger than most other currencies, it makes foreign investments look more attractive. We tend to forget that most US investors temporarily rent foreign securities. When we sell in declining markets local buyers are often the only buyers and they are not generous.
When looking at the statics of a company, investors look at where the fiscal headquarters of the company is located, not where the product or service is sold. Consequently, many investors currently think they are investing in the UK, Taiwan, or South Korea. The Financial Times 100 largest companies, which dominate the local British stock market, makes almost none of its operating earnings are earned in the UK. It is my guess that a good many US investors think their rapidly expanding earnings are coming from South Korea and Taiwan, not by what is happening in the US.
Investors are often attracted to various securities indices due to a handful of the leading performing issues within the index. These companies, at least for a while, perform better than the indices. However, history tells us that it is only a matter of time before the leaders become laggards and detract from the performance of the index.
One recent concern of mine is that a senior American General in Europe is resigning. He is a four-star general with a very good battle record. I don’t believe it is an appropriate time to reduce our military leadership anywhere, particularly in Europe.
As a portfolio manager for long-term beneficiaries, I am very conscious of the variability of performance records. Looking at the recent five-year period, only six mutual fund sectors had average performance better than the S&P 500 Index Funds average. For the ten-year period, only Large-Cap Growth Funds and Domestic and Global Science and Technology Funds beat the S&P 500 Index Funds average. Considering the CEOs of many companies don’t last beyond five years, with even fewer lasting ten years, I am particularly nervous about those whose stock prices depend on “AI” products and services. (I wonder how many repeat orders there are for their present products and services.) Many of last year’s leaders are selling below last year’s performance ranks.

Possible Buys

The one major stock group selling below its 2000 price is Healthcare. I do not know these stocks well and tend to use specialty funds to invest in the sector. I will probably reach sell decisions without much help from the industry, but that may be a long time from now. Without a lot of knowledge, I am starting my learning efforts with Johnson & Johnson and CVS Health. I like their strategies but don’t know their tactics, managements, and their outlooks for their critical present and future drugs. Furthermore, I don’t know the outlook for government regulation. I need any help subscribers can provide.

US Gifts to Others

Those in the US are incredibly lucky, or if you prefer God Given, considering the benefits/gifts we have received. However, it is wise to note that some of what we have given to the rest of the world is not always beneficial, as shown below:

A constitution that enshrines the rights of minorities.
An education process that attracts students from all over the world, who return to their homelands and contribute to them.
A military power that has critically helped defend other countries.
Innovation, which has produced great things for the world.

Hope you had a good July 4th and life gets better.

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

Mike Lipper's Blog: What is Pending and When - Weekly Blog # 947

Mike Lipper's Blog: Too Many Short-Term Worries To Pick Long-Term Winners - Weekly Blog # 946

Mike Lipper's Blog: Is This the Last Hurrah? - Weekly Blog # 945

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

A. Michael Lipper, CFA

Contact author for limited redistribution permission.

Comments

Comments

What is Pending and When - Weekly Blog # 947

Mike Lipper’s Monday Morning Musings

What is Pending and When

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

Who is Foreseeing?

We are entering a new phase at the Federal Reserve Bank where the new chairman wants to look to the unknown future rather than recorded history. He is searching to find a different set of indicators than government collected survey data. I always thought that the lunch discussions presidents of the local reserve banks had with “captains” of local industry were an attempt to gather this data. I believe what he is looking for is the kind of inputs many companies gather daily or weekly. (I knew the number of subscribers for each of our fund data products plus the number of new subscribers each week. Additionally, I knew the number of special individual reports generated, and the amounts of commissions earned each week.) I hope he gets what he wants, it will probably improve the efficiency of what the Fed decides.

My big complaint to the members of my securities analysis profession is that most of their reports focus on relatively short-term investment performance: the quarter, the rest of the calendar year, or one year. While that has some value for the media or gatekeepers, it has very little analytical value.

In viewing the work produced under the rubric of Securities Analysis, it is important to remember that the original text on the subject was written by Ben Graham, an investment manager and adjunct professor who favored “cheap” stocks. He was assisted by David Dodd, a full professor at Columbia University who taught accounting courses. Their original text was written in the middle of the depression. The key to their writing and financial survival was to avoid losses. Little attention was paid to making money, which came later. This bearish bent was echoed in the SEC’s Investment Company Act of 1940, which was not written by members of the SEC or their staff, but by a bunch of trust lawyers with heavy input from lawyers in Boston, New York, and Philadelphia. For them, the key issue was avoiding large losses and being sued. I took Securities Analysis under Professor Dodd at Columbia.

The More Modern Era

One could selectively make money by venturing into the market with new listings trading at a discount. An approach highlighted after WWII when war industries recommitted to the commercial world with new high energy leaders. However, far too many of the new ventures of the late 1940s produced large losses for their investors. By the late 1950s more pragmatic leaders emerged, with the “bull market” of the 60s bringing new generations into the market. The fear of losses ebbed in the late 60s, resulting in the idea of some leading stocks being held forever. This led to economic decline and a downturn in market enthusiasm which lasted into the mid-1980s. Since then and up to this calendar year the emphasis has been on making money, not avoiding losses.

We Have Possibly Entered a New Era

In last week’s blog I suggested that the critical market indicator has shifted from the Dow Jones Industrial Average (DJIA), from the late 1940s through the mid-1980s, to the institutional Standard & Poor’s 500 (S&P 500) from the mid-1980s to until very recently, and in the current period to the NASDAQ Composite. This week the DJIA was up 3 days and the S&P 500 was down 5 days. The NASDAQ was also down 5 days, but by a larger amount each day than the S&P 500 institutional measure. This seems appropriate as it rose more, driven by “AI” and the technology craze. I believe it is sensible to label this a technical correction.

More concerning is the market sensing a change in our future. Much of the current leadership comes from the retail side, whose increased numbers were driven by the conversion of retail brokers becoming wealth managers to earn a fee rather than a commission. The significance of this shift is that for the first time investment performance will be measured on the retail side. These new “managers” may panic and be quicker to sell than the institutionally oriented mutual fund portfolio managers. We may already be seeing this in redemption rates and attempts to redeem closed-end target date funds. Institutions have long experience with the cyclical results of below investment grade debt. Is it possible retail investors will lead the whole market in worries about declines?

Are There Reasons to be Worried?

I believe it is too early to be categorical about the next major decline, though I do believe it could happen. The following are potential signs of one or more major declines. (Going back to my course with Professor Dodd, I believe we should be prepared for the following pending triggers to generate meaningful declines.)

The biggest potential trigger is that we have not experienced a depression since the election of FDR in 1933, which did not end until 1942 because of his mismanagement. Skipping several cyclical recessions, the prior depression globally was in 1873. Thus, it has been 93 years since the beginning of the last depression or 84 years since it ended. (Depressions are caused by mismanagement and too much debt in the financial system.) The present administration, by personality, not policies, is very similar to FDR’s.
The surprise to the leaderships of attacks on Bahrain’s US Naval Base and Ukraine’s attack on Crimea. The nations hurt were thought by their people to be prepared for these attacks. Both nations have people worried about their country’s intelligence and governance.
Changes in Federal Reserve governance may be destabilizing.
ACA Insurance healthcare payments showed unexpected reductions.
Lack of progress on addressing Social Security solvency
Focus on innovation, but only on the mechanical side. In the US innovation typically has a bigger impact on sales size and structure.
Quality of schooling and home life vs. education retards growth and military preparedness. Probably negatively impacting marriage and childbearing.
Legal immigration

For the last 10 years only the average Large Cap Growth and domestic global Science and tech funds have beaten the S&P 500 Index fund average. For the current year-to-date period, 57 sector averages did better out of 104 equity sectors. The game has changed.

What are Your Thoughts About?