Topley’s Top 10 – June 29, 2022

1. Crude Oil vs. Copper

Two inflation measures disconnect

Jonathan Baird

2. OPEC Pumping Under Quotas

3. Two-Thirds of Americans Saying High Gas Prices Causing Hardship

Zero Hedge Blog–Two-thirds of Americans say recent increases in the price of gas are causing them hardship, which is up from 52% feeling this financial pinch in April. Although more Americans say they are experiencing “moderate” rather than “severe” hardship, the percentage describing the hardship as severe has risen from 14% to 22%.

4. Leading to Majority of Public Predicting Recession

5. Professional Investors Majority Betting on Recession Next Year

Jim Reid Deutsche Bank–In terms of preliminary results so far, you can see the risk of a US recession by the end of 2023 has only been building in recent months with 88% of you now thinking it happens by the end of 2023 up from 78% last month.

Interestingly only 17% believe it starts this year (up from 13% last month) so I think the market narrative of a more imminent recession has moved quicker than the responses. Of these over a third (so c.6% of the total responses) believe the recession has already started.

I still think 2023 is more likely than 2022 but it’s clear the risks are building.

6. Massive Cash Pile to Offset Recession

Irrelevant Investor Blog

7. Last Week Saw Retail Selling but No Capitulation Yet

Callum Thomas Chart Storm

Source:  @GunjanJS

8. China State-Owned Industry Market Cap Weight History

WisdomTree- Liqian RenDirector of Modern Alpha

The two charts below illustrate that a majority of Chinese equity market cap is in now in non-state-owned companies, and a majority of Chinese citizens work in the non-state-owned part of the economy. 

This presence of deep market economy and state power is a unique phenomenon. China will be a formidable challenge for the U.S. If U.S. understanding of China is just horror stories about state power, it may make people here feel good, but it won’t help the U.S. compete.

9. Hours Worked to Cover Mortgage Payments Hitting 2007 Levels

Schwab-Liz Ann Sonders

10. How You Define the Problem Determines Whether You Solve It

HBR by Art Markman

Typical stories of creativity and invention focus on finding novel ways to solve problems. James Dyson found a way to adapt the industrial cyclone to eliminate the bag in a vacuum cleaner. Pablo Picasso and Georges Braque developed cubism as a technique for including several views of a scene in the same painting. The desktop operating system developed at Xerox PARC replaced computer commands with a spatial user interface.

These brief descriptions of these innovations all focus primarily on the novel solution. The problem they solve seems obvious.

But framing innovations in this way makes creativity seem like a mystery. How could so many people have missed the solution to the problem for so long? And how in the world did the first person come up with that solution at all?

In fact, most people who come up with creative solutions to problems rely on a relatively straightforward method: finding a solution inside the collective memory of the people working on the problem. That is, someone working to solve the problem knows something that will help them find a solution — they just haven’t realized yet that they know it.

Sure, some people stumble on the answer. When Archimedes stepped into the bath and noticed the water level rise, he lucked into the solution for finding the volume of an ornately decorated crown. And others invest decades and millions (or even billions) of dollars into research and development (see drug companies). But tapping into the individual’s or group’s memory is one of the most cost effective and repeatable problem-solving approaches.

The key to this method is to get the right information out of memory to solve the problem.

Human memory is set up in a way that encountering a piece of information serves as a cue to retrieve other related things. If I ask you to imagine a birthday party, you can quickly retrieve information about birthday parties you have attended, and you will likely be able to think about party hats, cake, and singing “Happy Birthday.” You don’t have to expend much effort to recall this information; it emerges as a result of the initial cue.

If you want to retrieve something else from memory, you need to change the cue. If I now ask you to think about salad, you can likely call to mind information about lettuce, tomatoes, and dressing, even though you were thinking about birthday parties just a minute ago.

When doing creative problem solving, the statement of the problem is the cue to memory. That is what reaches in to memory and draws out related information.

In order to generate a variety of possible solutions to a problem, then, the problem solver (or group) can change the description of the problem in ways that lead new information to be drawn from memory.

For example, it is hard to see how Dyson would have gotten to industrial cyclones from thinking about vacuum cleaner bags. But an alternative way to describe the problem is that a vacuum takes in a combination of dirt and air and has to separate the dirt from the air. Bags do this by acting as a filter that traps the dirt and lets the air pass through pores in the bag. But there are many ways to separate particles from air. Industrial cyclones create a spinning mass of air that throws particles to the edges by centrifugal force.

This way of describing a vacuum is that it generalizes the problem by removing some of the specific components typically used to solve it. The phrase “separating dirt from air” does not mention the bag at all. When you focus on the bag, you’ll naturally be reminded of aspects of bags. The large list of patent numbers on most vacuum cleaner bags suggests that many inventors have done just that. A radically new solution to a problem, though, requires a new problem statement.

So how do you create the problem statement you need to find a solution to your business problem? Unfortunately, there is no ideal problem statement. Instead, the most consistently creative people and groups are ones that find many different ways to describe the problem being solved. Some of those statements will be specific and talk about the objects being acted on (e.g. vacuum bags). That leads to retrieval of specific information that is highly related to the problem (e.g. different types of vacuum bags). Then, groups should find several ways to describe the essence of the problem being solved in ways that focus on the relationships among the objects or a more abstract description of the goal (e.g. separate dirt from air). Each of these descriptions will help people to recall knowledge that is more distantly related to the domain in which the problem is stated.

Most of us have been looking in the wrong place for our creative insights. We ask people to “think outside the box,” but we should be asking people to find more descriptions of the box and see what that causes us to remember.

Topley’s Top 10 – June 23, 2022

1. Inflation Relief–Fertilizer and Used Car Prices Rollover

@Charlie Bilello Positive Signs on the Inflation Front

Fertilizer prices peaked in late March and have been trending downward since, now at their lowest prices since late January. This is very important given their high correlation with food prices. Hopefully, we’ll see this trend continue.

Used Car prices are down 6% over the last 6 months. In 2020, this was one of the first areas to spike higher, in advance of broader inflationary measures. Hopefully, the current downturn is a leading indicator of lower inflation rates to come.

2. Inflation Relief-China Housing Slump to Continue

Bloomberg-While global attention is focused on the economic impact of coronavirus lockdowns in Shanghai and Beijing, the slump in China’s housing market is likely to have even more profound implications.

An official index that tracks apartment and house sales has posted year-on-year declines for 11 months straight—a record since China created a private property market in the 1990s. With demand for services and commodities generated by housing construction and sales accounting for about 20% of gross domestic product, that represents a big drag on growth this year.

Even if Beijing wanted a construction boom, the fundamentals aren’t there. China’s massive urbanization process is maturing: Population growth in towns and cities dipped below 1% last year for the first time since 1996. In more developed provinces such as Guangdong in the south, about 75% of the population is urban—not far off the US rate of 83%.

Investment in housing accounts for about 11% of China’s GDP, and that will fall closer to 7% by 2030, according to a study by the Lowy Institute, a think tank in Sydney. Other kinds of investment such as infrastructure and factory construction won’t expand fast enough to fill the gap created by shrinking spending on apartment building, it argues.

China’s Property Slump Is a Bigger Threat Than Its Lockdowns

3. No Demand Destruction Yet………Gas prices aren’t leading to less driving — yet

Ben Geman, author of Axios Generate

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Data: Federal Reserve Bank of Dallas, Energy Information Administration; Chart: Simran Parwani/Axios

The rise in U.S. fuel prices isn’t yet spurring a major pullback in driving, but that could soon change, a new Dallas Fed analysis finds.

The big picture: Gas demand is historically not very sensitive to prices.

  • But “prices may be closer to consumers’ pain threshold than inflation-adjusted prices might suggest,” Dallas Fed economist Garrett Golding writes.
  • If they rise higher, “expect consumers to respond by cutting back on fuel consumption and overall spending sooner than later.”

What we’re watching: Remote work options could reduce demand, per the report, but it’s “too early to fully assess the impact.”

  • And many low-wage workers — the ones most hurt by high costs — lack that choice.

4. Energy Commodity vs. Energy Stocks

Kailash Concepts-Our team believes the disparity between the change in the commodity prices vs. the stocks is a compelling sign of just how little credit investors are giving the energy sector.

Over the last three years, natural gas prices are up 232%, while the Energy Sector’s stock prices have only risen 52%. Said differently, natural gas prices have risen 180% more than energy stocks since April 2019.

The last time the commodity ran this far ahead of the stocks was in November of 2000. That date would prove to be the start of a seven-year bull market for energy stocks, which would destroy the S&P500.

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5. Blown Up..Trillion in Market Cap Poof

by Michael Batnick Irrelevant Investor Blog

6. Celsius Blowup

Scott Galloway@profgalloway
What happened with Celsius is an example of desire working overtime. Splashed next to a stock photo of a sailbro, Celsius’s website promises: Earn up to 18.63% APY. That promise triggers our greed glands, so we don’t read the fine print and let that stranger in. The fine print, likely read sober, illuminates that this advertised rate is only for “Platinum Loyalty users” depositing “Synthetix” tokens. And the payouts come in the form of CEL, a digital currency from Celsius. CEL is down more than 90% year over year.

No Mercy No Malice Blog

7. IPO ETF Officially Making Run at Covid Low

8. Ukraine Refugee Data

Chartr–Data from the Ukrainian borders suggests that a substantial number of refugees that had previously fled Ukraine have now returned home — if only for a short trip.

Data from the UN refugee agency, originally reported on by The Economist, reveals that the gap between the number of people leaving Ukraine and the number of people entering Ukraine has narrowed. Indeed, throughout the first two weeks of June roughly 30,000 people have entered Ukraine per day, mostly staying west where the fighting with Russia has been more muted, suggesting Ukrainians are eager to return home as soon as they can.

Even with the number of returning refugees going up, there’s still a net exodus of people leaving the country — although it’s more of a trickle at 15,000-20,000 people per day compared to the hundreds of thousands that fled in the early days of the invasion.

9. Empty Wall Street Offices to Be Revived as Apartments

WSJ-Rebecca PicciottoFollow

A venture of two New York developers has purchased a one-third empty office building in the city’s financial district with plans to convert it into apartments, one of the largest such conversion schemes to be launched during the pandemic.

The venture, which includes Silverstein Properties and Metro Loft, has agreed to pay $180 million for the 30-story building that opened in 1967 and has housed numerous technology and financial-services tenants over the decades. The new owners plan to convert it into 571 market-rate apartments, ranging from studios to three bedrooms, during the next three to four years.

This is “the right evolution of these struggling, underperforming, older office assets that are approaching their obsolescence,” said Nathan Berman, Metro Loft founder and managing principal.

The deal comes as the remote-working trend that became popular during the pandemic is sending vacancies soaring in office markets throughout the country. Businesses adopting hybrid workplace strategies are leasing less space and migrating to newer buildings with modern designs, good locations and abundant amenities.

10. Golden State Wins: Cohesion, Defined Roles, and Andrew Wiggins

Psychology Today-Andrew Wiggins flipped his career narrative in one transcendent playoff run.– Benjamin D. Rosenberg, Ph.D., and Bret Levine, Ph.D.


  • Intangibles contributed to the Golden State Warriors winning another NBA title—namely, the science of team cohesion.
  • Team cohesion allows a group to remain united in their effort toward a goal, requiring clearly defined norms and roles.
  • Andrew Wiggins, long considered a bust, had a remarkable postseason because the Warriors’ clear norms and roles unlocked his potential.

The Golden State Warriors are 2022 NBA champions.

Three years removed from their last NBA Finals appearance and two removed from having the worst record in the entire league, that accomplishment seemed unfathomable to most. Since the 2019 NBA Finals loss to the Toronto Raptors, the Warriors had traded one Hall of Fame player (Kevin Durant), and the three other legendary players still on their roster (Stephen Curry, Klay Thompson, and Draymond Green) dealt with a variety of well-documented injuries.

Any other team might have folded in the face of this adversity, resigning themselves to lick their wounds under the glow of three recent NBA championships. This isn’t any other team, though—the Warriors’ famous culture, driven by superstars Curry, Thompson, and Green, isn’t about “satisficing.” Through a series of shrewd personnel moves and a whole lot of cohesion, the Warriors climbed back to the mountaintop.

One of these acquisitions, in particular, played an outsized role in helping the Warriors win a fourth NBA title in eight years: former number one overall draft pick, the much-criticized Andrew Wiggins. Many of the critiques levied against Wiggins in his first six seasons boiled down to a perceived lack of attention to detail, drive, and ability to be The Guy.

Somehow, Wiggins was able to overcome all of these criticisms in one fell swoop to become, arguably, the Warriors’ second-best player throughout the playoffs.

The science of team cohesion suggests that, for Wiggins, having clear group norms and a clearly defined role seems to have unlocked his potential.

The Andrew Wiggins saga

As a top NBA draft prospect, Wiggins’ profile was clear: He had the potential to be an elite athlete and defender immediately. Because of this high ceiling, Wiggins went number one overall to the Cleveland Cavaliers but was quickly shipped to the Minnesota Timberwolves. Through no fault of his own, Wiggins landed with a dysfunctional franchise with no norms to speak of; as the team transitioned away from the Kevin Garnett era, it lacked a clear tone-setter and culture-maker. Plus, they sucked: The Wolves went 16-66 in Wiggins’ first year, followed by 29-53 in his second.

In addition to lacking clear institutional norms, the Wolves’ role for Wiggins was a mismatch to both his talents and his personality. As such a high pick, Wiggins was expected to be the team’s top offensive and defensive option—an alpha dog in the Kobe Bryant mold. Wiggins, though, is a relatively reserved, family-focused guy. Outwardly, at least, Wiggins doesn’t appear to be the rabid competitor that Minnesota expected him to be.

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These two factors—a missing norm to tell the moldable rookie how to behave and a lack of a clear role—caused a mismatch between Wiggins’ potential and what he became in Minnesota. And, after 5.5 seasons, Wiggins earned several feared titles, like bust and lazy player. Even when the Warriors traded for him in 2020, the deal was generally considered a stepping stone for the team to acquire someone they really wanted.

A model of team cohesion

Every title run has numerous causal factors, perhaps foremost talent and a little bit of luck. For these Warriors, though, intangibles like Championship DNA, grit, and love play an outsized role.

Each of these factors is important, but the one that keeps surfacing again and again for the Warriors is team cohesion—“the tendency for a group to stick together and remain united in the pursuit of its instrumental objectives [1].”

One well-regarded model of team cohesion, from psychologists Carron and Spink [2], which appears in Figure 1, suggests several factors that contribute to teams’ overall feelings of togetherness.

Figure 1. Model of Cohesion adapted from Carron and Spink (1993)

Source: Benjamin D. Rosenberg

So, for instance, the most cohesive teams should feel distinct from the competition (“We are unique because of our winning history”), have clearly defined norms (“We always play hard on defense”) and roles (“Steph is the leader; I score when necessary and play hard defense”), communicate well (e.g., sharing grievances rather than letting them fester), and sacrifice for each other (e.g., giving up playing time so the team can win).

The importance of norms and roles in team cohesion

Each of these features is necessary to maximize team cohesion, but they can also operate like levers—augmenting one should ripple out and influence the others. In the case of Andrew Wiggins, having clear group norms and a clearly defined role seems to have unlocked his potential.

The Warriors’ well-established culture of greatness is founded on defense. As Coach Steve Kerr noted, “the key to our game is defense”; that’s a stark contrast to the popular conception that the Warriors are all about making pretty passes and long three-pointers. Each of the Warriors’ four recent titles, though, has found them with a top-five defense in the NBA.

Stepping into this clear norm of behavior (“Play defense or get out”), with such deep buy-in from the team’s leaders, put Wiggins in a position to lean into his defensive potential. And boy did he deliver, managing to body up several of the NBA’s top offensive threats in the playoffs, especially Dallas’ Luka Doncic and Boston’s Jayson Tatum.

Another foundational piece of the Warriors’ success has been their ability to offer players clear roles and expectations about how they fit into the team. Various veteran players have contributed in new ways after joining the Warriors—at least in part because they could focus on filling a very specific role. Another first overall pick, Andrew Bogut, revitalized his career and helped catapult the Warriors to the first title of this dynasty when he joined them and fulfilled a needed void as an enforcer, rim protector, and distributor.

Wiggins’ performance this season, capped by his stellar postseason, is the latest example of this trend. Rather than being The Guy, as he was expected to be in Minnesota, on a healthy Golden State roster Wiggins was arguably the fourth-best player. Being out of the spotlight allowed Wiggins to bond with his teammates and, more importantly, be exactly what the Warriors needed: an incredible defender and athlete, as well as a reliable second, third, or fourth shotmaker.

Andrew Wiggins, reborn

The Andrew Wiggins story is nowhere near over; he is only 26, after all. Wiggins showed this year that although it is easy to judge players on their first few years in the NBA, the narrative can change in a heartbeat—especially when a new team offers clear norms and roles for which they can strive.

Topley’s Top 10 – June 22, 2022

1. S&P on Track for Worst First Half Since 1932…What Happens Next?

Jim Reid Deutsche Bank-I’ve just released my latest chartbook (2022 – One of the worst years on record… so far..), which shows how 2022 is shaping up to be one of the worst years on record for financial markets. In fact, as today’s CoTD demonstrates, the S&P 500 is currently on track for its worst H1 performance since 1932 at the depths of the Great Depression, having shed -22.3% so far this year in total return terms. That just edges out 1962, when the index lost -22.2% over the first six months of the year. (more below)

But for those with a traditional 60/40 type portfolio, the news doesn’t get any better, since 10yr Treasuries are currently on track for their worst H1 since 1788.

If you’re looking for the positives, the 5 worst H1 performances for the S&P 500 before this year, all saw very good H2 performance. Indeed, on 4 of those 5 occasions, the index went on to gain at least +17%, with the other seeing a +10% gain. In order of H1 declines, we saw 1) 1932: H1 -45%, H2 +56%, 2) 1962: H1 -22%, H2 +17%, 3) 1970: H1 -19%, H2 +29%, 4) 1940: H1 -17%, H2 +10%, 5) 1939: H1 -15%, H2 +18%.

H2 is probably quite binary. If we don’t see a recession materialise over that period it might be tough for markets to continue to be as bearish as they have been, and a bounce back resembling history might be possible. However, it’s hard to see markets recovering if we see firm evidence of the recession.


2. Covid Bull was Shortest Since WWII

3. Last Week’s Sell Got to Leadership–Energy

Marketwatch–Barbara Kollmeyer

4. Will Gas Tax Holiday Move the Needle? 18.5 cents per gallon

As Biden weighs a federal gas tax holiday, here’s what that could mean for prices at the pump–Lorie Konish@LORIEKONISH


  • A gallon of gas now costs an average of $4.97, according to AAA. In some states, average prices are much higher.
  • Part of the costs drivers pay include an 18.4 cents per gallon federal tax.
  • Washington lawmakers, including President Joe Biden, are considering a gas tax holiday to provide relief from those levies. But the proposal is not without controversy.

For months, drivers across the U.S. face have faced eye-popping prices when they fill up their gas tanks.

Now, President Joe Biden is weighing a new remedy — a federal gas tax holiday.

A gallon of gas now costs an average of $4.97, according to AAA. That’s a slight improvement from earlier this month, when the national average crossed the $5 threshold for the first time. But prices are up from $4.59 a month ago and $3.07 a year ago.

However, in some states — like Washington, Oregon and Nevada — average gas prices are more than $5.50 per gallon. In California, the average is currently $6.38 per gallon.

The federal gas tax amounts to 18.4 cents per gallon, while states separately impose their own levies.

In February, Democratic Sens. Maggie Hassan of New Hampshire and Mark Kelly of Arizona proposed a bill that would suspend the federal gas tax through the end of the year.

5. 2022-70% Drop in IPOs and Secondary Offerings Globally

Dave Lutz at Jones Trading Just $198 billion worth of initial public offerings and follow-on sales have been priced so far this year, a 70% drop from a year ago. That puts them on track for the lowest first-half haul since 2005

6. U.S. Two Year Treasury Yield

Same as 30 year yield I showed last week….50day just going thru 200day to the upside.

7. China’s Electric Car Exports More Than Double, Mostly to Europe

(Bloomberg) — China’s shipments of cars rebounded in May, with electric vehicle exports more than doubling, as Covid lockdowns gradually ended.

Car manufacturers in China shipped $1.2 billion worth of electric passenger vehicles, up 122% from a year earlier and almost triple the level in April, when car factories in Changchun and Shanghai such as those run by Telsa Inc were shuttered or barely open. Passenger cars worth $2.8 billion were exported, the fourth-highest monthly total in the past few years.

China’s Electric Car Exports More Than Double, Mostly to Europe (

8. Chicago Public Schools….Budget +55% vs. Enrollment -22%

Stuart Loren

9. 2021 $881m in Dog Bite Insurance Claims. What?

Spotlight on: Dog bite liability | III

10. Ben Bernanke NY TIMES-Inflation Isn’t Going to Bring Back the 1970s

By Ben S. Bernanke

Mr. Bernanke, the chairman of the Federal Reserve from 2006 to 2016, is the author of “21st Century Monetary Policy: The Federal Reserve From the Great Inflation to Covid-19.”

Sign up for the Peter Coy newsletter, for Times subscribers only.  A veteran business and economics columnist unpacks the biggest headlines. Get it in your inbox.

We had another bad inflation report last week.

Inflation over the past 12 months exceeded 8 percent, a level that evokes memories of America’s Great Inflation of the 1960s and ’70s. From the beginning of 1966 through 1981, the Consumer Price Index rose, on average, by more than 7 percent per year, peaking at over 13 percent in 1980. This period also saw two major and two minor recessions and an approximately two-thirds decline in the Dow Jones industrial average, when adjusted for inflation.

Are we in danger of repeating that experience?

The short answer: almost certainly not.

Although the inflation of the 1960s and ’70s had higher peaks and lasted much longer than what we have seen recently, it’s true there are some similarities to what we are going through now. The inflation of a half-century ago, like today’s, began after a long period when inflation was generally low. In both cases, heavy federal spending (on the war in Vietnam and Great Society programs in the 1960s, on the response to Covid in 2020 and 2021) added to demand. And shocks to global energy and food prices in the 1970s made the inflation problem significantly worse, just as they are doing now.

But there are critical differences as well. First, although inflation was very unpopular in the ’60s and ’70s, as it (understandably) is today, back then, any inclination by the Federal Reserve to fight inflation by raising interest rates, which could also slow the economy and raise unemployment, met stiff political resistance. President Lyndon Johnson, attempting to insulate the public from the economic costs of an unpopular war, put intense pressure on the Fed chairman, William McChesney Martin, to keep interest rates low. Johnson promised to raise taxes to pay for the war, and Martin accordingly refrained from raising rates for a time, but Johnson’s temporary tax surcharge in 1968 failed to cool an overheated economy, allowing inflation to gain a toehold.


Richard Nixon, angling for re-election in 1972, made it clear to Martin’s successor at the Fed, Arthur Burns, that he would not tolerate an economic slowdown before the election, and Burns took no significant action against inflation. Even after Nixon resigned in 1974, Congress continued to pressure Burns and the Fed to avoid anti-inflation policies that might slow the economy. For example, a 1978 law set a target for the unemployment rate of 3 percent for people 20 and older — well below its sustainable, noninflationary level at the time.

In contrast, efforts by the current Fed chairman, Jerome Powell, and his colleagues to bring down inflation enjoy considerable support from both the White House and Congress, at least so far. As a result, the Fed today has the independence it needs to make policy decisions based solely on the economic data and in the longer-run interests of the economy, not on short-term political considerations.

Besides the Fed’s greater independence, a key difference from the ’60s and ’70s is that the Fed’s views on both the sources of inflation and its own responsibility to control the pace of price increases have changed markedly. Burns, who presided over most of the 1970s inflation, had a cost-push theory of inflation. He believed that inflation was caused primarily by large companies and trade unions, which used their market power to push up prices and wages even in a slow economy. He thought the Fed had little ability to counteract these forces, and as an alternative to raising interest rates, he helped persuade Nixon to set wage and price controls in 1971, which proved a spectacular failure.

Inflation gained momentum over the decade, ending only with the shock treatment applied by the Fed under Paul Volcker in the early 1980s, which resulted in a deep recession.

Burns wasn’t wrong that factors beyond the Fed’s control can contribute to inflation. Supply-side forces are, indeed, important today — not only the increases in global energy and food prices already mentioned but also pandemic-related constraints, like the disruption of global supply chains. Unfortunately, the Fed can do little about these supply-side problems.

Nevertheless, today’s monetary policymakers understand that as we wait for supply constraints to ease, which they will eventually, the Fed can help reduce inflation by slowing growth in demand. Drawing on the lessons of the past, they also understand that by doing what is needed to get inflation under control, they can help the economy and the job market avoid much more serious instability in the future.

In short, the lessons learned from America’s Great Inflation, by both the Fed and political leaders, make a repeat of that experience highly unlikely. The Fed today recognizes that it must take the leading role in controlling inflation, and it has the tools and sufficient political independence to do so. After a delay caused by a misdiagnosis of the economy in 2021, the Fed has accordingly turned to tightening monetary policy, ending its pandemic-era bond purchases, announcing plans to shrink its securities holdings and raising short-term interest rates.

Markets and the public appear to understand how the Fed’s approach has changed from the earlier era I described. Although the Fed has raised interest rates only twice this year (this week’s meeting will no doubt bring an additional increase), financial conditions have already tightened significantly (for example, mortgage rates have risen by more than two percentage points in the past year) as markets anticipate that policymakers will persist in their anti-inflation campaign. And while market indicators and surveys of consumers reveal that inflation is expected to remain high over the next year or two, for the most part, they suggest continued confidence that, over the longer term, the Fed will be able to bring inflation down close to its 2 percent target.

This confidence in turn makes the Fed’s job easier, by limiting the risk of an “inflationary psychology,” as Burns once put it, on the part of the public. Since Mr. Volcker’s conquest of inflation in the 1980s, bursts of inflation have tended to die away more quickly and with less need for monetary restraint than in previous episodes.

None of this implies that the Fed’s job will be easy. The degree to which the central bank will have to tighten monetary policy to control our currently high inflation, and the associated risk of an economic slowdown or recession, depends on several factors: how quickly the supply-side problems (high oil prices, supply-chain snarls) subside, how aggregate spending reacts to the tighter financial conditions engineered by the Fed and whether the Fed retains its credibility as an inflation fighter even if inflation takes a while to subside.

Of these, history teaches us, the last may be the most important. Inflation will not become self-perpetuating, with price increases leading to wage increases leading to price increases, if people are confident that the Fed will take the necessary measures to bring inflation down over time.

The Fed’s greater policy independence, its willingness to take responsibility for inflation and its record of keeping inflation low for nearly four decades after the Great Inflation, make it much more credible on inflation today than its counterpart in the ’60s and ’70s. The Fed’s credibility will help ensure that the Great Inflation will not be repeated, and Mr. Powell and his colleagues will put a high priority on keeping that credibility intact.

Topley’s Top 10 – June 21, 2022

1. Leading Indicators Trucking and Housing.

Homebuilders -33% from High…Clean close below 200 week moving average

2. Another 200 Day at Risk…Vanguard Total World Stock Index Right on 200 Week Moving Average.

3. Cash was at Record Levels Before Last Week’s Sell Off

4. When Do Stocks Bottom?

by Michael Batnick

Ben Carlson looked at the historical records and found some interesting results. Some bear markets were over as soon as they began, like 1948 and 1957. Others took a while, like 73-74 and the dotcom bust. The past isn’t much help with figuring out the future, but I did find this data point to be interesting: Seven out of the last twelve bear markets have bottomed in 46 days or less once the -20% level was breached.

When Do Stocks Bottom? – The Irrelevant Investor

5. Small Cap Energy -25% Correction

PSCE small cap energy ETF

6. Wealth Destruction Even Bigger than Many Past Bubbles….Due to Stocks, Crypto, and Bonds Going Down Together.

The Daily Shot The United States: Wealth destruction has been massive in this cycle, which is likely to create a drag on consumption.

Source: BCA Research

7. $800 Increase in Average Mortgage Payment


Housing Market Update: Share of Homes with Price Drops Reaches New High (

8. Gun Background Checks…2000 8.5m…2021 38.5m

Gun Background checks 8.5m 2000 to 38.9m 2022

9. The United States is installing less solar today than at peak of coronavirus pandemic

By Kelly Pickerel | June 7, 2022

The U.S. solar industry had its lowest quarter of installations since the start of the coronavirus pandemic, according to the “U.S. Solar Market Insight” report released today by the Solar Energy Industries Association (SEIA) and Wood Mackenzie, a Verisk business. In Q1 2022, price increases and supply chain constraints continued to suppress the solar market as the industry installed 24% less solar capacity than Q1 2021.

The White House’s executive action this week to provide a two-year suspension of any new solar tariffs gives businesses certainty to accelerate projects delayed by the Department of Commerce’s anti-circumvention investigation. Without this action, massive project delays and cancelations would have continued throughout 2022, putting President Biden’s climate goals at risk.

Since the case was initiated in March, most solar module manufacturers have halted shipments to the United States, causing an industry-wide module shortage. These supply constraints are expected to ease as manufacturers ramp up shipments to the U.S. in the coming months.

“The solar industry is facing multiple challenges that are slowing America’s clean energy progress, but this week’s action from the Biden administration provides a jolt of certainty businesses need to keep projects moving and create jobs,” said SEIA president and CEO Abigail Ross Hopper. “President Biden has clearly taken notice of how drags on the industry are hampering grid resiliency. By acting decisively, this administration is breathing new life into the clean energy sector, while positioning the U.S. to be a global solar manufacturing leader.”

Over the last nine months, 2022 forecasts have been cut in half due to continued supply chain challenges and the anti-circumvention inquiry.

“The White House’s executive action brings relief to the U.S. solar industry, which has been steeped in uncertainty regarding the anti-circumvention investigation initiated by the Department of Commerce in late March following a petition filed by Auxin Solar, a domestic module manufacturer,” said Michelle Davis, Wood Mackenzie’s principal analyst. “Despite this, this announcement is expected to create approximately 2 to 3 GW of upside potential to Wood Mackenzie’s 2022 base case outlook, assuming the global market resumes normal operations.”

The down numbers are due to the utility-scale market seeing its lowest quarter since Q3 2019 with 2,173 MWdc installed, a 41% decrease from Q1 2021 and a 64% decrease from Q4 2021. The utility-scale market is seeing the lowest number of new projects added to the pipeline since 2017.

The commercial market is also down: installing just 317 MWdc, down 11% year-over-year and down 28% quarter-over-quarter. Community solar installed 197 MWdc, up 16% year-over-year but down 59% quarter-over-quarter.

Residential solar, in comparison, had its largest quarter in history with 1,200 MWdc installed, a 30% increase over Q1 2021 and a 5% increase over Q4 2021, demonstrating the robust strength of the residential segment — a market less suspectable to price fluctuations.

With trade certainty in place, the solar market is eying the fate of clean energy policies in a federal reconciliation bill. Long-term tax credits, manufacturing incentives, and other provisions will significantly boost solar and storage deployment and help keep pace with President Biden’s clean energy goals.

News item from SEIA

10. 5 Tips to Handle Conflict When You’re Working with Your Polar Opposite By Jennifer B. Kahnweiler 

Extroverts and introverts are profoundly different. Extroverts become charged by being around other people while introverts find socialization draining and regain their energy with alone time. These differences can drive some pairs crazy, but for those that are able to work together, their combined strengths can achieve incredible results—ones they could never get to on their own.

Successful opposites acknowledge their differences, using them to challenge each other. They accept that decisions come with conflict and that conflict is normal, natural and necessary—they know that disagreements open up the path to a successful outcome. These opposites understand that avoiding conflict, on the other hand, creates tension and prevents them from achieving innovative and creative solutions.

Biologist Francis Crick said it well: “The death knell to real collaboration is politeness.”

When working together, introvert and extrovert opposites can do extraordinary things by pulling out the best thinking from each other, like blending two brains into one. But they have to be willing to “bring on the battles” for the world to benefit from the results of their genius.

Jennifer B. Kahnweiler, author of The Genius of Opposites, shares these six strategies to work through conflict and manage disagreements with your opposite:

1. Remember energy differences.

Accept that your partner’s introverted energy may wane from too much people time or your extroverted colleague might get too hyped-up during conflict. During conflict and stress we exaggerate our strengths; for example, we might talk loudly and more often as an extrovert or retreat into ourselves as an introvert. Resist the tendency to amplify your natural traits. Sometimes a time-out is the best workaround to help you regroup and reconvene, ready to engage with a clear head. Factor in breaks or a few moments of quiet to keep moving toward a resolution.

2. Tell ‘em what you need.

You can set the foundation for clear communication when you “bring on the battles.” Let your partner know specifically what you want and what you need to avoid emotional flare-ups. If you need to find a private space to work, then tell them. If you need to spill out your thoughts, say so. Mind reading doesn’t work here.

3. Manage crises together.

When an inevitable crisis occurs, put your heads together and figure out a way through. That often means drawing on the partner in the pair who is better suited to meet the problem at hand. Figuring out the logical solution may be your strong suit, while your opposite’s strength might be going to the source and diffusing the situation.

4. Bring in a third party.

Sometimes when you reach an impasse, no amount of discussion will work. The best action you can take is to bring in a neutral party, an objective outsider, to break through the tension, help you get unstuck and find a win-win way forward.

5. Walk and talk.

Consider moving your conversation outside the doors of your office. Talking out their ideas may help extroverts, while walking around might help them gain clarity about their positions. Introverts are likely to respond to the relaxed pace. They are also likely to conserve energy by not having to concentrate on making eye contact and other in-your-face listening behaviors. When you let the juices flow by getting up and moving, new ideas spring up and you will see solutions together.

The more high-stakes the situation, the more important it is for opposites to “bring on the battles” as an outcome-focused team.

This article was published in November 2015 and has been updated. Photo by fizkes/Shutterstock

Jennifer B. Kahnweiler

Topley’s Top 10 – June 15, 2022

1. The Big Question….Bear Market without Recession or Bear Market with Recession?  Here are the historical stats.

Ryan Detrick LPL Blog

2. Pure Value Vs. Pure Growth…10 year returns…Beginning of 2022 Growth 200% Over Value for Decade

Reversion to Mean 50% Spread Last and Closing

3. Small Cap Closes Below 200 Week Moving Average.

IWM Russell 2000 new low for 2022…hard close below 200 week…-30% from highs

4. 5 Year Chart…S&P +54% vs. IWM (small cap) +21%…2000-2022 Small Cap 100% Over S&P

5. SPLV Low Volatility Fund….Outperforming S&P YTD by 10%

6. Monday was Third Day Ever that 10 Year Treasury Yields Rose More than 20 Basis Points in One Day

Jim Reid Deutsche Bank-What a 48 business hours we’ve seen since Friday’s US CPI. Indeed yesterday was only the third day since daily Treasury data starts in 1962 that 10yr yields rose more than +20bps and the S&P 500 fell more than -3.5%. The other two times occurred in 1982 and 1986. That’s what happens when you see a regime change after decades under the old one.

If you’re looking for encouragement, at least the market is finally waking up to the extent of Fed hikes likely needed to tame inflation. Back in January, when we first used today’s CoTD, futures were only pricing in around 130bps worth of hikes over the first year of the hiking cycle. Even by the Fed’s meeting in March when they had begun to hike, futures were only pricing in 200bps. But, given inflation was already running at 7.0% last December and above 8% at the first hike, that would have been an unusually slow pace by historical standards, with the trend line of previous hiking cycles instead pointing to well over 300bps worth of hikes.

However, over the last 3 months markets have caught up to that trend line as inflation has proved stickier than the consensus was expecting. Futures now expect more than 300bps worth of further hikes by the February 2023 meeting (on top of the 75bps we’ve already had in March and May), meaning this is set to be the most aggressive pace of hikes in decades.

The terminal rate priced into the market is now at around 4%. This is starting to approach the 5% plus level we suggested was likely needed in our “Why the next recession will be worse than expected” (link here) note back in April.

The risk to our view is that something falls off the wheel as the Fed hikes aggressively over the coming months and they decide to pause or slow down the pace of hikes. This is clearly a risk but it’s not obvious that such a strategy would be enough to tame inflation.

7. Utilities -15% Off Highs…Pulls Back to Just Above 2022 Lows.

Yield on Utes ETFS below 3% vs. 10 year Treasury 3.5% Last

BITO -65% from highs

8. Floating Rate Bonds Beating AGG by 10% 2022

FLOT -1.3% vs. AGG -12.7%

9. 30 Year Treasury Yield Chart…50day thru 200day to Upside.

A couple weeks ago I showed this chart ….Surprised 50day was still below 200day….Upside breakout this week…Short-term overbought RSI long term bullish yield.

10. Wisdom is an Endless Pursuit-The Daily Stoic

It’s sort of strange—if you think back to when you were a kid, what appeared to you to be the best part about being an adult? No more school. Because that’s the example adults by and large set: that education stops. That adulthood is like one long summer break. That graduation is the final destination of learning and studying and investing in your education.

This is a relatively recent phenomenon. Not that long ago, adults prioritized their own education as much as their kids. There’s the story of Epictetus teaching one day when a student’s arrival caused a commotion in the back of the room. Who was it? Hadrian, the emperor. Hadrian’s example clearly had an impact on his successor and adopted grandson, Marcus Aurelius. Late in his reign, a friend spotted Marcus heading out, carrying a stack of books. Where are you going? he asked. Marcus was on his way to a lecture on Stoicism, he said, for “learning is a good thing, even for one who is growing old. I am now on my way to Sextus the philosopher to learn what I do not yet know.” In adulthood, Cato had the Stoic philosopher Athenodorus Cordylion come live with him so he could continue his studies. Thrasea, one of the Stoics who challenged Nero, continued his studies up until his last breath. In fact, he was discoursing and studying with Demetrius the Cynic when his death sentence from Nero arrived.

This is what it means to be a Stoic. To be a Stoic is to be a lifelong student. It’s to follow in the footsteps of Hadrian and Marcus and Cato and Thrasea. It’s to know that wisdom is an endless pursuit, to believe one never graduates, one never arrives at some final destination of education.