Daily Top 10 – March 9, 2017

Top 10 will be a little sporadic in near-term due to travel into next week…Thanks


1.Sector Valuations Comparison Based on Price to Book.

 State Street SPDRs Group Does Great Work… Click for More

 2.Sales Growth by Sector



Jeff DeGraff at Renmac
Reach out to Eric for details EBoucher@renmac.com


3.FirstTrust Asset Class Flows…Not the Kind of Flows at Top of Bull Market.

Top Sector Flows 2017
FTSL-Senior Loans
FVD-Value Line Dividend Index
FPE-Preferred Income




4.How do you Interpret CAPE Ratio when bonds are expensive, recession not likely near term and demographics are positive?

CAPE Approaching 30

Torston Slok Thoughts….
Several clients have sent me variants of the chart below and are asking: Why are investors buying stocks at these valuations? The answer is simple: Because they have no other choice; asset prices are high everywhere, not only in equities but also in fixed income, and with the Fed about to hike rates and interest rates moving higher equities continue to look attractive. As one big real money client said in a recent meeting “I get X million dollars in every month, what do you suggest I do with it, keep it in cash?”.
This illustrates a fundamental truth about investing in stock markets: The vast majority of the time growth wins over value. Put differently; investors will for long periods continue to buy equities even as valuations increase. Only when valuations reach extremes will the dominant regime become value. Are we there yet? I don’t think so. Big corrections in stock markets mainly happen when we have a recession, and at the moment it looks like a recession is several years away. In fact, from a macro perspective the risk today is not that we will soon have a recession, but instead that we will soon have an overheated economy with the Fed behind the curve. For more discussion see also our latest GEP here: http://pull.db-gmresearch.com/cgi-bin/pull/DocPull/10406-0A14/242830263/DB_GEP_2017-03-07_fc6bf16a-027d-11e7-b547-c3cda74fadfc_604.pdf


5.Chart of the Day…S&P Earnings Dropped to Great Depression Levels in 2008…Now New Highs-Capitalism Works

With Q4 earnings largely in the books (96% of S&P 500 firms have reported), today’s chart provides some long-term perspective on the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today’s chart illustrates the dramatic nature of the earnings plunge during the financial crisis as well as the recovery that followed — a recovery that took earnings from levels not seen since the Great Depression to a new record high. More recently, however, S&P 500 inflation-adjusted earnings declined significantly. On a somewhat positive note, S&P 500 inflation-adjusted earnings have been moving trending higher over the past several months.

6.China Still Dominates the Global Commodities Consumption.




7.Energy Pullback Does Some Technical Damage.


XLE-Closes Below 200 Day on High Volume (second arrow)


8.Pullback Just When Speculators Got to Record Bullish….

Raoul Pal‏ @RaoulGMI

Spec oil positioning versus the price of oil. I know I go on about this but the time to get involved on the short side is very close. #Oil



Those bullish bets on crude are becoming less popular, going by data last week from the Commodity Futures Trading Commission. It was the first reduction in three weeks and the strongest since early November for Brent, said Commerzbank. But the bank warned earlier this week that there are still too many long positions and that high optimism could turn into a “sword of Damocles” threat to prices if selling by those investors intensifies.
Echoing that $45-a-barrel warning this morning, analysts at National Bank, say it’s a “reasonable target” right now. Meanwhile, Saxo Bank’s chief commodity guy, Ole Hansen, says $47.18 a barrel opens a path to $42.20 a barrel.
Now let those partygoers eat some cake.



9.The Downfall of the Popular IPO

Posted March 7, 2017 by Ben Carlson

Snap Inc. (SNAP) has been getting plenty of headlines for going public late last week. Consumer technology companies tend to get a lot of publicity and Snapchat has an estimated 150 million-plus daily users so it makes sense this one has been getting so much attention.

The IPO offering price was set at $17/share but the stock immediately opened up at around $24/share. It got as high as $29.44 on the first full day of trading but has since fallen back to just over $21/share, meaning it’s already down almost 30% from its highs in just a few short trading days. It’s way too early to tell if Snap will be a successful investment or public company. I’ve never even used the product so this one definitely falls into my too hard pile.

But with the early stumble in the stock price out of the gate Snap is following a similar path that many other popular tech IPOs have gone down these past few years. Take a look at a number of other high-profile tech companies that have gone public in recent years along with their subsequent performance:

There have been a number of huge flameouts in this group and only two real winners — Facebook and Alibaba. But these numbers simply show the gains or losses from the offering price. Very few investors actually ever see that offering price because the float is typically so low on these shares and the demand is so high that there’s almost always a huge pop on the first day of trading.

Here’s the same list of companies along with the first-day performance and subsequent performance from the closing price on the first day:

Many of the losses look ever worse once you factor in that first day. The majority of the gain in Alibaba is completely wiped out. Twitter shot up all the way to around $70/share within the first few months of trading, so some investors could be sitting on close to 80% losses there too. Facebook remains the only company that’s been able to shine. The fact that these IPOs have all come during a strong equity bull market is another black eye for the performance of these shares.

Lots of people have been saying we’re in a technology bubble for a number of years now. While this IPO performance certainly doesn’t look like a bubble, if there was a bubble, the bursting of it has been outsourced from the private owners of these companies to the public owners.

Obviously, this is a tough space to pick the winners and losers. Competition and innovation make it very difficult to know whether or not a company will continue to dominate like Facebook or be a flash in the pan like Groupon or GoPro. History shows that the majority of IPOs end up underperforming the overall markets.

A number of other big-name tech companies, including Uber, Spotify, and Airbnb, could be filing to go public in the coming years. If they do, it will be interesting to see if this trend continues. It seems that private investors are enjoying all of the spoils in these deals while most public stock market investors are left holding the bag.

Further Reading:
Silicon Valley’s Dumb Money

From Ben Carlson Blog.



10.A school principal in a violent New York neighborhood shares 6 tips on how to handle conflict


The classroom can teach us a lot about dealing with conflict.jarmoluk / Pixabay
We all face conflict in our day to day lives, be it during our working day or at home. Sometimes a heated discussion is planned, but other times it can occur unexpectedly.

In these situations, it can be hard to keep your cool, meaning many of your sensible points might get lost in the process.

In 2010, Nadia Lopez opened Mott Hall Bridges Academy in Brownsville, Brooklyn. The area had a reputation as one of the most violent neighbourhoods in New York City, with the most shootings according to NYPD records. She knew it would be no easy task, but she used her corporate background and experience in education to face the challenges head on. One challenge in particular was knowing how to dial down conflict.

Lopez shared six ways to deal with heated situations in a blog on TED, which can be applied to many different situations, not just in the classroom.

Tip 1: Be transparent

Unsplash / Anna Vander StelBeing open and honest requires a certain vulnerability, but Lopez says it’s a way to restore morale and inspire others.

When faced with a challenging situation like a conflict, being transparent about what your vision is can build trust between people, which then turns into mutual respect.

Lopez says people appreciate it when you speak frankly, and that includes admitting when you’re struggling. This develops into connections where you understand and support each other, which, she says, is a lot more important that pretending to be a flawless leader.


Tip 2: Be aware of what’s going on around you.

Flickr / woodleywonderworks
Lopez says it’s important to stop and ask yourself why something is or isn’t working. The best way to do this is to check in with people face-to-face. Sometimes she gathers teachers into focus groups to ask them what’s going on, and what can be done to help boost morale. This way, people feel respected and feel that their opinion matters.

She also asks the kids the same; what they enjoy doing and how certain activities make them feel. This way, Lopez herself is accountable for what happens next, and ensuring everyone is comfortable with it.

Tip 3: Centre yourself as the mediator.

Unsplash / Nathan Shively

If you’re dealing with challenges from all sides, like principals do, things can quickly escalate. To combat this, Lopez makes sure she keeps a level head by centering herself as the calm and rational mediator.

In fact, being calm is so important to her that she tries to spend at least 15 minutes in complete silence.

People can have knee-jerk reactions to situations, and this can make conversations get heated quickly, so Lopez says she often runs situations past friends or family members before responding. This gives a new perspective on things, and often those close to you will be honest about how you could be doing something better.

Writing things down is also a good idea, Lopez says, because it can help clear you head and weigh up whether something really is worth a fight or not.

Tip 4: Have rules and stick to them.

Pixabay / Unsplash

When she’s being the referee, Lopez says she clearly lays out how the people who are disagreeing should act. She has certain rules, which are like the ones you learn at school, such as no shouting, wait to speak your turn, and respect the other person’s chance to talk. She says this helps create a safe space for honest and direct conversations.

When things can be discussed calmly and maturely, everyone involved feels respected, and the situation is much more likely to be resolved.

Tip 5: Make sure you listen properly.

Pixabay / sasint

There’s nothing worse than someone who doesn’t listen to your point of view, and this can be even more frustrating in moments of conflict.

Lopez says intense discussions it is important to acknowledge the other person’s feelings and ensure they know you have listened. The best way to do this is to use reflective language, such as repeating one of their points and highlighting that you took it in.

When conversations get emotional, it’s easier for things to get miss-communicated, which can set off an argument with people getting caught up in their own feelings. Rather than “he said, she said” accusations, it’s better to be compassionate and empathetic, and putting yourself in the other person’s shoes, even if it’s hard.

Tip 6: Acknowledge, be respectful, and say thank you.

Unsplash / Alexis Brown

Sometimes, all it takes for someone to feel appreciated is to thank them. Lopez says a gesture doesn’t have to be grand — a simple email, text, or handwritten note would do. It lets the other person know you’re thankful for their hard work, and it could help alleviate disagreements in the future.

When you recognize someone’s dedication and skills, they immediately feel more respected, and in return will respect you enough to come to you directly with any issues they have.