Topley’s Top 10 – September 27, 2021
1. Hedge Funds Take Off Bullish Bets on Palladium.
WSJ By Hardika Singh “If you can’t get chips to build the car, you don’t need as much palladium for the time being,” said Bob Haberkorn, senior market strategist at RJO Futures.
Price declines in the relatively small, volatile markets for palladium and platinum are being driven by an acute shortage of semiconductor chips, commonly used in cars for everything from engines to touch-screen displays. The shortage has dented global vehicle demand and production. Global auto makers in recent weeks have warned the chip shortage will extend production slowdowns.
https://www.wsj.com/articles/palladium-prices-hit-by-car-production-slowdown-11632348053?mod=itp_wsj&ru=yahoo
PALL—3 Lower highs over on chart…..still above 200 day
2. Lots of Talk About Hight Natural Gas Prices.
Natural Gas Sideways for 14 Years
3. Large Cap China ETF FXI Sideways for a Decade
FXI China Large Cap ETF in a 10 year range bound chart
4. KRE Regional Bank Index Held Rising Support Line for Second Time This Year.
Blue rising support line on banks in play during recent pullback
5. Top 20 Patent Recipients 2020
Here is a list of the top 20 patent recipients for 2020, including the number of patents they have received.
https://fortune.com/2021/01/12/ibm-most-patents-2020-full-rankings/
6. Netflix About to Break Previous Record for Content Spending.
Streaming wars, episode 317
This week’s episode of the streaming wars has been an eventful one. CNN announced a streaming service (?), Netflix paid almost $700m to acquire the works of Roald Dahl and Disney announced that its streaming subscriber growth was likely to slowdown this year.
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7. Big 4 Airlines Looking at Baby Boomer Pilot Retirement Boom
https://iflycoast.com/aviation-industry-demand/cft_graphs_02/
8. Household net worth rises above $141 trillion, but debt up sharply as well
Jeff Cox@JEFF.COX.7528@
KEY POINTS
- Household net worth at the end of the second quarter was $141.7 trillion, the Fed reported.
- Household debt rose 7.9% as well, while the federal government’s red ink also ballooned.
American households saw another significant jump in net worth as well as hefty increases in debt and credit, the Federal Reserve reported Thursday.
Thanks in good part to a big surge in stock market earnings, total household net worth rose to $141.7 trillion through the second quarter of 2021, the central bank’s Financial Accounts of the United States report showed.
That was good for a $5.85 trillion increase, or 4.3% from the first quarter. Looking back to a year ago, when the nation was in the early days of the Covid-19 pandemic, the net worth total represents a 19.6% increase.
A large chunk of the new wealth came from stocks, which accounted for $3.5 trillion of the gain, while real estate appreciation was responsible for $1.2 trillion.
However, along with that increase came a big surge in debt.
Consumers debt totaled $17.3 trillion as of June 30, a quarterly gain of 7.9%. Consumer credit grew at an annual pace of 8.6%, while mortgage debt was up 8%.
Household debt mirrored that of the federal government, which ended the quarter owing $28.5 trillion after a 9.6% increase. That was the largest percentage gain since the second quarter of 2020 as the government launched an aggressive stimulus program to pull the economy out of the pandemic. State and local government debt increased 3.1%, a slowdown from the 3.5% pace in the first quarter.
Nonfinancial business debt grew much more slowly, rising just 1.4% to $18 trillion.
Total nonfinancial debt outstanding across all sectors was $63.3 trillion, a quarterly increase of 6.4%, down from the 6.7% rise in the first quarter.
9. Top 10 Poorest States in U.S.
https://www.fcnl.org/updates/2020-10/top-10-poorest-states-us
10. We unconsciously become what we are near
Farnam Street Brainfood.
“We have been fighting on this planet for ten thousand years; it would be idiotic and unethical to not take advantage of such accumulated experiences. If you haven’t read hundreds of books, you are functionally illiterate, and you will be incompetent, because your personal experiences alone aren’t broad enough to sustain you.”
— General Jim Mattis
Tiny Thought
“It is inevitable if you enter into relations with people on a regular basis…that you will grow to be like them. Place an extinguished piece of coal next to a live one, and either it will cause the other one to die out, or the live one will make the other reignite. … If you consort with someone covered in dirt you can hardly avoid getting a little grimy yourself.” — Epictetus
We unconsciously become what we are near. If you work for a jerk, sooner or later you will become one yourself. If your colleagues are selfish, sooner or later you become selfish. If you hang around someone who is unkind, you will slowly become unkind.
Few things are more important in life than avoiding the wrong people. It’s tempting to think that we’re strong enough to avoid adopting the worst of others. But that’s not how it typically works. The changes are too gradual to notice until they are too large to address.
Over a long enough timeline, bad people eventually destroy themselves. They ignore relevant data because it doesn’t agree with them, they take unwarranted risks, they end up alone, without any friends. They might achieve external success, but they lack inner calmness and clarity.
Just as you watch what you put into your body or your mind, closely look at who you spend your time with. Are they kind? Are they honest? Are they thoughtful? Are they helping you or pulling you down? Are they reliable? Are they clear thinking? In short, are they the things you want to become? If not, don’t tempt fate, cut bate.
Distance yourself from the people you don’t want to become. Cultivate people in your life that make you better. People whose default behavior is your desired behavior. If circumstances make this difficult, choose among the eminent dead.
Topley’s Top 10 – September 24, 2021
1. China ADR ETF -50% Correction From Highs.
PGJ-China ADRs huge correction but held above Covid lows
2. Ten Year Treasury Yield Moving Higher Not Signaling China Global Panic.
10 Year yield chart…..trending up…
3. U.S. Investment Grade Companies Issued $1.1 Trillion in Debt this Year
LPL Blog
https://i2.wp.com/lplresearch.com/wp-content/uploads/2021/09/9.16.21-Blog-Chart-1.png?ssl=1
4. 6 stats that put into perspective the sheer size of Evergrande, China’s embattled real-estate giant that has $300 billion in debt
Business Insider Evergrande is the second-largest property developer in China by sale
It’s also on the brink of defaulting on its loans.
The developer owes money to hundreds of banks and financial firms, and if it fails to pay its loans, those companies will also feel the crunch.
Analysts are worried that if the company collapses, it could shockwaves across China’s economy. Some experts are calling it China’s “Lehman Brothers moment.”
To help you understand the scale of China’s real-estate giant, we’ve pulled together some statistics and comparisons that put it into perspective.
1. Evergrande owns more than 1,300 real estate projects in China.
An Evergrande housing complex in China’s eastern Jiangsu province STR/ Getty images
Evergrande has constructed more than 1,300 projects across the country, its website states. Many of these are sprawling housing complexes like the one pictured above.
2. Evergrande is $300 billion in debt, the most out of any company in the world.
Evergrande is estimated to have $300 billion in liabilities.
That’s enough to cover the entire debts of Peru ($93.3 billion), the Philippines ($97 billion), Iceland ($20.3 billion), Bulgaria ($46.5 billion), and Panama ($31.7 billion) combined.
3. Around 12 million homeowners live in properties built by Evergrande.
y for over 12 million homeowners, its website states.
That means more people live in Evergrande properties than in any of the following countries: Greece (population 10.4 million); Portugal (10.1 million); Cuba (11.3 million); or Sweden (10.1 million).
4. Evergrande manages enough land to cover the entire area of Manhattan.
Construction underway for Guangzhou Evergrande football stadium in Guangzhou in China’s southern Guangdong province. STR/AFP via Getty Images
The developer has contracted 7.3 billion square feet of land, and is currently developing 1.4 billion square feet of it, according to an announcement it made in February.
In comparison, Manhattan has a total land area of 23 square miles, or 6.4 billion square feet.
5. Evergrande is indirectly responsible for 3.8 million jobs, which is enough to employ all of Los Angeles.
While Evergrande employs about 200,000 people, it is indirectly responsible for creating 3.8 million jobs a year, the company says.
That’s nearly enough jobs to employ every single person who lives in the city of Los Angeles (population 3.98 million as of 2019), or the entire population of the state of Connecticut (population 3.5 million).
6. Evergrande’s debt load is equivalent to 2% of China’s GDP.
Equivalent to 2% of China’s $14.7 trillion gross domestic product, Evergrande’s debt is bigger than the GDP of any of the following countries: Finland ($271.2 billion); New Zealand ($212.5 billion); Qatar ($146.4 billion); or Hungary ($155 billion).
https://www.businessinsider.com/what-is-evergrande-china-real-estate-giant-scale-perspective-2021-9
5. Wood, Arnott Debate Market’s Status
Two prominent ETF players faced off in a wide-ranging debate this week on the outlook for growth equities.
Cathie Wood of ARK Invest Management and Rob Arnott of Research Affiliates appeared during the Morningstar Investment Conference Wednesday evening. Following are a few of their key quotes from a wide-ranging, multitopic conversation.
Growth Vs. Value Spreads
Arnott: We always hear the observation that “It’s different this time.” And the thing that’s interesting about that is, it’s always true. Things are always different this time; they’re just not necessarily different enough to matter. Now, what we’ve observed over the course of decades is that the spread and valuation between growth and value stocks widens and narrows, widens and narrows.
One of the marvelous things is that when it widens, that’s a good predictor for subsequent performance of value relative to growth. Same holds true when it narrows; it was abnormally narrow in 2007. Well, that’s when we had the quantum crash, because everyone was piling into value, and value cratered. In fact, to the best of my recollection, the Goldman Sachs global alpha strategy, I think, lost 40% in three days. So yes, I do think they will mean-revert.
Wood: The seeds for [ARK’s main investment themes] were planted during the 20 years that ended in the tech and telecom bubble. As we know so well, too much capital chased too much/too few opportunities, and it all ended badly. But that does not change the fact that the seeds were planted, that they have been gestating for 20, 25 years.
Now we’re on the cusp of transformations to every sector, globally, the likes of which we have not seen since the early 1900s. The major technological platforms back then were the telephone, electricity and the automobile. Life as we knew back then certainly changed, and never reverted to the mean, we did not want to go backwards. And I think the same will be true this time as well.
Price Vs. Fundamentals
Arnott: We saw in the internet bubble that there were countless disruptors, and they were radically reshaping the way we communicate, the way we transact, the way we interact with our clients. And thank goodness for that internet revolution, because when COVID came along, all of those innovations turned out to be massively important to all of us.
But the market got ahead of what was likely to happen. Briefly, Cisco had the largest market-cap stock on the planet. Since that time, for 21 years, they’ve had 12% annual earnings growth, 13% annual sales growth, and their share price is lower than it was at the peak in 2000, with double digit growth for 21 years. So the market was expecting stupendous growth. It got impressive growth. But it was priced to reflect expectations of stupendous growth. And that’s where I’m inclined to push back.
Wood: We are looking at exponential growth opportunities that have evolved as these innovation platforms have started to mature and move into prime time. When I say “mature,” I mean from an innovation point of view. These seeds, as I mentioned earlier, were planted probably in the 20 years that ended in 2000. And I think the power of the growth rates, the exponential growth rates that we’re going to see, is a function of how long they have gestated. When I throw out a number like 88%, 89% compound annual growth in units, that sounds preposterous, but it is tracking Wright’s law, and gives us a very nice guide.
I think most of the world is used to looking at the world in linear growth opportunities. That’s the kind of growth that has dominated ever since the telephone, electricity and internal combustion engine has evolved. We got a glimpse of exponential growth during the internet [bubble], it turned many people off because it was so wrong, the costs were too high, the technologies weren’t ready, we’ve got now 20, 25, 30 years, and the costs are low enough that technologies are ready. And not only are we seeing these five innovation platforms evolve at the same time, we’re beginning to see them converge. And we’re beginning to see S-curves feeding S-curves feeding S-curves.
Hype From News, Social Media
Arnott: I was at a conference where the then-CEO of CNBC was one of the speakers, and this was in the early 2010s. Somebody in the audience asked, “Do you feel any remorse or guilt about being a cheerleader for the very industries or the various segments of the market that fit into the crash and the global financial crisis”? And to my surprise, he was very thoughtful. And his answer was not a glib answer. He said, “You’ve got to understand that we’re in the entertainment business. We entertain by producing news, we entertain by producing analysis that relates to that news. But it’s an entertainment business, and viewed from that perspective, of course it’s cheerleading something that has nosebleed valuations and has a great story.”
Things that are expensive are always expensive, are based on a narrative of everything going amazingly well, of pathbreaking disruption. And here’s the trick: narratives are true. The narratives that drive these companies to lofty valuations are, for the most, part true. But the important question to ask is not if this is an amazing narrative; the important thing to ask is, what about this narrative isn’t known to the broad market and isn’t already reflected in the share price.
Wood: I think what the market is missing is this convergence between and among platforms. I want to get back to this idea of bubble. Are we in a bubble? Well, the tech and telecom bust and the 2008 debacle put such fear into investors that many just became benchmark sensitive and very backward-looking and flight to safety. And that continued until and throughout the first four years of our evolution as a company. It was palpable. That muscle memory is still there, because the word “volatility” puts fear in investors’ hearts and heads. But volatility on the upside is a good thing, as we saw last year.
Did I think that performance or innovation was going to last? No. In fact, if you asked everyone in the firm, I said, “We’ve got to prepare for the other side of it.” Well, we got the other side of it. The entertainment side of media was all about, how is this ARK Invest up 150% last year? Is it a reenactment of the bubble? How fast is it going to blow up and we’ll be rid of it? The entertainment daily on CNBC, and perhaps other channels, was all about that. That does not happen in a bubble.
Contact Dan Mika at dan.mika@etf.com, and follow him on Twitter
6. S&P/Naz 100 Stocks that are in Bear Market -20% Mode.
By
15
More than 100 large-cap stocks are at least 20% below their 52-week highs. But analysts love Micron Technology, Activision Blizzard and JD.com, among others
MarketwatchTo broaden a list of large-cap stocks, the following screen began with the S&P 500 and the components of the Nasdaq-100 Index, which is made up of the 100 largest Nasdaq-listed companies by market capitalization. After removing duplicates, this left a list of 523 stocks.
Among the 523 stocks, 107 are in a bear market — that is, they were down at least 20% from their 52-week highs through Sept. 21, according to data provided by FactSet.
Among the 107, there are 35 with “buy” or equivalent ratings from at least two-thirds of analysts polled by FactSet. Here they are, sorted by the 12-month upside potential implied by the consensus price targets:
|
Company |
Decline from 52-week high |
Closing Price – Sept. 21 |
52-week high |
Date of 52-week high |
Share “buy” ratings |
Consensus price target |
Implied 12-month upside potential |
|
Western Digital Corp. WDC,+1.61% |
-29.1% |
$55.47 |
$78.19 |
06/04/2021 |
70% |
$93.39 |
68% |
|
Baidu Inc. ADR Class A BIDU,+0.39% |
-55.8% |
$156.71 |
$354.82 |
02/22/2021 |
86% |
$258.24 |
65% |
|
Micron Technology Inc. MU,+0.09% |
-25.6% |
$72.14 |
$96.96 |
04/12/2021 |
88% |
$114.03 |
58% |
|
Activision Blizzard Inc. ATVI,+2.55% |
-30.1% |
$73.03 |
$104.53 |
02/16/2021 |
94% |
$115.34 |
58% |
|
NetEase Inc. ADR NTES,+0.32% |
-40.5% |
$79.95 |
$134.33 |
02/11/2021 |
94% |
$125.11 |
56% |
|
News Corp. Class A NWSA,+3.85% |
-20.6% |
$22.21 |
$27.97 |
05/10/2021 |
80% |
$32.86 |
48% |
|
General Motors Co. GM,+2.24% |
-23.2% |
$49.37 |
$64.30 |
06/07/2021 |
92% |
$72.79 |
47% |
|
Hess Corp. HES, +5.48% |
-26.1% |
$67.31 |
$91.09 |
06/23/2021 |
67% |
$99.13 |
47% |
|
Global Payments Inc. GPN,+1.77% |
-29.1% |
$156.58 |
$220.81 |
04/26/2021 |
81% |
$227.15 |
45% |
|
VF Corp. VFC, +1.98% |
-27.0% |
$66.25 |
$90.79 |
04/29/2021 |
67% |
$95.95 |
45% |
|
Pinduoduo Inc. ADR Class A PDD, +0.70% |
-55.3% |
$95.10 |
$212.60 |
02/16/2021 |
79% |
$136.67 |
44% |
|
Diamondback Energy Inc. FANG, +4.12% |
-21.9% |
$80.04 |
$102.53 |
07/01/2021 |
91% |
$114.09 |
43% |
|
Take-Two Interactive Software Inc. TTWO, +0.98% |
-32.2% |
$145.72 |
$214.91 |
02/08/2021 |
67% |
$206.82 |
42% |
|
Freeport-McMoRan Inc. FCX,+1.74% |
-33.9% |
$30.48 |
$46.10 |
05/10/2021 |
72% |
$43.21 |
42% |
|
Vertex Pharmaceuticals Inc. VRTX, +0.44% |
-33.9% |
$185.80 |
$280.99 |
10/13/2020 |
74% |
$260.67 |
40% |
|
Alaska Air Group Inc. ALK,+4.09% |
-24.4% |
$56.11 |
$74.25 |
04/07/2021 |
93% |
$78.71 |
40% |
|
Lamb Weston Holdings Inc. LW, -1.07% |
-29.1% |
$61.26 |
$86.41 |
03/08/2021 |
78% |
$85.43 |
39% |
|
Eastman Chemical Co. EMN,+1.65% |
-24.0% |
$99.18 |
$130.47 |
06/01/2021 |
73% |
$137.90 |
39% |
|
PTC Inc. PTC, +2.27% |
-22.0% |
$119.93 |
$153.73 |
07/23/2021 |
76% |
$165.23 |
38% |
|
Fidelity National Information Services Inc. FIS, +0.20% |
-22.2% |
$121.38 |
$155.96 |
04/29/2021 |
72% |
$165.93 |
37% |
|
Halliburton Co. HAL, +5.37% |
-22.1% |
$19.48 |
$25.00 |
06/04/2021 |
69% |
$26.47 |
36% |
|
Stanley Black & Decker Inc. SWK, +1.45% |
-20.0% |
$179.89 |
$225.00 |
05/10/2021 |
67% |
$241.71 |
34% |
|
Schlumberger Ltd. SLB,+6.37% |
-27.0% |
$26.93 |
$36.87 |
06/04/2021 |
80% |
$35.90 |
33% |
|
Newmont Corp. NEM, -1.10% |
-27.6% |
$54.51 |
$75.31 |
05/19/2021 |
71% |
$72.65 |
33% |
|
Southwest Airlines Co. LUV,+3.30% |
-24.1% |
$49.15 |
$64.75 |
04/14/2021 |
82% |
$65.00 |
32% |
|
Valero Energy Corp. VLO,+2.83% |
-25.5% |
$63.32 |
$84.95 |
06/03/2021 |
86% |
$83.41 |
32% |
|
Zimmer Biomet Holdings Inc. ZBH, +3.23% |
-20.8% |
$142.76 |
$180.36 |
04/29/2021 |
77% |
$187.58 |
31% |
|
FMC Corp. FMC, +0.48% |
-24.5% |
$93.31 |
$123.66 |
01/13/2021 |
68% |
$122.29 |
31% |
|
Cigna Corp. CI, +0.23% |
-25.8% |
$202.39 |
$272.81 |
05/10/2021 |
83% |
$264.73 |
31% |
|
Corning Inc. GLW, +1.26% |
-20.3% |
$37.31 |
$46.82 |
04/26/2021 |
67% |
$48.75 |
31% |
|
Leidos Holdings Inc. LDOS,+0.89% |
-20.1% |
$90.90 |
$113.75 |
01/25/2021 |
83% |
$117.78 |
30% |
|
WestRock Co. WRK, +2.78% |
-22.3% |
$48.19 |
$62.03 |
05/17/2021 |
67% |
$62.31 |
29% |
|
Peloton Interactive Inc. Class A PTON, -0.18% |
-41.0% |
$100.92 |
$171.09 |
01/14/2021 |
74% |
$129.67 |
28% |
|
FedEx Corp. FDX, -0.07% |
-21.2% |
$252.07 |
$319.90 |
05/27/2021 |
75% |
$321.15 |
27% |
|
JD.com Inc. ADR Class A JD,+0.28% |
-32.1% |
$73.50 |
$108.29 |
02/17/2021 |
94% |
$93.11 |
27% |
|
Source: FactSet |
|||||||
7. Housing Shortage has Increased 52% Since 2018….Entry Level Homes Went from 40% of Inventory to 7% Since 1980
Still facing a housing shortage
An underbuilt market is one of the factors helping sustain valuation in the hot housing market.
An analysis by housing giant Freddie Mac suggests that the housing shortage has increased 52% from 2.5 million in 2018 to 3.8 million in 2020.
Housing inventory
The decline in entry-level housing is even more pronounced than the overall shortage, it found. The share of entry-level homes in overall construction declined from 40% in the early 1980s to around 7% in 2019.
“A lack of supply rather than credit-driven speculation is driving house price growth,” says Leonard Kiefer, deputy chief economist at Freddie Mac. “House prices may be high, but there are some fundamental economic forces and not just speculation and very loose credit holding up the values.”
Even a price drop should not affect the housing market because of the pent-up demand and people who were priced out, says Lawrence Yun, chief economist for the National Association of Realtors.
“They’ll just jump back into the market, viewing it as a second opportunity,” he says. “We are still facing a housing shortage with inventory still down from one year ago and significantly down from two years ago.”
https://finance.yahoo.com/news/housing-crash-horizon-eight-experts-090018014.html
8. Housing Demand +27% Year Over Year with No Inventory
The Daily Shot Blog United States: Despite some recent talk of a pause in the housing market, high-frequency data from Redfin shows demand near multi-year highs.
9. Biggest Quarterly Increase Net Worth vs. Disposable Income in History
Zero Hedge
https://www.zerohedge.com/markets/has-be-mistake
10. 8 benefits of journaling for your success
Keeping a journal was something that I had neglected for many years. However, when I started blogging, I asked myself why not journal again? This is indeed a great decision that I’ve taken! Read my blog post to see how journaling equips you in planning for success…
1. Achieve goals
I make use of daily journaling to achieve my set goals! It helps me to monitor my progress and see when I need to go back on track (so that I don’t derail from my milestones). Journaling will keep you focused on what you want to achieve with long-term benefits.
“Writing in a journal reminds you of your goals and of your learning in life. It offers a place where you can hold a deliberate, thoughtful conversation with yourself.” – Robin S. Sharma
2. Aspects of life
Journaling will bring you many benefits. You can use it as you want to, to see progress in any aspects of your life that you’re determined to improve and work on. Set and track your personal, professional or any other types of goals. You may even instead choose to record daily life events, thoughts of gratitude, ponder on ideas in your mind and more.
3. Life purpose
Knowing your ‘why’ or ‘raison d’être’ is key to achieving what you really want to. The life goals that you set for yourself, need to be reflected on. This way you put in hard work and precious time, only on the things that you truly want to accomplish!
4. Intentional living
When you journal about the right goals for yourself, you ensure that you’re moving in the right direction. Intentional living involves knowing/thinking about what you truly want to achieve.
“My job in space will be to observe and write a journal. I am also going to be teaching a class for students on earth about life in space and on the space shuttle and conducting experiments.” – Christa McAuliffe
5. Emotional Quotient (EQ)
When you spend time expressing yourself on paper, you’re aware of your thoughts, feelings, and emotions. You understand and accept them, thus, can take calculated actions! With better EQ, you can work on harnessing relationships that matter to you, both in your personal and professional life.
6. Be accountable
With the habit of daily journaling, you hold yourself accountable for how you’re progressing towards your set goals. Think of it as business reporting! You need to answer about your results and improve upon what’s not quite up to the level.
7. Analyze situations
You’ll be better equipped to analyze matters in a rational way. This, in turn, will help you to act in a wise and informed manner. You can then better avoid misunderstandings and future regrets. You’ll make the most of handling situations and avoid blunders!
8. Mindfulness
Reflecting upon your thoughts, feelings, and emotions before acting has mental health benefits. Meditation and journaling go hand in hand. Include both in your daily routine and live mindfully!
“Whether you’re keeping a journal or writing as a meditation, it’s the same thing. What’s important is you’re having a relationship with your mind.” – Natalie Goldberg
Topley’s Top 10 – September 23, 2021
1. Sectors 10% Off Highs.
80% of Materials and 75% of Energy
2. Velocity of Money Making New Lows. Checking and Savings Accounts Record Highs…Velocity of Money Stuck.
What Is the Velocity of Money?–The velocity of money is a measurement of the rate at which money is exchanged in an economy. It is the number of times that money moves from one entity to another. It also refers to how much a unit of currency is used in a given period of time. Simply put, it’s the rate at which consumers and businesses in an economy collectively spend money.
https://www.investopedia.com/terms/v/velocity.asp
3. Deutsche Bank Poll…Only 8% of Institutional Money Managers Think Evergrande is Significant Market Impact Event.
Jim Reid DB Bank
As we await to see what the reopening of Chinese markets brings tomorrow post holiday, our flash poll asking your opinion of what Evergrande will mean for global markets in a month’s time had over 700 response in two hours. So many thanks.
Only 8% of you felt it would be significantly impacting global financial markets by then with a combined 68% expecting limited or no impact.
So for now markets are generally of the view that notable contagion is highly unlikely.
To read more my colleague Craig Nicol has just put out a note (link here) about the contagion risk to the broader HY market. He sums it up nicely as to why we should care one way or another. “Evergrande is the largest corporate in the largest sector of the second largest economy in the world.”
4. Why is Shorting so Hard? Citron had First Short Report on Evergrande in 2012…Forensic Accounting Shorts Timing Impossible.
Evergrande’s potential debt blowup is ‘not a contagion’ event for the stock market, says the man who said the firm was insolvent 10 years ago
By Mark DeCambre Citron Research founder Andrew Left was feeling a modicum of vindication on Monday, as China’s Evergrande looked to be on the brink of collapse, sending shock waves through financial markets.
“Yeah, I feel vindicated,” he told MarketWatch, in a phone interview on Monday.
Back in 2012, Left accused the prominent property developer of engaging in aggressive accounting practices and charged that it was actually insolvent, based on his research.
Left said that China’s second-largest property developer’s balance sheet hasn’t changed very much since his original analysis of its problems, aside from the scale of the issues.
“Nothing has changed in the 10 years since that research … I just identified when the problems started,” Left told MarketWatch.
Evergrande 6666, +2.94% is nursing more than $300 billion in debt and holders of Evergrande’s approximately $19 billion in dollar-denominated bonds are left to wonder what will become of their investments, while Wall Street attempts to gauge the potential spillover effects a collapse could have on China’s property sector and global financial markets.
Left, however, sees the problem as likely one that will be contained by dint of China’s nature of controlling its economy and propensity to bail out embattled companies.
“So, they are going to do whatever they have to do” to contain the harm to the broader economy and limit spillover, Left explained. He said that investors here, however, aren’t likely to observe the wheels within the Chinese machinery moving because of Beijing’s tendency to operate behind a veil when it comes to business matters.
As The Wall Street Journal described it in a Friday article, China’s Evergrande Group turned billions of dollars in borrowed money “into the dream of homeownership for millions of Chinese citizens.”
However, that dream was funded on outsize loans that are coming due soon.
Evergrande faces an $83.5 million interest payment Sept. 23 on its March 2022 bonds and a $42.5 million payment on Sept. 29 on its March 2024 notes, according to news reports. Failure to settle those payments within 30 days of their due date would put Evergrande in default.
S&P Global Ratings on Monday said a default by Evergrande would cause more than mere ripples in financial markets, but would be unlikely to lead to a tidal wave of defaults.
Left believes that a likely intervention by China in Evergrande will limit any spillover, preventing potentially harmful ripples throughout global markets, he speculated. “They’ll just take more control of it,” Left said of China’s government regarding Evergrande. “It’s not a contagion event,” he said.
Almost a decade ago, the Citron Research founder was banned from trading in Hong Kong markets after losing a civil case against regulators related to his allegations about Evergrande. The legal dispute lasted more than half a decade and cost him millions.
Left said that his ban from the Hong Kong market lifts next month but it isn’t clear that he will do much investing there in any event.
“I got a complete black mark on me for saying everything that’s already turned out to be true,” he was quoted as saying in Institutional Investor last month. “It’s Hong Kong’s attempt to stifle the truth. They knew it was going to happen, but they didn’t need a short seller to say anything about it.”
Left told MarketWatch that part of the reason he believes that Evergrande has been allowed to become so highly levered is because of the prominence of its Chief Executive, Hui Ka Yan, who founded the company in 1996 in Guangzhou as Hengda Group.
“Obviously, China is overbuilt,” Left said of China’s property market. “But I think it is a problem that they let this guy run wild,” he said of the Evergrande CEO.
Hui boasts a personal fortune of around $10.7 billion, according to Forbes. Hui took Evergrande public in 2009 and he owns the majority of the company, according to reports.
The South China Morning Post last month reported that Hui stepped down as chairman of the closely held Hengda Real Estate Group, in a reshuffling that “raised concerns about his grip on his flagship China Evergrande Group.”
Worries about Evergrande were being blamed for a broad selloff in the market that saw the Dow Jones Industrial Average on track for its worst daily fall since Oct. 28, 2020, according to data compiled by Dow Jones Market Data.
5. Evergrande Default? Historically Largest Default.
Jim Reid -Deutsche Bank
As we wait to see how the Evergrande situation evolves it looks highly likely to be the largest global corporate bond default of 2021. It has just under $20bn of offshore bonds which rating agencies opine on.
For perspective today’s CoTD shows the largest global corporate bond default each year since 1994.
A near $20bn default would certainly be the largest globally so far this year. We can only find ones a fraction of this so far in 2021. However it’s not out of line with the scale of the post GFC largest defaults in each year.
However we would say that this will be a more complicated default in that Evergrande is a much more complicated structure than a typical corporate.
S&P and Bloomberg have cited total liabilities of up to $300bn covering trade payables, wealth management products, onshore bonds, bank loans etc.
From this list Enron and Lehman also had more complicated structures than a typical corporate bond default.
We would agree that the most likely scenario is that China controls the contagion. However it’s worth highlighting that this is likely to be the biggest global corporate bond default of the year and probably the most complicated structure of a global corporate default for at least a decade.
6. Dow Transports Close Below 200 day
Transports 13.6% Off Highs….breaks thru August lows.
7. Biggest Drop in Oil Supplies 3 Months.
Dave Lutz at Jones Trading Stockpiles at the Cushing storage hub declined 1.75 million barrels, the biggest drop in more than three months if confirmed by the EIA
8. IPO 2021…Number of IPOs and Proceeds Raised Already Above Previous Bull Market Yearly Highs.
Number of IPOs Above 2014 highs………….IPO Proceeds Above 2014 Highs
IPOs | 2021 Upcoming & Recently Priced IPOs – Renaissance Capital
9. International Markets Large Spreads in Returns Last 3 Months Due to China.
Frontier Markets (FM) +5.6%….Developed International Flat………Emerging Markets (EEM) -6.4%
10. How to Be the Calmest Person in the Room
By Nick Papple | 04/8/2016 | 0 Comments
There are 13.5 seconds left on the clock in the NCAA Division I men’s basketball final. The North Carolina Tar Heels trail the Villanova Wild Cats by three points.
The Tar Heels inbound the ball to guard, Joel Berry, who dribbles up the court.
Just past half, senior, Marcus Paige cuts behind the three-point line. Berry fires a pass to Paige — just beating the hands of one Wild Cat defender.
Paige catches the ball, takes two dribbles, then shoots a contested off-balance three.
He makes it. The NRG Stadium erupts.
Now there are 4.7 seconds left on the clock and the score is tied, 74—74. Villanova inbounds the ball under pressure from the Tar Heels defense.
As the clock winds down, guard, Ryan Arcidiacono dribbles up the court, weaving past Tar Heel defenders.
Out of the corner of Arch’s eye, he sees teammate Kris Jenkins stepping into range behind the three-point line.
Arch makes a shovel pass to Jenkins, who without hesitation steps into the game-winning shot.
As the ball releases from Jenkins fingertips, time expires and the buzzer blares. The shot goes in and the Villanova Wild Cats are the 2016 Division I NCAA men’s basketball Champs.
Streamers and confetti pour down from the rafters, as fans scream and Charles Barkley jumps up and down.
Everyone loses it — except for one man. Head coach of the Villanova Wild Cats, Jay Wright.
Wright’s reaction is downright stoic. Ice — Cold.
Did people notice? You bet.
This Vine of Wright’s reaction has been viewed over 6,421,298 times as of writing this.
Today, we’re going to talk about something all great leaders possess.
John D. Rockefeller had it, Ulysses S. Grant had it, Jay Wright seems to have it, and former New York Mayor Rudy Giuliani has it too.
All great leaders have sangfroid: unflappable coolness under pressure.
I first heard this term used by Ryan Holiday in this article about John D. Rockefeller. When Rockefeller just started his career the financial panic of 1857 hit. While everyone was losing their chill, Rockefeller kept quiet, saved his money and watched what others did wrong. We all know how that turned out.
Another man who had sangfroid was Ulysses S. Grant. My favorite story is told again by Ryan Holiday in The Obstacle is the Way:
During the Overland Campaign, Grant was surveying the scene through field glasses when an enemy shell exploded, killing the horse immediately next to him. Grant’s eyes stayed fixed on the front, never leaving the glasses.
Other than looking like the coolest guy in the room or battlefield, you might be wondering why you’d want to develop sangfroid?
The answer is simple: people who stay calm in high-pressure situations perform better than people who don’t.
Whether it’s sports, investing, debating, war — you name it. Research shows that in high-pressure situations the man who has sangfroid will have the advantage.
How Successful People Stay Calm
Dr. Travis Bradberry, author of the bestselling book Emotional Intelligence 2.0 and cofounder of TalentSmart an agency that studies human psychology found there are10 things anyone can do to steady their nerves in stressful situations.
To be honest, most of the things Bradberry recommends are uninspiring. Things like deep breathing, disconnecting from technology for 24 hours, using a support system, quashing negative self-talk. The kinds of things you know probably work, but will never actually do in a stressful situation.
I wanted to know why Ulysses S. Grant could stand next to a horse being blown up and not flinch. I doubt Grant was practicing deep breathing at the time, or pumping himself up with positive self-talk.
So I kept researching and found this interview with Simon Sinek (the Golden Circle guy). Sinek explains how most high-performers keep their cool and he uses a sports analogy — go figure. He says:
Performing under pressure, whether it’s me or anybody else, is the same. What I find fascinating is the interpretation of the stimuli. Let me explain. So I was watching the Olympics and I was amazed at how bad the questions were that the reporters were asking all the athletes. And almost always they would ask the same question. Whether they were about to compete or after they competed: Were you nervous? To a T, all the athletes went: No. What I realized is it’s not that they’re not nervous, it’s their interpretation of what’s happening in their bodies. What happens when you’re nervous? Your heart rate starts to go, your breathing shortens, you get a little tense, you get a little sweaty. You have expectations of what’s coming. You interpret that as I’m nervous.
Now what’s the interpretation of excited? Your heart rate starts to go, your breathing shortens, you get a little tense, you get a little sweaty. You have expectations of what’s coming. It’s all the same thing. It’s the same stimuli. Except these athletes have learned to interpret the stimuli that the rest of us would interpret as nervous, as excited. They all say the same thing: No, I’m not nervous. I’m excited.
One thing Dr. Bradberry does mention in his 10 things is reframing. He explains that people who manage their cool know how to reframe and put their problems into perspective. This is similar to what Sinek recommends, which ultimately is the key to automatic sangfroid.
After the game on Monday night, Villanova coach Jay Wright was asked about his cold reaction to the win. Here’s what he said:
You know when you’re a coach you’re just always thinking about the next play. I was really thinking is there going to be more time on the clock. And I’m the adult. And I’ve got all these 18-and 22-year olds around me. And they’re going to go crazy. And I’m going to have to get them gathered up here and we’re going to have to defend a play with 0.7 seconds. That’s what I was thinking.
Wright’s frame of mind was different than everyone else. When I heard this, it reminded me of what former Mayor of New York City Rudy Giuliani said in an interview right after 9/11. Giuliani had to lead 20 of his panicked co-workers out of an office building on 9/11. When asked by reporters how he kept his cool, Giuliani said:
My father taught me when I was very young, that if you’re ever in an emergency, become calm. Become the calmest person in the room and if you do, you have the best chance of surviving. I don’t know why he taught me that but he did.
Nick Papple
Managing Editor
The Daily Brief
Topley’s Top 10 – September 21, 2021
1. China Sovereign 5 Yr CDS Blowout.
I may have jumped gun yesterday on calmness of China money market chart…..CDS Blowing Out.
BY TYLER DURDEN-ZEROHEDGE
One glance at global markets this morning suggests, at a minimum, that risk is being de-grossed across everything from European utilities to cryptos to US materials stocks.
However, the biggest – and ultimate-est – contagion is that of China’s sovereign risk itself… and that is starting to blow out…
This sudden surge in default risk on China’s sovereign debt is very significant in the context of China’s constant reassurance to the rest of the world that it is solid-as-a-rock (just as Larry fink, but don’t ask George Soros). However, we do note that China CDS spiked to around 90bps in March 2020 (as the COVID crisis hit) and around 150bps in early 2016 (accelerating after China devalued the yuan in late 2015).
The question is, of course, where will this stop this time? How much ‘risk’ is China willing to take with its sovereign risk?
https://www.zerohedge.com/markets/ultimate-contagion-china-sovereign-risk-starting-blow-out
2.China Real Estate ETF -44% from Highs.
CHIR ETF trading at half of book value.
3.China Internet ETF Holding Previous Low
KWEB China Internet ETF held August low…..August low was above previous Covid low see March 2020 on chart
China Small Caps holding up relatively well…15% off highs…50day still well above 200day on chart
4.Money Market Funds 2021 vs. 2008 Great Financial Crisis.
5.Hedge Fund Bets on Higher Commodities Falls to 11 Month Low.
Speculators slashed wagers on further price gains for agricultural markets such as soybeans, corn and hogs, and turned actively bearish on wheat, amid an improved supply outlook. That more than offset an increase in bullish bets, particularly in energy markets, as disruptions in U.S. production following two hurricanes led to a surge in prices during the past few weeks, Bloomberg reports.
From Dave Lutz at Jones Trading
6.Producer Price Index +8.8% vs. Consumer Price Index +5.5%…Something has to give, either producers have to pass on price increases or commodities have to come down in price.
Producer Prices +8.8%
Producer Prices +8.8%
https://fred.stlouisfed.org/series/PPIACO
7.2021-Share of Oil Reserves by Country….93.5% from 14 Countries.
8.Cybersecurity Job Growth.
In the United States alone, jobs for Information Security Analysts are expected to grow by 15% by 2024.
https://www.franklin.edu/blog/is-a-masters-degree-in-cyber-security-worth-it
https://www.indeed.com/lead/cybersecurity-outlook-2019
9.College graduate starting salaries are at an all-time high—and these 10 majors earn the most
Abigail Johnson Hess@ABIGAILJHESS
Despite a global pandemic that caused massive unemployment and slashed earnings among working-class Americans, starting salaries for recent college graduates continue to rise.
According to a recent report from the National Association of Colleges and Employers, the average starting salary for the college Class of 2020 was $55,260 — 2.5% higher than that of the Class of 2019 ($53,889 ) and 8.5% higher than the Class of ’18 ($50,944).
Among graduates who majored in science, technology, engineering and mathematics fields, average earnings were even higher.
“In some cases, salary increases most likely reflect these unique times,” says Shawn VanDerziel, NACE executive director. “For example, the increased demand for nurses as front-line workers during the Covid-19 pandemic may have fueled the 2.1% increase in the average starting salary for registered nursing majors, from $57,416 for these graduates from the Class of 2019 to $58,626 for Class of 2020 registered nursing graduates.”
“Technical majors typically are the highest paid as they are usually the highest in-demand,” explains Andrea J. Koncz, NACE research manager. “Also, as a result of the Covid-19 pandemic and the greater need for technology in the new ‘virtual world’ that we live and work, the computer-related majors account for 4 of the top 10 paying bachelor’s degrees from the Class of 2020.”
This trend has also been observed by other researchers.
A recent analysis of Department of Education data of 2.2 million college students who graduated in 2015 and 2016 and their early career earnings by public policy group Third Way found that STEM degrees provide some of the highest return on investment for graduates.
STEM degrees “tend to have the strongest job prospects, so they can start earning a lot of money right after graduating,” Third Way senior fellow Michael Itzkowitz tells CNBC Make It.
Beyond highlighting the financial benefits of earning an advanced degree, the pandemic has also shed light on how educational opportunity impacts the physical health of Americans.
According to a March study published in the Proceedings of the National Academy of Sciences, life expectancy for the two-thirds of Americans without a college degree is declining — creating a growing gap in life expectancy between those with and without a secondary education.
“When you look at the data, you see life expectancy rising until 2012, and then it starts going down for people without a B.A.,” Sir Angus Deaton, professor of economics at USC and Princeton University and one of the study’s co-authors, previously told CNBC Make It. “The decrease in life expectancy is happening not to everybody, but to Americans who do not have a four-year college degree. There is a huge educational divide.”
10.10 Surprising Things Successful Leaders Do Differently
ContributorOver the last three years, I’ve interviewed over 200 highly successful CEO’s, military officers, entrepreneurs and leadership gurus including John C. Maxwell, Ken Blanchard, Stephen M.R. Covey, Liz Wiseman, Kim Scott, Patty McCord and others. I always get them to reveal their number one secret to leadership; what advice would they give to a younger version of themselves? After analyzing their answers 10 themes emerged.
#1 Great Leaders Close Their Open Door Policy
Open door policies are passive ways to facilitate communication and do more harm than good. They make deep work and strategic thinking virtually impossible for the manager. Worse, research shows that half of all employees won’t go through the open door with problems or ideas because they fear repercussions. It’s time to close your door and open your calendar. Recurring, weekly one-on-one meetings are a far better way to proactively facilitate communication, and pre-scheduled “office hours”—perhaps an hour each day—is the best way to facilitate time-sensitive communication.
#2 Great Leaders Don’t Bring Smartphones Into Meetings
PROMOTED
If you use your smartphone in meetings, research from the University of Southern California’s Marshall School of Business suggests your colleagues probably think you’re being rude or unprofessional. Seventy-five percent of those surveyed thought it was inappropriate to read or write texts or emails in meetings, and 22% think it’s inappropriate to use the phone at all in any kind of meeting. And in a study titled “The Pen Is Mightier Than the Keyboard”, researchers discovered that when it comes to comprehension and memory, taking notes by hand was far superior to typing notes on a keyboard. To avoid distraction, to remain mindful and present, and to maximize recall, a leader should leave their smartphone in their desk and use good old fashioned pen and notebooks in meetings.
#3 Great Leaders Have No Rules
Every time we bump into a rule, it takes away a chance for us to make a choice or a decision. And it becomes “your” company, not mine. Rules crowd out conversation. Managers become rule enforcers instead of leaders. Instead of rules, have standards or guardrails that are rooted in company values. Use these standards as topics of discussion starting with recruiting and onboarding, and continuing throughout the employee life cycle. And when someone deviates from the values–the standards–well that’s a time for some feedback, that’s a coachable moment. Strive to model the Netflix culture of freedom with accountability.
#4 Great Leaders Are Likable, Not Liked
Are you a people pleaser? It’s normal to want to be liked, but it’s a problem if you have a need to be liked. A need to be liked causes managers to withhold direct, constructive feedback. It can lead to delayed decision making in the hopeless quest to get universal agreement. You don’t need to act like a jerk at work, but realize that your team members don’t need another friend, they need a leader who will coach them and advance their career, who will make the sometimes tough decisions to protect the team or advance the company. Replace your need to be liked, with a need to lead right. And replace your need to be liked by everyone, with the realization that if you are liked by your family and close friends, that’s enough.
#5 Great Leaders Lead With Love
Yes, I say leaders should love their team members. The Greeks called it agape; Professors Sigal Barsade and Olivia O’Neill call it companionate love. It’s the warmth, connection and caring we feel for humankind–absent the passionate kind of love. Leaders who care about their team members and show it achieve high employee engagement and business outcomes. Remember the words of the legendary basketball coach, John Wooden. He would tell his players, “I will not like you all the same, but I will love you all the same.”
#6 Great Leaders Crowd Their Calendar
Great leaders are obsessed with minutes. They know that every minute wasted or freely given away is another minute that can’t be spent coaching their team or on getting results. For best results, throw out your to-do list, and schedule everything. Identify your daily most important task and schedule it first thing in the morning (before interruptions and while you are cognitively at your best). Pre-schedule time to lead; schedule your recurring weekly one-on-one’s, your quarterly town-halls, your twice a year career path meetings. What about downtime? What about time to think? Yes, schedule that too. Great leaders, including LinkedIn CEO Jeff Weiner, actually schedule “nothing” time.
#7 Great Leaders Play Favorites
In a misguided attempt to be impartial and fair, too many managers treat all their team members the same. But it turns out that’s the most unfair thing we can do to people. And it’s the fastest way for you to lose top talent. Instead of treating everyone alike, you need to learn to individualize your leadership approach. You need to take the time to understand each of our team members when it comes to their: talent, experience, attitudes, strengths and goals. Then you play favorites, not based on who you like better, but based on who’s earned it.
#8 Great Leaders Reveal Everything
In traditional organizations information flowed “up” and the decisions came “down,” but to compete now, we have to replace “knowledge is power” to “sharing is power.” In his book Team of Teams, U.S. Army general Stanley McChrystal explained that radical transparency was a key to defeating Al Qaeda in Iraq because it enabled decision making to be pushed to the very lowest levels. In business, radical transparency means sharing everything, including all the financials needed to understand what makes the business work.
#9 Great Leaders Show Weakness
“Will you tell me about a time you failed?” It’s the first question I ask all my guests on the LEADx Leadership podcast. From Dan Pink and Captain Sully Sullenberger to Alan Alda and John Maxwell, I ask them to start with failure. Too many old school leaders believe “leadership is acting” or we must always wear a mask to project confidence and optimism. The best leaders today realize that authenticity and vulnerability are the fastest ways to earn trust. And as Stephen M.R. Covey told me, “Trust is the one thing that changes everything.” I’m not talking about striving to shed tears and share fears. That’s an inauthentic way of being authentic. Share your past failures as learning experiences. Share the bad news with the good. Drop your mask and be your unique self.
#10 Great Leaders Know: Leadership Is Not a Choice
The greats all agree that leadership in a word is: influence. And we know from behavioral psychology that we are always influencing those around us. You influence when you stand up to the bully, but also when you remain a bystander. You influence when you challenge the idea in the conference room, and also when you remain silent. Leadership isn’t a choice, because you are leading (i.e., influencing) all of the time. This means you are leading not just at work but also at the dinner table, and on the sidelines of the soccer field. But are you leading in a positive direction or a negative direction? Be mindful of your power as a leader. Remember, lead with intent.
Tying It All Together
Whether you are a front-line supervisor, middle manager, or senior executive, these 10 secrets will help you to become both the boss everyone wants to work for and the high achiever every CEO wants to hire–all without drama, stress, and endless hours in the office.