Topley’s Top 10 – November 8, 2021
1.S&P 500 has only been Down 2 of the Last 18 Days….It’s Never Happened in 20 Years.
ZeroHedge Blog -Currently, the bulls control the market as we are in the middle of a “buying stampede.” Historically, buying stampedes last on average between 7 and 12 days. Logically, buying stampedes always get followed by selling stampedes of similar lengths. However, there are times these stampedes can last much longer than expected.
We are currently in one of those longer-term periods. As shown below, the S&P 500 has only been down in 2 of the last 18 days. How unusual is that? In the previous 20-years of the S&P 500, the number of times the market accomplished such a feat was precisely ZERO.
https://www.zerohedge.com/markets/did-fed-just-set-stock-market-crash
2.Best and Worst Performers Since the COVID Crash Low
Bespoke Investment Group-The major indices have consistently been hitting new record highs over the past few days with the S&P 500 having now more than doubled off the COVID Crash low on March 23, 2020. As for individual stocks, there are currently only nine S&P 500 stocks that are below their levels from March 23, 2020, and expanding the universe to the S&P 1500 which includes small and mid-caps, there are currently 41 stocks that are below their levels from that date. Obviously, March 23, 2020 may not coincide with a particular high or low point on these individual stocks’ charts, but declines since then would be quite painful to handle given that the broad market has more than doubled over the same time frame.
As shown below, eHealth (EHTH) currently is the biggest decliner versus March 23, 2020 levels having fallen over 60% with a large share of that decline occurring this year. The only other stock that has been more than cut in half since the bear market low is Tabula Rasa HealthCare (STRA). TRHC has been declining since the spring, but a large share of that decline is actually occurring today after it reported an EPS and sales miss in addition to lowered guidance on earnings last night. Today, the stock has fallen nearly 50% in reaction to those weak earnings. There are a handful of stocks on this list that are up on a year-to-date basis with Fresh Del Monte Produce (FDP), Tootsie Roll Industries (TR), and Gilead Sciences (GILD) the only ones that are up double digits. While below their levels from the bear market low, TR and FDP are also two of the only stocks that are simultaneously above levels from February 19, 2020 which marked the last high prior to the start of COVID Crash bear market.
As for the stocks that have gained the most since the COVID Crash low on 3/23/20, meme mania darling GameStop (GME) still tops the list having rallied 5,492%. That is twice the rally of the next best performer, SM Energy (SM). As for the rest of the top performers since the bear market low, there are another 15 that have gained over 1,000%. One of those is a member of the trillion-dollar market cap club: Tesla (TSLA). Another one of these top performers, Tupperware Brands (TUP), is also one of the only stocks that is actually lower on a year-to-date basis, and those declines are significant at a 43.81% loss. TUP got below $2/share at its lows during the COVID Crash, but then surged back into the mid-$30s in late 2020. It has since moved back down into the teens. Click here to view Bespoke’s premium membership options.
3.The S&P 500 is at Near Record High Forward P/E and P/S Levels…Breakdown of Returns Since 2011…21% of Returns from Multiple Expansion
Steve Blumenthal CMG Weath–The chart below via Pavilion Global Markets shows the impact stock buybacks have had on the market over the last decade. The decomposition of returns for the S&P 500 breaks down as follows:
- 21% from multiple expansion,
- 4% from earnings,
- 1% from dividends, and
- 5% from share buybacks.
In other words, in the absence of share repurchases, the stock market would not be pushing record highs of 4600 but instead levels closer to 2700.
To put that into context, the high-water mark for the S&P 500 in October 2007 was 1556. In October 2021, after 14 years, the market would be 2700 without share buybacks. Such would mean that stocks returned a total of about 3% annually or 42% in total over those 14 years.
4.Buffett Can’t Find Whale Takeover so Spending on Buybacks.
(Bloomberg) — Warren Buffett has spent more money buying back Berkshire Hathaway Inc.’s stock in recent years than he did amassing his biggest equity bet on Apple Inc.
Berkshire spent nearly $20 billion more repurchasing its own stock since the middle of 2018 than it deployed accumulating its Apple stake through the end of last year. In total, Buffett poured about $51 billion into buybacks since a change to its policy more than three years ago, and appears to have continued snapping up at least $1.7 billion of stock since the end of September.
Buffett, Berkshire’s chairman and chief executive officer, has built Berkshire into a sprawling conglomerate valued at more than $650 billion, but that immense size has heaped pressure on his need for what he deemed an “elephant-sized” acquisition to ramp up Berkshire’s growth. Buffett has been foiled on his recent deal hunt, outbid at times by aggressive private equity firms. That’s left him increasingly relying on buybacks, with more than $20 billion of repurchases so far this year, as a way to put some of Berkshire’s record cash pile to work.
“The bull case would say they bought back $20 billion worth of their stock because they’re confident in their future outlook and that should be a catalyst for the stock, and my sense is it probably will,” Cathy Seifert, an analyst at CFRA Research, said. “The bear case, which is also relevant to point out, is this is a company that has had, as a stated desire, the need to make additional acquisitions and they haven’t been able to do that.”
https://finance.yahoo.com/news/buffett-berkshire-appetite-surpasses-cash-173252893.html
5.The Beginning of the End of Easy Money…Feds Balance Sheet Increased by Over 1000% During Covid
Charlie Bilello-As expected by everyone, the Fed finally announced a tapering of asset purchases at this week’s FOMC meeting. The plan: reduce purchases of Treasuries by $10 billion per month and purchases of mortgage-backed securities by $5 billion (from current totals of $80 billion in Treasuries and $40 billion in MBS).
But a slowdown in the purchases is still an increase, and the Fed’s balance sheet hit another new high this week at $8.575 trillion.
Incredibly, this is an increase of $1.2 trillion in a year (2021) that has featured the highest US inflation rates in 30 years and the highest US growth rates in 40 years.
6.Bakkt will allow customers to trade ether on its platform in the ‘next few weeks’
Gavin Michael, CEO of Bakkt, rings a ceremonial bell at the NYSE on October 18.
REUTERS/Brendan McDermid
- Users of Bakkt will be able to buy, hold, and sell ether directly through its app by the end of the year.
- Bakkt also said institutional clients can choose the Bakkt Warehouse for custody of ether.
- The digital asset firm went public on October 18 amid growing crypto demand.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
Users of digital asset platform Bakkt Holdings will be able to buy, hold, and sell ether directly through its app by the end of the year, a spokesperson told Insider.
“We have received all required approvals and have already built the necessary technology to begin offering ethereum on the Bakkt platform. These capabilities will be live on the platform in the next few weeks,” the spokesperson said via email.
The Alpharetta, Georgia-based firm, which went public on October 18, also said institutional clients can choose the Bakkt Warehouse for custody of ether, according to a statement.
“At Bakkt, providing flexible opportunities for users to enjoy their digital assets is a top consideration, and adding Ethereum brings a popular and growing cryptocurrency to our roster,” Bakkt CEO Gavin Michael said in the statement.
Bakkt’s addition of the second-largest digital asset by market cap to its suite of offerings, which already include bitcoin trading, is a nod to its rapid growth.
Ether has notched a 509.7% year-to-date gain compared to bitcoin’s 110.4% surge. The two assets command more than half of crypto’s $2.8 trillion market cap, according to CoinGecko.
As ether and bitcoin scale record highs, analysts have been anxiously awaiting “the flippening,” a hypothetical point at which ether overtakes bitcoin in market valuation to become the largest cryptocurrency. For now, bitcoin remains dominant with a market cap of $1.16 trillion compared to $534.5 billion for ether.
An ethereum futures ETF will be available before one that holds bitcoin directly – and approval could come in the 1st quarter of 2022, Bloomberg analysts say
- The approval of a bitcoin futures-based ETF means a similar offering for ether is imminent.
- Bloomberg analysts believe the first ether futures-based ETF could launch in the first quarter of 2022.
- And while a spot bitcoin ETF is possible, continued opposition from the SEC makes it less likely.
An ether futures-based ETF may launch as early as the first quarter of 2022, beating out the anticipated launch of a bitcoin spot ETF that directly holds the cryptocurrency, according to a Tuesday note from Bloomberg analysts.
Last month, the SEC approved the launch of a bitcoin futures-based ETF, which utilizes monthly futures contracts to gain exposure to the price movements of bitcoin.
Ether futures-based ETF applications were filed with the SEC earlier this summer. But VanEck and ProShares both withdrew their applications on August 20, suggesting the SEC is not yet ready to greenlight them.
However, that approval could come next year, according to the Bloomberg note. Ether futures currently have open interest of about $1.2 billion, according to data from the CME. That’s about the same amount bitcoin futures had when SEC Chairman Gary Gensler outlined requirements for futures-based ETFs in early August, the analysts pointed out.
To be sure, a futures-based method is more costly and less reliable in matching price movements than holding a cryptocurrency directly, similar to gold and silver ETFs. Still, the ProShares Bitcoin Strategy ETF was the fastest ETF launch to hit more than $1 billion in assets under management.
But while investor demand remains strong amid an ongoing bull market in crypto, don’t expect the SEC to take the next step soon with bitcoin.
“Though a spot Bitcoin ETF is possible in 2022, SEC approval may take longer due to concerns about regulation in the underlying bitcoin market,” the Bloomberg note said.
And a recent application for a leveraged bitcoin futures ETF has little chance of approval from the SEC, signalling that the agency still has a tough stance towards cryptocurrency regulation as it seeks to protect investors.
7.Meat Prices not Coming Down Soon?
Food for Thought: US meat prices:
With the pandemic igniting a collective reassessment of work, imagine posting openings for low-wage jobs that could require standing for 12-hour shifts, working six-day weeks and repeatedly lifting 70-pound objects in conditions that range from steaming hot to bloody and ice cold. And on top of all that, your industry recently made headlines for Covid-19 outbreaks that killed workers.
This is precisely what meatpackers are facing. Of all the industries experiencing crunches for hourly labor, it’s hard to find one with a greater recruiting challenge. Companies have tried all the usual tricks to lure applicants, including offering signing bonuses of as much as $3,000, but they’re still short workers and, as a result, there are an increasing number of sparse shelves.
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8.Daylight Savings Time Stats
It’s time to stop changing clocks 2x a year. It costs us far more than sleep: -8% more car accidents -5% more heart attacks -More injuries at work -Lower SAT scores -5% harsher sentences in court 19 states support year-round Daylight Saving Time. 31 to go https://theconversation.com/the-dark-side-of-daylight-saving-time-91958
9.Covid: Pfizer says antiviral pill 89% effective in high-risk cases
By Jim Reed and Philippa Roxby
BBC News
A pill to treat Covid developed by the US company Pfizer cuts the risk of hospitalisation or death by 89% in vulnerable adults, clinical trial results suggest.
The drug – Paxlovid – is intended for use soon after symptoms develop in people at high risk of severe disease.
It comes a day after the UK medicines regulator approved a similar treatment from Merck Sharp and Dohme (MSD).
Pfizer says it stopped trials early as the initial results were so positive.
The UK has already ordered 250,000 courses of the new Pfizer treatment, which has not yet been approved, along with another 480,000 courses of MSD’s molnupiravir pill.
Health and Social Care Secretary Sajid Javid called the results “incredible”, and said the UK’s medicines regulator would now assess its safety and effectiveness.
“If approved, this could be another significant weapon in our armoury to fight the virus alongside our vaccines and other treatments,” he said.
The Pfizer drug, known as a protease inhibitor, is designed to block an enzyme the virus needs in order to multiply. When taken alongside a low dose of another antiviral pill called ritonavir, it stays in the body for longer.
Three pills are taken twice a day for five days.
The combination treatment, which is still experimental because trials haven’t finished, works slightly differently to the Merck pill which introduces errors into the genetic code of the virus.
Pfizer said it plans to submit interim trial results for its pill to US medicines regulator the FDA as part of the emergency use application it started last month. Full trial data has not yet been published by either company.
The US has already secured millions of doses of the pill, according to President Joe Biden.
The company’s chairman and chief executive Albert Bourla said the pill had “the potential to save patients’ lives, reduce the severity of Covid-19 infections, and eliminate up to nine out of 10 hospitalisations”.
Trial results
Vaccines against Covid-19 are seen as the best way of controlling the pandemic but there is also demand for treatments that can be taken at home, particularly for vulnerable people who become infected.
Interim data from trials of the treatment in 1,219 high-risk patients who had recently been infected with Covid found that 0.8% of those given Paxlovid were hospitalised, compared with 7% of patients who were given a placebo or dummy pill.
They were treated within three days of Covid symptoms starting.
Seven patients given the placebo died compared to none in the group given the pill.
When treated within five days of symptoms appearing, 1% given Paxlovid ended up in hospital and none died. This compared to 6.7% of the placebo group being hospitalised and 10 of them dying.
Patients in the trial, which has not yet been published or verified, were elderly or had an underlying health condition which put them at higher risk of serious illness from Covid. They all had mild to moderate symptoms of coronavirus.
Dr Stephen Griffin, associate professor in the School of Medicine at the University of Leeds, said: “The success of these antivirals potentially marks a new era in our ability to prevent the severe consequences of Sars-CoV2 [coronavirus] infection, and is also a vital element for the care of clinically vulnerable people who may be unable to either receive or respond to vaccines.”
Pfizer is also studying the treatment’s impact on people at low risk of Covid illness and on those who have already been exposed to the virus by someone in their household.
2px presentational grey line
Developing truly effective antiviral drugs is notoriously difficult, so having two that look highly potent against Covid is a remarkable feat.
Viruses are much simpler beasts than bacteria or parasites.
That sounds like they should be easier to defeat, but in reality it means there are far fewer weak spots for drugs to exploit.
There is also a wide variety of different types of virus that exploit our bodies in different ways, which means scientists often have to go back to the drawing board for each one.
Then they hide inside our body’s own cells, which means drugs that seem potent in the lab may not work as well in the body.
There have been successes, notably in HIV, but reports concluded one antiviral for flu ended up being about as effective as paracetamol.
The question now is whether the success of these pills in clinical trials can be repeated in the real world, as people with Covid will have to be identified and treated within a matter of days of their symptoms developing.
https://www.bbc.com/news/health-59178291
10. Humility is simple to understand but hard to practice.
Farnam Street Blog
Tiny Thought
“It is impossible for a man to learn what he thinks he already knows.” — Epictetus
Humility is the anecdote to arrogance. Humility is a recognition that we don’t know, that we were wrong, that we’re not better than anyone else.
Humility is simple to understand but hard to practice.
Humility isn’t a lack of confidence but an earned confidence. The confidence to say that you might not be right, but you’ve done the diligence, and you’ve put in the work.
Humility keeps you wondering what you’re missing or if someone is working harder than you. And yet when pride and arrogance take over, humility flees and so does our ability to learn, adapt, and build lasting relationships with others.
Humility won’t let you take credit for luck. And humility is the voice in your mind that doesn’t let small victories seem larger than they are. Humility is the voice inside your head that says, ‘anyone can do it once, that’s luck. Can you do it consistently?’
More than knowing yourself, humility is accepting yourself.
Topley’s Top 10 – November 4, 2021
1.Shiller P/E Ratio Update.
Irrational exuberance
Answering that question is a bit like answering how long is a piece of string. Just limiting the question to US stock markets helps to narrow the focus, as does getting some help from Nobel laureate Robert Shiller.
Shiller is the creator of the Cyclically-Adjusted Price-to-Earnings Ratio (CAPE).
A simple price-to-earnings ratio compares how much one share costs with how much it earns. A share that costs $100, and earns $5 a year, has a P/E of 20x. It’s a rough but simple way to compare valuations between different companies, or history.
Shiller took that simple metric and… made it more complicated (but also probably better). Instead of just looking at one year of earnings, Shiller compares the price with the average from the last 10 years (adjusted for inflation). Doing that helps to smooth things out, as any company can have one good or bad year.
Lucky for us, Shiller has been calculating this CAPE ratio for the US stock market as a whole, for decades and decades.
So where are we now?
The latest CAPE ratio for the S&P 500 Index is 38x. That’s pretty close to the all-time record, which was 44x back in 2000. For those with a short memory, that was just before the dotcom bubble burst and markets (particularly tech) crashed hard.
2.ARKK ETF Update…Still $30 Below Highs.
ARKK had a +10% week but still well below highs.
3.Apple’s 8 Years of Buybacks=Greater than Market Cap of 490 S&P Companies
Apple has bought back $435 billion in stock over the past 8 years, which is greater than the market cap of 490 companies in the S&P 500.
4.DeFi — the ‘Wild West’ of crypto — is next on regulators’ hit list
Ryan Browne@RYAN_BROWNE_
KEY POINTS
- After a crackdown on Binance and other cryptocurrency firms, regulators are now turning attention to the world of decentralized finance.
- Decentralized finance, or “DeFi,” lets users take part in traditional financial activities like lending but with no middle men involved.
- Regulators are concerned about DeFi services marketing themselves as decentralized when that may not be the case.
The fast-growing decentralized finance industry could be about to get a rude awakening.
Decentralized finance, or “DeFi” as it’s commonly referred to, is a trend in cryptocurrencies that first started gaining traction in 2020.
It’s been called the “Wild West” of crypto — hoards of computer programmers trying to bring traditional financial products such as loans to the blockchain.
The idea sounds promising. In theory, anyone could lend and borrow digital money at competitive interest rates, with no middle men involved. Investors are lured by the promise of earning up to double-digit percentage yields on savings in certain digital tokens.
But with major hacks and scams plaguing the space this year, regulators are becoming increasingly worried about the risk of crime as well as harm to consumers.
“I think they’re going to pay more attention to the space,” Sid Powell, co-founder of DeFi lending platform Maple Finance, told CNBC.
Almost $90 billion has been deposited into Ethereum-based DeFi protocols so far, according to data from The Block.
“It’s probably inconceivable that you have meaningful growth of DeFi which does not need to complement existing regulation in future,” Powell said.
5.Where the Dow Would Be Without Change in Components Since 1997
Fascinating look at where Dow would be if the components hadn’t changed since 1997. (-65%) Chart:
https://twitter.com/cullenroche
6.Update on Mortgage Rates.
30 Year Fixed Rates
15 Year Mortgage Rates
7.History of American Home Equity Loans….No Big Spike with Drop in Rates
8.We are Short Units in All Housing
There is not enough housing for sale or rent in communities across the country
From Barry Ritholtz The Big Picture Blog https://ritholtz.com/2021/11/10-tuesday-am-reads-355/
9.Government Debt 1965-2021
Ben Carlson A Wealth of Common Sense…It’s also interesting to see how government debt has evolved over time. Brian Riedl put together a bunch of charts that show the main reason for higher government debt and it may surprise you.
Mandatory vs. discretionary spending is vastly different than it was back in the 1960s:
There’s a reason for this.
The baby boomers are the biggest generation of all-time to live as long as they are. When Social Security and Medicare were first introduced no one really planned on those programs taking care of 70+ million people for multiple decades.
Now look at how these programs are taking up a bigger piece of the pie over time:
The United States Has Been Going Broke For Decadesby Ben Carlson
https://awealthofcommonsense.com/2021/10/the-united-states-has-been-going-broke-for-decades/
10.Dark Personality Factors
Arash Emamzadeh-Psychology Today
What’s at the Root of Narcissism and Other Dark Traits
The Dark Factor of Personality (D) seems to be at the heart of dark personalities and socially offensive psychopathology.
What these unpleasant traits and dark personalities appear to have in common include the following:
- Overvaluing oneself.
- Devaluing others.
- Subjective justifications for the above.
Topley’s Top 10 – November 2, 2021
1.Rates Move Higher Globally.
Two Year Government Bond Charts-from Dave Lutz at Jones Trading
2.Short-Term Technicals
3.But Next 2 Months Favor Bulls
Ryan Detrick LPL-When the S&P 500 is up >20% for the yr heading in November did you know that stocks have never been lower in Nov or the final two months? 8 for 8 higher in Nov, up 3.7% vs. avg Nov up 1.7%. Final 2 months up 6.2% on avg vs. avg year up 3.2%.
https://twitter.com/RyanDetrick
4.Capitalism vs. Communism Part II –Stoxx 600 Europe Trailing S&P 500 by a Whopping 1300 Percentage Points Since Launch
Holger Zschaepitz-Just to put things into perspective: The Stoxx 600 may have marked a record today. But Europe’s benchmark index has lagged the US’s S&P 500 index by a whopping 1300 percentage points since the Stoxx 600 was launched in 1987.
https://twitter.com/Schuldensuehner
5.Wage Inflation Not Transitory
Reuters-Aspects of the job market, particularly the labor force participation rate, are unlikely to have recovered to pre-pandemic levels, and would seemingly still be short of the “maximum employment” the Fed has promised to restore before raising interest rates. But at that point, the Goldman team wrote, Fed officials would “conclude that most if not all of the remaining weakness in labor force participation is structural or voluntary,” and proceed with rate hikes to be sure inflation remains controlled.
Inflation, wage data, challenge Fed ‘transitory’ narrativeBy Howard Schneider
https://www.reuters.com/business/inflation-wage-data-challenge-fed-transitory-narrative-2021-11-01/
6.Price Index for Trucking Transportation into the Holidays.
7.Old Fashion Ha Freight Delivery Beating Space Travel 2021..S&P Kensho Space Index vs. S&P 500® Air Freight & Logistics Index
Richard Bernstein-Just as investors ignored the opportunities in the energy sector during the Technology Bubble, today’s investors continue to flood space-related companies with capital regardless of the significant need for capital in boring earth-bound logistical infrastructure. As the basic rules of investment suggest, too much capital is indeed hindering returns. Despite all the hoopla about Star Trek-like ventures into space, earth-bound logistics companies have been significantly outperforming space stocks during the recovery from the pandemic (See Chart 4).
Source: Bloomberg Finance L.P. For Index descriptors, see “Index Descriptions” at end of document.
https://www.advisorperspectives.com/commentaries/2021/10/30/a-world-of-opportunity-1
8. 80% of Venture Marked Up or Exited Last Quarter….Another Record
The State of Venture Capital-by Michael Batnick
The U.S. public stock market closed at an all-time high in October. Private markets are enjoying the same up only type of activity.
In a new report from AngelList, they shared that:
In 4Q20, 80% of startups that changed valuations were marked up or had a positive exit—a new record for startups on AngelList at the time. That record was broken in 1Q21 (85%) and then again in 2Q21 (90%).3Q21 fell just short of setting a new record for positive activity. Instead, it’ll be the second-best quarter ever for early-stage venture (Series A or prior): roughly 87% of events that happened to startups in the AngelList portfolio in 3Q21 were positive ones (i.e., markups and positive exits)
Private companies are growing bigger, faster, and stronger. The median pre-seed round is $8 million. Series B valuations are up 31% to $375 million. For context, and I know this a million years ago, but when Amazon went public in 1997, they were valued at $438 million.
The fastest-growing area in private markets are crypto and blockchain companies. Interestingly, one of the biggest players in the space is not a traditional venture capital fund. It’s a corporation, Coinbase. In Q3, they made a record 49 investments, averaging a new deal every 1.8 days.
On AngelList, blockchain/crypto investments made up 5% of all deals but garnered 16.6% of all deployed capital.
https://theirrelevantinvestor.com/2021/10/30/the-state-of-venture-capital/
9.Fortress Technologies Buys 4,500 Bitcoin Mining Machines From Bitmain
The purchase will more than triple Fortress’ hashrate.
Crypto mining machines (Shutterstock)
Bitcoin mining company Fortress Technologies has ordered 4,500 Bitmain Antminer S19j Pro machines as it seeks to capture a greater share of mining revenue.
- The purchase will more than triple Fortress’ hashrate from 195 petahash per second to 645 PH/s, the company announced Monday. A petahash is a measure of computational power.
- The machines are scheduled for delivery in monthly instalments from April to September 2022.
- Financial terms weren’t disclosed, and Fortress didn’t immediately respond to CoinDesk’s request for details.
- The purchase follows two weeks after Fortress bought 180 Whatsminers M30S machines, which are expected to be installed by the middle of this month.
- Fortress, which is listed on the Toronto Venture Exchange (TSX-V: FORT), underwent a shake-up of its leadership team in September following the departure of CEO Aydin Kilic, who joined publicly traded crypto mining firm Hive Blockchain as president and chief operations officer.
- At the time, Fortress named Antonin Scalia CEO and Drew Armstrong chief operating officer. Both executives came from Galaxy Digital.
Read more: Hive Blockchain Orders Another 6,500 Bitcoin Mining Machines From Canaan
10.Carli Lloyd 5 Rules
Topley’s Top 10 – October 29, 2021
1.Money Managers Have Almost 5% Cash.
LPL Research Blog https://i0.wp.com/lplresearch.com/wp-content/uploads/2021/10/10.20.21-blog-chart-2.png?ssl=1
2.S&P 600 Small Cap Outperformance Vs. Peers.
Joseph Carr• 1stDirector at S&P Dow Jones Indices53m • 53 minutes ago
Join us at 11 ET for the S&P DJI Weekly Index Strategy Update. Happy 27th birthday to the S&P SmallCap 600! Hamish Preston, CFA will look at performance, what makes this index different, how it has held up against active, the small cap space, and how it relates to
https://www.linkedin.com/in/joseph-carr-5416907/
3.Short Interest Hits New Lows.
Emily Graffeo
(Bloomberg) — Bets against the stock market are hard to come by these days, but that’s not necessarily good news to Wells Fargo.
Short interest in the S&P 500 has remained near historic lows for a large portion of 2021 as the U.S. equity benchmark has climbed to new heights. That’s concerning in the longer term, as higher short interest levels tend to help minimize price gapping when the market is faced with unexpected risks or shocks, said a team of strategists including Christopher Harvey in a Thursday note to clients.
“Current levels of SI indicate significant scope for shorting, which we view as a risk,” the strategists said.
On the other hand, the continued trend of low short interest suggests that investors who brushed off fears of shrinking large cap margins prior to the third quarter earnings season have largely been correct. So far, 200 companies in the S&P 500 have beat earnings per share estimates, outpacing the 33 companies that have missed, according to data compiled by Bloomberg.
While the current low levels remain a risk, the strategists also said short interest may pick back up after the earnings season ends and investors begin to focus on the macroeconomic calendar.
“To me it feels more like complacency than euphoria — just the idea that equities are the default asset class of choice. Cash and bonds are so unattractive. That, over time, can lead to a degree of complacency or perhaps inattenton to risk factors,” David Donabedian, chief investment officer of CIBC Private Wealth Management, said by phone.
https://finance.yahoo.com/news/p-500-short-bets-worryingly-145225507.html
4.Amazon Miss…See What Happens to this 18 Month Range.
Amazon sideways range since June 2020
5.U.S.Power Plants Import 90% of their Uranium.
ETF.Com Currently, U.S. power plants import more than 90% of their uranium from foreign sources, including Kazakhstan and Russia, which some feel is a national security risk.
Jessica Ferringer Uranium ETFs Explode https://www.etf.com/sections/features-and-news/uranium-etfs-explode
6.Incredible Chart of Undervalued Sector Returns when the Internet Bubble Burst.
Never Too Early to Sell a Bubbleby Richard Bernstein of Richard Bernstein Advisors, 10/28/21 https://www.advisorperspectives.com/commentaries/2021/10/28/never-too-early-to-sell-a-bubble
7.Here’s how Biden’s Build Back Better framework would tax
Greg Iacurci@GREGIACURCI
KEY POINTS
- President Joe Biden issued a $1.75 trillion social and climate spending plan on Thursday. About $1 trillion would be financed by higher taxes on wealthy Americans.
- The Build Back Better proposal would levy a tax surcharge on Americans who earn more than $10 million, invest in more IRS enforcement and raise taxes for some business owners.
- It’s unclear whether the plan has the full backing of Democrats in the House and Senate.
The White House issued a framework for a $1.75 trillion social and climate spending bill on Thursday — and would finance more than half of it from tax reforms aimed at wealthy Americans.
The plan would raise revenue by levying a tax surcharge on those making more than $10 million a year, raising taxes for some high-income business owners and strengthening IRS tax enforcement, according to the outline.
The framework was the product of several months of negotiations between moderate and progressive Democrats. Together, proposals targeting wealthy taxpayers would raise about $1 trillion of the nearly $2 trillion of total revenue being raised. (The rest would come from new taxes on corporations and stock buybacks, for example.)
President Joe Biden said the legislation was fully paid for and would help reduce the federal budget deficit.
“I don’t want to punish anyone’s success; I’m a capitalist,” President Biden said in a speech Thursday. “All I’m asking is, pay your fair share.”
Biden reiterated that households earning less than $400,000 a year wouldn’t “pay a penny more” in federal taxes and would likely get a tax cut from the proposal, via elements like the enhanced child tax credit, and reduced costs on child care and health care.
The framework omits specifics beyond high-level detail. But it seems to abandon many tax proposals issued last month by the House Ways and Means Committee, even while the overarching policy goal of targeting the wealthy is the same.
For example, the framework doesn’t raise the current top 37% income tax rate or 20% top rate on investment income (with the exception of multimillionaires subject to the proposed surtax). It also wouldn’t impose new required distributions from big retirement accounts or alter rules around estate taxes and trusts, for example.
“It’s far slimmed down,” said Kyle Pomerleau, a senior fellow at the American Enterprise Institute, a right-leaning think tank. “It forgoes a lot of things they’d proposed in the House bill.”
Of course, the proposal needs near-unanimous backing from Democrats in the House and Senate, given their razor-thin majorities, and it’s unclear whether it has the party’s full support.
Here are some of the major provisions in the Build Back Better framework.
Millionaire and billionaire surtax
The plan would impose a new surtax on the top 0.02% of Americans, according to the White House.
There would be a 5% surtax on adjusted gross income of more than $10 million, and an additional 3% (or, a total 8% surtax) on income of more than $25 million.
The surtax is estimated to raise $230 billion over 10 years.
“This is one of the main provisions in here that directly taxes the wealthy,” said Garrett Watson, senior policy analyst at the Tax Foundation.
It would affect a much larger number of people than another tax floated by Senate Democrats earlier this week on the wealth of billionaires. That tax would have affected about 700 people, whereas the millionaire surtax would perhaps affect hundreds of thousands of people, according to Watson’s rough estimate.
Essentially, an 8% surtax would mean the highest earners pay a top 45% federal marginal income tax rate on wages and business income. (They currently pay 37%.)
They’d also pay a top 28% top federal rate on long-term capital gains and dividends, plus the existing 3.8% net investment income tax on high earners. (Taxes on long-term capital gains apply to growth on stocks and other assets sold after one year of ownership. The top tax rate is currently 20%.)
That the tax seems to apply to “adjusted gross income” and not “taxable income” is significant, Watson said.
That’s because the AGI measure reflects income before it’s reduced by charitable contributions and other tax breaks — meaning the surtax would encompass more taxpayers.
IRS enforcement
Democrats’ plan would make investments in IRS enforcement to help close the so-called tax gap.
The top 1% evade more than $160 billion per year in taxes, according to the White House.
Relative to other taxpayers, they get a bigger share of income from opaque sources, such as certain business arrangements that aren’t as readily subject to tax reporting or withholding, according to Watson.
The IRS would hire enforcement agents trained to pursue wealthy tax evaders, overhaul 1960s-era technology and invest in taxpayer services to help ordinary Americans, according to the White House.
It estimates these measures would raise $400 billion over 10 years — the single-biggest revenue raiser in the proposal.
However, some question how lawmakers arrived at that revenue figure. The Treasury Department estimated last month that an $80 billion IRS investment would generate $320 billion in revenue over a decade.
Business income
There are two provisions in the Build Back Better framework related to business income.
One would apply a 3.8% Medicare surtax to all income from pass-through businesses and another would limit a tax break on business losses for the wealthy.
The reforms would raise $250 billion and $170 billion, respectively, over a decade, according to estimates.
Currently, the owners of most pass-through businesses are subject to a 3.8% self-employment tax or net investment income tax. (Such businesses, like sole proprietorships and partnerships, pass their earnings to owners’ individual tax returns.)
However, some profits (namely, those of S corporations) aren’t subject to the 3.8% net investment income tax, which was created by the Affordable Care Act to fund Medicare expansion. The proposal would close this loophole for wealthy business owners.
The second proposal is also somewhat vague on business losses. But the House tax proposal last month, which contained a similar measure, may offer a clue; it would permanently disallow excess business losses (meaning, net tax deductions that exceed their business income).
This applies to businesses that aren’t structured as a corporation.
This is a developing story. Check back for updates.
https://www.cnbc.com/2021/10/28/heres-how-bidens-build-back-better-framework-would-tax-the-rich.html
8.US Pending Home Sales Unexpectedly Tumble In September
BY TYLER DURDEN
After surging an unexpected 8.1% MoM in August, and on the heels of rebounds in new- and existing-home sales, Pending Home Sales in September were expected to scrape out a modest 0.5% MoM rise, but that was a long way off as Pending Home Sales tumbled 2.3% MoM…
That is the 3rd monthly drop in the last 4 months and leaves pending home sales down over 7% year-over-year.
“Contract transactions slowed a bit in September and are showing signs of a calmer home price trend, as the market is running comfortably ahead of pre-pandemic activity,” said Lawrence Yun, NAR’s chief economist.
“It’s worth noting that there will be less inventory until the end of the year compared to the summer months, which happens nearly every year.
“Rents have been mounting solidly of late, with falling rental vacancy rates,” Yun said.
“This could lead to more renters seeking homeownership in order to avoid the rising inflation,”
Because if you can’t afford to rent, you can afford a million-dollar starter-home?
Signings declined in all four U.S. regions from the prior month, led by a 3.5% drop in the Midwest
“Some potential buyers have momentarily paused their home search with intentions to resume in 2022.”
Pending sales are a forward-looking indicator of closed sales in 1-2 months so this decline suggests trouble ahead for the rebounding sentiment among homebuilders.
https://www.zerohedge.com/personal-finance/us-pending-home-sales-unexpectedly-tumble-september
9.Holiday Sales Set for Record.
Retail trade group: holiday sales could set new record
By ANNE D’INNOCENZIOyesterday
NEW YORK (AP) — The National Retail Federation, the nation’s largest retail trade group, expects that holiday sales gain could shatter last year’s record-breaking season even as a snarled global supply chain slows the flow of goods and results in higher prices for a broad range of items.
The trade group said Wednesday that it predicts that sales for the November and December period will grow between 8.5% and 10.5% to $843.4 billion and $859 billion. Holiday sales increased 8.2% in 2020 compared with the previous year when shoppers, locked down during the early part of the pandemic, splurged on pajamas and home goods, mostly online.
The group expects that online and other non-store sales, which are included in the total, will increase between 11% and 15% to a total of between $218.3 billion and $226.2 billion driven by online purchases.
The numbers exclude automobile dealers, gasoline stations and restaurants billion. Holiday sales have averaged gains of 4.4% over the past five years, according to the group.
The forecast considers a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit, previous retail sales and weather.
“There is considerable momentum heading into the holiday shopping season,” NRF President and CEO Matthew Shay said. “Consumers are in a very favorable position going into the last few months of the year as income is rising and household balance sheets have never been stronger.”
Shay also noted during a call with the media on Wednesday that the lifting of U.S. restrictions on international visitors from more than 30 countries early next next month should also give a jolt to retailers this holiday season.
NRF’s rosy forecast is similar to other predictions, which call for holiday sales to increase by at least 7%, according to Deloitte, MastercardSpending Pulse and KPMG.
Still, NRF executives acknowledged on the call that there are plenty of headwinds facing consumers who are dealing with the ripple effects of a clogged supply chain that has meant higher prices, less generous discounts and shortages of items.
For example, online prices are up 3% heading into the holidays; in contrast, that number, on average, has been down 5% in past years, according to the Adobe Digital Economy Index, which tracks more than one trillion visits to U.S. retail sites. Adobe predicts that discounts will be in the 5% to 25% range across categories this season, compared to a historical average of 10% to 30%.
Just like last year, shoppers are shopping early for the holiday season for fear of not getting what they want. But Shay said that retailers are doing a good job in making sure inventory is on the shelves though there will be some gaps in some categories. Still, he has seen shoppers learn to adjust by switching to other brands and items if they can’t find their top choice. That happened in the early days of the pandemic when customers were looking for alternative consumer packaged brands when they couldn’t find their top choice.
“Consumer will not be deterred,” said Shay. ”They will be out shopping for the holidays, and they won’t go home empty-handed.”
Follow Anne D’Innocenzio: http://twitter.com/ADInnocenzio
10.A Stoic Response to Power
A Stoic Response, Wisdom, and More
“To recognize the malice, cunning, and hypocrisy that power produces, and the peculiar ruthlessness often shown by people from ‘good families.’” Marcus Aurelius
At a young age, Marcus Aurelius is chosen to one day ‘assume the purple’—to become emperor—by Hadrian. Perhaps Hadrian saw something in him, perhaps since he lacked a son of his own, he thought he might be able to cultivate the traits needed to successfully rule the Roman empire.
Hadrian set in line a succession plan that involved Hadrian adopting the elderly Antoninus Pius who in turn adopted Marcus Aurelius. All the while, Marcus studied philosophy—he read and thought about what it meant to be a good person.
In 161 AD, after the death of Antoninus, Marcus becomes emperor. We’re told that absolute power corrupts absolutely. Well, Marcus was given that power. And what did he with it? What was the first thing he did upon ascending the throne?
He appointed his step-brother Lucius Verus co-emperor. Marcus Aurelius was given unlimited, executive power and the first thing he did was share it with someone he was not even technically related to. In fact, he essentially refused in front of the Senate to be made emperor unless Lucius would also rule with him. Marcus simply did it because he thought it was fair. Because it was the right thing to do.
That’s magnanimity. That’s what biographer Robert Caro, who has deeply studied some of the most powerful people in history, means when he says that power doesn’t corrupt, it reveals.
Marcus’s magnanimity didn’t stop there. Throughout his reign the power he held never seemed to go to his head—neither did the stress or burden. He rarely rose to excess or anger, and never to hatred or bitterness. What’s more impressive about his composure is all the challenges and obstacles Marcus faced during this period: Nearly constant war, a horrific plague, possible infidelity, an attempt at the throne by one of his closest allies, repeated and arduous travel across the empire—from Asia Minor to Syria, Egypt, Greece, and Austria—a rapidly depleting treasury, Lucius turning out to be an incompetent and greedy step-brother as co-emperor, and on and on and on. Despite all this, he adhered to philosophy as a guide.
It would be Machiavelli who would consider Marcus as one of the “Five Good Emperors” and say this about the respect he had earned through his virtuous rule: “Titus, Nerva, Trajan, Hadrian, Antoninus, and Marcus had no need of praetorian cohorts, or of countless legions to guard them, but were defended by their own good lives, the good-will of their subjects, and the attachment of the senate.”
Part of the reason Marcus was able to do this was practicing Stoicism and reminding himself of the important tenets of the philosophy. He was actively working to not let power go to his head. In his writings, we see him speak over and over again about the other emperors who had come before him and who would come after him. How many people even remember their names, he said? He reminded himself that his military successes paled in comparison to Alexander the Great’s. He reminded himself that all of Rome, which was his kingdom, was just a tiny piece of the earth—that it looked pathetic if you flew up in the clouds and looked down upon it. All of this was designed to escape what he called “imperialization”—the stain of power and popularity.
We can confidently conclude that it worked. As Matthew Arnold, the essayist, remarked in 1863, in Marcus we find a man who held the highest and most powerful station in the world—and the universal verdict of the people around him was that he proved himself worthy of it.
“But the great record for the outward life of a man who has left such a record of his lofty inward aspirations as that which Marcus Aurelius has left, is the clear consenting voice of all his contemporaries,—high and low, friend and enemy, pagan and Christian,—in praise of his sincerity, justice, and goodness. The world’s charity does not err on the side of excess, and here was a man occupying the most conspicuous station in the world, and professing the highest possible standard of conduct;—yet the world was obliged to declare that he walked worthily of his profession.”
Seneca’s fate, another prominent Stoic figure, eventually one of the most influential power brokers in the empire, was different. Like Marcus, he almost ascended through luck to the highest position in Rome. It would be a conspiracy’s plans—at the height of Seneca’s career—to murder the then-Emperor Nero and have Seneca take the throne, “being a man who seemed to be marked out for supreme power by the good qualities for which he was so famous.” But unlike Marcus, one can argue that Seneca was almost corrupted by power after becoming Nero’s tutor years earlier, a ruthless tyrant by most historical standards, and remaining by his side for years, amassing vast amounts of wealth and power in the process.
As the Roman proverb went, Amici vitia si feras, facias tua. If you put up with the crimes of a friend, you make them your own.
Seneca of course was deeply familiar with power’s corrupting effect, observing of Caligula, that “Nature produced him as an experiment, to show what absolute vice could accomplish when paired with absolute power.” He would eventually write to Nero, in the years after he became Emperor, how one should act when in a position to wield power. He would tell him that “great power is glorious and admirable only when it is beneficent; since to be powerful only for mischief is the power of a pestilence.” Seneca would also say that “cruel punishments do a king no honour: for who doubts that he is able to inflict them? But, on the other hand, it does him great honour to restrain his powers, to save many from the wrath of others, and sacrifice no one to his own.”
It was a letter that urged self-restraint, mercy and compassion and the beneficial exercise of power. Using a popular rhetorical device from the time, Seneca would write as if he was Nero, writing how a ruler, and particularly one with unlimited power, should behave,
“In this position of enormous power I am not tempted to punish men unjustly by anger, by youthful impulse, by the recklessness and insolence of men, which often overcomes the patience even of the best regulated minds, not even that terrible vanity, so common among great sovereigns, of displaying my power by inspiring terror.”
As Seneca’s biographer James Romm would observe, Seneca’s message was to show why power needs to be restrained. As Romm would say, the point was that “kindness from rulers wins adoration from subjects and results in a long, secure reign; severity breeds fear, and from fear springs conspiracy.”
And it would be Romm who would pose the timeless question in regards to Seneca’s life: “How could this sage, who constantly exhorted his readers toward virtue and reason, have served as the right-hand man of a despot notorious for madness, repression and family murder?”
We can never know. Seneca might as easily have told himself that he was the only one who could’ve controlled Nero. Without him, it might have been much worse. Or the answer is vastly simpler—he coveted to be close to power and wield influence as most of us would do given the chance. It may simply be that power corrupted Seneca and rendered all his Stoic training moot.
This tension between Stoicism and power seems to have always been there. Thrasea, a Stoic peer of Seneca’s would conspire against Nero rather than collaborate with him. Cato opposed Julius Caesar, and refusing to live under his rule, committed suicide. Musonius Rufus would be exiled by Vespasian and only returning to Rome after the emperor’s death. Epictetus has also observed power firsthand—as a slave, his own leg was broken by his master, was banished to Greece by Domitian, and his advice would be sought by Hadrian, the emperor who early on saw the potential in Marcus Aurelius.
And what we saw in Marcus was the true Stoic response to power—proving yourself worthy of it. He was a ruler that was universally acknowledged. Upon Marcus’s death, the renowned historian Cassius Dio would describe how things would turn for the worse: “My history now descends from a kingdom of gold to a kingdom of iron and rust, as affairs did for the Romans at that time.”
So for all the brilliance of Marcus, we can also look at Seneca as kind of a cautionary tale, a tragic figure that allows us to debate both the morality of his choices and the efficacy of what he claimed to believe. And through this complicated pairing of opposites, we have a set of important guideposts to orient ourselves against and be wary of.