Topley’s Top Ten – February 25, 2019

1.Historical Margin Chart.

Margin Call — Margin Debt Accelerometer:  Here’s an interesting chart, basically a bear market warning indicator; the year over year change in US margin debt [note it used to be called NYSE margin debt, but now FINRA publishes a broader set of data].  The basic concept is that when margin debt is contracting on an annual basis it can serve as a bear market warning signal (margin calls and lower risk appetite).  Only thing I would add is that in the 2000 & 2008 experiences there was a substantial acceleration in margin debt growth before the contraction signal was triggered, so one might argue the lack of that acceleration weakens the signal this time around…

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Topley’s Top Ten – February 22, 2019

1.Domino’s vs. Google.

Pizza Pays — Domino’s Delivers Over Google

Feb 21, 2019

If you were sent back in time to 2004 and had the choice to buy Domino’s Pizza (DPZ) or Alphabet (GOOGL) at their IPO, which would have been the better choice?  Due to the epic size and influence of its business, impulse would probably have you choose Alphabet.  But DPZ has actually seen significantly better returns than GOOGL since the companies’ IPO dates. Since inception, DPZ has seen a total return of 3,604% even after today’s 9.03% decline in the stock in reaction to an earnings miss this morning.  Not that GOOGL’s 2,490% return is something to turn your nose at, but it is dwarfed by DPZ’s returns.  For the stocks’ first decade, up until 2014, this was not the case though.  GOOGL had actually outperformed DPZ for much of their lifespans as public companies.  From then up until early 2016, the two stocks alternated between being the leader, but in the last two years, Domino’s ran away with things.  Part of the reason for this is DPZ has fairly consistently paid a dividend since 2004 which is why returns for the stock have been considerably better over the long term.

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Topley’s Top Ten – February 21, 2019

1.Record Selling of U.S. Stocks and Bonds in December of 2018

Torston SLok

In December foreigners sold a record $91bn in US stocks and bonds, see chart below. Roughly 85% of this amount, or $77bn, was the rest of the world selling US Treasuries. Despite this significant upward pressure on US rates during the stock market rout in December 10-year rates still went from 3.20% in November to 2.60% in early January. This reveals how strong the domestic bid is from pension funds and banks for US Treasuries at the moment, see also the second chart below. For more on the rates outlook see also our latest Fixed Income Weekly here.

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Topley’s Top Ten – February 13, 2019

1.Dollar Back to Even for the Year….Recouped All Early Year Losses.

“The dollar’s not weakening, and the reason for that is that the Fed is just the beginning, in the sense that all other central banks are most likely going to become dovish,” said Momtchil Pojarliev, head of the currencies group.

The greenback climbed 0.5 percent Monday to recoup its year-to-date losses, and is enjoying its longest winning streak since January 2016. The currency’s surprising strength has upended forecasts across Wall Street, with firms such as Morgan Stanley and Nomura having called for dollar losses. It’s also put a chill on U.S. corporate earnings.

While the Fed’s about-face would typically vindicate those calls, the darkening outlook for the dollar’s peers should support it in the days ahead, according to Kit Juckes, a Societe Generale SA global fixed-income strategist. The euro is a case in point: A lurch lower in German yields and sputtering European growth saw the common currency touch its lowest level since November on Monday.

“The problem for dollar bears is that there is a chronic shortage of currencies to like,” Juckes said. “Lower bund yields, not to mention weak growth, political uncertainty and Brexit, make a good set of reasons to hate the euro as much as you hate the dollar.”

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