Topley’s Top 10 – October 27, 2022

1. 10 Year to 3 Month Yield Curve Inverts…

Marketwatch By Vivien Lou Chen

Campbell Harvey, the Duke University finance professor who pioneered the use of bond-market yield curves as a predictive tool, said the 3-month/10-year spread needs to stay below zero through December in order for him to be confident that a recession is on the way.

“A one- or two-day inversion is not enough,” Harvey said via phone on Wednesday. “Just because it inverted yesterday and today is not sufficient to go on the record and say it’s flashing ‘code red,’ but it’s definitely ‘code orange.’ “

Still, he said, the significance of the moves on Tuesday and Wednesday is that “the countdown is on,” and the Federal Reserve’s need to keep hiking interest rates in order to contain inflation “is driving the yield curve in ways that are also potentially pushing the economy off the cliff in terms of a recession.” https://www.marketwatch.com/story/recession-ahead-this-bond-market-indicator-is-flashing-a-code-orange-warning-11666803770?mod=home-page


2. U.S. Dollar Pulls Back to 50 day

Close below 50 day would be first negative technical signal for dollar

www.stockcharts.com


3. Current Rolling 12 Month Performance of Dollar Only Happen 6x Since 1975

From Dorsey Wright Except for Energy – by way of U.S. Equities and Commodities – not many absolute trends in 2022 have been more dominant than NYCE U.S. Dollar Index Spot DX/Y. Through Monday’s close, DX/Y has rallied 17% in 2022 and if the calendar year’s action were to end today, it would be the first time since 2014 – when DX/Y gained 12.5% – that the Dollar has had a double-digit return. From a rolling 12-month performance perspective, DX/Y is hanging around the 20% mark recently for only the sixth time going back to 1975 and the last time was in July 2015.

https://www.nasdaq.com/solutions/nasdaq-dorsey-wright


4. Current Central Bank Balance Sheets

From Dave Lutz at Jones Trading The European Central Bank is expected to start the delicate process of shrinking its balance sheet this week after eight years of bond purchases and generous lending more than quadrupled its total assets to €8.8tn. The shift would mark an intensification of the ECB’s efforts to remove monetary stimulus and cool inflation – Policymakers must proceed with caution or risk a UK-style bond market sell-off that would add to the economic problems facing the region, FT reports.


5. U.S. Micro Cap Stocks Trade Back to Covid Lows

U.S. Micro Cap Stocks Trade Back to Covid Lows

S&P Global….Microcap 50% of holdings financials and healthcare

https://www.spglobal.com/spdji/en/indices/equity/dow-jones-us-micro-cap-total-stock-market-index/#data


6. Frontier Markets Pull Back to Covid Lows

Frontier markets are smaller than emerging markets…Way oversold on chart

Frontier Markets 50% financial stocks

www.etf.com


7. U.K Stocks Trading at Steep Discount to World

The Daily Shot Stock valuations remain near record lows relative to global peers.

Source: @marketsjoe Read full article

https://dailyshotbrief.com/the-daily-shot-brief-october-26th-2022/


8. Facebook Revenue Growth

@Charlie Bilello


9. Cash and Wine Outperformed in 2022

Chartr Investing in fine wines and rare spirits has been a staple of elite investors for years – and it’s easy to see why. From 3Q-20 to 3Q-22 the flagship Liv-ex 1000 wine index has gained nearly 40%, substantially outperforming stock markets.

www.chartr.com


10. Why Facts Don’t Change Our Minds

written by JAMES CLEAR

DECISION MAKING LIFE LESSONS

The economist J.K. Galbraith once wrote, “Faced with a choice between changing one’s mind and proving there is no need to do so, almost everyone gets busy with the proof.”

Leo Tolstoy was even bolder: “The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him.”

What’s going on here? Why don’t facts change our minds? And why would someone continue to believe a false or inaccurate idea anyway? How do such behaviors serve us?

The Logic of False Beliefs

Humans need a reasonably accurate view of the world in order to survive. If your model of reality is wildly different from the actual world, then you struggle to take effective actions each day.

However, truth and accuracy are not the only things that matter to the human mind. Humans also seem to have a deep desire to belong.

In Atomic Habits, I wrote, “Humans are herd animals. We want to fit in, to bond with others, and to earn the respect and approval of our peers. Such inclinations are essential to our survival. For most of our evolutionary history, our ancestors lived in tribes. Becoming separated from the tribe—or worse, being cast out—was a death sentence.”

Understanding the truth of a situation is important, but so is remaining part of a tribe. While these two desires often work well together, they occasionally come into conflict.

In many circumstances, social connection is actually more helpful to your daily life than understanding the truth of a particular fact or idea. The Harvard psychologist Steven Pinker put it this way, “People are embraced or condemned according to their beliefs, so one function of the mind may be to hold beliefs that bring the belief-holder the greatest number of allies, protectors, or disciples, rather than beliefs that are most likely to be true.”

We don’t always believe things because they are correct. Sometimes we believe things because they make us look good to the people we care about.

I thought Kevin Simler put it well when he wrote, “If a brain anticipates that it will be rewarded for adopting a particular belief, it’s perfectly happy to do so, and doesn’t much care where the reward comes from — whether it’s pragmatic (better outcomes resulting from better decisions), social (better treatment from one’s peers), or some mix of the two.”

False beliefs can be useful in a social sense even if they are not useful in a factual sense. For lack of a better phrase, we might call this approach “factually false, but socially accurate.” When we have to choose between the two, people often select friends and family over facts.

This insight not only explains why we might hold our tongue at a dinner party or look the other way when our parents say something offensive, but also reveals a better way to change the minds of others.

Facts Don’t Change Our Minds. Friendship Does.

Convincing someone to change their mind is really the process of convincing them to change their tribe. If they abandon their beliefs, they run the risk of losing social ties. You can’t expect someone to change their mind if you take away their community too. You have to give them somewhere to go. Nobody wants their worldview torn apart if loneliness is the outcome.

The way to change people’s minds is to become friends with them, to integrate them into your tribe, to bring them into your circle. Now, they can change their beliefs without the risk of being abandoned socially.

The British philosopher Alain de Botton suggests that we simply share meals with those who disagree with us:

“Sitting down at a table with a group of strangers has the incomparable and odd benefit of making it a little more difficult to hate them with impunity. Prejudice and ethnic strife feed off abstraction. However, the proximity required by a meal – something about handing dishes around, unfurling napkins at the same moment, even asking a stranger to pass the salt – disrupts our ability to cling to the belief that the outsiders who wear unusual clothes and speak in distinctive accents deserve to be sent home or assaulted. For all the large-scale political solutions which have been proposed to salve ethnic conflict, there are few more effective ways to promote tolerance between suspicious neighbours than to force them to eat supper together.”

Perhaps it is not difference, but distance that breeds tribalism and hostility. As proximity increases, so does understanding. I am reminded of Abraham Lincoln’s quote, “I don’t like that man. I must get to know him better.”

Facts don’t change our minds. Friendship does.

The Spectrum of Beliefs

Years ago, Ben Casnocha mentioned an idea to me that I haven’t been able to shake: The people who are most likely to change our minds are the ones we agree with on 98 percent of topics.

If someone you know, like, and trust believes a radical idea, you are more likely to give it merit, weight, or consideration. You already agree with them in most areas of life. Maybe you should change your mind on this one too. But if someone wildly different than you proposes the same radical idea, well, it’s easy to dismiss them as a crackpot.

One way to visualize this distinction is by mapping beliefs on a spectrum. If you divide this spectrum into 10 units and you find yourself at Position 7, then there is little sense in trying to convince someone at Position 1. The gap is too wide. When you’re at Position 7, your time is better spent connecting with people who are at Positions 6 and 8, gradually pulling them in your direction.

The most heated arguments often occur between people on opposite ends of the spectrum, but the most frequent learning occurs from people who are nearby. The closer you are to someone, the more likely it becomes that the one or two beliefs you don’t share will bleed over into your own mind and shape your thinking. The further away an idea is from your current position, the more likely you are to reject it outright.

When it comes to changing people’s minds, it is very difficult to jump from one side to another. You can’t jump down the spectrum. You have to slide down it.

Any idea that is sufficiently different from your current worldview will feel threatening. And the best place to ponder a threatening idea is in a non-threatening environment. As a result, books are often a better vehicle for transforming beliefs than conversations or debates.

In conversation, people have to carefully consider their status and appearance. They want to save face and avoid looking stupid. When confronted with an uncomfortable set of facts, the tendency is often to double down on their current position rather than publicly admit to being wrong.

Books resolve this tension. With a book, the conversation takes place inside someone’s head and without the risk of being judged by others. It’s easier to be open-minded when you aren’t feeling defensive.

Arguments are like a full frontal attack on a person’s identity. Reading a book is like slipping the seed of an idea into a person’s brain and letting it grow on their own terms. There’s enough wrestling going on in someone’s head when they are overcoming a pre-existing belief. They don’t need to wrestle with you too.

Why False Ideas Persist

There is another reason bad ideas continue to live on, which is that people continue to talk about them.

Silence is death for any idea. An idea that is never spoken or written down dies with the person who conceived it. Ideas can only be remembered when they are repeated. They can only be believed when they are repeated.

I have already pointed out that people repeat ideas to signal they are part of the same social group. But here’s a crucial point most people miss:

People also repeat bad ideas when they complain about them. Before you can criticize an idea, you have to reference that idea. You end up repeating the ideas you’re hoping people will forget—but, of course, people can’t forget them because you keep talking about them. The more you repeat a bad idea, the more likely people are to believe it.

Let’s call this phenomenon Clear’s Law of Recurrence: The number of people who believe an idea is directly proportional to the number of times it has been repeated during the last year—even if the idea is false.

Each time you attack a bad idea, you are feeding the very monster you are trying to destroy. As one Twitter employee wrote, “Every time you retweet or quote tweet someone you’re angry with, it helps them. It disseminates their BS. Hell for the ideas you deplore is silence. Have the discipline to give it to them.”

Your time is better spent championing good ideas than tearing down bad ones. Don’t waste time explaining why bad ideas are bad. You are simply fanning the flame of ignorance and stupidity.

The best thing that can happen to a bad idea is that it is forgotten. The best thing that can happen to a good idea is that it is shared. It makes me think of Tyler Cowen’s quote, “Spend as little time as possible talking about how other people are wrong.”

Feed the good ideas and let bad ideas die of starvation.

The Intellectual Soldier

I know what you might be thinking. “James, are you serious right now? I’m just supposed to let these idiots get away with this?”

Let me be clear. I’m not saying it’s never useful to point out an error or criticize a bad idea. But you have to ask yourself, “What is the goal?”

Why do you want to criticize bad ideas in the first place? Presumably, you want to criticize bad ideas because you think the world would be better off if fewer people believed them. In other words, you think the world would improve if people changed their minds on a few important topics.

If the goal is to actually change minds, then I don’t believe criticizing the other side is the best approach.

Most people argue to win, not to learn. As Julia Galef so aptly puts it: people often act like soldiers rather than scouts. Soldiers are on the intellectual attack, looking to defeat the people who differ from them. Victory is the operative emotion. Scouts, meanwhile, are like intellectual explorers, slowly trying to map the terrain with others. Curiosity is the driving force.

If you want people to adopt your beliefs, you need to act more like a scout and less like a soldier. At the center of this approach is a question Tiago Forte poses beautifully, “Are you willing to not win in order to keep the conversation going?”

Be Kind First, Be Right Later

The brilliant Japanese writer Haruki Murakami once wrote, “Always remember that to argue, and win, is to break down the reality of the person you are arguing against. It is painful to lose your reality, so be kind, even if you are right.”

When we are in the moment, we can easily forget that the goal is to connect with the other side, collaborate with them, befriend them, and integrate them into our tribe. We are so caught up in winning that we forget about connecting. It’s easy to spend your energy labeling people rather than working with them.

The word “kind” originated from the word “kin.” When you are kind to someone it means you are treating them like family. This, I think, is a good method for actually changing someone’s mind. Develop a friendship. Share a meal. Gift a book.

Be kind first, be right later.

FOOTNOTES

https://jamesclear.com/why-facts-dont-change-minds

Topley’s Top 10 – October 25, 2022

1. Ten Year Returns on AGG (bond index) .60 Basis Points Per Year

AGG wipes out 10 years of gains

https://www.google.com/finance/quote/AGG:NYSEARCA?sa=X&ved=2ahUKEwizqLSCvvn6AhXWhIkEHZLkAJwQ3ecFegQILBAg&window=MAX

2. Five-Year Break Even Inflation Rate Drops the Most in 20 Years

Found at Irrelevant Investor Blog https://theirrelevantinvestor.com/2022/10/12/animal-spirits-a-tough-break/

3. Lowest Percentage of Positive Days in S&P Since 1974

https://lplresearch.com/2022/10/19/fewest-up-days-since-1974-as-volatility-continues/

4. Chinese Internet ETF Breaks Thru All Support

www.stockcharts.com

5. Record Drop in Chinese Companies Listed in the U.S.

Bespoke Investment Group

https://www.bespokepremium.com/interactive/posts/think-big-blog/the-closer-china-collapse-lumber-lagging-auto-wo-ems-pmis-cot-10-24-22

6. History of 8% One Day Drops in China Markets

JP Morgan Still, he may be on to something this time. Prior to Monday, there have been only 13 times when the MSCI China Index tumbled at least 8% over the past three decades. The index rebounded in 11 out of those 13 occasions in the the next five days, and advanced 10 times in the following 60 days. In fact, since 1998, the hit ratio for the next 60 days is 100%.

From Zerohedge https://www.zerohedge.com/markets/jpmorgans-bullish-stock-call-backed-history

7. Rest of World Passing China as U.S. Trade Partner

https://ritholtz.com/2022/10/weekend-reads-538/

8. The U.S. House Reelection Rate is 95%

No Mercy No Malice Scott Galloway@profgalloway
The U.S. House reelection rate in 2020 was 95%. The mortality rate for Americans the (average) age of our representatives is approximately 2%. Meaning, with a two year term, it will soon be a coin flip whether they were voted out or left the rotunda feet first. The result: A daily occupation of our nation’s capital (and our capital) by a group that is a cross between The Golden Girls and The Walking Dead. Our leaders are too old.

https://www.profgalloway.com/churn/

9. France Putting 5 Nuclear Reactors Back Online

French state energy firm EDF said on Saturday it was postponing plans to bring five halted nuclear reactors back on stream, potentially putting more upward pressure on energy prices as winter approaches.

French state energy firm EDF said on Saturday it was postponing plans to bring five halted nuclear reactors back on stream, potentially putting more upward pressure on energy prices as winter
approaches.

France generates some 70 percent of its electricity from 56 nuclear reactors but 30 are currently offline, either for routine maintenance or because of corrosion in some emergency cooling systems.

Workers are striking at several nuclear plants where reactors have been shut down for maintenance.

The industrial action is part of a wider pay dispute in the French energy sector, where a strike by refinery workers has led to fuel shortages for motorists.

EDF is due to hold initial talks with unions on Tuesday.

While the strikes at EDF will have no impact on the general public for now, they could affect the timetable for bringing some reactors back on stream, Claude Martin, a representative for the FNME-CGT union, told AFP on Friday.

He said the halts in maintenance work, plus go-slows by workers that have reduced power output at functioning reactors, would primarily effect EDF’s finances.

The heavily-indebted company, which is being fully renationalised by the government, said in September that a drop in electricity generation due to problems with its reactors would sap its operating profit by €29 billion ($29 billion) in 2022, worse than previously forecast.

“I can confirm there is industrial action,” an EDF spokeswoman told AFP on Saturday. “It might have an impact on the timetable for restarting generation at some plants … It might also lead to a temporary drop in power output at certain reactors that are currently functioning,” she said.

Delays in restarting the reactors in question could last between one day and nearly three weeks.

Faced with concerns over winter energy shortages, President Emmanuel Macron vowed on Wednesday to get all but 11 of the country’s nuclear reactors back up and running by January 2023.

Problems with energy supply due to the state of the nuclear fleet have been compounded by prolonged drought, which has drained dams and reduced the country’s ability to generate electricity from hydropower.

Power grid operator RTE said in September it hoped pressure on the network could be reduced by “widespread efforts” to save energy.

https://www.thelocal.fr/20221015/frances-edf-delays-bringing-nuclear-reactors-back-on-stream/

10. Be in Good Position

Insight-Farnam Street

Charlie Munger on getting what you want:

“The safest way to try to get what you want is to try to deserve what you want. It’s such a simple idea. It’s the golden rule. You want to deliver to the world what you would buy if you were on the other end.”

Tiny Thought

One of the most overlooked opportunities in life is how you are positioned when circumstances hit.

Good positions create options, while bad positions reduce them. You don’t have to be an expert decision-maker to get better results, you only need to put yourself in a good position. Anyone looks like a genius when all the options are good.

If you’re forced to do something because you need to and not because you choose to, things quickly spiral from bad to worse.

The person in the good position eventually takes advantage of the person in the poor position. As one example, many people bought the biggest and most expensive house they could afford over the past five years. In an environment of low-interest rates, a booming economy, and house price increases that rival investments that didn’t seem like a bad idea at the time. Things change quickly. The very same person now might find themselves forced to sell their house at the worst time. Another person — one who didn’t go all in on a house — is thinking about buying today to take advantage of the opportunities.

Good positions are expensive, but poor ones cost a fortune. Spend less time worrying about maximizing your immediate results and more time maximizing your ultimate results. Giving yourself options in the future always appears suboptimal in the moment. Putting yourself in a good position for tomorrow means paying today. This might mean a lower return, living below your means, or sitting on the sidelines when everyone else is having fun.

Poor positioning kills more dreams than poor decisions. Decisions matter, but it’s easier to make good decisions when all your options are great.

Good positions allow you to master your circumstances rather than be mastered by them.

(Share this Tiny Thought on Twitter) https://fs.blog/

Topley’s Top 10 – October 24, 2022

1. Americans Buying Bonds and Cash….Private Bank Clients Buying

The Daily Shot Blog

https://dailyshotbrief.com/

2. Cumulative Flows into Money Market Funds

Callum Thomas Chart Storm More on Cash: Retail, upon witnessing both stocks and bonds melting down, (where possible) have piled into cash funds — where the nominal return is positive, and real return is still beating most other assets…

(n.b. as a guess, the insto draws probably = rebalancing + redemptions)

Source: @unusual_whales

https://chartstorm.substack.com/

3. U.S. Bond Market Still the Safe Haven

“While anything seems possible these days, especially scary scenarios, we would like to point out that even as the Fed is withdrawing liquidity” by raising the fed funds rate and continuing quantitative tightening, the U.S. is a safe haven amid challenging times globally, the firm said. In other words, the notion that “there is no alternative country” in which to invest other than the U.S., may provide liquidity to the domestic bond market, according to its note.

YARDENI RESEARCH NOTE DATED OCT. 21, 2022

FROM MARKETWATCH

https://www.marketwatch.com/story/mounting-fear-is-that-something-else-will-break-along-the-way-stock-market-investors-look-ahead-to-pce-inflation-data-amid-fed-overtightening-worries-11666443109?mod=home-page

4. The Cost to Hedge with Options Falls Back to Mean

Bloomberg Elena Popina Judging by the ominous pronouncements from Wall Street luminaries, every trader under the sun should be prepping for fresh turmoil in the world’s biggest stock market.

Yet hedging for doom and gloom is falling out of fashion fast, thanks to a historic equity rout that’s already erased $13 trillion in market value this year and flushed out both retail and institutional investors.

In the options marketplace, the relative cost of contracts that pay off if the S&P 500 Index sinks another 10% has collapsed to the lowest since 2017. Appetite for bullish wagers is on the rise. And the popular Cboe Volatility Index is sitting far below multi-year highs even as equity benchmarks plumb bear-market lows.

https://finance.yahoo.com/news/13-trillion-stock-crash-traders-123243360.html

5. S&P Hit 85% of Median Recession Drawdown

JP Morgan Stocks seem to be reflecting the most economic damage. The S&P 500’s year-to-date decline (-23%) represents roughly 85% of the median historical drawdown that coincided with a recession. Thanks to the exorbitant rise in yields and ~70bps in IG spread widening this year (credit spreads are ~185bps today), high quality bonds are also reflecting 76% of the pain of what you would expect to see in your typical recession—just another data point to add to the opportunity now for core bonds. High yield spreads, meanwhile, have remained relatively sanguine. From here, we expect high yield credit spreads to widen a bit further.

Market metrics: Where are we going from here | J.P. Morgan Private Bank (jpmorgan.com)

6. Huge Earnings Week

From Dave Lutz at Jones Trading MS Notes that 45% of the SPX reports this week. Looking at ETFs, 64% of the XLK (Tech), 54% XLI (Industrials), 53% of the QQQs, 51% XLE (Energy) and 42% IYR (REITS) report.

7. Some Russians drafted to fight in Ukraine say nobody is in charge and they don’t know what they’re doing there: report

Business Insider Sophia Ankel

  • A group of Russian soldiers in Ukraine complained to the Ministry of Defense, The Insider reported.
  • In a Telegram video, the men said they have no equipment and were thrown into a field “like dogs.”
  • Putin declared a mobilization last month, but some draftees said they get no training or equipment.

Russian soldiers drafted to fight in Ukraine say they have no ammo, no commanders, and don’t know what they are doing on the battlefield.

The claim came from a six recently-drafted men in a video circulated on Telegram, which featured in a report by the independent Russian outlet The Insider.

(The Insider is a Russian news outlet and has no affiliation with Insider.)

In the footage complained directly to the Russian Ministry of Defense about their lack of direction and equipment.

The group, per the report, said they were from Russia’s Krasnodar region and had been called up towards the beginning of the mobilization announced by Russian President Vladimir Putin on September 21.

After training, the men said, “it turns out that we’re somewhere in the fields of Ukraine and they just threw us out into the field like dogs,” according to The Insider.

They also said they were only equipped with uniforms and were given some AK-47s and bayonets – but no ammunition.

“There is no information, no command, we’re on pins and needles, as we don’t know where our people are and where [the enemy] is,” one man said in the video, The Insider reported.

“No radio, no ammo, not a fucking thing. No medical supplies either,” he added. “I’d like to show this to our authorities … Do you consider this normal?”

Insider was unable to independently verify the video.

The report comes more than a month after Russian President Vladimir Putin announced a partial mobilization of his country’s military reservists.

It tallies with other reports pointing to poor training and equipment issues among mobilized Russians.

Marina Miron, an honorary research fellow at the Centre for Military Ethics at King’s College London, told Insider’s Sinead Baker last week it was likely that “some of those mobilized have been sent to Ukraine without any guidance or training whatsoever.”

Last week, Putin said that around 16,000 mobilized men had already made it into combat in Ukraine. Many experts have concluded the men are effectively being used as cannon fodder.

Lack of equipment is also an issue in the Russian military, with one draftee telling The Guardian last week that he was made to buy his own gear.

“They gave us absolutely no equipment. The army has nothing,” the draftee told The Guardian.

https://www.businessinsider.com/drafted-russians-say-they-have-no-officers-or-ammunition-report-2022-10

8. U.S. Providing Most of Aid to Ukraine

https://www.zerohedge.com/geopolitical/where-most-aid-ukraine-comes

9. China Population Growth Goes Negative

China has one of the biggest aging problems in the world.

High parenting costs and lack of access to public services such as childcare and education have disincentivized couples from having children. China’s zero-COVID policy has also played its part, limiting social opportunities and adding to financial and employment insecurities.

A Deep Dive Into The Chinese Economy by Carl Tannenbaum, Ryan Boyle, Vaibhav Tandon of Northern Trust, 10/22/22

https://www.advisorperspectives.com/commentaries/2022/10/22/a-deep-dive-into-the-chinese-economy

10. The 6 Essential Traits of Good Character, According to Jim Rohn

By Jim Rohn | October 18, 2022 | 5

The following are what I believe to be the basics of good character. Miss one of these, and you’ll find a weak link in your character—one that might be your leadership’s undoing.

1. Integrity

Integrity is a good catchword that is similar to character but provides us with a different way of looking at the ideas of character. The root of integrity means “whole” or “undivided,” and that’s a terrific way to help us understand what integrity is—an undivided life. For example, you don’t act one way in one situation and another in a different situation. Living this way will build trust in your followers.

Another use of the word integrity that provides insight for us is when the word is used in regard to a physical structure. A wall or a building that is strong and has no cracks is said to have integrity. The same could be said for great leaders.

2. Honesty

It is regularly said that honesty is the best policy, but I would add that honesty is the only policy for great leaders. Think about it. Why do people hedge the truth? Usually for a few basic reasons: They are either afraid of the ramifications or they are trying to hide something. Either way, a lack of honesty results in the destruction of the trust of those who follow you. Even if you tell them the truth, knowing you have lied to others will destroy the trust they had in you. They will find themselves thinking, If he will lie to them, will he lie to me?

I’ve never understood what people hope to accomplish by being dishonest. Eventually people come to know that you’re not honest in your dealings, and that is what you become known for. Your reputation is what your leadership is based on. When we’re honest and live transparently before our followers, they’re able to see us for who we are and make the decision to follow us.

3. Loyalty

People of good character are loyal. They have a “stick-to-it” attitude when it comes to others. Anybody who knows human nature knows that people fail. It’s just a matter of time, no matter how talented someone is. A person of good character stays with their friends even in the down times. Anyone can be friends with others when times are good, but people of good character stay with their friends when they need them most. How this translates into making you a good leader is this: People want to follow a leader who will stretch them beyond where they are now, but who’ll also allow them to try—and to fail. When we are loyal to our followers, they’ll be loyal to us and make every effort to succeed on our behalf and on behalf of the organization. There are few things that strengthen the leader-follower bond more than when a leader shows loyalty to a follower in needReport Ad

4. Self-sacrifice

Lee Iacocca became a legend when he said he’d bring Chrysler back from the brink of bankruptcy and would take only a dollar a year in pay. This was a classic example of a leader sacrificing for their followers. It also showed his understanding of and empathy with the average line worker. As a result, the workers of Chrysler rewarded him with an incredible following as they built Chrysler into one of the world’s leading car companies.

What is it about self-sacrifice that breeds followers? Followers don’t mind putting in the hard work. They don’t even mind a leader making more money or reaping benefits from their work. What followers do mind, though, is when the leader is using them for personal gain. People of good character don’t use other people, period. So when a leader shows sacrifice of personal gain, it says to the followers that they are willing to come alongside them—and followers reward that almost universally. A person of good character shows that they can give up personal gain for the good of the whole.

5. Accountability

People of good character don’t mind accountability; that is, the act of allowing others to have a say in your life, to speak to you straight about your life and conduct. In fact, they welcome it. The brutal truth is that we have blind spots and need other people to be close to us so we can advance down the road of success. The need for accountability doesn’t prove lack of character. Rather, it proves the presence of character. The person of good character knows this and invites others to speak into their life.

Followers grow tired of leaders who will have nothing to do with accountability. They don’t mind leaders who make mistakes, but they do mind leaders who don’t take responsibility for their mistakes by being accountable. When we allow ourselves to be held accountable, our followers know that we are serious about keeping our own house in order, and thus will do a good job in leading the rest of the organization.

6. Self-control

The ability to make decisions—good decisions—about what we will and will not do with our actions is at the core of what we become in regard to our character. There will be plenty of options to participate in things that are not moral. Everybody has temptations, but a person of good character knows to exercise self-control over their choices. When people don’t exercise self-control, they sabotage their ability to lead. People lose respect for them and will follow less, if at all. Self-control is the ability to choose to do the things we should, and to refrain from doing the things we shouldn’t. When we exhibit self-control, we again build trust in our followers. They respect us and want to follow us.

Adapted from the Jim Rohn Guide to Leadership

This article was published in October 2016 and has been updated. Photo by Fernanda_Reyes/Shutterstock

https://www.success.com/rohn-6-essential-traits-of-good-character/

Topley’s Top 10 – October 19, 2022

1. Netflix Breaks Out of 3 Months Sideways Pattern

NFLX sideways pattern broken to upside with earnings

www.stockcharts.com


2. Less Than 25 Days Supply in the Strategic Petroleum Reserve

@JamesHMackay

https://twitter.com/JamesHMackay


3. Gasoline Prices

by Jill Mislinski

https://www.advisorperspectives.com/dshort/updates/2022/10/18/weekly-gasoline-price-update


4. Bond Crash….Lost Decade for Core Bonds

LPL Research

https://ipresearch.com/2022/10/18/a-lost-decade-for-core-bons/


5. EU ramps up Russian LNG purchases by 50% this year as Moscow cuts off natural gas pipeline supplies

  • The EU ramped up its purchases of Russian LNG this year, as Moscow slashes gas supplies via pipeline.
  • Imports of Russian LNG totaled 15 billion cubic meters through September, up 50% from last year.
  • Europe is scrambling to replace slashed pipeline flows through LNG purchases, which have allowed Moscow to pull in hefty amounts of cash.

The European Union has ramped up its purchases of Russian liquefied natural gas this year, while Moscow has slashed pipeline flows.

The EU’s imports of Russian LNG totaled 15 billion cubic meters through September of this year, up 50% from a year ago, Tim McPhie, the European Commission’s spokesperson for climate action and energy, told reporters on Friday, according to Russian news outlet Kommersant.

Still, Russia’s share of total EU LNG imports dipped to 17% from 20% a year ago, as Europe has sharply increased its purchases from other parts of the world.

The EU’s overall LNG imports soared 66% to almost 88 billion cubic meters through the first nine months of the year. 

European countries have been snapping up LNG cargoes from the US and Qatar recently as they scramble to build up inventories ahead of winter while Russia slashes pipeline gas flows.

Over the summer, Moscow began cutting deliveries via Nord Stream 1, then completely cut them off last month. Then earlier this month, explosions underwater blew open leaks in the pipeline in a likely act of sabotage.

Russia still supplies some pipeline natural gas to Europe via other pipelines, but not much: flows have been reduced from 350 million cubic meters at the start of the year to 70 million cubic meters, according to the most recent estimates from Kommersant. 

While LNG has helped make up for lost pipeline supplies, it comes with its own complications. LNG differs from pipeline gas in that it is largely imported overseas through tankers, and needs to be regasified before being used for energy.

Dozens of ships are circling the coast of Spain and other European countries as they wait to offload LNG cargoes, according to Reuters. The number of ships arriving outpaces the number of regasification terminals that can accommodate them.

In addition, increased LNG competition this year with Asian customers has ramped up prices and tanker rates dramatically. LNG ships now cost a record $400,000 a day, and Europe can no longer rely on cheap US LNG as supply continues to grow tight, a Texas-based LNG firm warned.

Meanwhile, Russia has been pulling in large amounts of cash through LNG sales, which are on track to reach a record high for the year, according to data from Bloomberg.

https://markets.businessinsider.com/news/commodities/europe-energy-crisis-eu-russian-lng-fuel-energy-prices-high-2022-10


6. Office Leases Signed Annually

@chasingthevig

https://twitter.com/chasingthevig


7. Half of Airnub Listings Have Been Added Since 2020


8. Personal Savings Rate Down and Consumer Credit Up

@Charlie BilelloThe answer: they are saving less (lowest savings rate since 2008) and borrowing more (highest increase in consumer credit since 2011).

Needless to say, this trend cannot go on forever, which is why bringing down the rate of inflation remains critical to the long-term health of the economy.


9. Americans Trust in Media Still at All-Time Lows

STORY HIGHLIGHTS

  • 34% have a “great deal” or “fair amount” of confidence in media
  • 38% with no trust at all outpaces great deal/fair amount for first time
  • 70% of Democrats, 14% of Republicans, 27% of independents trust media

Gallup BY MEGAN BRENAN https://news.gallup.com/poll/403166/americans-trust-media-remains-near-record-low.aspx


10. 6 steps to self-acceptance

Psychology Today Karyl McBride Ph.D.

1. Make a commitment to work on self-acceptance. This simply means you decide to address your level of self-acceptance and work on it. To begin, notice your self-talk and whatever you are beating yourself up for. Keep a self-acceptance journal and write down the messages you are sending yourself.

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2. Assess and work on any past trauma. If you have trauma in your past, take note of it and write about it in your journal. Try to identify any trauma you have experienced and begin to process it. You may need to do this with a therapist.

3. Determine your own value system. Take an inventory of what you believe in and what you don’t believe in. Write down your most important values and why you want to live by those values. Your value system may include some of what you were taught growing up, but you may also make the conscious decision not to include some of what you were taught to believe in your family of origin. Your value system should only include what is right for you.

4. Use your adult self to correct the negative messages you are sending yourself. Using your paternal or maternal adult self, speak to your inner child and correct the negative messages you’re sending yourself. Write to your inner child and talk to him or her as you would talk to any small child. Explain why the messages are wrong and decide how you want to correct them. For example, if the message is “I am not good enough,” explain to your inner child why you are good enough.

5. Forgive yourself for mistakes and failures. Make a conscious decision to offer yourself forgiveness. We can’t blame ourselves for things we didn’t know or weren’t aware of before, even if we are aware of those things now. It’s important to learn from our mistakes, but it is never helpful to keep punishing ourselves for regrets we may have.

6. Accept imperfection. No one is perfect, and no one can be perfect. Ask yourself: Who do I think I am that I have to be perfect, but I don’t expect others to be? Learn to accept yourself for all of who you are: your strengths, weaknesses, mistakes, and all.

https://www.psychologytoday.com/us/blog/the-legacy-distorted-love/202112/6-steps-self-acceptance?collection=1180927

Topley’s Top 10 – October 18, 2022

1. Last Week We Hit A Record Low Amount of Retail Investors That Say They Invest in Financial Markets

From Callum Thomas Chart Storm The Rise and Fall of Retail Investing: Bespoke’s survey of consumers showed a record low % that say they invest in financial markets.

Probably reflects a combination of bad market performance and less money to invest as the bad macro crunches consumers…

Source:  @bespokeinvesthttps://chartstorm.substack.com/p/weekly-s-and-p500-chartstorm-9-october-624


2. Ben Carlson Excellent Stats Always on Blog…..History of Bear Market Bottoms-Economic Signals Different on Every Bottom.

Highly Recommended Wealth of Common Sense Blog

I wish it was easy but there are no all-clear signals to tell you when the dust is going to settle. Just look at various fundamental indicators at the bottom of every bear market since 1945:

If you look at interest rates, valuations, inflation rates and dividend yields for every one of these bottoms there isn’t much consistency.  You could try to use the economy as a tell for the stock market but good luck with that.

https://awealthofcommonsense.com/2022/10/what-a-stock-market-bottom-looks-like/


3. Valuation Expansion in Tech Sector vs. Earnings Growth and Dividends

Jack Ablin Cresset Capital Between 2011 and 2021, the technology sector delivered a cumulative 760 per cent return to investors, or about 24 per cent annualized. Of that, 620 percentage points was attributable to valuation expansion, leaving 140 per cent, or about 9.1 per cent annualized, attributable to earnings growth and dividend yield. As we have pointed out repeatedly in our research, it’s unlikely investors will have the luxury of valuation expansion over the next 10 years.

https://cressetcapital.com/post/q3-earnings-will-show-damage-from-rates-inflation-dollar/


4. Dollar Yen Spread Hitting 42 Year High

Zerohedge BY TYLER DURDENJapanese Prime Minister Fumio Kishida is stepping up the rhetoric against a weaker yen, suggesting that policy makers may be willing to step into the markets yet again. Japan’s “yentervention” is doomed to failure.

As Bloomberg’s Ven Ram notes, it is important to prepare appropriate action on the yen, Kishida has told parliament, as USD/JPY hovers not too far away from the psychologically significant 150 level. In fact, into the close the USDJPY spiked above 149, a new post-1990 high for the pair.

https://www.zerohedge.com/markets/japanese-jawboning-wont-stop-yens-explosive-downward-spiral-testing-150dollar


5. Tesla Finally Gets the -50% Pullback

Wolf Street Blog

https://wolfstreet.com/2022/10/15/tesla-shares-get-halved/


6. The Federal Reserve Posted its First Operating Loss in a Decade

Bloomberg ByTracy Alloway @tracyalloway

The Federal Reserve is posting its first operating loss in years as interest rates soar and demand for US bonds craters.

Fed data show the central bank reporting earnings remittances due to the US Treasury of negative $2.9 billion as of Oct. 5.

It’s a stark, though not unexpected, turn of events for a central bank which made billions in extra interest income from its expanding balance sheet in the years since the financial crisis. Of course, the Fed isn’t a “normal” investor. It cannot go bankrupt and any operational losses stemming from its vast portfolio of bonds will simply mean it remits less money to the US Treasury.

But it does highlight the dramatic shift in the economic environment and could make for uncomfortable optics at a time when the Fed is already under pressure to bring down inflation. The central bank has ramped-up its fight against higher prices, paying added interest on bank reserves and through programs like the reverse repurchase agreement facility, better known as the RRP, as it attempts to dampen demand.

Source: FRED, St Louis Fed

“The Fed’s interest expense — the interest it pays banks and RRP counterparties — increases with each rate hike,” says Joseph Wang, a former trader on the central bank’s open markets desk and the founder of the Fed Guy blog. “The 75 basis point September rate hike pushed the Fed into an operating loss. With expectations for a ‘higher for longer’ Fed, the operating loss is likely to significantly increase in the coming months.”

As Wang explains, the move to an operating loss is notable because it so rarely happens. In the years since the global financial crisis, the US central bank earned more than $1 trillion in interest income that it remitted to the US Treasury. 

And while losses are likely to be uncomfortable for Fed policymakers who will have to answer awkward questions about it, it’s not expected to have a major effect on monetary policy.

“This isn’t something to be concerned about because it doesn’t have a meaningful impact on monetary policy and is likely temporary,” Wang adds. “The Fed cannot go broke, and the operating loss will go away when the Fed cuts rates during the next downturn. The optics of a money-losing Fed aren’t good, though.”

For more in-depth analysis of what this means for the Fed, check out this article from earlier in the year.

https://www.bloomberg.com/news/articles/2022-10-10/it-s-official-the-fed-s-in-the-red?sref=GGda9y2L&leadSource=uverify%20wall


7. Momentum Builds for Creating a Treasury Bond Buyback Program

Alexandra Harris

(Bloomberg) — The long-simmering idea that the US government should stand ready to buy back Treasury securities from investors to improve market functioning is moving closer to reality.

While the Treasury Department has carried out buybacks in the past — most recently between 2000 and 2002 — and while its industry advisers since then have urged it to consider establishing a program, steps taken in that direction last week were more than experts anticipated.

Liquidity metrics for the US government debt market are approaching crisis levels after a year of steep losses for bonds caused by rising inflation and Federal Reserve interest-rate increases, and with the central bank simultaneously cutting some of its holdings, the situation may worsen. Treasury Secretary Janet Yellen expressed concern about it last week.

https://finance.yahoo.com/news/momentum-builds-creation-treasury-bond-174307311.html


8. Checking a lot of Charts…..AA Alcoa $94 to $34 Since April

http://www.stockcharts.com/


9. Jim Reid Comments on Philly Fed Index

Jim Reid Deutsche Bank-Positives week last week was a bit of a struggle at times but I hope you appreciated the attempt to put a more positive spin on what is a fairly bleak outlook over the next 12 months (in my opinion), notwithstanding any countertrend rallies etc. Ultimately though much hinges on the question of if, when and how deep a US recession is.

On this theme, we first showed a version of this chart back in Q2 to highlight how if history was to believed, the US wasn’t yet close to a recession even though we fully expected one in 2023.

Since this data was first collated in the late 1970s, we have needed at least 5 US states to be seeing negative monthly activity for 7 successive months for a recession to start. Up to April we had no states showing negative activity. We crossed our 5 state threshold in June and jumped to 16 states seeing negative activity in August (the last print). So if we stay above 5 until December then the conditions for a recession will have been met. So we will be keeping an eye on this for the next few months.

Interestingly for 25 months post September 1984 we had more than 5 states with negative activity without a recession. However this perhaps shows the lag of monetary policy. The first of these 25 months marked the peak of a hiking cycle that saw rates go from 8.5% to 11.75% over the preceding 18 months. However from that point on rates were progressively slashed to trough at just under 6% at exactly the time growth returned to at least 45 states again.

So back then a recession was likely avoided by a big Fed pivot. That’s probably the main way a US recession can be avoided in 2023. But given the lags and last week’s CPI print, this looks very unlikely at this stage.


10. Psychology Says You Can Actually Sell Anything, So Long as You Use These 4 ‘Hidden’ Switches

Mastering the art of persuasion is a necessity when it comes to setting up a successful business. Here’s how to tap into the human psyche and turn potential customers to actual ones.

BY PETER YANG, CO-FOUNDER, <A HREF=”HTTPS://WWW.RESUMEGO.NET“>RESUMEGO</A> AND <A HREF=”HTTPS://WWW.MOCK-INTERVIEW.ORG“>MOCK INTERVIEW</A>@THEPETERYANG

The most knowledgeable and renowned marketers in the world view marketing not as an “art form,” but rather as an exact science. This is because marketing, like science, has been researched to death, experimented with since the dawn of time, and studied to the point where we can predict exactly what will and will not work.

I’ve been obsessed with the art of persuasion and marketing all my life, and this obsession has led me to study the very best out there–from Robert Cialdini to Seth Godin to Gary Vaynerchuk. After learning from these marketing gurus, as well as applying and experimenting with different marketing techniques myself for over a decade, I can tell you that there isn’t a product in the world that can’t be sold if you are able to simply flip four key switches that lie hidden within the human psyche.

1. Solution Switch: Show that your product is the answer to their problems.

People do not buy products. They buy solutions. And if you can convince your customers that your product is the solution to whatever problems they might be having, you’ll spark their interest and turn on the most important switch necessary to making a sale.

Take, for example, a sales video designed for an internet business. As an online entrepreneur, what is it that makes purchasing a sales video from someone such an exciting prospect for your website? Is it the creativity and wittiness that’s embedded within a memorable sales video? Or the extra care and effort that’s put into making it? It’s neither of these things, of course, because the real excitement doesn’t have anything to do with the features of the video but rather the leads and potential customers that the sales video can generate. So don’t market your product. Market the source of your customer’s excitement.

2. Trust Switch: Become an authority figure.

Trust is a necessary component of making a sale, and whether it’s consciously or subconsciously, all customers want to know that they’re buying from a legitimate source. The key to flipping a customer’s trust switch is to convince her that you’re an authority figure–someone who is trusted as an expert on the subject at hand.

To illustrate just how powerful the trust switch can be, think about the last time you visited a doctor and ask yourself why it is that you, and almost everyone you know, trust your doctors. It’s because when it comes to health and medicine, doctors are viewed as the ultimate authority figures. So when doctors tell us we should take such and such medication to fix such and such health problem, we listen to them because we trust them–not because we necessarily understand the medical reasoning behind their suggestions. This very fact highlights why trust is such a powerful persuader. The moment we trust someone as an authority figure, we are sold on anything he tells us.

3. Likability Switch: Befriend your customer.

We resonate with those who share our beliefs and ideologies, and we have trouble relating to those who don’t. Similarly, customers prefer to buy from people they like. It’s the whole reason why PR nightmares like the BP oil spill and the United Airlines overbooking incident are always followed by a noticeable decline in business, and it’s also why companies love to publicize their charitable acts of philanthropy.

The likability switch works on a high level with regards to a company’s image, but it’s even more potent when applied at the customer level. Customers want to feel that you’re truly out to help them and that you’re listening to what they have to tell you. This often means trying to understand your customers and tailoring your product or service to solve their unique problems. By befriending consumers and building strong relationships with them, you elevate yourself above the rest of the competition because customers see you not as a greedy corporate identity, but as a friend.

4. Evidence Switch: Customers need proof, not promises.

People are often skeptical about whether or not they’ll actually realize the benefits they hope to get from their purchase. It’s this uncertainty that puts them on edge, as it can be very difficult to ascertain the quality and effectiveness of what you’re trying to sell before actually making a purchase. In the back of their minds, customers are asking themselves a lot of questions: Will taking this marketing course really make me a master salesman and triple my income? Will buying this new outfit really impress all my friends? Will paying for this professional résumé writing service really double the number of interviews I get?

This is where you come in. Provide potential consumers with logical reasoning, quantitative data, or customer testimonials that validate what they were hoping to be true to begin with. Give them hard evidence proving that they will reap all the benefits they desire from your product, and you will easily win them over as eager customers.

https://www.inc.com/peter-yang/psychology-says-you-can-actually-sell-anything-so-long-as-you-use-these-4-hidden-switches.html?cid=sf01003