Topley’s Top 10 – July 05, 2023

https://www.topdowncharts.com/about

1. Happy 4^th of July….God Bless American Entreprenuers and their Employees

2. Two Charts that Sum Up 2023 Market from Callum Thomas….Technicals vs. Fundamentals

Technical Check: This one’s interesting because not only did we end up clearing the lower resistance line, and then go on to break the upper line, but now in fact its gone on to retest that breakout and even chalked up a new high. So again, just on technicals, without knowing anything else, that looks bullish.

Source: @topdowncharts Topdown Charts Professional

What About the Rest of Tech? It really is just a case of big tech carrying the market, if we look at the percentage of Nasdaq stocks with negative earnings, it has just reached a new all-time high. If you argue that it is a fundamental driven rally, it ain’t showing up in the numbers (at least not yet?).

Source: @_rob_anderson

3. Summary of Historical Top 10 Stocks Contribution to Returns

Marketwatch As an aside, Kostin(Goldman) and the team address the whole narrow market issue, saying that in any given year, returns have been concentrated on a group of outperformers. Observe the below chart: “Excluding the top 10 contributors in each year, the S&P 500 would have delivered an 8% average annual return since 1990 (vs. 12% for the full index),” they said. The top 10 contributors account for roughly 12 percentage points of the S&P 500’s 15% year-to-date return.

https://www.marketwatch.com/story/these-stocks-could-be-the-next-magnificent-seven-market-leaders-says-goldman-sachs-5ea8a4e6?mod=home-page

4. High Yield Spreads and Stock Market Performance

Dorsey Wright Of course, the economy is not our primary focus, but there is a strong relationship between the economy and US equities, so we wanted to see what high yield spreads might be able to tell us about stock performance. To answer that question, we looked at the quarterly change of the CBUS 10 Year Spread (CBUS10YRSPREAD), which measures the spread between US Treasuries and high yield corporate bonds, for each quarter since Q2 1987 and compared it to the quarterly returns of the S&P 500 (SPX). What we found is that SPX performs significantly better in quarters when high yield spreads are narrowing, and that the magnitude of the change is also significant as SPX performed better in quarters when spreads narrowed significantly and worse when they widened by a large amount. The results are shown in the table below.

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

5. Apple Sets Price to Sales Record High

Purple Arrow is 2007 Iphone Introduction

https://companiesmarketcap.com/apple/ps-ratio/#:~:text=According%20to%20Apple’s%20latest%20financial,P%2FS%20ratio%20of%206.91

6. Homebuilders and Lumber??

XHB Homebuilder ETF close to 2021 highs

But Lumber close to lows….This chart shows lumber versus homebuilder stocks …It is down close to -80% from highs.

7. The Other Real Estate Charts Forming Bases

Regional Bank ETF KRE forming base since March?

Vanguard REIT ETF forming base since October 2022 low?

8. Here is Homebuilders vs. REIT ETF

Straight up since mid-2022

More vivid in point and figure chart….massive move higher? Reversion?

https://www.nytimes.com/2023/06/29/realestate/home-prices-costs.html

9. The Real “Carrying Cost” of Homeownership…NY Times

NY Times By Michael Kolomatsky

Lurking Beneath Home Prices: Hidden Costs Insurance, taxes, maintenance and utility costs vary by region, driving up the true cost of homeownership.

Frustrated home hunters have watched U.S. home prices surge from a median of $327,100 in the fourth quarter of 2019 to $436,800 in the first quarter of 2023. With the focus on rapidly rising prices, it’s easy to forget the “hidden” costs of homeownership, including property taxes, homeowner’s insurance, utility payments and maintenance.

According to a recent Zillow study of housing costs in the first quarter of 2023, the median amount of these auxiliary expenses in 39 large U.S. metro areas was $14,155 a year. Among those metros (where sufficient data was available), San Francisco had the highest annual hidden costs (a median of $22,791), while Las Vegas had the lowest ($9,886).

Overall, maintenance was found to require the greatest median outlay ($6,413 a year), followed by utilities ($3,216), property taxes ($2,827) and homeowner’s insurance ($1,699). Taxes varied the most, from an annual median of $9,145 in New York City to just $1,055 in Pittsburgh.

To build the list, researchers used each metro’s median real estate tax and home value, as drawn from the Zillow Home Value Index. Insurance costs were calculated at 0.5 percent of value. Utility costs were derived from 2022 state averages, while phone bills and streaming-service costs were sourced from Forbes reporting. Zillow collaborated with Thumbtack, a site connecting contractors with homeowners, to determine local costs of maintenance and essential repairs, such as fixing appliances, house cleaning (including carpets, chimneys, gutters, grout and windows), lawn care, roof maintenance and yard work, among others.

10. Farnum Street Blog

TKP

A few gems from my remarkable conversation with Dr. Julie Gurner:

Victim or survivor mindset

“I think that there are two ways of looking at things that have happened to you. You can be a victim or you can be a survivor. Those are two very different cognitive positions. You can’t control what happens to you in either circumstance, but one is very powerful. You have overcome. One is you have had something happen to you and you are under that thing for quite some period of time. For me, if I hear someone and I hear that helplessness, one is that I want to reframe that experience. I want to tell a different story. I want them to tell a different narrative to themselves. I want them to rewrite that. In some ways, you want them to rewrite that narrative to survivorship and overcoming and what it took. You ask the right questions to get them to see that their own throughway in that case is based on their strength and ability. You want them to see those things rather than seeing the helplessness and powerlessness.”

Moving forward

“When people are telling me that “I’m doing this because of my childhood” or “I’m doing this because of this,” I think you’re giving up some amount of power. You’re giving up a lot of power to something outside of yourself, and also how you’re interpreting that event is not useful to you. There may be a lot of truth to the terrible things that have happened, but those terrible things—you have to shut the door at some point and say, “I am my own man or woman, and I move forward. … if you are somebody who uses other events as a reason to self-destruct, you’re ceding power… We see that even in companies—“I’m doing this because so-and-so made me angry. I’m doing this because…”—and you end up making some poor decisions and ceding power because of someone else. You’re willing to make a poor decision. You’re willing to give up. Sometimes people are willing to give up their entire future dreams because of X, Y, and Z, and it’s a tragedy. You want people to really understand the power they have to create their own lives at some point, and that creation is not given to anyone else but you.”

— Listen and Learn (FS | Transcript | Apple | Spotify)

Insight

“It’s one thing to create. The other is you have to choose. ‘What are we going to do, and what are we not going to do?’ This is a gigantic aspect of show-business survival. It’s kind of unseen, what’s picked and what is discarded, but mastering that is how you stay alive.”

— Seinfeld

Tiny Thought

Your life is designed to get the results you are getting right now.

For the trajectory to change, the approach must change.

(Click here to share on Twitter)

https://fs.blog/

Topley’s Top 10 – June 29, 2023

June 29, 2023

https://www.wsj.com/articles/cheaper-natural-gas-prices-in-store-this-summer-71272a10?st=jtpom4wufiiwr4t&reflink=desktopwebshare_permalink

1. OPEC Keeps Lowering the Supply of Oil but Prices Keep Moving Down

In theory, supply goes down and prices go up, but not happening….cheaper Summer driving season.

2. Natural Gas Prices Bouncing Around Lows Leading to Cheap Utility Bills for Summer

WSJ Ryan Dezember

3. Bank Deposits to Money Markets

Blackrock Insights

https://www.blackrock.com/us/individual/insights

4. High Net Worth Stashing Money in Cash at Higher Rate

Marketwatch Here’s a breakdown of the numbers: HNWI individuals stored 34% of their wealth in cash and cash equivalents in 2022, up 10 percentage points from 24% during the prior year, according to Capgemini’s annual wealth report, which was released this month. It’s also 20 percentage points lower than the 14% stored in cash and cash equivalents in 2006, a couple of years before the Great Recession. What’s more, cash is expected to remain high — along with interest rates. “We’ve never seen this before — banks are sitting on tons of cash, sitting idle, waiting for the right opportunity,” Elias Ghanem, global head of Capgemini Research Institute for financial services, told MarketWatch. “The amount of money held in cash has never been so high, and the jump year-over-year has never been so high. They’re putting their money into short-term cash allocation, checking accounts, savings accounts, and CDs.”

https://www.marketwatch.com/story/weve-never-seen-this-before-millionaires-are-doing-something-unusual-to-preserve-their-wealth-and-you-can-do-the-same-bdaede83?mod=home-page

5. Used Truck Prices Post-Covid Correction

Marketwatch Quentin Fottrell

6. Age of Cars on Road

7. The State of Economic Freedom

https://www.visualcapitalist.com/economic-freedom-map-2023/

8. July 4^th Travel Record 2023

Zerohedge

https://www.zerohedge.com/commodities/record-number-americans-forecasted-travel-july-4th-weekend

9. Airnub Revenues by City

https://twitter.com/nickgerli1

10. The Courage to Stand Out: Sam Zell’s Contrarianism Neckar Substack

The Courage to Stand Out: Sam Zell’s Contrarianism

“So what do you do?” I replied, “I’m a professional opportunist.” And that has been my response to that question ever since.

FREDERIK GIESCHEN

Sam Zell was a bit of a rascal. In 2007, when the legendary investor agreed to sell his Equity Office REIT to Blackstone, he was not allowed to solicit competing bids. But as Zell, who recently passed away, recounted in Am I Being Too Subtle?, he “sure as hell wasn’t going to discourage one if it was out there.”

So, he emailed an old buddy, real estate magnate Steve Roth of Vornado, who “had been circling around the idea of a purchase for some time.” Zell didn’t ask for a bid. He just shared a little poem:

Dear Stevie:
Roses are red
Violets are blue
I heard a rumor
Is it true?
Love and kisses,
Sam

Cheeky. After some back and forth, Zell happily sold to Blackstone. Just at a higher price. Anecdotes like this one make his story endearing. Zell got rich, walked his own path, and had fun.

People often ask me, “When are you going to retire?” And I answer, “Retire from what?” I’ve never worked a day in my life.

Zell struck me as an archetype for a capital cycle investor. While he’s best known for his work in real estate, Zell was much more flexible and truly a ‘professional opportunist.’

I am opportunistic. Sometimes I am a buyer, sometimes a seller. Sometimes I’m an equity investor, and sometimes I focus on debt. Often both. I never let my affinity for any one industry or my love of doing deals dictate my actions.

Keeping it simple.

Zell was a contrarian (“conventional wisdom is nothing but a reference point”) and keen observer of cycles. And he liked to keep it simple.

When I took Econ 101 at the University of Michigan, I walked into the first class, and written on the blackboard was “supply and demand.” I have to be honest with you, I’m not sure that there was ever anything else in Econ 101 that I learned that was relevant. If you understand and are focused on how supply and demand affects pricing, how it affects decision-making, how it affects risk — it’s the governing principle of everything, but it’s also simple.

His journey started with acquiring and developing apartment buildings in smaller markets, primarily college towns, where he encountered less competition and saw high returns. When he observed signs of a major construction and lending boom, he sold his holdings and waited for the market to turn before scooping up distressed properties.

He described many of his bets as ‘micro in the macro,’ individual properties or companies within a thematic insight. Zell took advantage of the bust in junk bonds with the same philosophy that led him to trailer parks and companies with large tax loss carryforwards.

I stay true to the fundamental truths: the laws of supply and demand; liquidity equals value; limited competition; long-term relationships.

We believed the real money in real estate came from borrowing long-term, fixed-rate debt in an inflationary scenario that ultimately depreciated the value of the loan and increased the position of the borrower.

His success rested on a combination of thematic insights, timing, and an ability to execute. Labeling him merely a contrarian misses the point. To paraphrase Seinfeld, anyone can see the opportunity. What counts is the ability to execut

The successful contrarian has to:

Observe the playing field and understand what expectations are priced in;
Develop a variant perception when price diverges substantially from value;
Have the courage to diverge from herd (miss out on near-term opportunities, possibly shut down lines of business);
Create conditions that allow her to diverge from the herd (sufficient cash flow, liquidity reserves);
Act during a limited window of opportunity; be able to source deals, raise capital under adverse conditions, and turn around underperforming assets.

Zell acquired his moniker ‘grave dancer’ after writing about the downturn in real estate. But really what he did throughout his career was to dance with market cycles, the ebb and flow of liquidity and opportunity. Zell was an astute observer of markets, but equally important was his ability to build lasting partnerships and persuasiveness.

Grave dancing involves confidence, optimism, conviction, and no small amount of courage. All the opportunity in the world means nothing if you don’t actually pull the trigger.

So, what worked for Zell?

Discipline (“suffering from knowing the numbers”).
Keen observer of change.
Speed of execution.
Closing deals by solving problems.
Turning being an outsider into an advantage.

In addition, we can observe many of the markers in From Predators to Icons in his story, including a family business, early sales experiences, networks of mentors and allies, a strong education, and even family money.

The remainder of this post and the opportunity to reflect, share, and discuss in the comments are reserved for the community of subscribers. If you would like to support my work and join the conversation, consider subscribing.

https://neckar.substack.com/p/the-courage-to-stand-out-sam-zells

Found at RealClear Markets https://www.realclearmarkets.com/

Topley’s Top 10 – June 28, 2023

June 28, 2023

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

1. VIX Call Buying

Dave Lutz Jones Trading Traders are piling into wagers that would profit if that occurred. More call options tied to the VIX have changed hands on an average day in June than in any other month on record, according to WSJ – Among the most actively traded options tied to the VIX in recent sessions have been those tied to the gauge jumping to as high as 47.5 or 30, a sign that some traders are positioning for more tumult later this year.

2. Nasdaq 1% Days

Dorsey Wright Another positive sign can be seen by breaking down the count of “extreme” days so far this year by the direction of the move. By random happenstance, the breakdown of positive to negative 1% days in 2023 directly follows the breakdown of the days in Q1 and Q2; there have been 30 positive 1% days and 19 negative 1% days. Said another way, 25% of the trading days so far this year have seen NDX move at least 1% higher, while 15.83% have seen it move at least 1% lower. That equates to a 9.17% spread between the percentage of positive days and the percentage of negative days, which is the most extensive spread favoring positive days since 2009. Only two other years have seen a larger spread, which occurred in 1998 (9.92%) and 1999 (11.90%).

The important point with this spread data is that we are seeing significantly more sharp moves higher than sharp moves lower this year, which has historically only occurred in two market environments: the formation of the dot-com bubble in the late 1990s and the bear market exit in 2009. The current market environment has been attributed to both of those timeframes. Some view the current AI-induced mania as the beginning of another bubble. It is worth pointing out that the overall percentage of 1% days experienced by the NDX would not support this theory in the same way that we saw in the late 1990s. At that time, the NDX saw the percentage of volatile days continuously elevating from 58% in 1997 to sitting north of 70% from 2000 through 2002. So, while we saw significantly more positive 1% days than negative 1% days in the final two years of the 20^th century, the overall level of volatility was continuing to rise as well. Fast forwarding to the current market environment, we are faced with a very different picture. Overall volatility has come down sharply over the past few months, but the days that have been “extreme” have seen consistent movement higher.

3. S&P Intra-year Drawdowns

Found at Barry Ritholtz The Big Picture

Blog https://ritholtz.com/2023/06/10-tuesday-am-reads-432/

4. Nasdaq 34 Straight Days Overbought Technicals

Bespoke Investment Group

https://twitter.com/bespokeinvest

5. Walgreens Broke to New Lows

Walgreens thru 2022 low

https://finviz.com/groups.ashx?g=sector&v=120&o=pe

6. Forward P/E Ratios by Sector in S&P

7. With the World Focused on Clean Energy…XLE Energy ETF vs. ICLN Clean Energy

XLE outperforming

https://www.redfin.com/news/all-cash-home-purchases-fha-loans-october-2022/

8. Share of Homes Bought Cash—Baby Boomers Have A lot of Money

9. Magic Mushrooms. LSD. Ketamine. The Drugs That Power Silicon Valley

Entrepreneurs including Elon Musk and Sergey Brin are part of a drug movement that proponents hope will expand minds, enhance lives and produce business breakthroughs

WSJ By Kirsten Grind

Elon Musk takes ketamine. Sergey Brin sometimes enjoys magic mushrooms. Executives at venture-capital firm Founders Fund, known for its investments in SpaceX and Facebook, have thrown parties that include psychedelics.

Routine drug use has moved from an after-hours activity squarely into corporate culture, leaving boards and business leaders to wrestle with their responsibilities for a workforce that frequently uses. At the vanguard are tech executives and employees who see psychedelics and similar substances, among them psilocybin, ketamine and LSD, as gateways to business breakthroughs.

“There are millions of people microdosing psychedelics right now,” said Karl Goldfield, a former sales and marketing consultant in San Francisco who informally counsels friends and colleagues across the tech world on calibrating the right small dose for maximum mindfulness. It is “the fastest path to opening your mind up and clearly seeing for yourself what’s going on,” said Goldfield.

Goldfield doesn’t have a medical degree and said he learned to dose through experience. He said the number of questions he gets about how to microdose has grown dramatically in recent months.

The account of Musk’s drug use comes from people who witnessed him use ketamine and others with direct knowledge of his use. Details about Brin’s drug use and the Founders Fund parties come from people familiar with them.

Musk, his attorney and a top adviser didn’t respond to requests for comment. A spokeswoman for Brin, the co-founder of Google, didn’t respond to requests for comment.

The movement isn’t a medical experiment or a related investment opportunity, but a practice that has become for many a routine part of doing business. It comes with risks of dependence and abuse. Most of the drugs are illegal. Before he was killed in April in San Francisco, Bob Lee, the founder of CashApp, was part of an underground party scene known as “the Lifestyle,” where the use of psychedelics was common. Lee had ingested drugs including ketamine before his death, an autopsy showed.

Silicon Valley has long had a tolerance toward drug use—many companies don’t test employees regularly—but the phenomenon is worrying some companies and their boards, who fear they could be held liable for illegal activity, according to consultants and others close to the companies.

Users rely on drug dealers for ecstasy and most other psychedelics, or in elite cases, they employ chemists. One prolific drug dealer in San Francisco who serves a slice of the tech world is known as “Costco” because users can buy bulk at a discount, according to people familiar with the business. “Cuddle puddles,” which feature groups of people embracing and showing platonic affection, have become standard fare.

Some start dabbling with psychedelics in search of mental clarity or to address health issues and end up using the drugs more frequently at Silicon Valley parties or raves, where they have taken a role similar to alcohol at a cocktail party.

Invitations to psychedelic parties are often sent through the encrypted messaging app Signal, rather than over email or text, so they can’t be shared easily. At some high-end private parties, users are asked to sign nondisclosure agreements and sometimes pay hundreds of dollars to attend, according to people who have attended or received invitations.

https://www.wsj.com/articles/silicon-valley-microdosing-ketamine-lsd-magic-mushrooms-d381e214

10. Write in Notebooks

The Daily Stoic In Walter Isaacson’s wonderful biography of Leonardo Da Vinci, he spends a lot of time dissecting and exploring the ideas in Da Vinci’s notebooks. As Isaacson observed of Da Vinci’s lifelong habit of journaling: “Five hundred years later, Leonardo’s notebooks are around to astonish and inspire us. Fifty years from now, our own notebooks, if we work up the initiative to start them, will be around to astonish and inspire our grandchildren, unlike our tweets and Facebook posts.”

Paper, Isaacson says, is one of the best technologies ever invented.

Marcus Aurelius’s paper journals survive to us today and remain best read in print. Much of what is in those journals was influenced by the handwritten notes Rusticus took while sitting and listening to the lectures of Epictetus. The simple letters that Seneca penned by hand to a friend also endure.

And it’s remarkable that the contents of those enduring pieces of paper would fill the journals, commonplace books, and published books of writers over the centuries and for centuries more to come.

Stop wasting your time tweeting and texting and snapchatting. Or at least steal some of that time to start producing your own notebooks. Create something that, if the centuries aren’t astonished and inspired by them, at least your family can be. Issacson again: “They’ll be around 50 years for…your grandchildren or great-grandchildren.”

Take his advice. Get a notebook. And start writing!

https://dailystoic.com/

Topley’s Top 10 – June 27, 2023

June 27, 2023

https://www.marketwatch.com/story/option-demand-explodes-in-june-as-investors-use-bullish-bets-to-chase-stock-market-rally-e10b0d50?mod=home-page

1. Technology Stocks Set for Best Half Since Internet Bubble

2. Nasdaq vs. Small Cap Russell 2000 (small cap) Record Spread Twice in 3 Years

From Nasdaq Dorsey Wright

3. Nasdaq Cap Weight vs. Equal Weight Hit Previous Highs

This chart is showing you QQQ cap weighted vs. equal weight QQQ

4. Cap Weighted Means 7 Stocks When It Comes to Nasdaq

5. June Will Be Busiest Month for Options Trades Ever

Marketwatch By Joseph Adinolfi Trading in U.S. stock option contracts has surged in 2023 as retail and institutional traders have harnessed bullish call options to chase a runaway rally in U.S. stocks, market analysts told MarketWatch.As of Friday, 46 million option contracts linked to U.S. equity indexes, individual stocks and exchange-traded funds have traded hands every trading session on average this month, according to an analysis by Callie Cox, a U.S. equity strategist at eToro.This means that, barring a sudden drop-off in trading activity, June is on track to be the busiest month for option traders ever, Cox said. That is particularly notable given that the summer months are typically more placid on Wall Street.“It’s pretty incredible for a summer month. It shows how engaged investors are after such a strong rally,” said Callie Cox, a U.S. equity strategist at eToro, during an interview with MarketWatch

6. S&P Duration Between 3% Drawdowns

Jim Reid Deutsche Bank In this week’s piece (link here) they show an interesting graph that suggests that we’re now in the 85th percentile of periods since WWII without a 3% drawdown in the S&P 500. This has been 73 trading days and over 3 months in real life. Due to a combination of this, positioning, and where vol currently is, they think we’re due a 3-5% modest correction.

7. Solar panel prices are 85% lower than they were a decade ago, adjusted for inflation

@Charlie Bilello

TAN Solar Stocks ETF about to break 200-week moving average …..-30% from 2021 highs