2. Japan and U.S. Higher Than Average Earnings vs. Emerging
Global Developments: Japan and the US experienced significantly higher-than-average earnings outperformance in Q4, in contrast to Emerging Markets, which persistently fell short of estimates.
Nasdaq Dorsey Wright Another one bites the dust: Conference Board walks back US recession call This week has been a quiet one for data. The Conference Board’s Leading Economic Index (LEI) was the one big release we got. As a leading indicator of the economy, the LEI is meant to predict when the US economy is headed for recession. Well… the latest data show it’s contracted for the 23rd straight month! Despite this, the Conference Board became the latest forecaster to walk back its US recession prediction. https://www.nasdaq.com/solutions/nasdaq-dorsey-wright
A fast-growing exchange-traded fund called BOXX uses an old loophole in a new way.
A Marine Corps veteran with a finance Ph.D. has come up with a new way to avoid taxes. Any American holding US government securities has to pay income taxes on the interest they generate. For the richest investors, the Internal Revenue Service’s cut is 37%. But a year-old investment fund offers returns that closely track short-term Treasuries, with starkly lower tax bills. The fund, Alpha Architect 1-3 Month Box ETF, uses a complex options strategy and a longstanding tax loophole that favors exchange-traded funds. “We spent seven years figuring out how to do this,” said Wesley Gray, the ex-Marine and chief executive officer of Alpha Architect. “My job is just to deliver all the value I possibly can to my shareholders, within the law.” The fund, known by its ticker BOXX, surpassed $1 billion in assets this month. It is one of a number of efforts to use the ETF loophole in creative new ways, said Jeffrey Colon, a tax professor at Fordham University’s School of Law in New York. He called BOXX “the poster child for tax arbitrage.” https://www.bloomberg.com/news/articles/2024-02-22/this-exchange-traded-fund-mimics-t-bill-returns-without-tax-bills?sref=GGda9y2L
9. CYBERSECURITY -Leaked files expose China’s network of hackers
Morningbrew Thanks to an anonymous whistleblower, the world now has more insight than ever into the Chinese government’s cyber-espionage efforts, which US officials rank as one of America’s top security threats. Hundreds of pages posted to GitHub last week and deemed credible detail how officials in China hire private-sector hackers to surveil and disrupt societies domestically and abroad, fueling a lively cyberspying marketplace. The documents showed the cards of one Chinese hacking firm, ISoon. According to the files, over at least eight years:
ISoon hackers contracted with Chinese government bureaus to target political dissidents in China and government officials in 20+ foreign nations, including the UK, by infiltrating social media or email accounts, wi-fi networks, and other infrastructure.
The firm mostly helped China get info from other Asian countries, including road network data from Taiwan, which could help the Chinese military in an invasion.
ISoon’s product list claimed to be able to gain remote access to Microsoft Outlook and Hotmail accounts and to Apple iOS smartphone GPS, contacts, and recording. But internal chats show that ISoon frequently failed to steal info from governments.
The US has been sounding the alarm. China’s support for and payment of contracted hackers has created such a large cyberespionage network that China’s hackers outnumber the FBI’s cyber/intelligence people 50 to 1, FBI Director Christopher Wray warned Congress last month.—ML https://www.morningbrew.com/daily
10. Fate Doesn’t Care
The Daily Stoic After everything that’s happened in the last few years, we’re tired. After everything that’s happened in your life, after everything that’s gone wrong the last couple weeks, you think to yourself, “I can’t handle one more thing going wrong.” Certainly, Marcus Aurelius would have related to the sentiment. Floods. Plagues. Wars. A troubled son. Personal health issues. “Haven’t I given enough?” we had him say in a recent Daily Stoic video. But the thing is, life doesn’t care. It has no time for your questions. It pays no mind to your limits. “I don’t think I’m up for this,” the novelist John Gregory Dunne said to his wife as they left the hospital after rushing to check on their daughter who had just been admitted. He was down about his career. He wasn’t feeling great about his own health. He was sick about his only child. He was worried it would be a long and hard road out for all of them. Joan Didion, his steely, stoic wife, responded with something we can imagine Marcus Aurelius reminding himself of in Meditations: “You don’t get a choice.” Fortune behaves as she pleases, the Stoics said. Life disposes. It decides. The only thing we get a choice in is how we respond.
Barrons Adjusted for inflation, that average 1983 price of $39.06 is worth $120.30 in today’s dollars. That doesn’t fully explain the increase in stock prices, but a precipitous decline in stock splits probably does. Silverblatt tells me that in 1983, 90 S&P 500 companies split their stock. Last year, only four did. According to Josh Staiger of Multpl, the market’s price-to-book ratio is 4.61, not a record (that was 5.06 in March 2000), but well above the average of 3.01. High stock prices aren’t just anecdotal—data bear it out, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. The average price of a stock in the S&P 500 is now $204.28, Silverblatt says, with some 73% of them (or 281 stocks) selling for more than $100 and nine trading for more than $1,000. Compare that with 40 years ago, when the average price was $39.06 and only about 4% (or nine) issues traded for more than $100, and zero over $1,000.
2. Private Equity Payouts at Major Firms Plummet 49% in Two Years-Bloomberg
Distributions to fund investors falling amid deal drought Fund investors zeroing in on a new metric for PE investments By Layan Odeh, Matthew Griffin, and Gillian Tan
3. 10 Companies Represent 25% of Euro Stoxx 600 Index
Euro News The rise of GRANOLAS By Piero Cingari-The GRANOLAS represent around a quarter of the STOXX 600’s market cap, and equate to the total market capitalisation of heavyweight sectors such as Energy, Basic Resources, Financials, and Automobiles. Reflecting on the changing tides of the European market, Goldman Sachs noted a significant shift from traditional industry leaders like Telecoms and Oil two decades ago, to a diverse array of sectors today. “Twenty years ago, at the start of 2000, the 10 biggest companies in Europe based on market cap were all Telecoms and Oil names, with the exception of HSBC. If we fast-forward to the Covid crisis, there were no Banks, Oil or Telecoms companies among the largest 10 in Europe,” Goldman Sachs’ analyst, Peter Oppenheimer, wrote in a note to clients on Monday. In the past twelve months, the GRANOLAS have notched up over €500 billion of revenue, showcasing an 8% annual surge. “They are a large part of the reason why European equities have performed well despite lacklustre domestic GDP,” Goldman Sachs noted. They’ve delivered a 15% average gain over the past year, outstripping the STOXX 600’s 5% and contributing to 60% of the index’s overall growth.
5. Two Charts I was Watching for New Highs…Buybacks and Spin-Offs…..
6. One More to Watch..IPO…Still Long Way to Go for New Highs.
7. Business Insider Russia has never been richer after selling $37 billion in oil to India last year
Jennifer Sor Prime Minister Narendra Modi, right, and President Vladimir Putin of Russia speaking at a conference in 2014. .
Russia’s record revenue in 2023 was partly attributable to India’s huge appetite for Russian crude.
India took in $37 billion of Russian oil last year, 13 times what it bought before the Ukraine war.
India, however, is under growing pressure to comply with Western sanctions.
Russia has never been this flush with cash — and it’s partly thanks to India, which snapped up a monster amount of Russian crude last year. Russia’s federal revenue soared to a record $320 billion in 2023 — an amount partly attributable to India’s huge appetite for cheap Russian oil, according to a new report from the Centre for Research on Energy and Clean Air shared with CNN. The nation bought $37 billion of crude from Russia last year, the report said, around 13 times what it purchased from Russia before the war in Ukraine. India has been a huge customer of Russian crude since Moscow began its invasion of Ukraine. After being slammed by Western trade restrictions, Moscow has doled out hefty discounts to its allies, like India and China, who have since gobbled up huge amounts of oil from the nation. https://www.businessinsider.com
9. Silicon Valley Venture Capitalists Are Breaking Up With China-Dealbook
Under intensifying scrutiny from U.S. lawmakers, top firms have pulled back from investing in Chinese start-ups. By Erin Griffith
DCM Ventures, a Silicon Valley venture capital firm, began investing in China’s start-ups in 1999. The move reaped such blockbuster returns that in 2021, DCM said it planned to “double down” on its strategy of investing in China, the United States and Japan. Yet when DCM set out to raise money last fall for a new fund focused on very young companies and promoted its “cross-Pacific” expertise, the firm described plans to invest in the United States, Japan and South Korea, according to a fund-raising memo that was viewed by The New York Times. China was not mentioned. DCM’s messaging is one example of an industrywide shift happening between Silicon Valley investors and Chinese start-ups. U.S. venture capital firms that once saw China as the next frontier for innovation and investment returns are backing away, with some separating their Chinese operations from their American business and others declining to make new investments there. The about-face stems from the tense relationship between the United States and China as they jockey for geopolitical, economic and technological primacy. The countries have engaged in a trade war amid a diplomatic rift, enacting tit-for-tat restrictions including U.S. moves to curb future investments in China and to scrutinize past investments in sensitive sectors. https://www.nytimes.com/2024/02/21/technology/silicon-valley-vc-china.html
10. 5 Reasons People Get Laid Off-HBR
HBR by Marlo Lyons Summary. As companies continue to conduct layoffs, despite signs of economic recovery, it’s normal to feel powerless. Sometimes thwarting a layoff is impossible. For example, there’s not much you can do if your entire business unit is being cut because company goals have…more Despite signs of economic recovery, including lower inflation rates and sustained low unemployment, the start of 2024 has already seen a surge in layoffs, surpassing 10,000 within the tech industry alone at the time of writing. Macy’s, Wayfair, Ford, and Citigroup are among the other companies who have already announced layoffs this year. This leaves many workers in a state of uncertainty, waiting to find out if they’re next to be cut. It’s normal to feel powerless in this position. There’s not much you can do if your entire business unit is being cut because company goals have changed and your work is no longer relevant, or if the company over-hired and revenue has unexpectedly dropped. However, there are proactive measures you can take that will help you manage your stress. Here are five common reasons people are laid off — and strategies to help you assert some control over your professional destiny. 1. Lack of skills advancement Employees are 100% responsible for continually upskilling and reskilling. While companies may offer resources to learn new skills, they tend to teach to the entire employee population, so most talent development programs focus on management skills such as giving feedback, leadership skills such as influencing without authority, and soft skills such as emotional intelligence. But employees need to continue to advance their hard skills, such as becoming technically proficient in AI applications or new programming languages. Those who don’t continue to evolve their skills to keep up with rapidly changing business needs may be targeted for layoffs. Recent advancements in generative AI and large language models (LLMs) such as ChatGPT provide a timely example. While this technology has been predicted to replace human workers at a large scale, for now it may be replacing tech workers who don’t have AI skills. As companies update their core products with this new technology, they’ll be looking for talent who have LLM expertise. Even if you’re an expert in natural language processing, machine learning, or natural language understanding technologies, if you haven’t gained expertise in LLMs, which can generate contextually accurate text, answer queries, summarize text, and preform language translation, then your skills are already outdated. Showing a dedication to reskilling yourself in a new space and demonstrating those skills during the transition to a new way of doing business could save your job. Therefore, employees should take a proactive approach to gaining skills and knowledge based on where the market and company are heading to ensure their skills remain relevant. 2. You’re an “overseer,” not a “doer” When companies decide to implement budget cuts, the finance department typically allocates a specific percentage reduction to each department. The most straightforward method to meet the assigned cut percentage is to eliminate the positions of individuals with the highest salaries, particularly if they’re not actively involved in accomplishing the work. Managers who lack hands-on involvement may be seen as less valuable to the organization, as there is a perception that they’re not directly contributing to task and project execution. This perception could increase the likelihood of them being considered expendable during cost-cutting measures. Managers who are invaluable to an organization find a balance between strategic leadership and hands-on involvement without micromanaging their teams. They’re perceived as more adaptable and capable of responding quickly to changes, making them more resilient in volatile business situations. Managers who have deep understanding of team dynamics, challenges, and goals and who can demonstrate their ability to speak to the details will make seem like they’re the glue holding the team together, which makes it harder to see their role as dispensable. 3. Lack of visibility Being the quiet worker bee won’t protect you from being laid off. In fact, being invisible could be your downfall. When determining which roles to cut, if senior leadership doesn’t know who you are, what you do, or the impact you make, your job could be an easy choice for elimination. In times of organizational changes or restructuring, being visible can help mitigate the risk of being overlooked or underestimated. Your visibility can act as a form of job security by ensuring decision makers are aware of your capabilities and impact. Having visibility at all levels in an organization can help you create a strong network of colleagues and senior leaders who can vouch for your contributions and accomplishments. It could also show leaders you can succeed if plugged into any position. If decision makers have a clear understanding of your skills, achievements, and contributions, they’re more likely to view your position as essential to the success of the company, or they may see you as the person to combine teams under when other roles are eliminated. 4. Lack of performance When companies need to cut their budgets, they’ll likely try to eliminate those who are considered non-performers. Where more than one person is doing a particular job, layoffs provide managers a ripe opportunity to cut low performers without having to do the hard work of giving them more feedback or putting them on a performance improvement plan. Employees must realize their manager’s perception means everything. So even if you think you’re doing a great job, if your manager doesn’t agree, you could be deemed a poor performer and be on the chopping block. Therefore, employees need to proactively request feedback from their managers more often than just during the performance-review period. Once you receive feedback, continually work on improving, and check back in with your manager to see whether they agree that your performance has improved. 5. Offshoring and automation The automation or offshore relocation of specific jobs is determined based on strategic, economic, and operational costs as well as technological advancements. Companies may opt for offshoring to countries with lower labor costs where the talent pool is rich with expertise. They may also implement automation technologies that prove more efficient and accurate than human labor to cut expenses associated with salaries, benefits, and operational overhead. The World Economic Forum’s 2023 Future of Jobs Report delves into which jobs will likely shift toward automation, minimizing the need for human interaction. To safeguard against a potential layoff, it’s critical to stay informed about market trends and assess whether your chosen career is prone to offshoring or automation in the future. In some cases, U.S.-based companies may have a U.S. manager overseeing offshored talent or automated processes. That may pose further challenges for early-career professionals who want to grow into management positions and are seeking experience through jobs that have been offshored or automated to get there. If you discover your job is one that’s likely to be automated in the future or you see trends moving toward offshoring your type of position, find ways to gain new skills that will help you transition to another field with less risk and will be just as (if not more) fulfilling. For example, you could take on a stretch project in another department at your company or form a side hustle consultancy. . . . Building a reputation for being a valuable team member through your work and relationships is key to minimizing your risk of being laid off. Ensure your leadership and cross-functional stakeholders know your contributions and the impact you bring to the organization as well as where you’ve upskilled to stay relevant, which will help position you as an indispensable asset. This proactive approach helps ensure that your value is recognized long before any decisions about layoffs are made.
Jim Reid Deutsche Bank To illustrate, today’s CoTD looks at the market cap of the Mag-7 versus that of the US Regional bank equity index with 50 constituents, and the S&P Financials index with 72 members including the mega banks. The Mag-7 are collectively c.64 times bigger than the entire US Regional Bank index.
3. AAPL-Two Lower Highs and Close Below 200-Day
4. Is SMCI the New MEME?
Bloomberg Carmen ReinickeStill, short sellers are sticking to their bets that Super Micro’s climb will eventually end. In the last 30 days, the group has increased shares shorted by 12%, piling an additional $623 million into bets against the artificial intelligence darling, per S3.
On Friday, the cost of puts — which serve as downside protection — sank less than equivalent calls, which give exposure to added gains. That dynamic reversed trading patterns earlier in the week, when seemingly boundless euphoria for artificial intelligence pumped interest in call options and propelled the one-month call skew to its highest level in more than a year.
Short sellers may be emboldened by the San Jose, California-based company’s sharp moves higher. The stock rallied 246% in 2023 and is up 183% so far this year, a jump that has some resemblance to the social media-fueled gains of AMC Entertainment Holdings Inc. and GameStop Corp. https://finance.yahoo.com/news/super-micro-short-sellers-notch-124640928.html
Business Insider Yuheng Zhan Housing starts collapsed 14.8% month-over-month in January to a five-month low, according to Census Bureau data released Friday.
The annualized rate of 1.331 million units came as as a surprise compared to consensus estimates, and the sudden plummet was even more stark relative to a big upward revision to December’s 1.562 million, up from an initial 1.46 million Building permits also dropped 1.5% to 1.47 million, falling short of the forecast of 1.512 million. Private housing completions also disappointed, dropping 8.1% below the revised December estimate to 1.416 million.
Building of single-family homes experienced a 4.7% decline following a 6.4% drop in December — marking the sharpest consecutive decline in that segment of the market since the summer of 2022.
According to best-selling author and star psychologist Adam Grant, there’s one response that’s a sure sign your EQ is very low — and it can be captured in just one four-word phrase.
“I don’t judge emotions, but I do judge the way that people give up agency over their emotions,” Grant tells David. “A sign of emotional intelligence is abandoning the phrase ‘You made me feel.’ Because you’re giving other people power over your emotions. No one can make me feel anything, to take the line misattributed to Viktor Frankl.”
Which means if you regularly use that same phrase — “You made me feel” — you might be sitting on an opportunity to significantly improve your own EQ.
It’s not that other people don’t influence our emotions. Of course they do. Nor is anyone arguing that other people’s behavior can’t be genuinely awful and worthy of our anger, sadness, or disappointment. Grant is also at pains to emphasize his comment should not be seen as letting genuine bad actors off the hook.
“I’m not talking about abusive relationships here. If you’re being, you know, gaslit by a manipulative narcissist, that is not what we’re describing,” he underlines.
But the two psychologists stress just how disempowering it is to believe there is no freedom of action — no conscious choice — between other people’s everyday problematic behavior and our mental and emotional response to it. “There is a space between stimulus and response. You control your behavior, but I choose my reactions,” Grant insists.
A Wiser approach to your emotions
The idea that we have the capacity to choose how we respond to provocations and disappointments is appealing. But it also raises an important question. If “You made me feel” is a red flag for low emotional intelligence because it implies other people control our feelings entirely, what is the alternative approach? How exactly do you create and employ that “space between stimulus and response” Grant talks about?
Grant and David share some ideas in the podcast. David, for example, suggests a subtle but important switch in how you think about your emotions: “If we think about the language that we use, when we say, ‘I am,’ I am sad. I am angry. I am being undermined … You are showing complete linguistic fusion between yourself and your emotion.”
Here, there is no space between stimulus and response in which you can make a different choice. Instead of “I am sad,” David suggests, tell yourself “I’m noticing that I’m feeling sad.” Research shows emotions are stories we tell ourselves to explain physical and mental sensations. When you use language to remind yourself they are constructed in this way, you give yourself space to tell different, better stories.
That’s a fascinating approach — and one I’ve written about before — but I recently read about a more practical method that translates academic theory into simple, everyday practice. It’s called the Wiser method and it’s endorsed by decades of research. Wiser stands for watch, interpret, select, engage, reflect.
You can read about it in detail here, but it basically boils down to exactly what Grant recommends. Rather than feeling hijacked by your emotions, you observe and probe them before choosing how you want to label your feelings and respond in practice. In this model, others can give you unpleasant fodder for consideration, but they can’t make you feel anything that doesn’t serve you.
Trying to tamp down or ignore emotions through sheer force of will seldom works, but taking a step back and considering your feelings before acting on them is an excellent way to significantly increase your emotional intelligence.
Dave Lutz Jones Trading Cam notes As we await NVDA’s earnings report keep this in mind: BoA Global Fund Manager Survey shows a possible crowded long in technology positioning, but managers can stay overweight for years.
22% Russell’s weight reports, and 45% of XOP’s – but all eyes on NVDA Wednesday.
2. A $700 Billion Insurance Product Is Powering the US Credit Market Rally-Bloomberg
Annuity sales could total about $700 billion in next two years
Funds likely to be allocated to corporate and structured debt
An insurance product that consumers use to help fund their retirements is selling at record levels, powering demand for corporate debt and commercial mortgage bonds.
Last year, sales of annuities, which allow consumers to effectively buy income for the rest of their lives, reached an all-time record high of $385 billion, according to life insurance trade group Limra. That’s up 23% from the year before. The products grew more attractive as rising interest rates translate into higher potential annual payouts from the products.
Behind the scenes, the life insurers that usually sell annuities are buying bonds to generate income for the products, and in particular, corporate debt and asset-backed securities including mortgage bonds. Their demand might decline a bit this year after bond yields have fallen, but Limra says annuity sales are still expected to remain strong by historic standards.
6. Walmart Did Make New Highs Prior to Today’s Earnings
7. Another Day…Another China Implosion Chart …Foreign Investments in China $350B to $50B
China’s direct investment liabilities in its balance of payments stood at $33 billion last year, according to data from the State Administration of Foreign Exchange released Sunday. That measure of new foreign investment into the country — which records monetary flows connected to foreign-owned entities in China — was 82% lower than the 2022 level and the lowest since 1993.
Barrons The country’s overcapacity and overproduction pose risks not just to China but also to rivals in these sectors abroad. Take solar panels. Beijing mandated that state-owned enterprises get half of their energy capacity from renewables by 2025, contributing to strong solar panel growth. But prices for solar inputs and panels have tumbled. Eurasia Group estimates that 60% to 70% of solar firms could face bankruptcy or acquisitions in the next couple of years, potentially saddling Beijing with another debt-laden sector. By Reshma Kapadia
Equities: Dividend growers have been outperforming the average stock in the S&P 500
Source: The Daily Shot
6. SMCI Hit Wall Street Record 97 RSI (overbought) Before Sell-Off Friday
SMCI AI Small Cap
7. PitchBook Analyst Note: Estimating US VC First-Time Manager Dropouts
37% of first-time VCs will not be able to raise a second fund
2021 was the heyday for new entrants in venture capital: First-time fundraising reached a peak of $14.7 billion, including to more inexperienced managers without bulletproof track records or networks. Now that LPs have retreated, those same fund managers are in trouble, according to our latest VC analyst note.
More than 247 first-time managers who closed funds between 2019 to 2021 will not be able to raise a sophomore fund, according to PitchBook estimates. Those particularly at risk of being incapable of raising a second VC fund will likely be managers of funds with less than $10 million in commitments and those in emerging US markets.
8. China Vows to Centralize Tech Development Under Communist Party
Xi’s party will take more direct role in steering development
Tech leadership is a major priority for China’s government
China’s ruling Communist Party vowed to enhance its role in steering its science and technology industries, centralizing decision-making power as the country navigates US trade curbs designed to limit its advancement.
The party will refine a mechanism whereby technological works are led by the Central Committee, according to state broadcaster CCTV citing a central government meeting led by President Xi Jinping. The news broadcast didn’t specify details of the plan, though the pronouncement marks an escalation of Beijing’s prioritization of a sector that China’s leaders consider of critical importance.
A year ago, Xi called for China to accelerate scientific research and replace foreign technologies with homegrown alternatives. His remarks were part of a broader push to stimulate both domestic efforts and international cooperation in the pursuit of technological independence from the US. Export controls from Washington have curtailed China’s access to the most advanced semiconductors, especially those made by Nvidia Corp. to accelerate artificial intelligence training.
China is now elevating the party’s role in directing its fight against the US for leadership across an array of strategic technologies, including semiconductors and AI.
Xi had earlier tapped his top deputy, former Vice Premier Liu He, to oversee development of China’s own chip technologies. Under that regime, Huawei Technologies Co.’s moonshot chipmaking effort yielded results that surprised outside observers by producing a modern smartphone chip without recourse to US tech.
BOSTON — Can we finally stop the aging process? Researchers at Brigham and Women’s Hospital (BWH) are hoping so after developing a DNA clock that may unlock the secrets of aging. These new epigenetic clocks can more accurately predict biological aging and the effectiveness of anti-aging treatments. This study introduces a machine-learning model capable of distinguishing between genetic factors that either accelerate or decelerate the aging process, a distinction not made by previous models.
The research revolves around the concept of DNA methylation, a biological process that modifies the DNA structure and affects how genes function. This process is closely linked to aging, with certain DNA regions, known as CpG sites, being particularly influential. The novel epigenetic clocks, named CausAge, DamAge, and AdaptAge, are designed to parse out which methylation changes are merely associated with aging from those that directly cause it.
“Previous clocks considered the relationship between methylation patterns and features we know are correlated with aging, but they don’t tell us which factors cause one’s body to age faster or slower. We have created the first clock to distinguish between cause and effect,” says study corresponding author Dr. Vadim Gladyshev, a principal investigator in the Division of Genetics at BWH, in a media release. “Our clocks distinguish between changes that accelerate and counteract aging to predict biological age and assess the efficacy of aging interventions.”
To develop these clocks, researchers employed an epigenome-wide Mendelian Randomization (EWMR) on over 20,000 CpG sites across the genome, correlating them with eight aging-related traits, including lifespan, health span, and frailty index. This technique allowed them to establish causation rather than a mere correlation between DNA structure and observable aging traits.
