Topley’s Top 10 – October 12, 2021

1. Earnings Season—Big Downshift in Forecasts After Massive Covid Bounce.

Dave Lutz at Jones Trading….Third-quarter earnings season will kick off this week, and investors are awaiting insight into the impact of stickier-than-anticipated inflation, brought on by supply-chain disruptions, labor shortages and surging energy prices. Some are worried that higher costs for products and energy could crimp demand, while winter could lead to a resurgence in Covid-19 infections and hospitalizations. No major earnings are due Monday, WSJ reports.

Analysts see a 29.6% year-over-year increase in earnings for S&P 500 companies in the third quarter, according to IBES data from Refinitiv as of Friday, down from 96.3% growth in the second quarter. The third-quarter forecast is down a touch from several weeks ago, a reversal of the recent trend for estimates.

Reopening demand and marooned containers have caused bottlenecks across supply chains just as the holiday shopping season kicks off in North America, prompting downgrades across analysts estimates for the upcoming earnings season.  Few expect the supply snarls to end this year as an energy crisis stokes inflation fears. Caution abounds in the semiconductor, retail and raw material segments.

2. Coal 5 Year Chart ….$50 to $250 in One Year.

Trading Economics Blog—Coal futures rose slightly on Monday to trade around $240 per metric ton and getting closer to a record of $269.5 hit on October 5th as flooding put in question China’s efforts to address energy shortages. Heavy rains have forced the closures of 60 coal mines in Shanxi province, the largest coal mining hub in China. Last week, the coal prices eased to $230 after Beijing ordered coal miners to boost production in an effort to curb an ongoing energy crisis, while Russian President Vladimir Putin said Gazprom will send more gas to European countries via Ukraine.

3. Historical Profit Margins Chart…..Hit 10 Year High.  Higher taxes, labor costs, materials, and interest rates coming?

Callum Thomas Chart Storm US Profit Margins: following a disastrous global pandemic and widespread supply chain issues, US economy-wide profit margins are… at a 10-year high.

Specifically what the chart shows is US corporate profits before tax (with IVA and CCadj) as a percentage of GDP.

Clearly a lot has gone right for corporates: very easy and cheap financing, wage subsidies and other fiscal economic-life support measures, and a stimulus-fueled (and reopening-driven) economic rebound. Some of these things will be hard (won’t happen) to replicate going forward.

Indeed, most signs point to very tight labor markets and rising wage pressures as global supply chain blockages send prices skyward (and prompt many to rethink how they even arrange their supply chain e.g. reshoring, etc). Shorter-term energy costs are rising as well, and I think it’s likely we’ve already seen the low point in interest rates, and of course global tax rates.

So it seems likely this rebound in profit margins will be short-lived.

Best regards,

Callum Thomas

4. Massive Projected Spending in Clean Energy 2021-2050

Capital Group Blog-Trillions in global investments expected for clean energy

Green infrastructure investment set for big growth

Infrastructure investment (USD billions)

Source: International Energy Agency, Net Zero by 2050 (May 2021).

5. Chinese Military Spending Doubles in 10 Years

6. Office Buildings Conversion to Apartments

Wolf Street Blog–For 2021, a total of 20,122 apartments are expected to be completed, in 151 buildings of all types, with a surging share of office buildings, according to Yardi Matrix data cited by sister company RENTCafé. But it’s not huge: By comparison, new construction starts of multi-family buildings with five or more units averaged around 370,000 units per year over the past five years. The number of completed buildings in 2021, at 151, are over double the number in the prior two years.

Office conversions have been the leader since 2013, and they shot higher in 2020 and 2021 and have far outdistanced factory and hotel conversions. Hotel conversions are easier to accomplish because the existing floorplans, utilities, and other aspects are less costly to adapt for residential use. But the real volume going forward is in office buildings, given the vast amount of space available, though they’re more costly to convert than hotels:

Apartment Conversions from Old Office Buildings, Hotels, Factories: The Numbersby Wolf Richter • Oct 11, 2021

7. Private Jet Sales and Bookings at Record Levels.

Private jet rage grows as a record number of fliers strain the system, causing plane shortages
Robert Frank@ROBTFRANK

  • The flood of new private jet customers — driven by health concerns during the pandemic and the rapid creation of wealth — is now taxing an industry geared for slower growth.
  • The problem has been made worse by a shortage of new and used planes, delays getting aircraft parts and crew and pilot shortages.
  • NetJets has halted sales of jet cards, fractional shares and leases for light cabin aircraft amid the challenges.

Record number of travelers are now flying on private jets

Private jet fliers are facing increasing delays, cancellations and lack of available flights as the industry struggles to serve a record number of new fliers, while facing supply chain troubles.

July was the busiest month ever for private jet flights, with more than 300,000 flights, according to Argus International. While business usually cools in the fall, September saw nearly 300,000 flights and Argus projects October’s pace will break the July record.

The flood of new private jet customers — driven by health concerns during the coronavirus pandemic and the rapid creation of wealth — is now taxing an industry geared for slower growth. A shortage of new and used planes, delays getting aircraft parts, crew and pilot shortages, catering snafus, and air traffic problems are combining to create a growing number of delays and cancellations, according to industry executives.

Customers who paid five or six figures for their dream flights are now learning that even private jets encounter delays and logistics problems.

“These are people who spent $200,000 and they want perfection,” said Doug Gollan, founder of Private Jet Card Comparisons, a website that reviews jet card programs.

A Private Jet Card Comparisons survey of private jet fliers found that more than 20% had experienced a service issue in recent months.

Industry executives say the main issue is a lack of aircraft. People who own private jets and usually hire them out for charter are using the planes more often themselves, leaving fewer available for the charter market.

Fractional owners are also using their planes more. The supply shortage is feeding through the entire private aviation system, from charter companies and jet management companies to brokers and operators. The inventory of used planes is at all-time lows, and private jet makers BombardierTextron and General Dynamics’ Gulfstream have all raised production to meet demand.

Pilots are in short supply as well. Many retired or dialed back during the Covid-19 pandemic, and with the commercial airlines aggressively hiring, private jet companies and owners are scrambling to find pilots. Finding cabin crew is also becoming difficult and costly.

Shortages and delays are also hurting the availability of aircraft parts, which means that repairs that should take a day or two are now stretching for a week or more, taking more planes out of circulation.

Wheels Up, which started trading as a public company this summer, just launched a new Pilot Employee Equity Grant to try to lure and retain more pilots. The program provides equity to full-time and part-time pilots on its seniority list as of Aug. 31, and new pilots hired after Sept. 1 will be eligible.

Even catering has become a source of customer complaints. Private jet customers typically call in their catering order a day or two before the flight. But many of the new fliers are calling it in the night before, which has created a mad scramble for the caterers trying to source and make the meals — and line up the right wine or spirits — that clients are requesting.

“Say you’ve got a client who ordered Belvedere vodka and the caterer couldn’t only get Grey Goose,” Gollan said. “So the customer gets on the plane and he’s ticked off that he’s paying all this money and saying “why didn’t I get my Belvedere vodka?’”

Turning away new business

The cascade of problems has led some companies to halt sales and new customers. Sentient Jet just stopped sales of jet cards as of midnight on Sept. 30, saying it wants to focus on its existing customers.

NetJets has halted sales of jet cards, fractional shares and leases for light cabin aircraft — like the Citation XLS and Phenom 300. The company said flight demand is the highest in its 57-year history, averaging 500 flights a day compared with under 400 in 2019.

“The vast number of flights is taxing the air travel infrastructure in ways we haven’t seen in years,” the company said. Pausing light jet sales, along with other restrictions on card buyers, “allows the company to continue prioritizing what is most important — delivering the best possible experience to all owners.”

Concerns about rising costs and lower margins are squeezing some private jet operators and companies. Wheels Up’s share price has fallen by more than 40% since its peak in July, in part because of analyst concerns over margins.

Wheels Up said it “is uniquely positioned to service our members and customers in the current environment with our fleet of owned, operated, managed and third-party partner aircraft.”

The big question is whether the more than 10,000 customers who started flying private for the first time during the pandemic will stick around if the problems continue to mount. Gollan said that while customers may complain about service issues, none of the 300 it surveyed said they planned to go back to commercial airlines.

8. SpaceX $100 Billion Valuation

9. Israel a step closer to commercial drones with latest tests


TEL AVIV, Israel (AP) — Dozens of drones floated through the skies of Tel Aviv on Monday, ferrying cartons of ice cream and sushi across the city in an experiment that officials hope provided a glimpse of the not-too-distant future.

Israel’s National Drone Initiative, a government program, carried out the drill to prepare for a world in which large quantities of commercial deliveries will be made by drones to take pressure off highly congested urban roads. The two-year program aims to apply the capabilities of Israeli drone companies to establish a nationwide network where customers can order goods and have them delivered to pick up spots.

The project, now in the third of eight stages, is still in its infancy and faces many questions about security and logistics.

“We had 700 test flights at the start of this year and now we are close to 9,000 flights,” said Daniella Partem, from Israel Innovation Authority, a partner in the drone initiative.

Israel is a global leader in drone technology, with much of its expertise rooted in the highly technologized military. Many of the 16 companies participating in the drone initiative have links to the military.

According to Partem, the initiative was inspired by the halting effect that COVID-19 had on the transportation of medical supplies in early 2020.

An early stage tested the transport of medicines and blood plasma by drones. The initiative has since carried out wider tests in three different urban districts in Israel and hopes to promote legislation that would allow drones to be widely used through an app that customers and clients can use.

Israel’s population of 9.3 million people is largely packed in in urban centers, with major cities like Tel Aviv and Jerusalem suffering from high levels of road congestion. Access to Israel airspace is highly regulated by security officials, and flying a drone requires a permit from the Israeli Civil Aviation Authority.

The initiative faces many obstacles. Officials will have to ensure that drones can handle flights through turbulent weather conditions and that the skies can be quickly cleared in case of war or emergency. There are also issues of privacy.

“Once you have a drone that actually takes photos or videos you create a totally new dimension of privacy invasion,” said Tehilla Shwartz Altshuler, digital technology expert and fellow at the Israel Democracy Institute, a think tank in Jerusalem. 

The drone initiative has already tried to address such concerns by using cameras that can help the machine land, but don’t have the resolution to take detailed photos.

The drone initiative has worked in cooperation with the aviation authority since its first flight tests in January. Five more tests are planned over the next 14 months. 

“One day, we will have drone-powered taxis in the sky,” said Yoely Or, co-founder of Cando Drones, one of the companies that participated in Monday’s experiment.

10. 7 Ways to Retain More of Every Book You Read

written by JAMES CLEAR


There are many benefits to reading more books, but perhaps my favorite is this: A good book can give you a new way to interpret your past experiences.

Whenever you learn a new mental model or idea, it’s like the “software” in your brain gets updated. Suddenly, you can run all of your old data points through a new program. You can learn new lessons from old moments. As Patrick O’Shaughnessy says, “Reading changes the past.”

Of course, this is only true if you internalize and remember insights from the books you read. Knowledge will only compound if it is retained. In other words, what matters is not simply reading more books, but getting more out of each book you read.

Gaining knowledge is not the only reason to read, of course. Reading for pleasure or entertainment can be a wonderful use of time, but this article is about reading to learn. With that in mind, I’d like to share some of the best reading comprehension strategies I’ve found.

1. Quit More Books

It doesn’t take long to figure out if something is worth reading. Skilled writing and high-quality ideas stick out.

As a result, most people should probably start more books than they do. This doesn’t mean you need to read each book page-by-page. You can skim the table of contents, chapter titles, and subheadings. Pick an interesting section and dive in for a few pages. Maybe flip through the book and glance at any bolded points or tables. In ten minutes, you’ll have a reasonable idea of how good it is.

Then comes the crucial step: Quit books quickly and without guilt or shame.

Life is too short to waste it on average books. The opportunity cost is too high. There are so many amazing things to read. I think Patrick Collison, the founder of Stripe, put it nicely when he said, “Life is too short to not read the very best book you know of right now.”

Here’s my recommendation:

Start more books. Quit most of them. Read the great ones twice.

2. Choose Books You Can Use Instantly

One way to improve reading comprehension is to choose books you can immediately apply. Putting the ideas you read into action is one of the best ways to secure them in your mind. Practice is a very effective form of learning.

Choosing a book that you can use also provides a strong incentive to pay attention and remember the material. That’s particularly true when something important hangs in the balance. If you’re starting a business, for example, then you have a lot of motivation to get everything you can out of the sales book you’re reading. Similarly, someone who works in biology might read The Origin of Species more carefully than a random reader because it connects directly to their daily work. 

Of course, not every book is a practical, how-to guide that you can apply immediately, and that’s fine. You can find wisdom in many different books. But I do find that I’m more likely to remember books that are relevant to my daily life.

3. Create Searchable Notes

Keep notes on what you read. You can do this however you like. It doesn’t need to be a big production or a complicated system. Just do something to emphasize the important points and passages.

I do this in different ways depending on the format I’m consuming. I highlight passages when reading on Kindle. I type out interesting quotes as I listen to audiobooks. I dog-ear pages and transcribe notes when reading a print book.

But here’s the real key: store your notes in a searchable format.

There is no need to leave the task of reading comprehension solely up to your memory. I keep my notes in Evernote. I prefer Evernote over other options because 1) it is instantly searchable, 2) it is easy to use across multiple devices, and 3) you can create and save notes even when you’re not connected to the internet.

I get my notes into Evernote in three ways:

I. Audiobook: I create a new Evernote file for each book and then type my notes directly into that file as I listen.

II. Ebook: I highlight passages on my Kindle Paperwhite and use a program called Clippings to export all of my Kindle highlights directly into Evernote. Then, I add a summary of the book and any additional thoughts before posting it to my book summaries page.

III. Print: Similar to my audiobook strategy, I type my notes as I read. If I come across a longer passage I want to transcribe, I place the book on a book stand as I type. (Typing notes while reading a print book can be annoying because you are always putting the book down and picking it back up, but this is the best solution I’ve found.)

Of course, your notes don’t have to be digital to be “searchable.” For example, you can use Post-It Notes to tag certain pages for future reference. As another option, Ryan Holiday suggests storing each note on an index card and categorizing them by the topic or book.

The core idea is the same: Keeping searchable notes is essential for returning to ideas easily. An idea is only useful if you can find it when you need it.

4. Combine Knowledge Trees

One way to imagine a book is like a knowledge tree with a few fundamental concepts forming the trunk and the details forming the branches. You can learn more and improve reading comprehension by “linking branches” and integrating your current book with other knowledge trees.

For example:

  • While reading The Tell-Tale Brain by neuroscientist V.S. Ramachandran, I discovered that one of his key points connected to a previous idea I learned from social work researcher Brené Brown.
  • In my notes for The Subtle Art of Not Giving a F*ck, I noted how Mark Manson’s idea of “killing yourself” overlaps with Paul Graham’s essay on keeping your identity small.
  • As I read Mastery by George Leonard, I realized that while this book was about the process of improvement, it also shed some light on the connection between genetics and performance.

I added each insight to my notes for that particular book.

Connections like these help you remember what you read by “hooking” new information onto concepts and ideas you already understand. As Charlie Munger says, “If you get into the mental habit of relating what you’re reading to the basic structure of the underlying ideas being demonstrated, you gradually accumulate some wisdom.”

When you read something that reminds you of another topic or immediately sparks a connection or idea, don’t allow that thought to come and go without notice. Write about what you’ve learned and how it connects to other ideas.

5. Write a Short Summary

As soon as I finish a book, I challenge myself to summarize the entire text in just three sentences. This constraint is just a game, of course, but it forces me to consider what was really important about the book.

Some questions I consider when summarizing a book include:

  • What are the main ideas?
  • If I implemented one idea from this book right now, which one would it be?
  • How would I describe the book to a friend?

In many cases, I find that I can usually get just as much useful information from reading my one-paragraph summary and reviewing my notes as I would if I read the entire book again. 

If you feel like you can’t squeeze the whole book into three sentences, consider using the Feynman Technique.

The Feynman Technique is a note-taking strategy named after the Nobel Prize-winning physicist Richard Feynman. It’s pretty simple: Write the name of the book at the top of a blank sheet of paper, then write down how you’d explain the book to someone who had never heard of it.

If you find yourself stuck or if you see that there are holes in your understanding, review your notes or go back to the text and try again. Keep writing it out until you have a good handle on the main ideas and feel confident in your explanation.

I’ve found that almost nothing reveals gaps in my thinking better than writing about an idea as if I am explaining it to a beginner. Ben Carlson, a financial analyst, says something similar, “I find the best way to figure out what I’ve learned from a book is to write something about it.” 

6. Surround the Topic

I often think of the quote by Thomas Aquinas, “Beware the man of a single book.”

If you only read one book on a topic and use that as the basis for your beliefs for an entire category of life, well, how sound are those beliefs? How accurate and complete is your knowledge?

Reading a book takes effort, but too often, people use one book or one article as the basis for an entire belief system. This is even more true (and more difficult to overcome) when it comes to using our one, individual experience as the basis for our beliefs. As Morgan Housel noted, “Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works. We’re all biased to our own personal history.” 

One way to attack this problem is to read a variety of books on the same topic. Dig in from different angles, look at the same problem through the eyes of various authors, and try to transcend the boundary of your own experience.

7. Read It Twice

I’d like to finish by returning to an idea I mentioned near the beginning of this article: read the great books twice. The philosopher Karl Popper explained the benefits nicely, “Anything worth reading is not only worth reading twice, but worth reading again and again. If a book is worthwhile, then you will always be able to make new discoveries in it and find things in it that you didn’t notice before, even though you have read it many times.”

Additionally, revisiting great books is helpful because the problems you deal with change over time. Sure, when you read a book twice maybe you’ll catch some stuff you missed the first time around, but it’s more likely that new passages and ideas will be relevant to you. It’s only natural for different sentences to leap out at you depending on the point you are at in life.

You read the same book, but you never read it the same way. As Charles Chu noted, “I always return home to the same few authors. And, no matter how many times I return, I always find they have something new to say.” 

Of course, even if you didn’t get something new out of each reading, it would still be worthwhile to revisit great books because ideas need to be repeated to be remembered. The writer David Cain says, “When we only learn something once, we don’t really learn it—at least not well enough for it to change us much. It may inspire momentarily, but then becomes quickly overrun by the decades of habits and conditioning that preceded it.” Returning to great ideas cements them in your mind.

Nassim Taleb sums things up with a rule for all readers: “A good book gets better at the second reading. A great book at the third. Any book not worth rereading isn’t worth reading.”

Where to Go From Here

Knowledge compounds over time.

In Chapter 1 of Atomic Habits, I wrote: “Learning one new idea won’t make you a genius, but a commitment to lifelong learning can be transformative.”

One book will rarely change your life, even if it does deliver a lightbulb moment of insight. The key is to get a little wiser each day.

Now that you know how to get more out of each book you read, you might be looking for some reading recommendations. Feel free to check out my book summaries or my public reading list.