Topley’s Top Ten – December 23, 2019

1.Short-Term Greed at Excessive Levels.

2.The S&P Price/Sales Ratio in 100th Percentile for Valuation

The S&P 500’s price/earnings ratio, based on both five-year normalized earnings and five-year trailing peak earnings under Generally Accepted Accounting Principles, stands near its 90th percentile for the period. Ditto for the MSCI USA Index’s price-to-cash flow ratio. On a price-to-sales basis, the S&P is at the 100th percentile.

Stocks Hit New Highs Just One Year After Bleak Lows. But a Yellow Light Is Flashing.

3.10% of S&P Assets are Goodwill…Break Out Your Accounting Books.

The Great & The Goodwill

One of the great complaints about the post-crisis equity market is that it is “propped up” via buybacks.  However, buybacks are just one form of capital return (with dividends the other option).  Firms with operating cash flow have limited options around what to do with it: hold the cash (which almost always has poor returns), reduce debt (which isn’t a very good strategy for most companies when real rates are low), invest in new production (again, a poor strategy in a world of relatively weak final demand growth), return capital (via dividends or buybacks) or, finally, purchase other businesses via M&A.

Given the buyback narrative, it may surprise investors to discover that 10% of S&P 500 assets are goodwill (that is, the asset recorded when a company is purchased above book value). The growth of goodwill represents a relatively aggressive acquisition strategy from major corporate CEOs, and frankly, it makes us somewhat nervous that 10% of all US equity assets (which themselves in aggregate are already being valued at 3.3x book value) are the remainder of acquisitions above and beyond the book value of assets.

Are companies really better-served continuing to accumulate these sorts of assets via acquisitions instead of returning capital to shareholders?  As things currently stand, the 10% number is probably manageable, but we encourage investors to think critically when considering some of the alternatives implied by market memes similar to the complaints about buybacks.  Sign up for Bespoke’s “2020” special and get our Bespoke Report 2020 Market Outlook and Investor Toolkit.

4.Netflix Numbers Breakdown

From Barry Ritholtz Blog

5.Profit Margins by Market Cap.

The Daily Shot-WSJ

6.Another Look at Low Inflation….25 Years of Core Inflation Being Under Fed Target

The Fed cuts rates again amid low inflation. What’s keeping it down?

back to topJared Franz

7.Student Loan Statistics

Great Read on Student Loans–Student Loan Debt Statistics In 2019: A $1.5 Trillion Crisis-Zack FriedmanSenior Contributor

8.World Bank Rate of Extreme Poverty Drops More than Half in 10 Years  18.2% to 8.6%..

50 Year Drop in Extreme Poverty

9.Size of Cruise Ships Hit Another Record.

2019 Biggest Year for New Cruise Ships Ever

January 09, 2019

 Monty Mathisen

New ship deliveries in 2019 will make it the biggest year in the history of the cruise industry for ship and berth introductions.

Twenty-four ocean-going ships are to debut this year, marking a new record, according to the 2019 Cruise Industry News Annual Report.

The class of 2019 represents just under $10 billion in new ships, with an average size of 67,694 tons and passenger capacity of 1,770.

Those 24 ships also make up 42,488 new berths, easily eclipsing 2018’s record of approximately 34,000 new berths.

Prior to 2018, the record year for berth introductions was 2010, when 28,076 berths were introduced. In terms of vessel introductions, the previous record prior to 2018 was for 17 new vessels in 2001.

The biggest vessel to enter service this year will be the Costa Smeralda with capacity for 5,224 guests.

The Smeralda will enter service in the Western Mediterranean in the fall and will be powered by LNG. Being built at Meyer Turku in Finland, the Smeralda is part of Carnival’s next generation XL class of vessels.

MSC’s Grandiosa, a Meraviglia-plus class ship, is also large, and will debut in November with capacity for just under 5,000 guests.

Other notable introductions include the Carnival Panorama, which will be positioned on the West Coast and sailing to the Mexican Riviera.

In addition is the new 4,200 guest Norwegian Encore, which debuts in Miami in the fourth quarter.

Twelve of the 24 ships on order are expedition newbuilds, and 14 of the 24 new vessels are under 1,000 guests. 

Hurtigruten’s 530-guest Roald Amundsen will debut the industry’s first hybrid platform, with the ability to run on battery power. 

Of the shipyards, Fincantieri will have the biggest year, with four ships being delivered, in addition to five more from its subsidiary, VARD.

Meyer Werft will deliver a trio of newbuilds, while sister yard Meyer-Turku will deliver two ships.

In addition is the American Harmony, a next generation riverboat from American Cruise Lines with capacity for 195 guests.

10.Ten People To Be Thankful For In Your Career

Caroline Ceniza-LevineContributor 

  • Giving thanks to the supportive people in your careerWhile giving thanks this holiday season, don’t forget all the things to be grateful for in your career, especially the people who enable your career to flourish. People hire people. People decide who to retain, promote and advance. Even if you’re self-employed, your clients hire you, and you benefit from word-of-mouth and other people-powered promotion.

Here are 10 people to be thankful for in your career:

1 – Role models to inspire you

You need role models at every career stage. At the very least, seeing other careers gives you ideas for your own – if you know you want to be Head of Marketing someday, look up profiles of Chief Marketing Officers and other senior marketing executives and see the roles they’ve held along the way. More importantly, you get inspiration for what could be. Almost 30 years into my own career, I find new role models regularly. I’m looking to increase my international travel and work 100% remotely and recently read about an expat to France hosting bespoke wine-tasting parties out of her home! I’m grateful for each and every role model in my life – even if I’m just reading about them.

2 – Cheerleaders to encourage you

When you’re looking to make a change or put yourself up for a stretch role, you need encouragement. If you have an upcoming presentation or job interview, you want to have someone who can give you that pep talk or confidence boost the night before. It’s easy to take the cheerleaders in your life for granted because they’re often in a good mood and seem perfectly able to take care of themselves. However, use the holiday to return the favor and make their day with a thank you for [insert personalized story of how they boosted your spirits].

3 – Truth-tellers to stretch you

The phrase, “Feedback is a gift,” exists for a reason. There is incredible value in honest, helpful feedback. However, it is difficult to say something that could be taken negatively in a constructive way, so too many people, even managers, avoid giving feedback. If you have people around you who take the hard path and give it to you straight, thank them. Hearing a difficult truth can stretch you to improve or help you avoid a costly mistake. I once had a client who was very resistant to my feedback so, while she improved on the job and the company who brought me in was satisfied, I thought the coaching was only partly successful because the person I actually coached didn’t seem satisfied. However, several years after the assignment ended, she got back in touch with me to tell me how she had an a-ha moment with what I had tried to tell her before. She applied my earlier feedback to her next job and continues to incorporate the things we had worked on years ago. I was surprised, but very moved and so happy she got back in touch.

4 – Mentors to advise you

Like role models, you need mentors at every stage of your career. As your needs are numerous and vary over time, your mentors should be numerous and change over time. You can get some advice from business and professional development books (here are my favorites from 2019), but live, customized advice is ideal. For anyone who has given you advice this year, send them a note of thanks and tell them what you did with their suggestions.

5 – Insiders to inform you

Valuable career support can be as simple as a well-timed piece of information. You’re looking for a job and need to know who does what at a company you’re targeting. You’re pitching a project and need to know what the decision-makers at the sales meeting will be like. You’re considering a lateral move to another department and want to know more about your prospective new boos. To get that much-needed information, you probably leaned on friends and colleagues for help. Thank them!

6 – Connectors to introduce you

Some friends and colleagues are in a position to go a further step and introduce you to the company you’re targeting or the manager at the department you want to move into. If you’re lucky enough to have people who made those connections for you, thank them.

7 – Supporters to recommend you

An even further step than an introduction or information is a recommendation. Perhaps a former colleague started an email thread, introducing you to someone at your dream company with a nice testimonial about your work together. Perhaps a current colleague organized a group lunch with you and the manager of the department you want to transfer to, and your colleague casually brings up how valuable you are to the team. Even if things didn’t work out, even if you thank them at the time, acknowledge them again.

8 – Sponsors to go to bat for you

If that colleague who introduces you and recommends you is a senior executive, that support could catapult your career to a new level. As a senior executive, their support of you is a reflection of them and therefore an investment in you. That going to bat for you and putting their credibility on the line is sponsorship, and it’s significant. The best way to thank them is by doing an excellent job and exceeding their high standards.

9 – Accountability partners to keep you on track

You don’t need to have made a big move (e.g., new job, new promotion) to have needed career support. Managing your ongoing career also requires effort, and you may have benefited from that friend who reminds you about the monthly professional association meeting or Lunch & Learn on a useful topic. You might have a formal accountability arrangement where you call each other regularly to report on what each of you is working on. Or you might just call when you need that someone to get you productive again. That motivated and motivating friend is a special career advantage – thank them!

10 – Recruiters to mark you to market

Hopefully you have recruiters calling you with interesting opportunities, or you have existing relationships where you can call to get the latest information about your market. Staying on top of your market is critical. You should know what roles are in demand and what companies are paying for your level of skills and experience. Sure, you can also research job postings, salary sites and trade newsletters to understand your market, but if you have recruiters in your market that you can tap, be grateful for the nuanced and insider information they have.

Use this list to design next year’s networking priorities

Do you have people in your active network that you could tap for each of these roles? If not, consider spending your networking time to fill in any gaps. As you think about what lunch, coffee and LinkedIn invitations to accept, remember that you need a diverse and supportive network based on your specific career goals. Be grateful for the people already in your life. Think about who you still need to meet!

From Joe Duran on Linkedin