Topley’s Top Ten – June 25, 2018

1.Small Business On Fire…Highest Optimism and Earnings in 30 Years.

https://www.nfib.com/assets/SBET-May-2018.pdf

 

2.Amazon Vs. The World.

AMZN 700m Mobile Customers

 

 3.Global Estimated Annual E-Commerce Growth Rates.

 

Here are some of the key takeaways:

  • Emerging markets are going to be essential for e-commerce growth, as retailers in developed markets may soon reach saturation in terms of consumer growth.
  • India is the clear overall leader in e-commerce potential, but countries in Southeast Asia and Latin America are also worth keeping an eye on. Within Southeast Asia, Indonesia shows the most promise for retailers, as the government is loosening restrictions on foreign investments, and its massive population is gaining spending power and more access to internet. Meanwhile, Mexico is a retailer’s best bet for expansion in Latin America, due to its stable economy and rising middle class, but Brazil may be gearing up to steal the top spot.
  • However, doing business in these regions can be difficult. In most of these emerging markets, infrastructure is underdeveloped and the population is largely unbanked, making digital payments a challenge.
  • If retailers can build a brand presence in these markets while online shopping is still in its nascent stages, they may become market leaders as e-commerce takes off in the regions. Moreover, these markets could provide new sources of growth for companies that would otherwise stagnate in more mature e-commerce markets.
  • THE GLOBAL E-COMMERCE LANDSCAPE: How emerging markets will transform the future of online shopping
  • Stephanie Pandolph

http://www.businessinsider.com/the-global-ecommerce-landscape-report-2017-11

4.Capex-New Orders Consistent Strength.

Clues that capex may be rebounding have been increasingly apparent in “hard data” that represent actual economic activity. When trying to determine whether the increase in capex can be sustained, survey-based, or “soft data,” can useful. One of our favorite soft data indicators is the new orders component of the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index. As our LPL Chart of the Day shows, this component tends to be a leading indicator both for capex and the overall economy. While off its recent peak in December 2017, it’s held above 60 for 13 consecutive months (above 50 indicates expansion), the longest sustained level of strength since 2004, as our LPL Chart of the Day shows.

 

https://lplresearch.com/

5.Long-Term Look at S&P Performance.

Found at Barry Ritholtz The Big Picture http://ritholtz.com/

6.More Seniors Have Low Retirement Balance and More Debt.

By Heather Gillers,Anne Tergesen and Leslie Scism

A Generation of Americans Is Entering Old Age the Least Prepared in Decades

Low incomes, paltry savings, high debt burdens, failed insurance—the U.S. is upending decades of progress in securing life’s final chapter

Read Important Story

https://www.wsj.com/articles/a-generation-of-americans-is-entering-old-age-the-least-prepared-in-decades-1529676033?mod=ITP_pageone_0&tesla=y

7.Automakers Flooding Market With Crossovers.

Food for Thought: Crossover vehicle sales:

Source: @business; Read full article

https://blogs.wsj.com/dailyshot/

8.Always Great Read…Howard Marks Qt. Letter.

Latest memo from Howard Marks: Investing Without People

Over the last twelve months I’ve devoted three memos to discussing macro developments, market outlook, and recommendations for investor behavior.  These are important topics, but usually not the ones that interest me most; I prefer to discuss things that are likely to affect the functioning of markets for years to come.  Since little in the environment has changed from what I described in those three memos, I feel I now have the liberty to turn to some bigger-picture issues.

This memo covers three ways in which securities markets seem to be moving toward reducing the role of people: (a) index investing and other forms of passive investing, (b) quantitative and algorithmic investing, and (c) artificial intelligence and machine learning.

Before diving in, I want to state loud and clear that I don’t claim to be an expert on these subjects.  I’ve watched the first for decades; I’ve recently learned a little about the second; and I’m trying to catch up regarding the third.  On the other hand, since many of the “experts” in these fields are involved in them, I think they may be biased favorably toward them as potential successors to traditional active investing.  What follow are just my opinions; as always you should make of them what you wish.

Passive Investing and ETFs

I’ve told this story many times, but I want to repeat it here to lay a foundation for what follows.  I arrived at the University of Chicago Graduate School of Business (not yet the Booth School) just over 50 years ago, in September 1967.  The “Chicago school” of finance and investment theory – largely developed there in the early ’60s – had just begun to be taught.  It was methodically constructed on theoretical underpinnings, as well as on a healthy dose of skepticism regarding what investors had been doing previously.

One of the major foundational components was the “Efficient Market Hypothesis” and its conclusion that “you can’t beat the market.”  First there was the logical argument: it seemed obvious that collectively all investors have to do average before fees and expenses, and thus below average after.  And then there was the empirical evidence that for decades most mutual funds had performed behind stock indices like the Standard & Poor’s 500.

My professors’ response in the late 1960s was simple, albeit hypothetical and fanciful: why not just buy shares in every company in an index?  Doing so would allow investors to avoid the mistakes most people made, as well as the vast majority of the fees and costs associated with their efforts.  And at least they would be assured of performing in line with the index, not behind it.  As far as I know, no one invested that way at the time and there were no publicly available vehicles for doing so: no “index funds” and no “passive investing.”  I don’t think the terms even existed.  But the logic was clear and convincing, per the following citation from Wikipedia (with apologies to Richard Masson, my conscience regarding sources, for relying on it):

In 1973, Burton Malkiel wrote A Random Walk Down Wall Street, which presented academic findings for the lay public.  It was becoming well known in the lay financial press that most mutual funds were not beating the market indices.  Malkiel wrote:

What we need is a no-load, minimum management-fee mutual fund that simply buys the hundreds of stocks making up the broad stock-market averages and does no trading from security to security in an attempt to catch the winners.  Whenever below-average performance on the part of any mutual fund is noticed, fund spokesmen are quick to point out “You can’t buy the averages.”  It’s time the public could.

. . . there is no greater service [the New York Stock Exchange] could provide than to sponsor such a fund and run it on a nonprofit basis. . . .  Such a fund is much needed, and if the New York Stock Exchange (which, incidentally has considered such a fund) is unwilling to do it, I hope some other institution will.  (Emphasis added)

Read Full Letter

https://www.oaktreecapital.com/insights/howard-marks-memos

9.Health.. Cortisol: Why the “Stress Hormone” Is Public Enemy No. 1

5 simple ways to lower your cortisol levels without drugs

Christopher Bergland

The stress hormone, cortisol, is public health enemy number one. Scientists have known for years that elevated cortisol levels: interfere with learning and memory, lower immune function and bone density, increase weight gain, blood pressure, cholesterol, heart disease… The list goes on and on.

Chronic stress and elevated cortisol levels also increase risk for depression, mental illness, and lower life expectancy. This week, two separate studies were published in Science linking elevated cortisol levels as a potential trigger for mental illness and decreased resilience — especially in adolescence.

Cortisol is released in response to fear or stress by the adrenal glands as part of the fight-or-flight mechanism. The fight-or-flight mechanism is part of the general adaptation syndrome defined in 1936 by Canadian biochemist Hans Selye of McGill University in Montreal. He published his revolutionary findings in a simple seventy-four-line article in Nature, in which he defined two types of “stress”: eustress (good stress) and distress (bad stress).

Both eustress and distress release cortisol as part of the general adaptation syndrome. Once the alarm to release cortisol has sounded, your body becomes mobilized and ready for action — but there has to be a physical release of fight or flight. Otherwise, cortisol levels build up in the blood, which wreaks havoc on your mind and body.

Eustress creates a “seize-the-day” heightened state of arousal, which is invigorating and often linked with a tangible goal. Cortisol levels return to normal upon completion of the task. Distress, or free-floating anxiety, doesn’t provide an outlet for the cortisol and causes the fight-or-flight mechanism to backfire. Ironically, our own biology — which was designed to insure our survival as hunters and gatherers — is sabotaging our bodies and minds in a sedentary digital age. What can we do to defuse this time-bomb?

Luckily, you can make 5 simple lifestyle choices that will reduce stress and anxiety and lower your cortisol levels:

  1. Regular Physical Activity:Kickboxing, sparring, or a punching bag are terrific ways to recreate the “fight” response by letting out aggression (without hurting anyone), thus reducing cortisol.

Aerobic activities, like walking, jogging, swimming, biking, or riding the elliptical, are great ways to recreate the “flight” outlet and burn up cortisol. A little bit of cardio goes a long way. Just 20 to 30 minutes of activity most days of the week pays huge dividends by lowering cortisol every day and in the long run.

Fear increases cortisol. Regular physical activity will decrease fear by increasing your self-confidence, resilience, and fortitude — which will reduce cortisol. Yoga will have a similar effect, with the added benefits of mindfulness training.

If your schedule is too hectic to squeeze in a continuous session of aerobic activity, you can reap the same benefits by breaking daily activity into smaller doses. An easy way to guarantee regular activity is to build inadvertent activity into your daily routine. Try things such as riding a bike to work, walking to the store, taking the stairs instead of the escalator… These all add up to a cumulative tally of reduced cortisol at the end of the day.

  1. Mindfulness and Loving-Kindness Meditation(LKM):Any type of meditation will reduce anxiety and lower cortisol levels. Simply taking a few deep breaths engages the Vagus nerve which triggers a signal within your nervous system to slow heart rate, lower blood pressure, and decrease cortisol. The next time you feel yourself in a stressful situation that activates your “fight-or-flight” response, take 10 deep breaths, and feel your entire body relax and decompress.

Setting aside 10 to 15 minutes to practice mindfulness or meditation will fortify a sense of calm throughout your nervous system, mind, and brain. There are many different types of meditation. “Meditating” doesn’t have to be a sacred or new-agey, “woo-woo” experience. People often ask me specifically what kind of meditation I do and how to practice “Loving-Kindness Meditation” (LKM). I am not an expert on this, but have developed a technique that works for me. I suggest that you do more research, visit a meditation center if you can, and fine-tune a daily meditation practice that fits your schedule and personality. Below is my daily meditation routine:

Example of Mindfulness and Loving-Kindness Meditation (LKM) method.

I like to practice two types of meditation in one 15-minute session. Personally, I like to use a timer and an “Om” or “Aum” track I have on my iTunes. Some purists might call this “sacrilege,” but it works for me, and it might work for you….

To begin, I jot down the names of people I know who are struggling or suffering on a notecard. Next, I set my iPhone to a 15-minute countdown that ends in a harp sound. Then, I sit upright in a chair with my legs crossed at the ankles, set the timer, start the Om/Aum track, and sit with my palms open and facing upwards on my knees.

I begin with a mindfulness meditation of simply focusing on my breath and repeating my “mantra,” which is three words that resonate with me. You can choose any word or combination of words that have meaning and significance to you. I repeat these words silently in my mind like a rosary, as I take deep breaths, relax my shoulders, and feel myself drift into a trance-like state.

After a few minutes, I move into the Loving-Kindness Meditation (LKM) phase, which has three steps for me. First, I go through the checklist of specific people I know who are struggling, suffering (or frustrating me), and send them love, light, strength, and compassion. Secondly, I move to universal thoughts of loving-kindness for strangers I may have read about in the news or larger populations that are suffering. Thirdly, as part of the LKM phase, I focus on self-compassion and forgive myself for my “trespasses” and ask for atonement.

After I’ve completed the LKM cycle, I return back to a single-focused meditation, emptying my mind and focusing on my breathing until the alarm goes off. When I hear the harp sound, there is always a Pavlovian-conditioned response of an “ahhh” feeling, accompanied by a big exhale, as I open my eyes and face the real world again.

Remember, you can meditate anytime and any place. There don’t have to be strict boundaries to when and how you do it. Mindfulness and meditation is a powerful de-stressor and cortisol reducer that is always in your toolbox and at your fingertips. You can squeeze in a few minutes of meditation on the subway, in a waiting room, on a coffee break… I hope this advice is helpful to you.

  1. Social Connectivity:Two studies published this week in the journal Science illustrate that social aggression and isolation lead to increased levels of cortisol in mice, which trigger a cascade of potential mental health problems — especially in adolescence.

Researchers at Johns Hopkins established that elevated levels of cortisol in adolescence change the expression of numerous genes linked to mental illness in some people. They found that these changes in young adulthood — which is a critical time for brain development — could cause severe mental illness in those predisposed for it. These findings, reported in the January 2013 journal Science, could have wide-reaching implications in both the prevention and treatment of schizophrenia, severe depression, and other mental illnesses.

Akira Sawa, M.D., Ph.D., a professor of psychiatry and behavioral sciences at the Johns Hopkins University School of Medicine, and his team set out to simulate the social isolation associated with the difficult years of adolescence in human teens. They found that isolating mice known to have a genetic predisposition for mental illness during their adolescence triggered “abnormal behaviors” that continued even when they were returned to the group. They found that the effects of adolescent isolation lasted into the equivalent of mouse adulthood.

“We have discovered a mechanism for how environmental factors, such as stress hormones, can affect the brain’s physiology and bring about mental illness,” says Sawa, the study leader. “We’ve shown in mice that stress in adolescence can affect the expression of a gene that codes for a key neurotransmitter related to mental function and psychiatric illness. While many genes are believed to be involved in the development of mental illness, my gut feeling is environmental factors are critically important to the process.”

To shed light on how and why some mice got better, Sawa and his team studied the link between cortisol and the release of dopamine. Sawa says the new study suggests that we need to think about better preventative care for teenagers who have mental illness in their families, including efforts to protect them from social stressors, such as neglect. Meanwhile, by understanding the cascade of events that occurs when cortisol levels are elevated, researchers may be able to develop new compounds to target tough-to-treat psychiatric disorders with fewer side effects.

In another study, published on January 18, 2013 in the journal Science, researchers from France revealed that mice who were subjected to aggression by specific mice bred to be “bullies” released cortisol, which triggered a response that led to social aversion to all other mice. The exact cascade of neurobiological changes was complex, but also involved dopamine. The researchers found that if they blocked the cortisol receptors, the bullied mice became more resilient and no longer avoided their fellow creatures.

Close-knit human bonds — whether it be family, friendship, or a romantic partner — are vital for your physical and mental health at any age. Recent studies have shown that the Vagus nerve also responds to human connectivity and physical touch to relax your parasympathetic nervous system.

The “tend-and-befriend” response is the exact opposite to “fight-or-flight.” The “tend-and-befriend” response increases oxytocin and reduces cortisol. Make an effort to spend real face-to-face time with loved ones whenever you can, but phone calls and even Facebook can reduce cortisol if they foster a feeling of genuine connectivity.

  1. Laughterand Levity: Having fun and laughing reduces cortisol levels. Dr. William Fry is an American psychiatrist who has been studying the benefits of laughter for the past 30 years and has found links to laughter and lowered levels of stress hormones. Many studies have shown the benefits of having a sense of humor, laughter, and levity. Try to find ways in your daily life to laugh and joke as much as possible, and you’ll lower cortisol levels.
  2. Music:Listening to music that you love, and fits whatever mood you’re in, has been shown to lower cortisol levels. I recently wrote about the wide range of benefits that come from listening to music in a Psychology Today blog titled “The Neuroscience of Music, Mindset, and Motivation.” We all know the power of music to improve mood and reduce stress. Add reducing your cortisol levels as another reason to keep the music playing as a soundtrack of health and happinessin your life.

Conclusion

President Obama’s second inaugural speech brought up many calls to action that can be framed through the lens of “Cortisol as Public Health Enemy Number One.” The ripple effect of a fearful, isolated, and stressed-out society increases cortisol levels across the board for Americans of all ages. This creates a public health crisis and a huge drain on our economy.

If each of us works alone, and together, to reduce cortisol levels, we will all benefit. As citizens, if we live like we are “All for one, and one for all,” we can reduce the amount of stress hormone in our society and individual lives.

Feeling socially connected, safe, and self-reliant reduces cortisol. I hope the 5 tips presented above will help you make lifestyle choices that reduce your levels of stress hormone.

Lastly, in light of the Sandy Hook tragedy last month, we are all looking for components to a multi-pronged approach that will stop the violence and bloodshed. In my opinion, one specific way for us to do this is to create public health policies and funding aimed specifically at reducing cortisol levels in American youth.

In Obama’s inauguration speech, he declared, “Our journey is not complete until all of our children, from the streets of Detroit, to the hills of Appalachia, to the quiet lanes of Newtown, know that they are cared for, and cherished, and always safe from harm.” Beyond talk of gun violence legislation, if our legislators and business leaders strive to create policies and fund initiatives that create social connectivity among at-risk teens and reduce bullying, they will be reducing cortisol levels in our young people. This will make them mentally and physically healthier, more resilient, and less likely to be violent.

Online:
www.theathletesway.com

https://www.psychologytoday.com/us/blog/the-athletes-way/201301/cortisol-why-the-stress-hormone-is-public-enemy-no-1

10.Top 10 Life Advice Comments for Millennials

By Matthew Topley

Key Takeaways

  • Surround yourself with the smartest people you can find and learn how to network face-to-face.
  • Become self-aware and get out of your comfort zone. Balls will take you farther than brains.
  • Take a break from technology and social media and master real-world writing and speaking skills. Read bios and obits. Study philosophy, religion and psychology.
  • The first decade of your career is not about making the money—it’s about gaining the best experience and access to the right people.

This is the time of year when college applications and family gatherings collide to create a combustible combination of well-intentioned advice for today’s teens and young adults. With two teens living under my roof, including a daughter heading off to college next year, I thought I would share my favorite fatherly financial tips in the hope that you will share them with your own kids or grandkids.

1. Hang with people up front at conferences.  Why do they even have conferences anymore?  Three-quarters of the room is on the phone while the speaker is on stage. Get the hell off your phone! Pay attention and network with the people sitting up front. It shows respect for the speaker, respect for the hosts, respect for the people around you and most importantly respect for yourself. I don’t have any scientific data to back up this hypothesis, but my guess is your best bet for networking resides in the front rows.

  1. Read obituaries and biographies.  First of all, if Charlie Munger and Warren Buffet suggest you should read all the time, it’s probably a good idea. Second, there is no type of advice better than the real-world experience of accomplished people. When you read biographies, you get the advice of people who have achieved historical change in our society. When you read obituaries, you learn about the incredible lives that people have lived in your own community.
  2. Study philosophy, religion, and psychology instead of self-help.No offense to Tony Robbins, since his investment book is actually filled with good advice.  But, if you want to be a deep thinker and get to the ultimate educational goal of self-awareness, I would start with subjects such as philosophy, religion and psychology.  Telling yourself that you feel great when you look in the mirror three times per day isn’t going to cut it in the real world. Philosophy, religion and psychology will help you better understand yourself and those around you.
  3. Get off Facebook like today if not sooner. I know this one is controversial. Facebook seems essential for keeping in touch with family and friends. But, the biggest disease in society today is the narcissistic personality that social media encourages. Sure some good comes out of maintaining connections on Facebook, unfortunately these popular social media platforms become an addictive form of scrolling voyeurism for 90 percent of users. Social media encourages us to celebrate others failures or envy other’s successes. It really is screwing people up!  Shut it down and see #2 and #3 above.
  4. Work for less money during the first 10 years of your career so you can be around smart people. Your first 10 years of working life will forever change your earnings potential. It’s a lot more important to gain valuable learning experience than economic gain. There is a ton to learn at big companies around technology, presentations, client service, etc. There is even more to learn at small companies where you get to wear more hats. Sure the failure rate is higher for small companies, but failure teaches us many valuable lessons. Consider it good luck, not bad luck, to be at a company that went under early in your career. Soak up as much experience as you can rather than complain on Facebook that you don’t make enough money.
  5. Spend the first decade of work listening. The best thing you can do for your career is hang out with people smarter than you.  If possible, move to where the intellectual capital is prevalent.  This will not have a long-lasting effect unless you can check your ego and listen.  It’s a free education and I highly recommend taking smart people up on the deal.
  6. Learn to speak and write well.Universities don’t do a good enough job teaching graduates how to write for publication or speak in public. You better get on this the day you leave school—finely honed writing and public speaking skills are the ultimate weapons in today’s working world. If overcoming fear is the key to life, then success in the professional world starts with speaking and writing well.  At the end of the day, the people who bring in the clients make the most money and these are the confident people with outstanding communication skills.
  7. Forget SAT scores and focus on self-awareness.  If you’re hoping to be a neurosurgeon, sure you can stay focused on achieving the perfect math score. I recognize this generation has sent more kids to college than any previous generation. Congrats to all the parents willing to pay for SAT tutors, but it’s time for the real world.  If you want to interact every day and survive, your education will come down to self-awareness. You can’t really test for that, but if you don’t know what self-awareness means, it’s time to study up ASAP.  See tips #2 and #3 above.
  8. Avoid dysfunctional people early in the ball game. We are all dysfunctional in our own ways, but seriously dysfunctional co-workers can crush your career and ruin your life. I’m not exaggerating. If you want to watch a realistic show about the white collar world, turn off “The Office”and watch “Game of Thrones.”  Get to know when winter is coming in your career.
  9. Grow a pair.In my 25 years of experience, balls will get you further than brains. Hang out with entrepreneurs and let me know your thoughts. Are they smart?  Of course, but they have an intestinal fortitude that separates them from the pack. There are plenty of smart people in America, but the bigger the balls the better. Bring new ideas to your boss starting tomorrow. Find a way to grow the business. Grow a pair.

Conclusion
So, there you have it. Ten tips for financial/life……….Let me know how these go over with the young adults in your life and feel free to suggest your own favorites for my next Top 10 list. Have a safe and happy Holiday (especially around the family dinner table).

Matthew Topley is the Chief Investment Officer of Fortis Wealth, 1045 First Avenue, King of Prussia, PA 19406  (610) 313-0910 mtopley@fortis-wealth.com and author of the View from the Top blog

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