Topley’s Top Ten – June 7, 2018

1.Small Cap Following Dollar and Momentum Following Tech.

Factor Trends 2018.

2.Quarter One 2018 VC Backed Fintech Deals Hit a Record.

Theme Based ETF on Fintech.

3.Softbank Invested $100B with Vision Fund.

SoftBank’s Vision Fund Investments

by Barry Ritholtz

A few weeks ago, SoftBank’s mammoth Vision Fund came up in my MIB conversation with Steve Murray of Revolution Growth.

At $100 billion dollars, Masayoshi Son has taken the Japanese venture capital firm to new levels. Recode reports that last year, “SoftBank was involved in more than half of the top 10 biggest investments in VC-backed startups.”

If you want to better understand the valuation issue, its a matter of supply and demand. There is an enormous amount of capital looking for a home (Demand) and only so many investments it can go into (Supply).

Where SoftBank has invested its $100 billion Vision Fund

Source: Recode

4.Number of U.S. Stocks Halved But Supply of Global Stocks Doubled.

Supply & Demand in the Stock Market

Posted June 1, 2018 by Ben Carlson

The number of stocks in the U.S. has more than halved since 1997, falling from roughly 7,000 to around 3,400.

This chart from Dimensional Fund Advisors shows how the rest of the world has more than made up for this decline in U.S. names:

Since 1997, stocks outside of the U.S. have doubled, from roughly 20,000 to 40,000.

One of the worries some investors have when they see this kind of data is that the U.S. market is becoming too concentrated at the top.

The data doesn’t back this up.

First of all, the concentration of the top 10 stocks in the S&P 500 has been fairly stable over time in the 20-25% range. In fact, things were far more concentrated at the top in both 1980 (26% in the top 10) and 2000 (24%) than they are now (23%).

It also makes sense to look at the types of stocks that have disappeared over the past 20 years or so. Vanguard found that the majority of publicly traded companies that have dropped off have been micro-cap names. These are the smallest companies in the market, which make up less than 2% of the total U.S. market cap.

They found there were over 2,000 micro-cap companies in 1979, a number that jumped to more than 4,100 during the late-1990s tech craze (most of these stocks probably never should’ve gone public to begin with). Micro-caps names now stand at just over 1,500. Most small companies are simply being acquired by larger companies or private equity rather than going public themselves.

And the proportion of large, mid, and small-cap stocks has been relatively stable since the 1970s:

Read Full Story

Found at Abnormal Returns

5. Buffett says economy is feeling strong: ‘If we’re in the sixth inning, we have our sluggers coming to bat’

Buffett says economy is feeling strong: ‘If we’re in the sixth inning, we have our sluggers coming to bat’

  • Warren Buffett and Jamie Dimon cite several aspects of the economy as reasons for optimism.
  • “Right now, there’s no question: It’s feeling strong. I mean, if we’re in the sixth inning, we have our sluggers coming to bat right now,” Buffett tells CNBC.
  • “The way I look at it, there is nothing that is a real pothole,” Dimon adds. “If you look at how the table’s set, consumers are in very good shape.”

David A. Grogan | CNBC
Warren Buffett

Berkshire Hathaway chairman Warren Buffett and J.P. Morgan Chase chief executive Jamie Dimon told CNBC the U.S. economy is in rare form and could continue to prove strong for years to come.

In an exclusive joint interview with CNBC’s Becky QuickDimon and Buffett cited several aspects of the economy as reasons for optimism.

“Right now, there’s no question: It’s feeling strong. I mean, if we’re in the sixth inning, we have our sluggers coming to bat right now,” Buffett said in the “Squawk Box” the interview that aired Thursday.

“I’m no good at predicting out two or three or five years from now, although I will say this: there’s no question in my mind that America’s going to be far ahead of where we are now 10, 20 and 30 years from now,” the 87-year-old billionaire added. “But right now, business is good. There’s no question about it.”

But Buffett added that a strong economy doesn’t necessarily mean it’s a good time to buy stocks.

“The decision on the stock market should be made independent of the current business outlook,” Buffett said. “I don’t think you should buy stocks based on what you think the next six months or year is going to bring.”

For his part, Dimon — who’s led J.P. Morgan as its CEO since 2005 — echoed Buffett’s positive comments on the state of economic growth, saying that the current uptrend in business could last a number of years.

“The way I look at it, there is nothing that is a real pothole,” the bank chief said. “Business sentiment is almost at the highest level it’s ever been, consumer sentiment is at its highest levels, markets are wide open, housing’s in short supply and my guess is mortgage credit will expand a little bit.”

Comments from the two business leaders came as indicators of economic health continued to show strength. The unemployment rate, for example, fell to an 18-year low of 3.8 percent, according to figures released Friday, while second-quarter growth may reach 4.5 percent, according to the Atlanta Fed’s GDPNow tracker.

Source: U.S. Bureau of Labor Statistics, FRED, Federal Reserve Bank of St. Louis

“If you look at how the table’s set, consumers are in very good shape,” Dimon added. “Their balance sheet, their incomes, wages are going up, their debt levels are low, all the credit written since the Great Recession is pristine, whether it’s mortgage credit – other than student lending, which is done by the government – but it’s mortgage credit, small business credit, large corporate credit.”

“So,” he concluded. “It looks pretty good.”

6.Read of the Day….China increasingly challenges American dominance of science

By Ben GuarinoEmily Rauhala and William WanJune 3Email the author

Like many ambitious young scientists, José Pastor-Pareja came to the United States to supercharge his career. At Yale University, he worked in cutting-edge laboratories, collaborated with experts in his field and published in prestigious journals.

But the allure of America soon began to wear off. The Spanish geneticist struggled to renew his visa and was even detained for two hours of questioning at a New York City airport after he returned from a trip abroad. In 2012, he made the surprising decision to leave his Ivy League research position and move to China.

“It is an opportunity not many take,” Pastor-Pareja said. But the perks were hard to resist — a lucrative signing bonus, guaranteed research funding, ample tech staff and the chance to build a genetics research center from scratch.

After decades of American dominance, Chinese science is ascendant, and it is luring scientists like Pastor-Pareja away from the United States. Even more China-born scientists are returning from abroad to a land of new scientific opportunity.

The United States spends half a trillion dollars a year on scientific research — more than any other nation on Earth — but China has pulled into second place, with the European Union third and Japan a distant fourth.

China is on track to surpass the United States by the end of this year, according to the National Science Board. In 2016, annual scientific publications from China outnumbered those from the United States for the first time.

“There seems to be a sea change in how people are talking about Chinese science,” said Alanna Krolikowski, a Chinese science expert at Missouri University of Science and Technology. Foreign observers, many of whom were once condescending, now “are rather in awe at what the Chinese policies have accomplished.”

The scientific advances are a small piece of China’s larger ambitions. President Xi Jinping aims to supplant the United States as the world’s economic superpower within three decades. In October, Xi vowed to produce “a world-class army by 2050.”

Meanwhile, China is spending more on infrastructure than the United States or Europe, and the middle class has ballooned — making relocation more attractive.

“More and more people keep coming, that’s for sure,” Pastor-Pareja said. “Right now, China is the best place in the world to start your own laboratory.”

7.10 Highest Paid Athletes 2018.

8.5 No-Nonsense Steps to Conquering Information Overload

Because our lives depend on it.

A 2009 study found that the average American consumes 34 gigabytes of content and 100,000 words of information every day, certainly more than our ancestors ever handled—the iPhone had barely been out for 1 year, who knows how much information we take in today. We swim in an increasingly turbulent sea of information and stories: the ones we tell ourselves, the ones we tell others, the ones we hear on the news, and the ones we choose to watch on Netflix—and read in books, listen to on podcasts, and follow on Facebook, Instagram, and Twitter. Research suggests these stories have powerful impacts on our well-being.

  1. Understand What Information Helps You

Some forms of narrative are deeply nourishing. A study at the New School for Social Research found that reading literary fiction especially (as opposed to best-selling thrillers or romances) helps people develop skills they need in social relationships, like the ability to see from another person’s perspective. In particular, participants who read literary fiction were better able to read emotions in other people’s eyes—a critical skill for determining the state of mind of another person.

The researchers believe that the key ingredient in literary fiction is that it improves your creative and intellectual skills as you come to understand the characters in a novel. The ability to understand that another person has his or her own thoughts and feelings is something psychologists call Theory of Mind. Developmental psychologists believe Theory of Mind begins in toddlers and small children and continues to develop with time. Reading brings new perspectives and the ability to see the world through someone else’s experience.

Moreover, inspiring or moving news pieces or articles can uplift us and even teach us new ways of thinking or acting. They are the ones we share with others, tell our friends about and keep thinking about for days. They help us reflect about issues and life in deeper and more meaningful ways. And we have a profound need for meaning – which makes us deeply fulfilled, as Emily Esfahani Smith shows in her book The Power of Meaning(link is external). One way to help uplift others is to post uplifting news ourselves.

  1. Cut out Information that is Destructive

Other forms of narrative, on the other hand, can be exhausting and even destructive: the constant influx of negative, sad, or traumatic news coming our way, violent films, and pornography, as well as the constant barrage of advertising and irrelevant information. Just as “we are what we eat” the same is true for the types of information we absorb. What do you want to be thinking about at the end of the day, what kinds of thoughts do you want floating around in your head?

  1. Practice Volume Control

Even when the narratives that surround us are nourishing, they can still be overwhelming. As a friend shared with me, “I think I am suffering from narrative overload. So many projects, stories—whatever—that even if all of them are ‘good’ I still feel frazzled.” We all need firm boundaries around the types and numbers of narrative we pursue and accept.

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  1. Build Resilience

Given the sheer amount of information we ingest every day, is it any surprise we feel overwhelmed, exhausted, and stressed? Of course, it is wonderful to be so in touch with the world, and this is a time of tremendous freedom of speech and information exchange, but it is more important than ever to be able to disconnect to retain our sanity. Here are some science-based tips that help:

  • Grounding practices like walks in naturemeditation, exercise, and technology fasts can help us get centered.
  • Verbalizing our experiences and feelings by talking them out or writing them down have also been shown to be deeply therapeutic.
  • Breathing practices I’ve described in my book The Happiness Track(link is external)can calm our nervous system in moments, our research with highly stressed individuals (veterans with trauma) has shown. In so doing, we regain the resilience we need.

Instead of being overwhelmed and distracted, we get back in touch with ourselves. We regain awareness of our values, and are reminded of what is actually important to us. Fundamentally, to stay true to ourselves, we need to stay in touch with our own core narrative.

  1. Understand the Impact of Self-Focus

The form our narrative takes is also critical. Depressed or anxious feelings, for example, are often accompanied by self-focus—narratives revolving around “me, myself, and I” as the central character. Yet news pieces are often designed to provoke some sort of anxiety – why? Because it gets our attention. When you read news pieces that make you feel you’re not good enough (women’s magazines and men’s magazines focused diets and looks are particularly good at that), these articles can leave you feeling insecure. As a consequence, we feel more disconnected and lonely. We are less able to connect with others and more likely to brood over negative thoughts.

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However, exercises as simple as focusing on the things we feel grateful for, remembering how much in our life is going right, doing a loving-kindness meditation focused on sending love to others, taking a yoga or exercise class, or engaging in acts of service can quickly shift the discourse of our narrative to one that is more positive and uplifted.

  1. Don’t Avoid

Suffering, pain, and illness are narratives we don’t prefer, yet are inevitable, and they too have a powerful and sometimes beneficial influence. As Sri Sri Ravi Shankar says: “Hardship makes you deeper.” One way it makes you deeper is that you begin to understand that pain is part of the human narrative. And that is a powerful realization.

Happiness is something everyone wants; pain is something nobody does. By fundamentally realizing this point, you begin to participate in a narrative where you actively choose not to hurt others. You become more conscious: of the food you eat, of the words you speak, of the actions you take. Others’ pain becomes your pain.

As a fellow mother told me the other day, “Every time I give my baby cow’s milk to drink, my heart hurts for the cow who was forcibly taken from her calf in order to produce milk for us.” The Jain and Yogic concept of ahimsa or non-violence comes from a deep understanding that others’ pain is also our pain. You therefore weave a new narrative: a narrative in which you walk lightly and delicately, in which you speak consciously and compassionately, in which you act mindfully and with love.

6.Read Topley’s Top 10

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Read more on the science of happiness in my book The Happiness Track(link is external).

Follow me on Twitter @emmaseppala

Copyright Emma Seppala Ph.D. 2018 (c)

This article first appeared on Spirituality & Health(link is external)