Topley’s Top Ten – March 12, 2019

1.Contra-Indicator?  Outflows 49 of 52 weeks in Europe

 $111 Billion in Outflows from European ETFs.

2.Bonds Delivered in 4th Quarter Correction.

3.Good Read on China From WisdomTree.


China Is a Market That Moves in Sweeping Trends

One of the primary questions many investors face is whether to take exposure to a broad benchmark or whether a more country-specific basis makes more sense.

Figure 1 indicates the performance of the S&P China 500 Index, one of the broadest equity benchmarks for China, against the MSCI Emerging Markets Index.

  • It’s easy to remember the start of 2016, when China was destined for the so-called “hard landing.” This was the catalyst for a trend of China equity underperformance until the end of the first quarter of 2017.
  • From about the end of April 2017 to May 2018, there was a strong year of outperformance of China’s equities over broader emerging markets. During this period, we started hearing about the “China-FAANG” stocks as the Information Technology sector was strong, similar to what was seen in the U.S.
  • Emblematic of the trade tensions in place through the second half of 2018, China’s equities began to underperform broader emerging markets. This was a tough period for emerging markets overall, featuring tightening monetary policy from the Fed and a strengthening U.S. dollar. Notably, China is also the world’s second largest economy, so it is difficult to see much in the way of performance from emerging markets without China following suit.
  • Similar to how the appreciation of the British pound may be implying the possibility of an eleventh-hour BREXIT deal coming together, China’s equity market seems to be front-running the possibility of a trade deal with the U.S. We’ve seen outperformance of China’s equities to start the year.

It may be tempting to think about individual sectors within China to increase the octane and cyclical nature of any strategy. Figure 2 indicates just how challenging that might be. In 2017, for example, the spread between the best and the worst of the GICS sectors was around 100%. To mitigate the risk, we think broad exposure to China’s equity market, as opposed to betting on certain sectors, will benefit any asset allocation looking to invest in China.

Figure 2: Gauging the Massive Shifts in China’s Sector Performance

Is It Time to Get Excited about Chinese Equities?
Christopher Gannatti, CFA, Head of Research, Europe
Found at

4.Yale 2016 Target Allocation….Venture Now Up to 20% in 2019

Yale boosts venture capital bet to almost a fifth of endowment

Yale University increased its venture capital allocation to almost a fifth of its endowment, after the asset class helped drive returns for the third-richest U.S. school.

The fund with a record $29.4 billion boosted its venture allocation to 19% as of June 2018 from 17.1% the prior year, according to the school’s annual investment report published online. The allocation was 13.7% in 2014.

Yale, one of the most-watched institutional investors, helped pioneer a pivot to alternatives more than three decades ago.

Yale University endowment rises 12.3%Yale makes changes to retirement plansYale endowment dives into cryptocurrency marketYale allows managers to divest from socially irresponsible companies

This year’s report shows a heavy commitment to alternative investments, though the mix is changing:

Leveraged buyout funds shrunk to a 14.1% allocation as of June 2018 from 19.3% since fiscal 2014. Real estate was down to 10.3% from 17.6% in that period. Hedge funds increased to 26.1% from 17.4%.

The annual report often provides nuggets of insight from the endowment, which has been run by Chief Investment Officer David Swensen since 1985. One theme in 2015 was “the home-run potential” of venture investing, where the payoffs can be huge even with many swings and misses. Yale’s original $2.7 million investment in LinkedIn produced $84.4 million in gains for the endowment after the company went public in 2011.

The venture capital portfolio’s 20-year time-weighted return is 24.6%, a measure that compensates for external flows, according to the most recent report.

The endowment returned 12.3%, net of fees, for the year through June 2018, trailing some schools whose investment chiefs trained at Yale, including Bowdoin College at 15.7% and Princeton University at 14.2%.

5.Where Cash is King in Europe….Europe still all cash society.

by Martin Armstrong,

How much cash do you have with you at the moment? The answer to this question will probably depend, not only on your bank balance, but also on the country in which you live. As figures from the Access to Cash Review show, there are significant cultural differences in the use of cash in Europe. In Greece and Spain, the vast majority of in-person purchases are made with cash – 88 and 87 percent respectively. While in Sweden, Denmark and the UK, most items are paid for digitally.

In the report, which focuses on the UK, despite the relatively low share of people relying on cash in their everyday lives, it was found that over 8 million adults – about 17 percent of the population – would struggle to cope in a cashless society.

6.Has Homeownership Rate Bottomed?

It turns out Americans weren’t ready to become a nation of renters. Homeownership is back in.

7.1400 Cities Lost Newspapers Over the Last 15 Years.

Last September, Waynesville became a statistic. With the shutdown of its newspaper, the Daily Guide, this town of 5,200 people in central Missouri’s Ozark hills joined more than 1,400 other cities and towns across the U.S. to lose a newspaper over the past 15 years, according to an Associated Press analysis of data compiled by the University of North Carolina.

Blame revenue siphoned by online competition, cost-cutting ownership, a death spiral in quality, sheer disinterest among readers or reasons peculiar to given locales for that development. While national outlets worry about a president who calls the press an enemy of the people, many Americans no longer have someone watching the city council for them, chronicling the soccer exploits of their children or reporting on the kindly neighbor who died of cancer.

Decline in readers, ads leads hundreds of newspapers to fold

8.Seven Steps to Reduce Your Stress at Work

Thinking differently can reduce your stress

All of us experience stress at times, but some of us seem to find almost every day to be a stressful experience. You might experience stress in your relationship with your partner, at work, or simply commuting to and from work. Or you feel stressed thinking about finances, your health, or coping with your children. It’s all around us.

Let’s start with some simple ideas. A stressor is something that causes strain or tension and stress is the resulting strain or tension that you experience. This is a distinction made by Richard Lazarus whose stress appraisal theory was a seminal influence on the study of stress. Lazarus proposed that our resulting experience of stress is directly related to our belief about our skills in coping with the stressor. For example, if I have to write a five-page paper and I think that I won’t have enough time and I lack the skills I will likely experience some stress. The stressor is the requirement to write the paper and the stress is my resulting frustration and anxiety. But if I actually have the skills and I believe I can do it then my stress will be less.

There are many ways that we can think about coping with stress or demands on us. No one can provide an exhaustive list. But in this post I will describe seven things that can affect how much stress you experience and how you can cope more effectively with the demands that you face.

  1. Describe Specifics, Not Generalities

    People who are prone to depression often have what is called “overgeneralized memory” (Sumner et al., 2010). This is the tendency to remember, or think about, things in vague and general terms rather than specific descriptions. For example, rather than think “I have a lot of work to do” you might try to be more specific—“I have to write five pages”. The advantage of being more specific is that it seems doable—writing five pages is something that you can imagine doing. But doing “a lot of work” is amorphous, vague, and even ominous if you are anxious. Try to specify precisely what the task is that you are working on. Avoid generalities.

  2. Break It Down into Small Parts

    As many of you may know I have written a lot of books. But it may surprise you that I am not a workaholic, I never write at night, and I almost always get eight hours of sleep. But what I do to cope with the “demands” of writing is I assign myself small steps. For example, rather than sit down and “write a book,” I will sit down and write for one or two hours two or three times each week. Your doctor may tell you that you need to drink eight glasses of water each day. But let’s imagine you were thinking of drinkingall the glasses that you would need to drink over the next 50 years. That’s 146, 000 glasses—right in front of you. Start drinking. It’s overwhelming. OK, try this. Drink this one glass of water in the next hour. If you can break down your tasks to simple steps, one at a time, you will find that you will stress less.

  3. Do One Thing at a Time

    I have noticed that a lot of my depressed, anxious, and stressed patients will start describing one thing that stresses them and when we put that in perspective they jump to another and another. You can imagine how stressful life is when you are jumping from one demand to another demand, chasing around every thought that pops into your head. I suggest staying on one thing at a time. Focus on this task for now and when you have completed it you can then go on to the next task. People with Attention Deficit Disorderoften experience this cascade of demanding tasks, one after another. Take one at a time. That will help reduce your stress.

  4. Give Up Maximization to Experience Satisfaction

    Individuals who expect close to 100 percent levels in performance are far more likely to experience stress than those with more realistic expectations of performance. People holding perfectionistic beliefs may also endorse a motivational theory that “the highest standards are necessary to preserve motivation.” For example, one patient commented, “If I accept less than perfection I will lose my edge, I won’t be motivated, I just want be able to do as well as I can. If I let my standards relax I am afraid that I will become lazy and mediocre.” Research comparing “maximizers” and “satisfiers” indicates that maximizers who uniformly seek the best possible outcome are more dissatisfied, more indecisive and have more regrets (Schwartz et al., 2002).The research on perfectionism also supports this observation. You can reduce your stress if you consider changing your expectations to a “satisfaction” level that is less than perfect. As Salvador Dali once said, “Don’t worry about perfection because you will never see it.”

  5. Fixed vs. Growth Beliefs

    One source of stress at work or study is the belief that one’s abilities are stable and cannot improve or change. Carol Dweck has described differences in “Mindsets” that individuals utilize in approaching challenging tasks. Drawing on decades of research on cognitivefactors that underlie helplessness vs. persistence or resilience, Dweck describes a mindset that some individuals have that abilities are fixed versus the belief or mindset that abilities can grow. If you believe that your abilities are frozen then you will believe that trying harder, persisting, and giving yourself time to learn more won’t work. If you believe that abilities can grow, then you will give yourself time to learn new skills and solve problems. Some of my patients who experience stress often think if they don’t “get it” immediately” then they will never get it. They give up and feel defeated.

  6. How Do You Explain Your Performance?

    How would you explain not doing well on this task? Would it be due to lack of effort, ability, bad luck, or that the task was just too hard for almost anyone? If you explain your failure on a task as due to lack of ability, then you will feel helpless and hopeless. If you explain your failure as due to the task difficulty (“No one does well on this”) then you won’t feel badly about yourself, although you might give up on the task. If you explain the failure as due to lack of effort, you might try harder and eventually get it. How do you explain your failure on something? You can also ask yourself, “Is there something that I learned from this experience that can help me cope better in the future?”

  7. Put Things in Perspective

    Stress is always greater when you give enormous significance to how you do on a task. For example, one young man thought that if he couldn’t get this project done at a level that his boss would like then he was a failure and that he would then lose his joband then feel disgraced among his family and friends. This is like thinking you are walking a tight-rope ten stories up. But as we looked at the task at work it was one that a lot of people had difficulty with. And he also realized that in his group at this company very few people lasted more than three years. Many moved on to more rewarding, less stressful jobs. He could also recognize that there were a lot of things in his life that he enjoyed independently of this job. As his stress lessened, he was able to concentrate better on his job. And when he turned it in his boss did raise some criticisms (as she was likely to do with anyone) but that this simply came with the territory. Everyone got criticized at some point. So, don’t take it personally. I discuss this and many other techniques in my book, The Worry Cure.

    One way of thinking about any stressor is to ask yourself what you will still be able to do even if this doesn’t work out. For example, the man described above could still see his family and friends, still work on other projects, still go to sports events that he enjoyed, still travel, still consider other possible jobs. In fact, the list became exhaustingly long. You can also ask yourself how you will think about this a week, a month, or a year from now. I am willing to bet that a lot of things that you found stressful in the past are things you almost never think about now. The stress fades. There is life after this task.

Last Thoughts

Stress has a lot to do with how you think about it. Take a deep breath, use your mindfulness techniques, stand back and observe how you are thinking about things. Keep in mind: There is always another way of thinking about things.