Topley’s Top Ten – March 15, 2018

1.Treasuries Go Range Bound.

Range Trading

As for Treasuries themselves, they have settled into a new trading range after an almost 1 percentage point increase in the 10-year yield from September to late February. That stability has kept it from retesting the 3 percent level for now, a move above which is seen as a risk to many markets.

— With assistance by Andrew Janes, and Joanna Ossinger

Wages Also Range Bound

Wages: Same As It Ever Was?


Kevin Flanagan, Senior Fixed Income Strategist—Wisdom Tree

The jobless rate remained at 4.1% for the fifth consecutive month, which is the low watermark for this expansion. The alternate measure of job creation, civilian employment, has been surging thus far in 2018, producing a two-month average of just under +600,000.

Average Hourly Earnings

Let’s turn our attention to wages. Average hourly earnings (AHE) rose at an annual rate of +2.6% in February, following a downward revision of 0.1 percentage points for the prior month. In other words, the +2.9% surprise to the upside in January has now been dialed back a bit to +2.8%. Remember, one of the lynchpins behind the rise in the UST 10-Year yield this year was an increase in inflation expectations, led by said “January surprise.” The current pace leaves wages essentially “stuck in the mud,” at least for the time being, illustrated by the fact that the average year-over-year increase over the last two years has been that same +2.6% (see the graph).


So, when will that jobs trend translate to higher wages? According to the new Fed chair, a key force behind the frustrating lack of significant progress has been the result of “the weak pace of productivity growth in recent years.” Powell also stated that given the economic backdrop and strong job creation, he expects to see wages rising. This line of reasoning is definitely justified, but thus far, the results have been lacking. Nevertheless, there does seem to be an expectation that later this year, the annual rate of increase for AHE will eventually hit, and possibly eclipse, the +3.0% threshold. The bottom line is that, barring any unforeseen circumstances, the Fed will not be dissuaded from raising interest rates this year, a development expected for next week’s FOMC meeting.

Wisdomtree Blog

2.Adding $1 Trillion in Debt and Foreign Appetite for US Treasuries is Declining.

Foreign appetite for US Treasuries is declining, see chart below. What is particularly worrying is that despite the Fed having lifted short-term rates significantly we continue to see a decline in foreign appetite for T-bills. Similarly, the fact that the dollar is not going up despite higher interest rates is also remarkable. We are not predicting an EM-style fiscal debt crisis for the US, but the fact that higher interest rates in the US are not able to attract foreign investors to T-bills and push the dollar higher are worrying signs. For more discussion see here. Also, If you think my team is helpful then please vote for us in Fixed Income II, which started this week, or in Equity II voting, which is in May. My team is in the category: Strategy & Economics: Economics.


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3.Blackrock Makes Case for Emerging Market Bonds.

The BlackRock strategists pointed to four reasons why emerging markets bonds are a great bet going forward and why they were resilient during the selloff in February.

  • Monetary policy in local markets is very attractive for bond investors, Trigo Paz explained. That’s partly because you have diversification across a wide range of countries with different levels of inflation and partly because the EM central banks typically have plenty of room to lower interest rates. If rates go down, yields on local bonds usually follow, which means prices go up. Yields and prices always move inverse.
  • Economic growth across developing economies is much stronger than during the infamous taper tantrum of 2013, which sent emerging-market assets into a tailspin. The exodus from EM at that time was largely due to huge sums of money pumped into the financial system via the Federal Reserve’s quantitative-easing program, which worked its way into emerging-markets assets. When it looked like the Fed would remove those easy-money initiatives, investors freaked because they realized the EM economies weren’t strong enough to stand alone.However, that has changed now, according to Trigo Paz.“That means you go there, but you are not buying the Fragile 5, fiscal deficits or whatever in trying to go for an asset using QE. You are buying emerging markets because of the [solid] dynamics of those countries,” he said.
  • The political risks are much lower across those regions than they’ve been for years. Concerns over the North American Free Trade Agreement, or Nafta, political shifts in South Africa, and Russian sanctions have all been priced into the market, so there is little to worry about overall, Trigo Paz said. He did, however, warn that coming elections in Brazil and Mexico could spark some volatility.
  • Institutional investors are getting excited about EM. Using the taper tantrum as an example again Trigo Paz said investors had used the emerging-market assets from a tactical perspective and not because they fundamentally believed in the space. But that has changed now, and institutional clients are using EM assets as a building block for their portfolios, which make the bonds a more stable place to invest than previously, he added.

This story was first published on March 14, 2018.

Ishares Emerging Markets Bond ETF.


4.Somebody Betting Big on Inflation….Vanguard Materials ETF Sees Largest Weekly Inflow on Record.

Trade War Inflation Fears Spark Rush to ETFs That Would Benefit

Trade War Inflation Fears Spark Rush to ETFs That Would Benefit

Vanguard Materials ETF Double Since 2016 Lows.

5.Another Look at the Dominance of FAANG…..Tech Now 25% of S&P

Amazing Spike from 2016

6.Cobolt Prices Double in One Year….Key Battery Ingredient.

China just locked in its position as a dominant player in electric vehicle production

  • China signed a deal to secure a huge amount of the global supply of cobalt.
  • The Chinese company GEM will purchase 50,000 tonnes of cobalt over three years, which amounts to half the world’s supply in 2017.
  • The deal locks in China’s position as a market leader in the manufacturing of electric car batteries globally.

China has signed a huge deal to secure the lion’s share of global cobalt supply — a core component of electric car batteries.

The deal will see GEM — a $4.6 billion company listed on the Shenzhen stock exchange — purchase 50,000 tonnes of cobalt from mining company Glencore over the next three years.

According to the Financial Times, that’s equal to half of the world’s total cobalt supply in 2017 — and comprises around one third of Glencore’s total production estimates through 2020.

The Glencore deal locks in China’s position as a market leader in the manufacturing of electric car batteries globally — given that it already produces more than 80% of the world’s refined cobalt.

Prices for the metal have doubled over the past two years as electric vehicle manufacturers scramble to secure adequate supplies.

There’s a similar race to lock in supply for lithium — Australia is one of the world’s biggest suppliers— although a recent report by Morgan Stanley said increased global lithium supply will see prices fall by 45% by 2021.

GEM said increasing levels of demand meant the use of recycled cobalt metal in battery production was no longer adequate. The company is the main cobalt supplier to Chinese batter maker CAML, which recently announced that it’s now the largest battery supplier in the world.

The total value of deal was not disclosed, but GEM will receive 13,800 tonnes in year one — increasing to 21,000 in 2020.

The FT reports that more than half of the world’s cobalt supply is mined from the Democratic Republic of Congo (DRC), and Glencore is the world’s biggest producer.

The second largest is China Molybdenum — dual-listed in Hong Kong and Shanghai — which purchased the Tenke Fungurume mine in the DRC for $US2.65 billion in 2016.

Glencore’s cobalt mining capacity in the DRC will increase from in around 40,000 tonnes in 2018 to more than 60,000 tonnes next year.

Around 10 kilograms of cobalt is used in the production of an electric car battery — compared to around 10 grams for an iPhone.

Read the original article on Business Insider Australia. Copyright 2017. Follow Business Insider Australia on Twitter.

 7. Lithium More Than Double Since Early 2016…Key Battery Ingredient.

$90 Billion In Investments Into EVs & Batteries Now Pledged By Global Auto Manufacturers

March 15, 2018 By Staff Editor

Porsche recently doubled their investment in electric cars to 7.4 Billion by 2022, Volkswagen is spending 24 Billion by 2030, and Ford plans to roll out 40 electric vehicles by 2022, investing 11 Billion in the same time frame. That’s a lot of Lithium demand, in a very short time frame.

Where will all this Lithium come from to power the World’s new found green energy surge?

According to experts, the junior lithium miners have the most upside in this race, mainly due to untapped energy metals which are now being sought after on a scale never seen before in our lifetime. There’s a lot of choices out there for investors, and investing in this sector is as sure of a thing as speculative investing will ever be.

The appetite for lithium can only get steadily higher, and it is still a long way off from being fulfilled. The demand for electric cars alone is enough to make this shinny substance the premium commodity of the next decade, and beyond. While your smartphone Li-ion battery contains a few grams of lithium, a Tesla “Model S” for instance, might have 100 pounds of lithium. And Tesla is just one of the major forces driving lithium demand.

Lithium carbonate prices could easily rise from about $7,000 per ton to $10,000 in the next few years. (Source: “Luster of Advantage Lithium Shines as Tesla Surpasses GM in Value,” NASDAQ, May 8, 2017.) They are already up 30% just a few years ago

8.As You Would Guess…New ETF Focused on Electric Vehicles….KARS.


KraneShares Electric Vehicles & Future Mobility ETF

Investment Strategy:

KARS seeks to measure the performance of Solactive Electric Vehicles and Future Mobility Index. The Index is designed to track the performance of companies engaged in the production of electric vehicles and/or their components, or engaged in other initiatives that may change the future of mobility. The Index includes issuers engaged in the electric vehicle production, autonomous driving, shared mobility, lithium and/or copper production, lithium-ion/lead acid batteries, hydrogen fuel cell manufacturing and/or electric infrastructure businesses.

 9.The Future of Radio Revenues???

— iHeartMedia Files for Bankruptcy

iHeartMedia Inc. IHRT , the largest owner of radio stations in the U.S., filed for Chapter 11 bankruptcy.

The company said it reached an agreement with holders of more than $10 billion of its outstanding debt for a comprehensive balance sheet restructuring that would reduce its debt by more than $10 billion.

iHeartMedia said it would continue operating the business in the “ordinary course as a leading global multi-platform media, entertainment and data company.”

The company, which owns 858 radio stations, said it believes that cash on hand, together with cash generated from ongoing operations, “will be sufficient to fund and support the business during the Chapter 11 proceedings.”

Number of commercial radio stations in the United States from 1952 to 2016

10.7 Years Ago I Graduated from Ranger School—Here are 7 Life Lessons that Remain with me to this Day

  • Published on Published onMarch 8, 2018

Wes Cochrane

Seven years ago this week, on March 4th, 2011, I graduated from the U.S. Army’s Ranger School. Frequently, Ranger School is touted as the Army’s best leadership training and one of the most grueling experiences a soldier can endure, short of actual combat.  The 62-day ordeal simulates the harsh, austere environment of combat. The school is designed to teach soldiers, NCOs, and Officers how to lead combat units successfully, under immense stress, with limited resources, while facing challenging terrain and a determined enemy. Trainees can expect to get 0-5 hours of sleep per night and consume 2 meals per day. Ranger grads laugh at the story that has made its way around over the years about a soldier, deployed to Vietnam, who woke up in a cold sweat one night, having just had a nightmare. The soldier looked about and sighed with relief, “Oh, thank God. It’s only Vietnam. I thought I was in back in Ranger School.”

Ranger School was one of the toughest seasons of my life. As I reflect back on the experience 7 years later, I’ve come up with 7 lessons that have stuck with me since.

FIRST.  At some point, we just need to show up.

No one really wants to go to Ranger School. It’s absolutely dreadful. I still have the occasional anxiety dream about being back there, leading a patrol. But, we all acquiesced and showed up. Nothing could substitute for simply beginning the experience.

In life, talk is easy. Real credit goes to those who, ready or not, put themselves out there and take a shot at their goals. Often the momentum of merely beginning a new mission, task, initiative, or endeavor is sometimes just the spark you need to continue it. No magic amount of training or preparation can substitute for breaking that coefficient of friction and getting the ball rolling.

SECOND. More “readiness” and “preparation” is not always the answer.

Ranger School is immensely physically demanding. It’s no surprise that candidates preparing for it spend hours ruck marching under heavy loads, performing body-weight exercises like pull-ups and pushups, hitting compound lifts in the gym, and churning out 5-mile runs “for time.” All of this fitness is really only good for one thing—RAP Week; that is, the Ranger Assessment Phase, a four-day bout of testing that includes push-ups, pull-ups, sit-ups, a 5-mile run, 12-mile ruck march, long distance land navigation, survival swimming, an obstacle course, and other mental tests. Fitness really does matter here.  One of the major reasons for a Ranger student’s failure is simply not getting through RAP week. It’s freaking hard.

But, after RAP week, Ranger School becomes much more about one foot in front of the other. In other words, after RAP week (and especially after the first of three phases), Ranger School is less about physical fitness, and more about mental toughness. This got me thinking…

Often we are comfortable endlessly preparing. We can easily be convinced that we are doing ourselves a favor by preparing more than necessary. It will only help, right? We can easily forget that so much of success in life comes down to grit and mental toughness. It comes down to resilience. Life is hard. Period. And it is a mistake to always view more preparation as the silver bullet for handling future challenges. Sometimes it just comes down to putting one foot in front of the other and simply not quitting. More squats and pull-ups can’t train that.

THIRD. Overcoming many of life’s challenges comes down to our perspective.

Ranger School is a battle for your mind. Back in January of 2011, my class had completed RAP week and many of us were thankful to finally start the real training of Phase 1. We had marched out to Camp Darby to begin “Benning Phase.” It was only the first night out there, and it was cold. Our Ranger Instructors (RI) were teaching a hands-on class on Battle Drill 1A (pronounced “One Alpha”), where we practiced dividing our unit in half; with one half providing suppressive (or covering) fire while the other maneuvered on the enemy. The RIs hadn’t let us put on some of our cold-weather gear yet. As ridiculous as it sounds (with it being just the first week there), my mind started to waver. I started to fear… I was so cold that I couldn’t think straight. All I could think about was being warm. In my head, I started to think, “How can I possibly do this? It’s the first night of real training and I’m already struggling so much. I can’t take 50+ more days of this.” That night was the only night I really considered quitting…

Thankfully, shortly after the “block of instruction” concluded, the RIs gave us an opportunity to layer up and eat one of our two meals. Instantly, my perspective changed. I realized that perspective, not super-human resistance to cold or hunger, would get me through. And it did. Each day was a battle to remind myself that I’d be able to rest soon. Or, I’d eat soon. The discomfort would eventually subside.

Similarly, in life and work, we have to fight for perspective. Circumstances will always be difficult. No one has a monopoly on suffering. In fact, there is plenty of it to go around. Take just one component of typical adult life, for instance—parenting. Add that to your already demanding work and you have a recipe for suffering right there! Because circumstances are not necessarily a dial that we can play with (since so often they are out of our control), we are left manipulating the dial of perspective.

If you struggle with this, find a friend, a partner to confide in. The truth is that despite what Instagram accounts and Facebook feeds may suggest, everyone struggles and no one has “it” together.

FOURTH. The best teammate or co-worker is the one who makes everyone around him or her better.

I was fortunate to have several Army Green Berets in my Ranger School platoon. These guys were the best of the best—fit, smart, likeable, durable, etc. More than that, they also consistently taught others what they knew. Most of them viewed Ranger School, even in all its challenges, as an opportunity to practice a critical mission of the Green Beret—to train “foreign internal defense” forces (or FID forces). These Special Forces soldiers viewed their Ranger School peers as opportunities to practice their craft of elevating the performance of those around them. And it was incredible to behold and experience myself.

In life, surround yourselves with people like this. Hire them. Recommend them. Befriend them. Become them. The best people to have in your organization are people who look not to their own needs, but also to the needs of others. You want men and women with their heads on a swivel, looking around and seeing how they can make the rest of the organization better.  This will have a positive impact on your organizational culture and ultimately propel your organization toward its goals. On the flip side, if you are trying to add value as an employee, find ways to elevate the performance of those around you. Help others, behind the scenes, improve their performances. Become a mentor. You will reap what you sow.

FIFTH. Success often looks messy.

Success does not always come easily and sometimes it can look like a real hot mess. There doesn’t have to be anything wrong with this. In the third phase of Ranger School, in Florida’s panhandle, Ranger Students finish with a 10-day field training exercise (FTX), where they are assessed in leading long-range patrols and conducting raids and ambushes in the Florida swamps.

My Ranger buddy (we’ll call him Jay) was leading a patrol of exhausted, hungry, and loopy Ranger students. This was the final day of the 10-day FTX. Jay needed a “go” on his patrol to pass Florida phase. It appeared that we’d be late to our objective and miss our hit time (a big no-go). Jay could not accept this. He frantically (literally) ran about encouraging his fellow Rangers to run. He grabbed equipment from men who were struggling and transferred it to men who could handle the extra weight. He furiously checked his map and distance to the objective. He yelled (yes, not too tactical…) at his peers to keep it up. In essence, he spent himself to do anything and everything he could to help his unit reach its goal.

It worked.

We barely made our hit time and probably had the worst raid ever. Nonetheless, the RIs were inspired by Jay’s heart and the relentless pursuit of the mission. Did the RI’s see an incredible display of tactical expertise? No. Did they see a compelling display of selfless leadership? Yes. Jay was the only leader on that patrol to receive a “go.”

In life, things aren’t always perfect. Sometimes, despite our best efforts, we just don’t looklike we have it all together. But, that doesn’t have to be an obstacle to success. In this culture of digital image crafting, it’s easy to think that everyone’s work is perfect and flawless all the time. BS. This just isn’t the case. Anytime you have humans interacting, life will be messy. While it should be our aim to do things well all the time, we need to recognize when our own “need” for everything to be perfect is actually getting in the way of our goals.

SIXTH. Everyone can contribute something—find your value.

In Ranger School, not everyone has a gifted mind… There are some real “knuckle draggers” that make it to Ranger School. But, you know what? Some of these soldiers have unbelievable grit. They’ll carry anything you give them. They’ll carry the heaviest machine guns, extra ammo, radio equipment, special equipment, etc. Then, they won’t want to surrender it. They’ll bond with the difficulty and consider it their cross to bear. And others will gladly let them bear it. In Ranger School the body feels every extra ounce of added weight.

Some Ranger students literally collapse from the weight of 13 extra pounds. They simply can’t handle it.

But, there are those, with nothing cerebral to offer, that become the saviors of their platoons or squads for their willingness to simply bear burdens.

The lesson? Everyone has value to add. Find yours. Recognize the potential in others, even if it appears simple and unsophisticated. Don’t arrogantly belittle what someone has to add because it isn’t sexy or impressive.

By the end of Ranger School, we all learned to cherish the soldiers who volunteered to simply carry “heavy shit.”

SEVENTH. Bury the ego—we all need teammates.

Ego kills us. When everything has to be about us, we poison our ability to truly add value. We actually ensnare our value. We cage it. We don’t give people access to it because our Ego is jumping in the way. In other words, Ego is not only hurting you (by making others eventually despise you); it’s also hurting the people who have to work with you. They aren’t getting your best.

Ranger School, if it did anything, exposed us for who we were. It revealed how we acted when there was not enough energy left to posture. Take away food; take away sleep; take away family; take away leisure time; for 2 or more months; and you see the man underneath. Sometimes it wasn’t pretty. This goes for me too. There were moments when I was saddened, as if I could see myself from the perspective of a third party, by my ownselfishness and self-centeredness.

If there is anything I learned in Ranger School, it’s that I need a team to do anything worthwhile in this life. There is nothing I can do unilaterally. If I want to be my best version, I need folks in my life in whom I invest and who invest in me.

**There is much that could be said about the benefits of Ranger School and the lessons to be drawn. I have not touched on all of them by any means. Folks will have other lessons to add to the conversation! Truly, as a society though, we must encourage our young men and women to pursue hard things for the sake of pursuing hard things. Trials foster grit. We ought not crave the easy path, when there is so much to be gained from embracing life’s many versions of “Ranger School”.