Topley’s Top Ten – May 6, 2020

1.The Buffet Indicator Up to Date Q1 2020.

The Latest Data-With the Q1 GDP Advance Estimate, we now have an updated look at the popular “Buffett Indicator” — the ratio of corporate equities to GDP. The current reading is 156.3%, up from 156.0% the previous quarter.

Advisor Perspectives

2.March Decline in Exports Worse Than Lows in 2000 and 2008.

 The March decline in exports was the highest in recent history.

• US imports from China plummetted over the past year.

Source: @TCosterg

The Daily Shot

3.MSCI ACWI Stock Concentration….Top 10 Names Highest Market Cap Since 2000.

Ned Davis Research

4.High P/E vs. Low P/E 10 Year Stock Performance Spread Wider than Internet Bubble.

What you are witnessing right now is a generational clobbering of Low P/E stocks by High P/E stocks, the likes of which we haven’t seen since the Tech Bubble…

5.Valuation of Energy and Metals Companies Relative to S&P at Historical Lows-



Valuation of Energy and Metals Companies Relative to the S&P 500

As of 3/31/20 | Source: S&P, MSCI, Moodys, GMO

GMO Commentary- An Investment Only a Mother Could Love: The Tactical CaseBy Lucas White and Jeremy Grantham

6.Buffett Comments Now Sam Zell Comments

Billionaire Sam Zell Sees Economy Permanently Scarred by Pandemic

by Erik Schatzker, 5/5/20

Sam Zell, the billionaire known for buying up troubled real estate, said the coronavirus pandemic will leave the same kind of impact on the economy and society as the Great Depression 80 years ago, with long-lasting changes in human behavior that imperil many business models.

“Too many people are anticipating a kind of V-like recovery,” Zell said in an interview with Bloomberg Television. “We’re all going to be permanently scarred by having lived through this.”

Just as the depression left behind a generation that couldn’t shake the experience of mass unemployment, hunger and desperation, the burdens this crisis has forced on society may be similarly hard to forget. Zell, 78, said it won’t be easy for people to live as they did before the “extraordinary shock” of the pandemic.

He expects some amount of social distancing and working from home to persist long after the acute phase of the outbreak is over, possibly for years. Retail, hospitality, travel, live entertainment and professional sports are some of the industries he sees continuing to struggle.

“How soon will anybody get on an airplane? How soon will anybody stay in a hotel? How soon will anybody go to a mall?” he asked. “The fact that these places may be open doesn’t necessarily mean that they’ll be doing business.”

Nothing to Buy

Zell disagrees with the conventional wisdom that big cities like New York are doomed and warehouses are the smartest bet in commercial real estate.

For now, the raspy-voiced investor who earned his nickname, the Grave Dancer, buying distressed real estate in the 1970s, is watching from the sidelines. Like Warren Buffett, Zell hasn’t found anything to buy since the onset of the pandemic. Part of the problem is a lack of deals.

“Those sellers that wanted to sell still remember the prices that were available seven or eight weeks ago. The buyers are looking at a very different world and expecting to see significant discounts,” he said. “When you’ve got that big a spread, nothing happens.”

Zell’s own investments — concentrated in real estate and ranging from U.S. mobile-home parks to shopping centers in Latin America — have been a mixed bag. At one project, a bridge called the Cross Border Xpress that connects California with Tijuana International Airport in Mexico, business is down 90%. Yet at U.S. hospital chain Ardent Health Services, “the impact is almost unfelt,” other than government bans on elective surgery, he said.

Every weekday morning, Zell confers with his managers on a Zoom call from his office overlooking the Chicago River. Recently, he’s been briefed on the situation at Equity Residential, his largest publicly traded company.

Shares of the real estate investment trust, one of the biggest apartment owners in the U.S., are down almost 30% since late February. Rents, however, are holding up well enough that Zell said he doesn’t expect any significant changes in monthly collections.

Oversupply Warnings

For years, Zell has been warning that the U.S. construction boom would result in oversupply and lower prices, and the current shutdown “is going to dramatically make things much worse.”

“Just like we won’t see a lot of retailers reopen,” he said, “I think we’ll see a lot of hotels that basically can’t reopen.”

When he does decide it’s time to invest, Zell will have plenty of company. Apollo Global Management Inc. is pivoting its $25 billion private-equity fund to buy distressed corporate debt. Oaktree Capital is raising a $15 billion pool to capitalize on similar situations.

“Bankruptcies are what you need to clear markets and what you need to end recessions and dips,” Zell said. “The fact that there’s a lot more distressed players today will help clear the market, but it also means that there aren’t anywhere near as many opportunities as there were in the past.”

Bloomberg Opinion provided this article. For more articles like this please visit

7.Spread Between 10 Year Treasury and 30 Year Mortgage Rates at Record Highs.

Chart of the Day

The spread between Treasuries and 30-year mortgage rates is at GFC levels. (chart via @ycharts)


Abnormal Returns Blog

8.Mortgage Delinquency Payments Only Slight Uptick…Foreclosures at Record Lows.

Bespoke Investment Group
Looking for deeper insight on markets?  In tonight’s Closer sent to Bespoke Institutional clients, we look at how the S&P 500 has broken its recent uptrend and the massive rally in crude oil over the past 10 days.  Next, we delve deep into March trade data and consumer credit data.

See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!

9.Your genes could determine whether coronavirus puts you in the hospital — and we’re starting to unravel which ones matter

By Austin Nguyen,Abhinav Nellore andReid Thompson-Marketwatch

Differences in HLA genes may be a significant reason for huge differences in infections

When some people become infected with the coronavirus, they only develop mild or undetectable cases of COVID-19. Others suffer severe symptoms, fighting to breathe on a ventilator for weeks, if they survive at all.

Despite a concerted global scientific effort, doctors still lack a clear picture of why this is.

Could genetic differences explain the differences we see in symptoms and severity of COVID-19?

To test this, we used computer models to analyze known genetic variation within the human immune system. The results of our modeling suggest that there are in fact differences in people’s DNA that could influence their ability to respond to a SARS-CoV-2 infection.

What we did

When a virus infects human cells, the body reacts by turning on what are essentially antivirus alarm systems. These alarms identify viral invaders and tell the immune system to send cytotoxic T cells — a type of white blood cell — to destroy the infected cells and hopefully slow the infection.

But not all alarm systems are created equal. People have different versions of the same genes — called alleles — and some of these alleles are more sensitive to certain viruses or pathogens than others.

To test whether different alleles of this alarm system could explain some of the range in immune responses to SARS-CoV-2, we first retrieved a list of all the proteins that make up the coronavirus from an online database.

We then took that list and used existing computer algorithms to predict how well different versions of the anti-viral alarm system detected these coronavirus proteins.

A model of an HLA protein (green and yellow) bound to a piece of a virus (orange and blue) – in this case, influenza. Prot reimage via Wikimedia Commons, CC BY-SA

Why it matters

The part of the alarm system that we tested is called the human leukocyte antigen system, or HLA. Each person has multiple alleles of the genes that make up their HLA type. Each allele codes for a different HLA protein. These proteins are the sensors of the alarm system and find intruders by binding to various peptides — chains of amino acids that make up parts of the coronavirus — that are foreign to the body.

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Once an HLA protein binds to a virus or piece of a virus, it transports the intruder to the cell surface. This “marks” the cell as infected and from there the immune system will kill the cell.

In general, the more peptides of a virus that a person’s HLAs can detect, the stronger the immune response. Think of it like a more sensitive sensor of the alarm system.

The results of our modeling predict that some HLA types bind to a large number of the SARS-CoV-2 peptides while others bind to very few. That is to say, some sensors may be better tailored to SARS-CoV-2 than others. If true, the specific HLA alleles a person has would likely be a factor in how effective their immune response is to COVID-19.

Because our study only used a computer model to make these predictions, we decided to test the results using clinical information from the 2002-2004 SARS outbreak.

The section of DNA that codes for HLAs is on the sixth chromosome. Pdeitiker at English Wikipedia / Wikipedia, CC BY

We found similarities in how effective alleles were at identifying SARS and SARS-CoV-2. If an HLA allele appeared to be bad at recognizing SARS-CoV-2, it was also bad at recognizing SARS. Our analysis predicted that one allele, called B46:01, is particularly bad with regards to both SARS-CoV-2 and SARS-CoV. Sure enough, previous studies showed that people with this allele tended to have more severe SARS infections and higher viral loads than people with other versions of the HLA gene.

Read:Early research indicates the coronavirus has mutated, similar to SARS

What’s next?

Based on our study, we think variation in HLA genes is part of the explanation for the huge differences in infection severity in many COVID-19 patients. These differences in the HLA genes are probably not the only genetic factor that affects severity of COVID-19, but they may be a significant piece of the puzzle. It is important to further study how HLA types can clinically affect COVID-19 severity and to test these predictions using real cases. Understanding how variation in HLA types may affect the clinical course of COVID-19 could help identify individuals at higher risk from the disease.

To the best of our knowledge, this is the first study to evaluate the relationship between viral proteins across a wide range of HLA alleles. Currently, we know very little about the relationship between many other viruses and HLA type. In theory, we could repeat this analysis to better understand the genetic risks of many viruses that currently or could potentially infect humans.

Now read:Treating a typical coronavirus infection is four times the cost of a case of the flu

Austin Nguyen is a Ph.D. candidate in computational biology and biomedical engineering at Oregon Health & Science University in Portland. Abhinav Nellore is an assistant professor of biomedical engineering and surgery and Reid Thompson is an assistant professor of radiation medicine, both also at Oregon Health & Science University. This was first published by The Conversation — “Your genes could determine whether the coronavirus puts you in the hospital – and we’re starting to unravel which ones matter”.

10.This Can Make You Happier

How you explain your experience matters to your mood and relationships.

Source: Alex Jumper/Unsplash

In the early days, when we were still dating, my now-husband had a bad habit that almost derailed our relationship. He was hostile on the road.

If another driver cut him off, he would flip out, flip him off, pound the steering wheel. Yell. If another driver failed to let him merge, or tailgated him on the highway, ran a yellow, my husband took it personally and he got fired up about it.

I hated it. Heck, I’ve been cut off plenty of times. I’m not a saint on the freeways, I can get plenty upset about it too, but rarely. I’m much quieter that way. Usually, I note the lack of courtesy and figure the other driver is late for work, or racing to the hospital, or just didn’t see me. I figure he just made a mistake and I’ve made plenty of those myself.

In short, I give the offending driver the benefit of the doubt, and then it’s over. I usually don’t think about it again. My husband, he used to talk about the incident all day long. It stuck to him. Stressed him. And that affected us. 

We all have what psychologists call an attributional style that determines the way we explain situations to ourselves. My husband would often blame the other driver and view the mishap as a personal attack. Me, I just figured people made a mistake and it had nothing to do with me. 

He got angry. I forgot about it and moved on. Both approaches did influence how we interacted with each other though. I’d feel stressed and upset when he erupted. And sometimes we’d argue about that.

A new study in the Journal of Happiness Studies indicates that the way we explain life experiences and situations to ourselves impacts our relationships and happiness

When we feel slighted, a friend forgets to call on our birthday, or a boss fails to give us the praise we think we deserve, we can view the situation as a sign of disrespect and feel hurt, devalued, and angry. Or we can tell a different story.

Perhaps the friend didn’t have a chance to call because her child is in the emergency room, or the boss had a difficult meeting with his supervisor right before and wasn’t thinking. Maybe — probably — the mishap had nothing to do with us. Recognizing that, might help us feel better. 

By interpreting the actions of another as malicious or hurtful, we are hurting ourselves. When we give others the benefit of the doubt, researchers say we can boost our happiness.

In a study of 707 participants, researchers found that people who gave others the benefit of the doubt were happier and got along better with others than those who interpreted the actions of others as intentionally mean. 

With plenty of research supporting the importance of a healthy social network to ward off mental and physical health issues, the lead researcher of this benefit-of-the-doubt study Dorota Jasielska, suggests the two might be connected.

If we are surrounded by people who are kind, warm, and supportive we may be more likely to see the world as a safer, gentler place, and give others a break, Jasielska says. And staying close to people you trust and care for also makes it easier to check out the assumptions that can get us into trouble. 

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When I catch myself feeling slighted, or hurt, when I’m jumping to conclusions, particularly in work relationships, or with close friends, I often speak up. I’ll ask about it. In a calm and curious tone, I’ll ask “I want to make sure I understand…what did you mean by this?” Or “I’m feeling confused here, can you explain to me what you want?”

And, in my husband’s case of the crazy drivers, we began playing the what-if game, challenging his beliefs about other drivers. What if, I suggested, the driver who cut you off was on his way to a veterinary hospital with his dying dog and didn’t even see you? What if he would say, the driver who failed to let me merge was so deep in conversation with his teenage son that he just made a mistake. What if,  Zombies are chasing that guy in the truck and he’s speeding up to lead them away from the rest of us?

The game became sillier as time went on and over time my husband learned to give other drivers – and other people — the benefit of the doubt. He said he isn’t sure if that’s impacted his happiness one way or another, but I know this — it’s improved mine because he’s a lot more chill behind the wheel.