Topley’s Top Ten – November 19, 20185

1.Thanksgiving Market Returns

Thanksgiving week has historically been a positive time for the equity market.  Since WWII, the S&P 500 has averaged a gain of 0.64% during Thanksgiving week with gains three-quarters of the time.  Market trends heading into this Thanksgiving aren’t as positive for the bulls, though.  As shown in the table below, during years where the S&P 500 was positive but up less than 5% YTD heading into Thanksgiving week, the index’s average change during the week has been 0.00% with gains less than half of the time.

On a day to day basis, for both all years since WWII and in years where the S&P 500 was up less than 5% heading into Thanksgiving week, Monday has been the worst trading day as it is the only day of the week with negative average returns and positive returns less than half of the time.  Tuesdays and Friday, however, have been positive days, though, with average gains of 0.10% and 0.29%, respectively.  Additionally, for those years where the S&P 500 was up YTD but up less than 5%, Tuesdays and Fridays have been even stronger with average gains of 0.26% and 0.35%, respectively.

As we move past Thanksgiving, though, seasonal trends for the market based on this year’s performance so far improve.  In those years where the S&P 500 was up less than 5% YTD heading into Thanksgiving week, the average gains the week after Thanksgiving was 0.41% with positive returns 55% of the time.  For the remainder of the year, average returns were even stronger at +2.83%.  Not bad for a period of just over five weeks!

2.What Sub-Sectors Have the Most Cyclical Operating Margins.

CHART OF THE DAY: Respect The Peak

Keith McCullough


Editor’s Note: Below is a chart (and excerpt) from today’s Early Look written by Hedgeye CEO Keith McCullough.

We already know that Facebook (FB), Amazon (AMZN), and Apple (AAPL) are guiding to cyclical slow-downs in both revenues and earnings. And that’s AFTER a record 9 straight quarters of top-down US GDP Growth #accelerating!

How do you think these companies are going to do when the Tech Sector (66 companies in the SP500) has to cycle against the #CyclePeak EPS (year-over-year) growth rate of +32% of Q2 of 2018 in Q2 of 2019?

Whether you’re buying speculative Tech, Momentum, or Credit you absolutely have to have some respect for The Cycle and how it will impact equity multiples and credit spreads when The Cycle slows.

Or you don’t, and you can just get mad at me like limited-field-of-macro-rate-of-change-vision Bitcoin Bulls did.


How is this evolution impacting the components of indices like the S&P 500?

  • In 1999, MSCI and S&P developed the Global Industry Classification Standard (GICS©), creating a universal standard for categorizing companies into sectors and industries.
  • As part of the 2017 annual review, it was decided that the GICS structure needed to change in order to reflect how companies in the communication sector have evolved.
  • The key change was that to replace the Telecommunication sector with a new Communication Services sector.
  • The changes will be implemented in S&P Dow Jones Indices as of the close on September 21, 2018 to coincide with the annual rebalance, and in MSCI equity indexes as part of the November 2018 Semi-Annual Index Review.

Read on to learn how these changes will impact the companies and sectors in the S&P 500.

How do these changes affect companies in the S&P 500?

GICS changes will affect approximately 11% of the S&P 500

4.Latin America Elections Do Matter.

Markets Liked Brazil Election Not So Much Mexico….1yr. 17% spread in returns.

5.Facebook Image Problem Growing.

6.We Shall See But Plenty of These Stories Floating Around Today….I think lack of Gen Y participation in the bigger problem

The Facebook Era is Over

  • Published on November 15, 2018


Founder & CEO at Mighty Networks (We’reHiring!)

24 hours, the New York Times reported on a new layer of Facebook’s role in our current climate of toxicity. It’s a layer that’s shocking even to those of us who are long time Facebook watchers and occasional fans.

There’s something different about these latest revelations.

While the chattering class of Silicon Valley will brush this story aside as another PR snafu and talk about Facebook’s powerful and monopolistic network effects–where the value of the network grows with each new user who joins–that analysis alone misses the fundamental shifts happening under our feet.

The same viral loop that catapulted Facebook into every corner of Earth is now slowly turning the other way towards its unwinding.

To be sure, Facebook isn’t going away tomorrow. But in the same way we grudgingly use Microsoft Word with a complete absence of joy, the days of Facebook’s growth and inevitability are behind it.

So, what’s next? Here are three predictions:

There’s no Facebook Killer. There will be no single company or app that will take Facebook on and win. There’s no David to their Goliath. Rather, the company’s missteps are sending people to a range of other services to do what they once did on Facebook.

The three most obvious alternatives people are turning to are:

  1. Private Messaging Platforms.We’re already seeing people move conversations with their family and close friends to iMessage, Houseparty, Marco Polo, Telegram, Discord, and Signal for their most important relationships or interests.
  2. Vertical Social Networks and Subscription ContentWatch as time spent on The Athletic, NextDoor, Houzz, and other verticals goes up in the next year. People want to connect to content that matters to them, and the services that focus on a specific subject area will win their domain.
  3. Highly Curated, Professional-Led Podcasts, Email Newsletters, Events, and Membership Communities. The professionalization of creators and influencers will continue unabated. Emboldened by the fact that their followers are now willing to follow them to new places (and increasingly even pay for access), these emerging brands will look to own their engagement and relationships, not rent them from Facebook.

With awesome experiences and low switching costs, time spent will fan out among hundreds, if not thousands of different services, each uniquely useful in their own way.

Growth halts on the edges, not the core. Facebook’s prominence is eroding as the sources of creativity and goodwill that gave it magic, substance, and cultural relevance are quietly moving on. The reality is that Facebook stopped giving creators a return on their time a long time ago.

Facebook’s shifting algorithms and pay-to-play “boosting” schemes over the past few years have primed a generation of influencers, podcasters, bloggers, and Group admins to look for the exit. When you’ve worked for a decade to build a following, and now only 1% of that following sees what you produce, you’re ready for an alternative.

Creators and Group admins used to be scared their users would riot if they took their page or group elsewhere. What a difference a year makes. Yesterday I spoke to a podcaster whose large following explicitly asked him to find a Facebook alternative. This isn’t to say that people are deleting Facebook. It’s more nuanced than that. It’s a way for people to have fewer reasons to be there. If they’re part of something special and authentic, many don’t want it to be tarnished by what’s happening across the rest of the social network.

Big brands will be the last to leave. Unlike creators and Group admins, big brands will stick with Facebook for as long as possible. Despite CPMs jumping 171% in one year, big brands have institutionalized Facebook ad buying and posting not only with budgets but with dedicated teams. They’re too invested to acknowledge the writing on the wall, despite objectively diminishing returns.

While we talk about 1.4 billion daily users and 2.3 billion monthly ones, the reality of Facebook’s revenue story is that the U.S., Canada, and Europe generated 72% of Facebook’s ad revenue in its latest quarter. Yet, the service lost four million users in Europe in the last six months and growth has plateaued in the United States. The last decade for Facebook saw it fully seize its advertising revenue glory. The next decade will be different. Its CPMs will continue to rise while its usage grows modestly or stays flat. This is partially a reflection of the law of large numbers, as well as the pricing power that comes from being one of the two main sources of new customers on the Internet today.

But as the newspaper industry learned, this doesn’t last forever. Eventually, user stagnation catches up with you.

Niche brands will be the first to own their engagement. They’ll continue to use Facebook for acquisition until they are big enough to drive direct connections. On the other hand, the big brand holdouts choosing Facebook for growth and engagement over direct-to-consumer relationships (read: relationships where you have an email address or cell phone number) are going to be in a very precarious position.

When they finally lift their heads and look at the post-Facebook landscape, they’ll find consumers spread out across millions of different spaces based on who their friends are, who they follow, and what they care about. Brands who take a holistic approach to building direct connections not just with their customers, but with their entire market, will dominate.

Where does this leave us now?

The decision to #deletefacebook today, or in the future, is a personal one. However in the same slow, but potent way that Facebook shifted from being the place that connected us to the people and things we cared about to a haven for bad actors, bad news, and superficiality, Facebook will gradually become less relevant to each of us in our daily lives.

As more people become conscious of how we spend our time online, we will choose differently. We will seek to feel good about what we’re contributing and what we’re getting out of our time invested. There will emerge new safe, positive places governed not by algorithms and monolithic companies, but curated by real people who have a passion for inspiring and uplifting other human beings.

This won’t be because it’s technologically inevitable, but because people demand something different. I would argue they already are.

Gina Bianchini is the founder and CEO of Mighty Networks, a software-as-a-service company for brands and businesses that bring people together via classes, events, content, and community, all in one place. Before Mighty Networks, she founded Ning, a pioneering social platform for creating your own social networks, in 2004.

7.Percent Married Among 18-34 Year Olds Cut in Half Since 1978

Modern Love. Cohabitation on Rise in U.S.: Demographic Trends Alexandre Tanzi

8.Culture, Leadership, Performance: How Are They Linked?

Rodger Dean Duncan Contributor

Opinions expressed by Forbes Contributors are their own.

Careers I cover leadership issues that make or break your workplace experience

Culture affects everything that goes on in your organization. Everything.Pexels

Every organization has its own culture. And I’m not referring to the kind you find in a cup of yogurt.

Rather than recite an esoteric definition, which would sound like gobbledygook anyway, let’s consider the ingredients of culture in layman’s terms.

The culture of any social unit includes group norms, shared perceptions, espoused values, and consensus around goals and objectives.

Culture includes the way people interact with each other, how they solve problems, and how they justify themselves.

Culture includes artifacts like furniture (metal desks versus mahogany) and physical layout (bullpen versus corner office with a view).

In summary, culture could be described as “the way we get stuff done around here.”

I’ve worked with a lot of organizations that seem to regard culture as important. In one place I might ask “Why do you do things the way you do them here?” People will recite their espoused values and say something like “We’re very informal here because we believe in teamwork and open communication.” Then I go to another place—in the very same industry supposedly operating by the same regulations—and someone will tell me “We’re very tightly structured, here. We play strictly by the rules. We don’t talk much. We just do as we’re told.”

Different strokes for different folks.

Of course having “rules” doesn’t necessarily mean that people follow them. I’ve seen sincere and earnest people pull little cards out of their pockets and read off the values they profess to embrace. But then I’ve noticed that their behaviors and artifacts don’t square with the professed values.

Deloitte Risk and Financial Advisory

Why Culture Risk Requires Action By CEOs And Boards

To explore this idea of culture, I visited with Dr. Edgar H. Schein, professor emeritus of the Massachusetts Institute of Technology Sloan School of Management. I had the pleasure of serving with Ed on the advisory council of the Institute of Nuclear Power Operations. He’s a monumentally intelligent man who’s also uncommonly kind and generous. Today he’s teamed up with his son Peter on various projects in their Organizational Culture and Leadership Institute ( 

Rodger Dean Duncan: Many years ago you were credited with coining the term “corporate culture.” How do you find that term used and abused in the workplace today?

Edgar Schein: Managers today understand the importance of culture as a factor in whether a company performs well or not. But many of them mistakenly believe they can arbitrarily decide whether or not you will have a good culture. They still don’t understand that culture is a product of years of learning and experience, not something you “implement.” You can find companies whose culture helps them perform, but they acquired that culture over a period of years through leadership that worked. You can find in those same companies a drop in performance as the very culture that made the company successful became a liability when changes occurred in technology and in the market. This is the story of Digital Equipment Corporation. The same culture explained both its success and its failure.

Duncan: In what important ways are culture and leadership fundamentally intertwined?

Edgar H. ScheinOCLL

Schein: In a mature company run by promoted general managers, as opposed to entrepreneurs or founders, the culture will reflect the past history of founders and leaders and will limit what kind of leadership is possible. If a new leader such as Carly Fiorina comes into a company like Hewlett-Packard with a long history and strong culture, there will be conflict between what the new leader tries to impose and what the culture will allow. The leader will win in such conflict only by firing large numbers of the carriers of the old culture, as turnaround managers usually do. The new leader can then start [fresh] by imposing new values and behavior patterns. But this is not a new culture until it succeeds for a number of years and becomes internalized by the employees. So you can talk about destroying an old culture, but you cannot create or impose a new culture, only new values and behavior patterns.

When Lou Gerstner went into IBM, his success was based on figuring out what the culture was that had led to IBM’s success. He noticing that the company had drifted away from some of the elements of that culture and he found a way to revive it. He worked on the culture by reviving and reinvigorating the best elements of what was already there, not by “changing” the culture.

Duncan: How does culture influence the leadership styles that “work” or fail to “work” in an organization?

Schein: In general, the culture is stronger than the new leader and either limits or ignores new leaders who do not fit into the culture. The HP culture emphasized good relations between people, teamwork and humility. Carly Fiorina was able to impose some new goals and values, but her flamboyant style did not fit the culture at all and caused her ultimately to lose credibility and effectiveness. When John Sculley became CEO of Apple, he got the board to fire Steve Jobs. Then Sculley then was himself succeeded by several outsiders. The Apple culture never adapted to these new CEOs and limited their effectiveness because Apple was a technically based culture in which marketing-oriented CEOs never gained respect. When Steve Jobs came back, there was once again mutual congruence between the culture and the CEO’s style and values.

Duncan: We know that culture influences leadership. In what ways can leadership influence culture? For example, how can a leader reinforce the “helpful” aspects of a culture and dilute the culture’s “harmful” attributes?

Change by announcement never works…

Schein: In both cases, what the leader can do is to impose new behaviors and hope that performance improves. But the new behavior has to solve a problem. In a company whose culture leads salesmen from different units to visit the same customers and cause confusion and subsequent loss of those customers, the new leader might announce “from now on we will have a culture of teamwork in our sales force and we will work together.” But this will be meaningless until it is analyzed in behavioral terms. In this future “culture,” what exactly are salesmen supposed to do differently? When the leader announces that from now on customers will be serviced by account teams of salesmen from different units and that individual salesmen will be rewarded by how the account does, and changes the structure and reward system to make that happen, then the new teamwork values will mean nothing. If that is implemented and succeeds over a period of time, then we can talk about a new “team culture.”

Most culture change programs fail because they are just announcements of new values without a change in what new behavior will be required and how the structure and reward system will make that happen.

Duncan: What are some of the early warning signs that an organization’s culture needs to change?

Schein: The warning signs are never “cultural.” They are always performance issues that lead to specifying new behaviors needed to fix the problem. The culture gets involved if the new behavior won’t work because of the culture.  At Digital, they needed engineers to build simpler turnkey products to survive. But the engineering culture had been built on creating sophisticated, fun products, so the engineers did not respond to the new requirements. To fix such a problem, you have to destroy elements of the old culture. But the focus has to remain on fixing the business problem and only then seeing how culture will aid or hinder the fix.

Duncan: Various forms of resistance often thwart attempts at culture change. Why do people resist change, and what are the keys to turning resistance into support?

Schein: Resistance to change is a normal response because what we are doing is based on past success, so why should we change what has worked in the past? The only way you can convince me to change is to show me that the old behavior no longer produces results and show me what new behavior would work better. You have to convince me that there is a business problem and show me how the new behavior that you are demanding will fix the problem and then provide me with the resources, and training in the new behavior and give me new incentives to learn it.

Additional resources on organizational culture:

Organizational Culture and Leadership and The Corporate Culture Survival Guide, both by Ed Schein.

For the past 40 years I’ve consulted and coached leaders from the factory floor to the boardroom in some of the world’s best companies in multiple industries. Basically, I help people get good stuff done while avoiding the Dilbert Zone. Early in my career I covered politics …


Rodger Dean Duncan is the bestselling author of CHANGE-friendly LEADERSHIP: How to Transform Good Intentions into Great Performance. Follow on Twitter @DoctorDuncan