Topley’s Top Ten – October 2, 2019

1.You Call This A Bull Market?-Bespoke Investment Group

By just about all accounts, investors have been spoiled over the last ten years as the S&P 500 has rallied more than 13% on an annualized basis.  However, when you compare returns for the market over the last one, two, five, ten, and twenty years, current returns are hardly at any sort of historical extreme.  The chart below compares the S&P 500’s annualized performance on a total return basis to the average annualized return for all similar time frames.  Looking just at the last year (through 9/30), the S&P 500’s total return is 4.3%, which is less than half of the historical average one year total return of 11.7%.  Looking at two and five-year annualized performance figures, current returns are just modestly above their historical average.  While the ten-year annualized return is almost three percentage points above the historical average, the current 20-year annualized gain of 6.3% is well below the S&P 500’s historical average of 11.0%.

2.Muni Defaults Are Rare.

3.Schwab Cuts Trading Costs to Zero…Amertrade Matches Them Today

Ameritrade and Etrade Traded Straight Down to 2017 Lows on Schwab News.



4.New Export Numbers Bad

Torston Slok

ISM at 47.8 is bad but new export orders at 41 is even worse, see chart below. There is no end in sight to this slowdown, the recession risk is real. For more see also here.


Let us know if you would like to add a colleague to this distribution list.

Torsten Sløk, Ph.D.
Chief Economist
Managing Director

5.Here Are Some of The Underlying Components That Make Up ISM Index

Here are some of the components of the ISM index.

• Production:

• Employment:

• New orders:

• Export orders (declining at the fastest pace since the recession).

6.Offshoring Gains Experienced By Manufacturing Are Under Pressure.


Battening Down The Hatches Part Two

by Tina Byles Williams | Sep 27, 2019 | Market Insights Alerts | 0 comments

7.New Homes Hit Historic Low Level of Total Market

John Burns Real Estate

8-9.The Top 20 Business Transformations of the Last Decade.

  1. New growth: How successful has the company been at creating new products, services, new markets, and new business models? This includes our primary metric: the percentage of revenue outside the core that can be attributed to new growth areas.
  2. Repositioning the core: How effectively has the company adapted its traditional core business to changes or disruptions in its markets, giving its legacy business new life?
  3. Financials: Has the company posted strong financial and stock market performance, or has it turned around its business from losses or slow growth to get back on track? We looked at revenue CAGR (combined annual growth rate), profitability, and stock price CAGR during the transformation period, which was different for each firm.

10.Things That Matter: Three Useful Principles for Life

Noam Shpancer Ph.D.
Insight Therapy

The best life advice is: Be wary of life advice.

Life, observed the writer Amos Oz, evades every formula. If that’s the case (and it is), then so-called guides for life—those lists of rules, owner’s manuals, and how-to books—are bound to be found wanting. In other words, the best life advice is to be wary of life advice.

That being said, those of us who toil in the teaching profession are charged with preparing our students for life. Such preparation requires that we equip them with some useful tools for navigating the terrain. What should those be?

Source: ShonEjai (pixabay)

I often begin my introductory classes by talking about three general principles that can, in my judgment, be quite helpful on the journey of learning and living. I speak of ‘principles’ rather than ‘rules’ because rules, by definition, are specific and rigid prescriptions, often imposed from the outside under threat of punishment. Trying to capture, anticipate, and address the infinite complexity of life and its manifestations with specific and rigid rules is unwise. Life advice is more palatable, and useful, when it articulates guiding principles, since principles are broader, more flexible, and tend to take the form of internal convictions rather than external impositions. ‘Finish all the food on your plate’ is a rule. ‘Be mindful of wastefulness’ is a principle. The latter is better life advice. With that in mind, here goes:

1. Knowledge Matters:

The assumption that knowledge has value is quite uncontroversial, and fundamental to the work of teaching. Yet the point deserves emphasis, for several reasons. First, American culture is big on opinions. Speech, after all, is free. And free things tend to get used much, often wastefully. Many of my students are told throughout their early years that they always have a right to an opinion, that their opinions matter a lot, and that all opinions are created equal. This of course is untrue. Indeed, everyone is entitled to their opinions, yet that does not mean that all opinions matter, or that they matter equally. To wit: I have an opinion about how Amazon should be run. So does Jeff Bezos. His opinion matters more. In a well-run life (be it individual or social), a knowledgeable opinion matters more than an ignorant one. 

Second, American society is also big on feelings. Many of my young students are taught that how they feel is of prime importance in terms of discerning what’s going on and how they should respond. This is problematic. Now granted, feelings are important. Our emotions provide useful information in our effort to navigate the world. Everyone is entitled to feel what they feel, and there’s often benefit in reflecting on and communicating our feelings honestly. At the same time, feelings are mind events, not world events. The fact that you feel scared does not necessarily mean you are in danger. Recognizing the difference is important, and will require knowledge of the situation, not merely an awareness of your feelings. The fact that you hurt does not necessarily mean that you’ve been wronged. The fact that you feel good does not necessarily mean you are doing good. If you feel like a great driver, you have a feeling, not necessarily driving skill. In a well-run life, your driving skill–that is, your actual knowledge–is more important than your feeling. Knowledge matters.

Of course, this principle is violated often—as when people who have acquired power, wealth, or fame in one area get a pass on spouting ignorant nonsense about another (a phenomenon known as the ‘halo effect’). This seems to have become more common in recent years, as the current cultural conversation appears to devalue knowledge in favor of other currencies that photograph better, such as celebrity, wealth, outrageous opinions, and outraging feelings. Yet violating the principle comes at a cost. A process that devalues expertise begets inferior quality product. Failing to gather—or ignoring—the evidence begets error and injustice.

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Another reason why knowledge matters is because what you know defines the parameters of your world. Thought experiment: You come home from work to find your wife in bed with your brother. Now, this is a situation in which you’ve just acquired a new bit of knowledge. At this point, you face some choices; you have many ways in which to react to these new data–you may storm out, start a fight, faint, or join in on the fun. Whatever. It’s a free country. Yet one thing you cannot do is go back to being who you were before that moment. The knowledge has changed you; it has changed your understanding of yourself, and of your wife, and of your brother, and of relationships, and of the world. And the change is irreversible. You may mend things with both your brother and your wife, but you cannot un-see what you saw. You cannot un-know what you know. Even if you recover completely and become whole again, you are not whole in the same way you were before. This is why, as hinted well in the biblical story of Adam and Eve, knowledge is dangerous. It is consequential. It matters.

2. Context Matters:

This is perhaps the most important and most often overlooked guiding principle for sound thinking and judgment: Nothing has meaning independent of context. Human affairs in particular cannot be meaningfully reduced to the study (or description) of the individual alone. Granted, we may speak of an object sans context heuristically, in the abstract, for the didactic purposes of simplification or illustration. But to arrive at a practical understanding that can inform successful movement in the world, speaking of anything sans context is unhelpful. For example, pregnancy happens inside the womb. But the womb is nested inside a body that contains a brain–that is to say, a person. And the person is involved in certain specific relationships, in a certain community, inside a culture, at a certain historical time. You can’t understand the meaning and implications of pregnancy without knowing something about all of those layers.

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As the above example shows, a complicating factor here is that human phenomena exist within multiple contexts at once. Which of those we choose to emphasize will matter to our understanding. Three types of context that tend to matter greatly to our understanding of human events are the sociocultural, historical, and situational contexts. The sociocultural context refers to the cultural traditions, social expectations, and group processes in which one’s individual life is embedded. Similar gestures, words, or decisions have different meanings in different cultures. Two adult males walking hand in hand means very different things depending on whether it happens in Uganda (where it signals male friendship) or the US (where it signals homosexuality).

Moreover, just as public behavior is given meaning by the culture, so does private, individual behavior. There is no ‘I’ in ‘Alone.’ But there is ‘I’ in ‘Tribe.’ This is to say that selves are built out of cultural materials, using cultural tools. Sociocultural influences are internalized in the socialization process and become parts of our integrated sense of self. The very concepts you use to define yourself—or, for that matter, your very idea of self—have been provided to you by society. Take language, for example. Your culture gave you the gift of language, and now, you consider that language your own. In other words, you have internalized and integrated culture.

This is why even your most private intimate moments carry a cultural stamp. For example, when you make love to your partner in the privacy of your bedroom, your society is right there with you. After all, your understanding of what lovemaking means and how to go about it were taught to you by your culture. Everything about your love making session: the expectations you and your lover have of each other, the scripted dance of dating and mating that brought you here, the things you have come to consider attractive, acceptable, or necessary for arousal, the sex toys and contraceptives you use—these are not of you. They were gifted to you by the sociocultural milieu. Context matters.

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Another type of context is historical. Clearly, similar behaviors have different meanings at different historical times. Ideas that were once taken for granted truths are now considered folly. And vice versa. The wealthiest, most powerful person in the world five hundred years ago did not have access to the technology our poorest citizens take for granted today. This is one reason why evaluating the past in terms of the present devolves quickly into meaninglessness. Our ancestors look like backward barbarians to us. But they did not think of themselves as such, and were not such compared to their ancestors. People 500 years from now will look at us as backward barbarians.

Judging human phenomena without regard to the times in which it took place is seductive since hindsight is 20/20, and comparisons to the past often reflect well on the present. But such comparisons often muddy our analysis. To wit: I’m quite certain that Bill Gates abhors the idea of slavery. Thomas Jefferson, on the other hand, embraced it. That does not mean that Gates is good and that Jefferson was evil. Both of them are, in fact, normative in the context of their historical time and particular culture. Thus, they are more alike than different. In other words, if Gates lived in Jefferson’s time he’d be a slave master, too. Person-(or event or object)-in-context is the lowest meaningful unit of analysis. Thus, it is fairer to compare our ancestors in their context to us in ours.

The third important context is situational. Clearly, different situations call for different behaviors. And the same behavior acquires different meanings depending on the situational context in which it is emitted. Indeed, one of the ways we judge mental health and illness is by noting a mismatch between behavior and situation, as when someone laughs at the funeral, or takes his pants off in public.

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Even the meaning of things we assume to be absolute, universal, or self-evident are in fact tethered to situational context. Telling the truth, for example, is broadly seen as a good thing. Yet in some contexts—for example, if you’re hiding Jews in your basement in Europe during WWII, and the SS soldiers are at your door asking you if you’re hiding any Jews—truth-telling would be immoral. This is why we say that in psychology, the correct answer to most every question is ‘it depends.’ On what? On context.

3. Things Are Not What They Seem:

This idea is neither new nor original. An essence of humanity is embodied in our tendency to want to look under the hood or to peek behind the curtain; our curiosity about how, and to what ends, the myriad appearances around us are produced. Many grand historical ideas involve upending the obvious:

Freud’s notion of the unconscious is one example. Per Freud, the true meaning of the things we do is hidden from others and also from ourselves. The woman doting incessantly over her baby is motivated not by love, but by resentment.

Darwin’s great insight involved the realization that nature, which many Victorians saw as beautiful, harmonious and graceful in its various manifestations—is actually a brutal, ceaseless war for survival.

Marx’s grand theory was premised on the notion that capitalism, the seemingly wining economic system, was in fact doomed by its very own structure, as the proletariat, upon whose labor the wealth of the bourgeoisie depends, were bound to eventually revolt against their exploiters.

And so on.

The reason that things are not what they seem has to do with the structure of our evolved brain. We all must rely on our senses when taking in the world. We have no other means by which to commerce with the ‘there’ that’s out there. Our senses are systems. All systems have boundaries, that is to say limitations, that is to say, certain things they cannot do (for example, we can’t breathe underwater). All systems also have a character, that is to say specifications, that is to say certain things they do better than other things they do (for example, we see better in daylight than at night).

Evolution has shaped our senses to include certain useful tendencies. We learn certain tasks (e.g.: to fear a snake) more easily than others (to fear a table). We are drawn to and prefer certain things over others (babies track a moving object at birth; they prefer symmetry, and the smell of vanilla over ammonia). These sensory adaptations serve a survival purpose, but they are in essence biases, and thus, by definition, distortive.

Moreover, it is by now common knowledge that our senses do not passively transmit, record, and store information from the outside world but rather actively participate in shaping the form and meaning of these data. We act on the world as it acts upon us.

Your memory, thus, is not a recording of your life events, even though it seems so. Rather, it is a story constructed about those events in retrospect. You don’t remember all of what happened to you. You remember a version you’ve constructed. That version omits certain parts, emphasizes others, and makes up some others for good measure. In other words, what you remember will depend not just on what actually happened, but also on factors such as your mood at the time of the event, your level of arousal at the time, your mood at the time of recall, and on how you are asked to remember, when, by whom, and how often.

Another aspect of this principle refers to the role of expectations. Everyone has heard that seeing is believing. And this is in part true. Humans rely on vision to a great extent, and so we use this sense to verify things for ourselves. Fewer people though realize that the opposite of this equation is also true: Believing is seeing. That is to say, what you expect to see, hope to see, and believe you will see, you tend to see, independently of what’s actually there. People who believe in God see his good works everywhere. People who don’t fail to find him anywhere.

Thought experiment: Imagine two equally matched teams. One anticipates a loss. The other believes it is going to win. At some point in the game, either team may fall behind. Yet the team that expects to lose will see that as prophecy fulfilled, an inevitability, a signal, while the team that expects to win will see falling behind as a temporary setback, an error, random noise. Now, which team is more likely to win? The one that expected to. This result will seem right to both teams. But it isn’t, insomuch as it reflects not their true (evenly matched) abilities, but their (distorted) expectations.

In sum, while neither comprehensive nor exhaustive, the three principles described above are useful to consider as one labors to survive intact the typhoon of existence. How may these principles be translated into action? Well, knowledge matters, so try to learn something. Context matters, so in beholding things, consider too the environment in which they’re embedded. And things are not what they seem, so don’t trust your vision blindly. Examine things again.