Topley’s Top Ten – October 3, 2019

1.Micro-Caps Barely Up for the Year After Yesterday.

Micro Cap ETF IWC YTD.  …Still -20% from Highs.

2.Two-Year Treasury Yields Heading to New Low….Near 2017 Levels.

3.October Seasonality…Some Famous Drops but Over the Last 20 Years Third Best Month for U.S. Stocks.

As shown in the LPL Chart of the Day, October has quietly been one of the strongest months of the year over the past 10 and 20 years. Going back to 1950, it ranks as the seventh strongest month of the year, so right near the middle of the pack.

Four other things to consider:

  • Since 1950, no month has had more 1% moves (higher or lower) than October.
  • Since 1928, 6 of the 10 worst single-day drops have taken place in October; however, 3 of the 10 best days ever occurred in October as well.
  • This is a pre-election year, and as the chart above shows, October’s average returns in a pre-election year have been muted since 1950. The catch here is that this average return is greatly impacted by the 21.8% drop in 1987. The median return is actually quite respectable.
  • October has been higher during a pre-election year every year since 1999, with an average return of an impressive 6.5%.

4.Construction Payroll Employment Hits 2008 Highs…Tough to Go Any Higher With Unemployment 4%


5.European Buybacks Pickup….U.S. Buybacks Declining.

Bloggers note we need that Buyback bid later this month to come to the rescue of the tape

 From Dave Lutz at Jones Trading

6.Growth Rolls Over Hard—Financial Conditions Most Accommodative in 5 Years

An expected dovish pivot by central banks has materialized. Now what? Financial conditions in key developed economies have become more accommodative as a result, even though the lift to the broader economy has yet to kick in. We see policy easing helping sustain the economic expansion–and the likelihood of a growth pickup over the next six to 12 months. This supports our moderate pro-risk stance. Yet it could be a bumpy ride due to the persistent uncertainty from protectionist policies.

A growth recovery looming ahead- Elga Bartsch, PhD

7. $300 Billion Investment in Electric Vehicles.

A Reuters analysis of 29 global automakers found that they are investing at least $300 billionin electric vehicles, with more than 45 percent of that earmarked for China.

By Paul Lienert and Christine Chan

8.U.S. Slaps $7.5B in New Tariffs on Europe.

          Francis Scialabba-Morning Brew

The World Trade Organization (WTO) gave President Trump approval to slap tariffs on up to $7.5 billion in European goods annually yesterday…and his administration went for it about 11.2 seconds later.  The backstory: The U.S. and its GMT+2 neighbors have been sparring over aerospace subsidies for 15 years. The WTO has previously ruled that some European governments gave Airbus loans and subsidies for two of its newer models at unfair rates, making that aid illegal. You gotta go big for the finale. If implemented, this will be the largest “retaliatory action” in WTO history.  What happens next  The Trump administration will levy… A 25% tariff on agricultural and industrial products, including single-malt Irish and Scotch whiskeys A 10% duty on large commercial aircraft The tariffs are slated to take effect Oct. 18, and the U.S. has asked the WTO to pencil in an Oct. 14 meeting to formally approve the tariffs.  The EU’s response? “You wouldn’t like me when I’m angry”  It plans to hit back with tariffs of its own—if it gets the go-ahead. Early next year, the WTO will rule on the EU’s complaint over subsidies the U.S. hands to Boeing (-1.98%).  Zoom out: Both Russia and China are subsidizing their aircraft manufacturers to better compete with the U.S. and European giants. European officials did not forget to remind the U.S. about that.  Airbus’s response? “I’m rubber, you’re glue”  It said the tariffs would bounce back to the U.S. aerospace industry, which supplies about 40% of the company’s parts. It also warned of global repercussions from tit-for-tat escalation, saying its tat would hurt more than the U.S.’…initial round of tariffs.  Bottom line: There’s no good time for a trade war between the longtime allies. But this 15-year battle is reaching a climax when the global economy is already groaning.         


9.One Third of Americans are Innumerate.

How math skills plus confidence equals better judgment on health, money

By Ellen Peters and Brittany Shoots-Reinhard 

September 29, 2019 at 2:00 p.m. EDT

Almost a third of American adults don’t have the math skills necessary to make effective decisions about their health and finances.

These 73 million people can count, sort and do simple arithmetic. But they probably cannot select the health plan with the lowest cost based on annual premiums and deductibles, or figure out that they can’t pay off credit card debt based on the amount they owe, minimum monthly payments and an annual percentage rate.

They are innumerate, meaning they’re unskilled with numbers. Numerate people, in contrast, are mathematically proficient.

In our research as psychologists, we measure numeracy with a math test. If you can answer the following question correctly, your response falls in the top half of well-educated Americans, and you are highly numerate:

“Out of 1,000 people in a small town, 500 are members of a choir. Out of these 500 members in the choir, 100 are men. Out of the 500 inhabitants that are not in the choir, 300 are men. What is the probability that a randomly drawn man is a member of the choir?” (The answer is at the end of this report.)


People who are better at answering these kinds of math questions make decisions differently from those who struggle with them. The highly numerate search for and think hard about numbers when they make decisions. Ultimately, they trust numbers more and have a clearer understanding of what the numbers mean for their decisions.

The less numerate, however, rely more on compelling stories and emotional reactions in decisions rather than the hard facts. They tend to make worse decisions for themselves when numbers are involved.

Being numerate doesn’t guarantee you’ll use numbers well in decisions, though. Confidence matters, too. We measure numeric confidence with questions such as “How good are you at working with fractions?” More numerically confident people stick longer with even tedious or difficult mathematical tasks. For best outcomes, you need to use numbers correctly, and you need to persist when the going gets tough. That is, you need to be numerate and you need to be numerically confident.


But our new research suggests that more is not always better when it comes to number skills and number confidence. Instead, having a good understanding of your ability — a match between ability and confidence — is critical.

To investigate this connection between math ability and confidence, we carried out two separate studies.

In one, we measured 13 self-reported good financial outcomes among 4,572 Americans — things such as not having high credit card debt or a payday loan. Out of our 13 possible financial outcome scenarios, we then counted up how many good outcomes each person experienced.

In the second, we collected data on physician-reported disease activity among 91 lupus patients. Less disease activity — for example, better medical test results or fewer new rashes — means a healthier patient.


We saw the best financial and health outcomes in those with high numeracy and high numeric confidence. “Mismatched” individuals — with either high ability and low confidence, or low ability and high confidence — experienced the worst outcomes.

And the effects were not small.

Read Full Story

Found at Abnormal Returns

10.I Use This 5-Minute Therapy Technique Every Day for My Anxiety

First, you have to understand what type of cognitive distortion is occurring.


Courtesy of Tatiana Dyuvbanova / EyeEm / Getty Images

I’ve lived with general anxiety for as far back as my memory goes. As a writer and stand-up comedian, I have the most trouble fighting against social and performance anxiety on a day-to-day basis, as I conduct interviews and interact with editors during the day and then take the stage at night.

My anxiety most often shows itself in what I call “anxiety hangovers,” when I wake up on the day following a social event or meeting or comedy show feeling horrible about everything I did or said — no matter how fun or successful the event felt the night before.

Everyone thinks you’re egotistical and obnoxious, my inner voice spits at me when I wake up.

You said the exact wrong thing to your friend when she asked for your opinion, because you never think before you open your mouth.

You dominated the dinner conversation. No wonder no one likes you.

You were so embarrassing on stage, of course you aren’t a success.

The mean little voice goes on and on and on.

After big events, like a friend’s wedding or important comedy show, I’ve had panic attacks the following morning: a racing heart, trembling hands, and trouble breathing. On other days, I just can’t concentrate because of the worry and feel mentally paralyzed, and the confidence I need to do my work is sunk.

Where cognitive behavioral therapy comes in

The central idea behind cognitive behavioral therapy (CBT) is extremely simple: If you change the way you think, you can change the way you feel.

But if feeling better and escaping depression and anxiety were that easy, we wouldn’t live in a country where psychological distress is increasing.

While I’ve found that I can’t fully eliminate or “cure” my anxiety (and probably never will), I’ve found a simple five-minute CBT exercise that quiets it down each day. My racing thoughts stop, my foggy brain begins to clear, and my fatigue lifts.

Suddenly, I feel like I can start my day.

Called the triple column technique, which was developed and named by clinical psychiatrist Dr. David D. Burns, all it does is change my mindset. But sometimes, this shift is enough to completely shut my anxiety up for the day. A change in how we think about ourselves is all we really need to find a calmer, happier place.

Recognizing cognitive distortions

In 2014, a friend recommended Burns’ “Feeling Good,” a CBT classic that takes readers step-by-step through recognizing negative self-talk, analyzing it rationally, and replacing it with healthier and more accurate thinking.

(Burns also suggests, for many people living with anxiety and depression, to see their doctor and pair therapy and the appropriate medication if deemed necessary.)

The book made it crystal clear that I wasn’t a secretly bad person and incredible failure who can’t do anything right. I’m just a pretty regular person who has a brain that can distort reality and cause way too much anxiety, stress, and depression.

The first big lesson was to learn the specifics of cognitive distortions — those statements that the little voice makes about who I am and what’s going on in my life.

There are 10 big distortions that can occur:

  1. All or nothing thinking. When you see things in black and white instead of in shades of gray. Example: I’m a bad person.
  2. Overgeneralization. When you extend a negative thought so it reaches even further. Example: I never do anything right.
  3. Mental filter. When you filter out all the good stuff to focus on the bad. Example: I didn’t accomplish anything today.
  4. Disqualifying the positive. When you believe a good or positive thing “doesn’t count” toward your larger pattern of failure and negativity. Example: I guess I survived the talk — even broken clocks are right twice a day.
  5. Jumping to conclusions. When you extrapolate an even bigger and broader negative thought from a small negative experience. Example: He said he didn’t want to go out with me. I must be an unlovable person.
  6. Magnification or minimization. When you exaggerate your own mistakes (or other people’s accomplishments or happiness) while minimizing your own accomplishments and others’ flaws. Example: Everyone saw me mess up at the game, while Susan had a perfect night on the field.
  7. Emotional reasoning. When you assume your negative feelings reflect the truth. Example: I felt embarrassed, therefore I must have been acting in an embarrassing manner.
  8. Should statements. When you beat yourself up for not doing things differently. Example: I should’ve kept my mouth shut.
  9. Labeling and mislabeling. When you use a small negative event or feeling to give yourself a huge, general label. Example: I forgot to do the report. I’m a total idiot.
  10. Personalization. When you make things personal that aren’t. Example: The dinner party was bad because I was there.