Topley’s Top Ten – September 4, 2018

1.Momentum Continues to Lead…Winners Keep Winning.

August a Continuation of Trend

Aug 31, 2018

Below we show our decile analysis of S&P 500 gains in August. To construct these analyses, we show how each 10% bucket of stocks in the S&P 500 (50 per bucket) by a given metric performs. In this example, we’ve broken the S&P 500 into deciles based on their percentage change in the first 7 months of the year through July. Over the course of August, performance in the other 7 months was highly correlated to performance this month. As shown in the chart below, the 50 best performing stocks YTD through July were up almost 5% in August, with the 2nd through 5th deciles also performing quite well. The bottom half of the market in terms of YTD performance through July generally didn’t do as well in August. That was most true for the 50 stocks that performed the worst through July, which dropped on average 2.2% in the month of August. Owning winners is often derided by contrarians as a way to underperform, but the decile analysis below is one example of momentum begetting more momentum in financial markets.

2.September Seasonality.

Sept. Down 55% of time but this is important mid-term election year.

Much of the month’s abominable record can be attributed to seasonality, with investors slow to return from summer vacations, resulting in low trading volumes, which partly contributes to elevated market volatility. In fact, market activity on Aug. 23 was the thinnest for the year to date with only 5.19 billion shares trading hands, tracking total composite volume of trading on the Nasdaq, NYSE and its various exchanges.

Indeed, the stock market could theoretically come under intense pressure as speculation about the possibility of Trump’s impeachment mounts after his campaign chairman Paul Manafort last week was found guilty on eight charges including tax fraud. In a double blow, Trump’s former lawyer Michael Cohen admitted that he violated campaign-finance law at Trump’s direction.

However, with the exception of a scant few bumps, the market has held steady with most market observers generally expressing doubt that the Trump’s political drama will hurt investor sentiment that has thus far been underpinned by a health economy and strength in corporate results.

And just looking at short-term data for the bull market that became the longest last Wednesday, the one month period starting from Aug. 21 had been among the best with the S&P 500 posting a median gain of 3.31%, according to Bespoke Investment Group.

On top of that, the midterm elections may help dull the stock market’s propensity to downshift in September, at least statistically speaking.

Jeff Hirsch, editor of the Stock Trader’s Almanac, said the market has been fairly strong in the runup to November during midterm election years. Returns in September during those elections have resulted in gains of 3.84% since 1950.

“On average the vast majority of S&P 500 gains are from late September to midterm Election Day,” Hirsch wrote in a recent blog post.

Stock market likely to undergo vigorous stress test in September

By Sue Chang

3.Another Interesting Chart on Buybacks…Announced Buybacks vs. Executed Buybacks.

Callum Thomas @Callum_Thomas · 23h23 hours ago

Announced vs Executed buybacks in 2018… firms keeping their powder dry looks like it. h/t @LONGCONVEXITY $SPX $SPY

4.World’s Top 10 Countries by Market Cap.

U.S. Still Dominant But See Percentage Change Column…China +1200%

5.Improving American Consumer Across Wage Earnings?

Fewer consumers have debt problems, see chart below and here.


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

Torsten Sløk, Ph.D.
Chief International Economist
Managing Director
Deutsche Bank Securities
60 Wall Street
New York, New York 10005
Tel: 212 250 2155

6.Less Than Half of Hollywood Movies Make Money.

7. Starter Home Prices Hit New Highs….Millennials Need 23% of Income to Afford an Entry-Level Home.

Here’s why the U.S. housing market is cooling: Prices are just too high.

Starter homes are now more costly to purchase than at any time since 2008, when the last boom came to a crashing halt. In the second quarter, first-time buyers needed almost 23 percent of their income to afford a typical entry-level home, up from 21 percent a year earlier, according to an analysis by the National Association of Realtors.

The property market, after years of price gains that outpaced income growth, is showing signs of slowing as sales decline. The affordability crunch is especially severe at the low end of the market and in hot areas where supplies are tightest and values have risen most. A jump in mortgage rates this year only made it worse.

“When prices go up at the entry level, that’s where the affordability issue is most acute,” Charles Dougherty, a Wells Fargo & Co. economist, said in a phone interview. “People are hesitant to stretch the amount they’re willing to pay.”

The most expensive U.S. markets include San Francisco and New York, where the median household needed about 65 percent of its income to buy a home in the second quarter, according to an analysis from Trulia. The share was 59 percent in Los Angeles and 55 percent in Miami.

Starter Home Affordibility Hits New Lows
Prashant Gopal

8.Read of the Weekend….The World Isn’t as Bad as Your Wired Brain Tells You

Ever wonder why people’s perception of the incidence of crime, terrorism, kidnapping and other violent acts is often much higher than the reality? Why the U.S. is becoming a low-trust society? Why Americans are collectively in a funk?

A big part of the answer, according to experts in social science, psychology and computer science, is that the biases that were once useful to our primitive forebears have become—like the craving for sweet foods—detriments in our modern world. Instincts that may once have saved us from real dangers have now, thanks to global instantaneous communication, turned us all into Chicken Littles.

Our best hope for breaking their spell may lie in understanding the workings of our cognitive and social biases—and the algorithms of online social networks that reinforce them.

The Incredible Drop in Crime

The World Isn’t as Bad as Your Wired Brain Tells You

Magnified by the internet’s algorithms, our primitive biases make our fears go viral”
Christopher Mims

 9.Health-You Know You Need More Sleep. Here’s How to Get It.

As Shakespeare noted, “Uneasy lies the head that wears a crown.” In contemporary language, the work of a leader is never done. Even if a leader has cleared her desk of all ongoing tasks for the day, the job is not over. Leaders must manage the present while preparing for the future. There is always something more a leader can be doing, and doing better.

So it is not surprising that many leaders put in long hours to meet these demands. In a recent example, Elon Musk (currently serving as the CEO of Tesla, SpaceX, and Neuralink, all at the same time) spent the full 24 hours of his 47th birthday at work. Marissa Mayer (former CEO of Yahoo!) noted that early in her career she would work all-nighters at least once a week. In extolling his own work ethic, President Donald Trump notes: “Don’t sleep any more than you have to. I usually sleep about four hours per night.” These examples are merely the tip of the iceberg; systematic research indicates that sleep deprivation is very common among leaders even at lower levels of organizations.

But sleepy leaders are less effective leaders. When leaders trade away sleep in order to work more, they become more abusive toward subordinates, have less effective working relationships with their employees, are less able to inspire others, and see engagement rates drop on the teams they manage. And, of course, sleep deprivation leads to impulsiveness, disrupts decision making, and undermines creativity and innovation. It is probably not a coincidence both Trump and Musk talk about how much sleep they trade away for extra work time, and that they have both also displayed some impulsive Tweeting.

Begrudgingly, some leaders are starting to accept the fact that they are better leaders if they regularly get a good night’s sleep. But acknowledging that fact is much easier than actually making the lifestyle changes required to get that sleep. There is always one more urgent task to complete right now, and we tell ourselves that if we don’t do it, the consequences will be dire. We tell ourselves that sleep can wait just one more hour. We’ll catch up on sleep later, perhaps on the weekend. We’ll just drink another pot of coffee, and that will get us through the storm. Then we can focus on sleeping some other time when we are not so busy. But of course that time never comes, because the same thing happens the next night, and then the next.

We need to take the plunge to a more meaningful step in the right direction. This requires asking an important question: When should I call it a night? When should I stop working for the evening so I can rest up and be at my best tomorrow?

First, face up to the fact that we all face a tradeoff between the quantity of work we do and the quality of that work. Increasing your work hours from 10 hours per day to 18 hours per day will surely increase the amount of work that you can get done. That’s simple math. But it is also a mirage; you may be able to complete more tasks, at least in the short term. However, that 18-hour workday will destroy your effectiveness through the harmful effects of sleep deprivation. During those 18 hours, you will be like a boxer fighting with one hand tied behind his back. 18-hour-workday-you will make more mistakes. You will catch some of those mistakes, which means they will only waste your precious time. But some of those mistakes will go undetected until they create much bigger problems later on. 18-hour-workday-you will miss important opportunities for insight into difficult problems, so you will keep banging your head against a wall trying the same old solutions. So the choice is really this: would you rather have a full workday of high quality work, or a really long workday of degraded work? Most of us would be better off with the full workday of high quality work. So ask yourself each day at work the following question: Will my world come to an end if I wrap up my workday in time to get a full night of sleep? If we answer this honestly and without an inflated sense of self-importance, the answer will usually be no. So wrap up your day and get a good night of sleep.

Second, use your caffeine consumption as an indicator of your need to reprioritize sleep. In simple terms, caffeine blocks the signals that tell our brains we need sleep. But it does not actually address the physiological needs which can only be met with sleep. Essentially, caffeine masks the problem of sleep deprivation rather than solving the problem. If you feel you MUST use caffeine to make it through your morning without feeling sluggish, that should be a major red flag that you are just covering up your problem of sleep deprivation. If you feel you MUST use caffeine again in the afternoon, that should be a second red flag. Each red flag thrown on the pile should increase your urgency of getting out of the office earlier so as to not infringe upon sleep.

Third, don’t be a lone superhero. You do important work. Not everyone can do the work you do. But you can put people on your team who can do much of the work. You have to be willing to delegate. Many leaders who sleep-deprive themselves do it because they are not willing to share the workload with their team. If you have no team members who are qualified to do the work, either further develop the ones you have or recruit new team members who are qualified. For many of us, this means getting over our own egos. We often tell ourselves that we must do these tasks, because nobody else can do them as well as we can. But rather than viewing that as self-flattery, we should view this as a failure to develop our teams. Addressing this problem may require fighting for more resources in resource-constrained environments. That can be difficult. But leaders themselves are also resource-constrained. Working an unsustainable amount of hours comes with a price tag that is probably bigger than adding some help; we just don’t see that price tag until it reaches a crisis point (see Arianna Huffington’s story about passing out at work and breaking her cheekbone). Don’t set yourself on fire just to keep your office warm in the short term.

Finally, make a plan each day on how you are going to get out of the office at a reasonable hour. If you wait until five minutes before you would like to leave in order to try to disengage from work, you will probably fail. But if you start the day with a plan, and then prioritize your work according to that plan, you have a much sounder structure to support your bid to keep your workday from crowding out a good night of sleep. No plan is perfect, but this form of planning which is specifically focused on getting you out of the office by a certain time will be better than just trying to wing it.

If you follow these steps and get out of the office early enough each night to get a good night of sleep, you will be more effective in the hours that you do work. Moreover, you’ll be happier, healthier, and a better version of yourself in non-work contexts as well.

Christopher M. Barnes is an associate professor of management at the University of Washington’s Foster School of Business. He worked in the Fatigue Countermeasures branch of the Air Force Research Laboratory before pursuing his PhD in Organizational Behavior at Michigan State University.

Found at Abnormal Returns Blog

10.Do you think you deserve a raise? If you have all 8 of these traits, you probably do

By Nicolas Cole

Face Everybody wants to know when they can expect their next raise.

As a founder, it’s something I didn’t fully realize until I was on the other end of the desk — deciding employee salaries instead of asking someone else to pay me more. Raises are a key incentive, and certainly not something you should ever get frustrated talking about with your employees. After all, if they’re not in it for the next raise, what are they in it for? To change the world?

Please. People want to be part of things they believe in, yes. But they also want to be able to provide for themselves too.

The issue with raises is that it’s often the people who don’t deserve them that ask the most questions — while it’s the people who provide the most value that you almost can’t help yourself from paying more. They’re that good.

Which are you?

If you have these 8 traits, then chances are, your next raise is right around the corner:

  1. You do what is needed before anyone asks you to do it.

Nothing, and I seriously mean nothing, helps a startup or growing company more than employees that look for ways to help on their own — rather than waiting for someone to give them direction.

If your To Do list is empty, and you take that as your cue to open Facebook, you aren’t worth a raise. You are doing the bare minimum. But if you’re the type of person who finishes all their work, or maybe still has work to do but sees can opportunity to be more helpful, and you jump into action, then don’t worry.

Someone, somewhere in your company, is very, very aware of your efforts.

You will be rewarded accordingly.

  1. You take it upon yourself to suggest positive changes to the company

Founders all have different preferences as to how they want their company run.

But personally, I prefer being surrounded by people who bring suggestions to the table as to how we improve — not people who stand on the sidelines even if they have an idea.

As an employee, you have to trust that since you’re the one doing the work, you have a good perspective as to how things are getting done. Which means it’s your responsibility to take that knowledge and build on it.

Any company that doesn’t welcome that sort of conversation isn’t worth working for in the first place.

  1. You don’t clock out exactly at 5:00 p.m.

Part of being on a team means owning your responsibilities. And if those responsibilities aren’t handled, and you’re putting your coat on at 4:58 p.m. like it’s the end of a school day, don’t expect a raise anytime soon.

The best employees are the ones that know what needs to get done, and are willing to put in the time to get to the result. It’s not about working 80 hours per week.

It’s about seeing things through to the end. And if that means working past 5:00 p.m., so be it.

  1. You ask for feedback directly

You can’t learn if you don’t ask questions. And you can’t improve if you don’t get feedback.

Forget quarterly (or worse, yearly) “employee reviews.” It’s certainly the responsibility of the founder and his or her organization to have check-ins and provide helpful feedback, but it’s also the responsibility of the employee to be vocal about what they still need help on.

The people who take action to learn and improve are the ones who get rewarded most often.

  1. You bring positive — not passive-aggressive — energy to the table

Good luck getting a raise if you’re the employee sending passive-aggressive emails.

This is a huge issue for organizations that don’t realize they cultivate an internal culture of competitiveness and poor showmanship. Part of being a great team member means being a force of positivity, and not someone who causes drama or starts issues — either with other team members or clients.

If you always have a good attitude and don’t let yourself get defeated when things get tough, you will stand out.

  1. You let your actions speak for you

Trust me when I say that founders and company managers are aware of how often you ask for a raise.

It’s not that asking for a raise is bad. If anything, it’s a conversation worth having — because you always want people to feel incentivized to do great work. An issue arises, however, when that employee spends more time asking for things instead of looking for ways to help out.

Bring the conversation up once you’ve proven your value. Not before.

  1. You pay attention to where the company is struggling — and you design your own solution

Especially when you work for a startup, it’s not hard to pick up on what still needs fixing.

It’s a startup.

There’s a lot to fix and improve — always.

The best employees are the ones that take note of these internal pain points and then devise their own solutions. They look for ways to help the whole, which exponentially increases their own value.

Any half-way intelligent founder will see these efforts and realize they’ve got a crucial team member on board — and will find a way to reward them accordingly.

  1. You never the drop the ball

This is probably the most important one of all. Because unfortunately, one bad mistake can wipe out a whole list of jobs well done.

Teams succeed when little wins are added up day by day. Part of being a solid team member and employee, then, is all about making sure you keep that pattern going. Think of it like playing Ping-pong with a friend, where you try to see how many volleys you can get in a row. As soon as you start getting worried about making a mistake, you usually drop the ball. But when you’re in flow and just having fun, you could volley forever.

As a mentor of mine, and fellow Inc columnist Ron Gibori, used to tell me all the time, “Slow down to speed up.”

This article from Medium originally appeared on Inc. Magazine.