Topley’s Top Ten – August 13th, 2019

Author

Matt Topley
August 13, 2019

1. Microsoft, Apple, Amazon, Alphabet, and Facebook Make Up Half of Tech’s Market Cap.

In late 2018, shares of SiliconValley’s finest tanked some 16% in three months. Since then, Big Tech has beenbusy climbing back near record highs. And, as The Economist points out,listed tech firms now make up more than 25% of the value of U.S. stockmarkets. 

The last time tech was thisimportant was 2000, when the sector briefly made up one-third of the value ofall U.S.-listed equities. Back then, the concern was that tech firms were “tooflimsy” for their valuations. We all know how the dotcom bubble ended, but…

Today’s a different story—tech’sbig five (Microsoft, Apple, Amazon, Alphabet, and Facebook) account for 12% ofpre-tax profits among the U.S.’ non-finance firms, up from 4% in 2010.

Zoom out: Those bigfive make up half the tech industry’s market value, meaning new worriesfor the new millennium. Today, the concern is lessabout financials and more about the idea that Big Tech has accumulated too muchpower.

Morning Brew

2.Chinese Army Trucks Lined Up Across Border from Hong Kong.

Disturbingvideo taken in #Shenzhen just across the boarder with #HongKong. Something extraordinarily bad isabout happen. #China #HongKongProtests #Democracy #SaveHongKong

3.Argentina Sees 2nd Biggest One Day Market Crash in History.  -50% Intra-day

Investors also remained on edge over the damage caused byMonday’s crash in Argentina – the 2nd biggest one day market crash inhistory which saw about 50% of the local stock market value wiped out in onesession – after its President Mauricio Macri became the latest pro-freemarket, pro-reform leader to be given a beating at the polls by a populistrival.

4.Another Big Euro Bank Breaks to New Single Digit Lows.

Comerzbank New Lows

5.25%  Tariffs Raise The Game to Another Level.

WSJ–Chao Deng@CHAO_DENG

When the Trump administration firstimposed 10% tariffs on many Chinese goods about a year ago, suppliers,importers, distributors and retailers worked together to defray the cost andtry to avoid passing it on to consumers for fear of losing sales. Mr. Stone andhis Chinese partners initially ate most of the vinyl flooring tariff cost,passing just a tad on to retailers.

Tariffs at the 25% level are quite another matter. They areupending cost projections and business models and straining relationships builtup over decades. For operations such as Mr. Stone’s, the math is painful. Heand others are trying to figure out how much of the new expense can bedispersed throughout the supply chain, how much should be passed to customers,at what potential cost in lost sales, and how much they must swallow.

6.U.S. Budget Deficit Already Exceeds Last Year’s Total Figure

Sarah McGregorBloombergAugust 12, 2019

(Bloomberg)— The U.S. fiscal deficit has already exceeded the full-year figure for lastyear, as spending growth outpaces revenue.

The gapgrew to $866.8 billion in the first 10 months of the fiscal year, up 27% fromthe same period a year earlier, the Treasury Department said in its monthlybudget report on Monday. That’s wider than last fiscal year’s shortfall of $779billion — which was the largest federal deficit since 2012.

So far inthe fiscal year that began Oct. 1, a revenue increase of 3% hasn’t kept pacewith a 8% rise in spending. While still a modest source of income, tariffsimposed by the Trump administration helped almost double customs duties to $57billion in the period.

Republicantax cuts, increased federal spending and an aging population have contributedto the fiscal strains, though the GOP says tax reform enacted last year willspur economic growth and lift government revenue. Corporate income-tax receiptsrose 3% between October and July, while individual income taxes gained 1%,according to Treasury data.

The annualbudget deficit is expected to exceed $1 trillion starting in 2022, the CongressionalBudget Office has said. The non-partisan agency is scheduled to update itslatest 10-year budget and economic forecasts on Aug. 21.

For themonth of July, the budget deficit was $119.7 billion, compared with $76.9billion a year earlier, according to Treasury. Still, “July 2019 was a recordreceipts month, and the month is generally a deficit month — 63 of the last 65times,” a senior Treasury official said in an accompanying statement.

–Withassistance from Sophie Caronello and Nancy Moran.

©2019 Bloomberg L.P.

7.Mortgage Debt is 70% of All Consumer Debt.

3.25% -4.25% fixed low mortgage rates vs.rising wages. Mortgage debt the most significant consumer debt we have. It isroughly 70% of all consumer debt. Homeowners in this cycle have the best loanprofiles I have seen in my 23 years in finance with substantial nested equity

From Michael Batnick Blog

8.How to Use the Classroom Mindset to Experience Significant Change

Mymother used to wash old tennis balls.

Towardthe end of every summer, I would visit our community tennis club and ask thepro if she had any dead balls that I could take off her hands. I would delivera bag to my mother, who would endure the thunderous sound that comes fromlaundering dozens of tennis balls in a residential washing machine, then passthe lot over to my father so he could drill holes in each one.

Momtaught elementary school for 29 years, most of that time in kindergarten. Thetennis ball project was just another ritual that comes with being part of akindergarten teacher’s family, just like learning to run a laminating machineor how to turn two dozen pint milk jugs into graham cracker gingerbread houses.Once my father was done with them, the tennis balls fit perfectly onto the feetof a standard elementary school chair and eliminated the high-pitched scrapingnoise that otherwise occurred every time a child shifted his or her seat. Whenyou are charged with taking a classroom filled with 5- and 6-year-olds who havenever been to school before and turning them into students, it’s the littlethings that count.

Eachyear, like teachers across the country, mom would head back into the classrooma few weeks before classes began. She would spend hours in her hot room gettingthings ready for the next group of wide-eyed youngsters prepared to make theirelementary school debut. She would make nametags and daily schedules, createactivity stations and set up a reading corner. She would decorate her door andbulletin boards with messages of welcome and possibility. And, yes, put tennisballs onto the feet of the chairs.

* * *

Thestart of a new school year is as much, if not more, of a marker for newbeginnings and transformative change as New Year’s Day. Stores are filled withsupplies to help you plan and organize your life. There is a fresh batch ofsports leagues and fitness classes to try. Regularly scheduled social events,from Bible studies to poker night, return from summer hiatus.

Even ifyou’re not in school and don’t have school-age children at home, chances areyou feel this seasonal change too. The swimming pools close. The nights begingetting longer. The backyard barbecues become fewer and farther between. Therhythm of life shifts away from vacation mode and toward something morestructured and fast paced. We are no longer basking in the glorious sunshinebut once again on the move and going places.

Or arewe? Children certainly are. Kindergarteners are walking into a school for thefirst time, backpacks filled with supplies and ready to be transformed intostudents. In just the first few days, they will learn to follow a dailyschedule, be responsible for themselves, and work together in a team. Over thenext nine months, they likely will make tremendous progress in multiplesubjects: math, reading, writing, science, social studies and more. By the lastday of school, they will look like different people. Don’t believe me? Checkthe endless first day/last day photos their parents post on social media.

What happens inside those classroomwalls that conditions us to be learners, to create a new vision for ourselvesand then turn that vision into reality?

Similar transformations happen to adults pursuingstructured education. The first day/last day photos of college students may notcome with the adorable dimpled cheeks and gap-toothed smiles of elementaryschool, but the trajectory of change is just as steep. But once we leave formaleducation behind, we rarely experience a similar level of progress in such acompressed amount of time.

Why isthis? What happens inside those classroom walls that conditions us to belearners, to create a new vision for ourselves and then turn that vision intoreality?

Teacherscall their secret sauce classroom management. The idea is that if you providethe right structure to the environment and then follow those structuresreligiously, you can achieve more significant results at scale.

Consistentstructure is powerful. One year when my mom was teaching, one of her colleagueshad a transfer student join her class in March, quite late in the school year.The little boy had a long discipline record for a kindergartener, includingeight suspensions from his prior school and a reputation for cursing at prettymuch everyone. His teacher still remembers being nervous about how he wouldimpact her classroom, but she welcomed him with a smile and kindly went overthe rules, procedures and expectations for her class. On his second day, hechallenged one of her directions with, “What are you going to do if I don’t doit?” Day after day, she explained that she was there to help him and believedhe could do the work. She praised everything he did that was positive. It wasan exhausting few weeks, but he turned into one of the best students that year.

* * *

Althoughyour school days may be behind you, perhaps classroom management shouldn’t be athing of your past. If you want to experience significant, lasting change inyour life, try mapping out your goal as if you were going back to school toachieve it.

Start with planning yourcurriculum. Where do you want to be at the end of your school year?What will you need to do to achieve that? What will you need to read or study?What skills will you need to practice?

Next, create your lesson plans. Teachers breaktheir curriculum down into detailed, day-by-day lesson plans that map out ascript for each day. Their lesson plans include a series of activities designedto deliver on the day’s objectives. Each day builds on the previous one,culminating in achieving the final desired result. Fitness goals fit neatlyinto this framework. Google “marathon training plan,” for example, and you’llfind multiple curriculum options broken down into daily plans for physicaltraining, nutrition, and more. Other goals may require more imagination on yourpart.

Finally, set your environment. The schoolenvironment comes with rules—lots of them. To adopt the benefits of the schoolyear in your adult journey, establish some new rules to live by. Many schoolrules translate well into the adult world. For example, schools provide adefinite start and end time to the learning day and have a strict schedule inbetween. They typically limit the use of electronic devices and other potentialdistractions. They insist on a rigorous program of homework and independentstudy to reinforce the material. Other school rules require some adaptation.For example, you may no longer have a use for colored pencils or graphingcalculators, but you likely will benefit from having all of your supplies atthe ready at the start of your day.

Get toostructured, of course, and you kill the joy. Schools have caught onto this inrecent years, to the benefit of today’s students. My youngest son, for example,walked into his second-grade classroom to find he’d been assigned a camp chairinstead of a traditional desk and chair. The next day, he had a giant floorpillow. Another day, he had a wobbly stool. This flexible seating gave him andhis classmates more control over their own learning environment, a key, newresearch suggests, to engaging with the material.

* * *

Bypairing a robust curriculum with solid classroom management, teachers canperform virtual miracles in a single school year. Kindergarteners who couldn’twrite their names will be able to draft their own stories with a beginning,middle, and end. New middle schoolers who could barely open their lockers willbe able to complete multi-part assignments on Google Classroom, complete withslide presentation. High school seniors will cross that final bridge intoadulthood, heading out into the world with the independence to choose jobs oradvanced studies.

Whatcould you accomplish in your own life in the next year? Maybe you can’t devoteeight hours a day to your pursuit as if you were a full-time student, but youcan still use this time of year to embrace a season of change. Identify yourgoal and then map out your plan for taking yourself back to school—at least inmindset—to make it happen.

Even if you need tostart by eliminating your squeaky chair.