Topley’s Top Ten – August 8th, 2019

Author

Matt Topley
August 08, 2019

1.Real Rates Below Zero Vs. Gold.

Inflation adjusted rates in U.S. dip to negative

2.Homebuilder Stocks Seeing No Lift From Drop in Rates.

3.More Stats From the Negative Real Rate World….Aussie 100 Year Bond Doubled in One Year.

https://twitter.com/Schuldensuehner

4. EUR The 10yr swap rate went negative for the first time.

An interest rate Swap is a contract in whichone party agrees to pay a fixed interestrate to another party inexchange for receiving a variable rate. … One party agrees to paythe 10–year Swap rate to another party in exchange forreceiving 10 years ofvariable interest payments based on 90-dayLIBOR

Here is the European bank index vs. the 10yr Bund yield.

The Daily SHot

5. 3 Reasons Why a Drop in the Value of China’s Yuan Spooked Investors

3 Reasons Why a Drop in the Value of China’s Yuan Spooked Investors

If last week’s market turmoilwas driven by tariffs, this week it is the yuan that hasbeen at the center of investor fear.

Stocks fell sharply on Mondayafter the Chinese currency reached its weakest level in more than adecade, going past 7 to1 against the U.S. dollar.

That move came as a responseto President Donald Trump’s surpriseannouncement on Aug. 1 that he would impose $300 billion inadditional tariffs on Chinese imports starting in September. A falling yuan canhelp China mitigate, if not entirely offset, the impact of U.S. tariffs bymaking its exports cheaper.

Whyexactly is the falling value of the Chinese currency roiling markets?

Thefirst, and most obvious, answer is that it signals an escalation in theU.S.-China trade war. And not just an escalation in tone, but in the venue ofthe conflict. Taking the trade war into international currency markets willhave far-reaching economic effects that even the previously announced tariffshad not. The impact of a devaluation and volatility in the yuan would be felt,effectively, by every company with an extensive Chinese supply chain orcustomer base.

Anotherreason for the reaction is the level to which the yuan weakened. Tradersbriefly took it beyond 7.1 to the dollar on Monday, a record low for theoffshore exchange rate. At a visceral level, record moves grab the attention ofmarket participants. And for a market that is as closely monitored by theChinese government as the yuan-to-the-dollar is, the weakening was a clearsignal that it was approved by the most-senior political leadership in thecountry.

And a third reason that thefalling yuan is worrisome to investors is that it has led to a markedratcheting up of American rhetoric toward China, as evidenced by the TreasuryDepartment’s declaration that it consideredChina to be a currency manipulator.

That the justification forthat declaration was effectively that China hadmanipulated its currency in the past and was now declining to do so asit weakened only reinforced the extent to which the president’s trade agenda isdriving the decisions of U.S. bureaucracy beyond the White House. It is anindication that hope for any thaw in relations between the U.S. and China areprobably misplaced.

Write to BenWalsh at [email protected]

6.Follow Up to Yesterday’s FedEx Comments….Amazon Already Its Own Biggest Shipper.

Amazon, the new king of shipping

Data: RakutenIntelligence; Chart: Axios Visuals

Less than a decade after Amazon broke into the logistics industry, it hasbecome its own biggest shipper.

Why it matters: While the worldhas fixated on Amazon’s moves into books, groceries and cloud computing,perhaps most formidable of all has been its swift break into a differentbusiness — package delivery.

In a relatively short time, Amazon has built up a logistics arm that isalready turning this industry worth many billions on its head.

  • “Amazon is about 40% of all e-commerce. If they’re handling half of their own shipments, that’s 20% of the whole market,” Alex Pellas, a logistics expert at market research firm Rakuten Intelligence, says. “That’s huge.”

In a dataset provided first to Axios, Rakuten Intelligence followed tracking numbers for millions of Amazonpackages per month.

  • Researchers found that nearly half (48%) of Amazon packages are delivered by the company itself.

  • That’s a dramatic shift from two years ago, when the Postal Service delivered more than 60% of Amazon parcels, and Amazon just around 15%.

The total U.S. domestic package market in 2018 was about $106 billion. Of that, $35–$40 billion, or about athird, was e-commerce, according to David Vernon, an analyst at Bernstein.

In a statement to Axios, Amazon said, “The numbers are not an accurate representation of how Amazon shipmentsare shared between Amazon and our carrier partners.”

What’s happening: As Amazonbecomes a shipping juggernaut in its own right, experts say it will attack twodifferent sets of rivals — retailers and shippers.

  • The e-commerce behemoth is already faster than competitors — and it has ambitions of getting even speedier. It takes Amazon an average of 3.2 days to deliver a parcel after a shopper clicks “buy,” per Rakuten Intelligence. For all other e-commerce companies, the average time is 6 days.

  • Amazon — which has started offering its shipping capabilities as a service — will be able to ship products for about two-thirds the rates of UPS and FedEx, Pellas projects. Its trucks and planes are out delivering Amazon packages anyway so it can offer shipping at cost, instead of collecting a margin.

“We’re now talking about a retailerthat will control the entire process” from manufacturing to delivery, saysMark Rosenbaum, a professor at the University of South Carolina.

But, but, but: While Amazon’s suddenlylarge profile might look menacing, it won’t necessarily move as it did in booksto knock out its rivals, says Yossi Sheffi, director of MIT’s Center forTransportation and Logistics. “They just want to take all the profitableroutes and operations and leave the carriers with all the dogs.”

The bottom line: Amazon’s marchinto shipping is the company’s “classic model of partner with, copy, andunseat their competitors,” says Jaimee Minney of Rakuten Intelligence.

  • Shipping partners have begun cutting ties with the e-commerce giant as it steps onto their turf. Earlier this month, FedEx chose not to renew its contract with Amazon for air shipments. Others could follow suit, experts say.

  • Like Amazon, Walmart also has a logistics business of its own and could emerge as a shipping competitor.

Found at Morning Brew  https://www.morningbrew.com/

7.Corporate Borrowing at Record Levels But The Correlation with Rising Investment/Capital Spending Has Broken

When the Federal Reserve cuts interest rates, making it cheaperto borrow, it’s supposed to deliver a direct boost to the economy. But one keypart of that machinery has broken down.

Businessinvestment used to rise when U.S. companies took on more debt—because mostcompanies borrowed to add capacity. Nowadays, they’re likelier to funnel themoney to shareholders.

Investment is stuck at low levels by historical standards.President Donald Trump’s reduction in corporate taxes hasn’t changed thepattern. Neither has a decade of low interest rates, even before the Fed’squarter-point cut on July 31.

It’snot that business stopped borrowing. As a share of gross domestic product,corporate debt has climbed to a record. What’s all but vanished is thecorrelation between how much companies borrow and how much they invest.

8.6 Reasons We Make Bad Decisions, and What to Do About Them

AUGUST 01, 2019

JAMES W. PORTER/GETTY IMAGES

Research has shown that that the typical person makes about 2,000 decisions everywaking hour. Most decisions are minor and we make them instinctivelyor automatically — what to wear to work in the morning, whether to eat lunchnow or in ten minutes, etc. But many of the decisions we make throughout theday take real thought, and have serious consequences. Consistently making gooddecisions is arguably the most important habit we can develop, especially atwork. Our choices affect our health, our safety, our relationships, how wespend our time, and our overall well-being. Based on my experiences from threedeployments as an Army officer and from researching Lead YourselfFirst, I’ve found the following mindsets to be detrimental togood decision-making. When you have to make an important decision, be on thelookout for:

Decision fatigue. Even the most energetic people don’t haveendless mental energy. Our ability to perform mental tasks and make decisionswears thin when it’s repeatedly exerted.  Oneof the most famous studies on this topic showed that prisonersare more likely to have parole approved in the morning than when their casesare heard in the afternoon. With so many decisions to make, especially onesthat have a big impact on other people, it’s inevitable to experience decisionfatigue. To counter it, identify the most important decisions you need to make,and, as often as possible, prioritize your time so that you make them when yourenergy levels are highest.

A steady state of distraction. The technology tsunami of thepast decade has ushered in an era of unprecedented convenience. But it’s alsocreated an environment where information and communication never cease.Researchers estimate that our brains process five times as much information today asin 1986. Consequently, many of us live in a continuous state of distraction andstruggle to focus. To counter this, find time each day to unplug and step backfrom email, social media, news, and the onslaught of the Information Age. It’seasier said than done, but doable if you make it a priority.

Lack of input. The Kellogg School recently found that ina typical meeting, an average of three people do 70% of the talking. As authorSusan Cain articulates so well in her book Quiet, many introverts are reluctant tospeak up in a meeting until they know precisely what they want to say. Yet,these members of our teams often have some of the best ideas to contribute,since they spend so much of their time thinking. To counter this inclination,send out a meeting agenda 24 hours in advance to give everyone time to thinkabout their contributions, and work to set a meeting culture that allows peopleto contribute their ideas after the meeting is over.

Multi-tasking. There aren’t many jobs left in the worldtoday that don’t require at least some multi-tasking. While that’s the reality,research clearly shows that performance, including decision-makingeffectiveness, suffers by up to 40% when we focus on twocognitive tasks at the same time. When you need to make important decisions,carve out and commit to several blocks of time during the day to focus deeplyon the task at hand.

Emotions. Experiencing frustration, excitement, anger, joy,etc., is a fundamental part of the daily human experience. And while theseemotions have a meaningful role in our lives, you probably don’t need to seethe research to know that our emotions,especially during moments of peak anger and happiness, can hinder our abilityto make good decisions. Deciding to speak or send an email while angry oftencompounds a tough situation, because the words don’t come out right. To counterthis, pay attention to your emotional state and focus on the character strengthof self-control. Resist the temptation to respond to people or make decisionswhile you’re emotionally keyed up. Practice walking away from the computer orputting the phone down, and return to the task at hand when you’re able tothink more clearly and calmly.

Analysis Paralysis. While the Information Age has gifted uswith an abundance of information, big data, and metrics, there’s also no end tothe amount of information we can access. And we know that the more informationwe have to consider, thelonger we typically take to make a decision. While thedecision-making process should be thorough, the best way to make good decisionsis usually not to take more time or to look at more information.Instead, review the pertinent information you need, set a deadline to make adecision, and then stick to it.

The decisions we make determine our reality. They directly impacthow we spend our time and what information we process (or ignore). Ourdecisions shape our relationships — and increasingly in today’s hyper-connectedworld, decisions contribute to our energy level and how efficient we are in thevarious aspects of our lives. Inevitably, we all make some poor decisions everysingle day. But if we are aware of these six enemies of good decision-making,and take steps to outmaneuver them, we can make better decisions that have apositive impact on the people we work with and lead.