Topley’s Top Ten – December 10, 2019

Author

Matt Topley
December 10, 2019

1.20 best-performing stocks of the past decade

Some lesser-known companies have special advantages in their industries

MarketWatch photo illustration/Getty Images, iStockphoto

Netflix is the runaway winner for total returnsin the S&P 500 over the past 10 years, but Amazon.com and Apple are alsoimpressive.

Theseare the 20 best-performing stocks of the past decade, and some of them willsurprise you–Some lesser-known companies have special advantages in theirindustries  PHILIPVAN DOORN

2.Longest Expansion, Lackluster Growth

Mon,Dec 9, 2019

Below is an excerpt from one of the first sections of our 2020 Outlook Report that was released on Friday discussing Economic Cycles which provides our outlook for the economy and equity market performance surrounding economic expansions and recessions:  With this being the longest expansion on record, and still in good health based on the November jobs report, it wouldn’t be a leap to assume that both the stock market’s performance and economic growth during this period have also been among the best. The reality, though, isn’t quite the case.  Starting with the stock market, the S&P 500 has rallied more than 230% since the end of the recession in June 2009 which is stronger than any other expansion. It is also only the third post-WWII expansion where the S&P 500 more than doubled. Besides those three periods, though, the stock market’s gain during all other expansions was less than 55%.

Where the current expansion has been lacking, though, is in terms of economic growth.  One would think that with a record economic expansion in terms of length, that overall growth would also be strong. As shown in the charts below, four other expansions have seen a stronger level of total growth than the 26.4% level in the current period (median: 22.9%).  Sign up using our 2020 Annual Outlook Special to gain access to the entire section on Economic Cycles as well as other individual sections and the full publication to be released by year-end.

3.A Growing Share of S&P Earnings are Contracting.

A Growing Share of S&P 500 Companies’ Earnings AreContracting

Thepercentage of S&P 500 companies posting a year-over-year decline inearnings is at highest level since 2009

4. If you were picking equities by throwing darts at a board, more than 90% would fail to beat cash.

Last week, I published a chart described by itscreator as the “most depressing chart ever” for asset managers. AndrewLapthorne, chief quantitative strategist at Societe Generale SA, pointed outthat over the last two years, barely one in five stocks globally have managedto beat the S&P 500. Here is his chart again, for those who didn’t see it:

Depressed Enough Yet? TryThis Stock Chart, Then

If you were picking equities by throwing darts at aboard, more than 90% would fail to beat cash.By John Authers

5.2010’s Only Decade Going Back to 1850 Without a Recession.

Ben Carlson

This will be the first decade in moderneconomic history (since 1850) that the US won’t experience a single recession

Found on Barry Ritholtz TheBig Picture Blog

6.Who Knew ?

7.New State of American Rental Market….30% Detached Homes.

30%of America’s renters live in a detached home, yet only ~10% of new rentalsupply is detached. That is about to change. JohnBurns Real Estate Consulting hashtag#JBRECDailyInsight

John Burns Real Estate.

8.See Exact Timing of College Costs Separating from Median U.S. Income.

9.Paul Volcker, former Fed chairman who fought inflation, dies at 92

Updated1:34 PM ET, Mon December 9, 2019

New York(CNN Business)Paul Volcker, the former chairman of the Federal Reserve knownfor his battles against inflation in the late 1970s and early 1980s, has died.He was 92.

He passed away at his home in NewYork Sunday from complications related to his prostate cancer, said hisdaughter, Janice Zima.

Volcker served as Fed chairman from August 1979 through 1987. He returnedto public service more than 20 years later in the wake of the financial crisis,serving as an economic adviser to President Barack Obama during the early daysof his administration.

“Paul A. Volcker was a giantamong American public servants. He was a man of great courage and integrity whocommitted most of his working life to the public good,” said Thomas Ross,president of the Volcker Alliance, a government advocacy group for whichVolcker was the chairman.

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Volcker became chairman of theFederal Reserve in August 1979, appointed by President Jimmy Carter, as theUnited States was in the grip of high inflation. Prices were up 11.8% from theprior year during his first month on the job.

To choke off demand for goods andput downward pressure on prices, the Fed under Volcker raised interest rates tounprecedented levels. By the high point in July 1981, the effective Fed fundsrate had reached 22.36%.

But the high rates also plunged thenation into a series of recessions, one starting in January 1980, the next inJuly 1981. It helped lead to Carter’s loss of his 1980 reelection bid.Unemployment hit a high of 10.8% in late 1982, the highest rate since the GreatDepression and a higher rate than the one that was reached during the GreatRecession of 2007 through 2009.

But his battle against inflationwas successful. The annual rate of price increases had fallen to 1.2% by late1986, soon before he left office. And except for a brief period in 1990,overall inflation hasn’t topped 6% since he left office.

Volcker was reappointed to lead theFed by President Ronald Reagan in 1983. But he clashed with the Reaganadministration, according to a biography by Joseph Treaster. Although Reagandidn’t publicly criticize Volcker, he made it clear a third term was not in thecards. Volcker announced he was stepping down in 1987 and was replaced withAlan Greenspan.

During his time working with theObama administration, he helped to draft what became known as the “Volcker Rule” which limited the trading that banks coulddo with their own proprietary accounts.

At a January 2010 press conference,Obama announced his support for the Volcker Rule, saying new reforms should banproprietary trading. Volcker was reportedly surprised to discover Obama hadgiven the ban his name.

The Volcker Rule passed as a partof the Dodd-Frank bill of Wall Street reforms, but remains one of the mostcontested measures by banks and Republicans. Volcker had vigorously defended it.

But the limits were loosened on smaller banks in 2018 under abipartisan bill signed by President Donald Trump. There were further changesput in place by Federal regulators in August 2019.

He was praised Monday by several ofhis successors.

“He personified the idea ofdoing something politically unpopular but economically necessary,” saidBen Bernanke, who served as Fed chairman from 2006 through 2014.

“Paul Volcker was aninspiration to me and to everyone in the Federal Reserve,” said JanetYellen, who was Fed chair from 2014 through 2018. “He embodied the valueswe hold most dear: devotion to public service, the courage to do the rightthing, even when it’s immensely unpopular, a commitment to strong and effectiveregulation of the banking system and the highest ethical standards.”

Yellen said Americans have Volckerto thank for low inflation and economic stability

“His life exemplified thehighest ideals — integrity, courage, and a commitment to do what was best forall Americans,” said Jerome Powell, the current Fed chairman. “Hiscontributions to the nation left a lasting legacy. My colleagues and I at theFederal Reserve mourn this loss and send our condolences to his family.”

Volcker has been active in publicaffairs until recently. He was one of four former Fed chairmen, along withGreenspan, Bernanke and Yellen, who wrote in an op-ed column in the Wall Street Journal in August arguing that it wasdangerous to even suggest Powell could be removed from office by President Trump, who hasrepeatedly criticized him and the Fed’s decisions. They argued thatan erosion of the central bank’s independence would undermine financial marketsand damage the economy.

“Even the perception thatmonetary-policy decisions are politically motivated, or influenced by threatsthat policy makers won’t be able to serve out their terms of office, canundermine public confidence that the central bank is acting in the bestinterest of the economy. That can lead to unstable financial markets and worseeconomic outcomes,” they wrote in the column.

Volcker was an imposing figure, whowas six feet, seven inches tall. He loved fly-fishing and cigars. He issurvived by his wife Anke Dening, his children Janice Zima and James PaulVolcker, and by his grandchildren. His first wife Barbara Bahnson Volcker diedin 1998.

10.Five Reasons to Get Out of Your Comfort Zone

Improveyour happiness and health by taking a new look at your personality.

They callit a comfort zone for a reason. There is definitely comfort in having a lifethat is predictable and without unpleasant surprises. There is also comfort inhaving steady routines that you follow day in and day out, and from year toyear as you go through the ebbs and flows of the seasons.

Peoplewho know you won’t call you at 7 p.m., because they know, with certainty,that you’ve just sat down to eat dinner. They also know what to get you for abirthday gift, because your preferences for clothes, wine, or even store giftcards are so well-established. As it turns out, though, treading the “straight and narrow” pathway maynot be all that beneficial to your well-being. Even if you never actuallychange those reassuring routines, just contemplating a break in your patternscan be of value.

Peoplemay gravitate toward steady routines for a number of reasons, but one of themost probable has to do with personality. The Five-Factor Model proposesthat the quality of “openness to experience”is one of the basic building blocks of personality, influencing whether you’rewilling to contemplate new ideas, explore new opportunities, try out newcultural experiences, question your values from time to time, and take the timeto explore your feelings. Although openness to experience is somewhat the poorstep-child of the Five-Factor Model, paling in comparison to popular favorites,such as introversion/extraversion and neuroticism, there is now increasingevidence of its importance in overall psychological health.

In onerecent study by the National University of Ireland’s Anna Soye and PáraicO’Súilleabháin (2019), a sample of 77 women ages 18-25 were subjected to twodifferent stress-producing conditions while their blood pressure and heart ratewere monitored. In the active stress condition, participants had the unusualtask of speaking as loud as possible into a camcorder about words presented tothem on a screen. In the passive stress condition, they were required to watchthe recorded videos as they performed this task.

Previousresearch has actually revealed that both of these conditions producecardiovascular stress responses. The findings showed that women highest inopenness to feelings were most likely to show elevated stress reactions, butonly in the acute stress condition. Across thepassive stress condition, these highly open individuals actually recovered moresuccessfully. In other words, in some circumstances, being willing to exploreyour feelings might help you become better able to adapt to stressful situations.

Opennessto experience as a personality trait may also matter for how young you feel.Yannick Stephan of the University of Montpellier (France) andcolleagues (2019) examined data from a large U.S. sample initially includingover 10,000 adults and followed them for 8 to 20 years. Participantscompleted measures of Five-Factor personality traits, along withself-report measures of physical activity and subjective age (calculatedby subtracting self-rated age from actual age and dividing by actual age).

The finalstatistical model in the Stephan et al. study revealed the beneficial effectsof physical activity on subjective age, via a route through openness to experience.In other words, as the authors concluded: “A physically active lifestylecontributes to feeling younger, in part because of the personality and healthbenefits of such a lifestyle” (p. 7).

Otherresearch shows that being open to experience may also boost your creativity. In the “Big Two” modelof personality, the five factors break down into plasticity (openness andextraversion) and stability (low neuroticism, agreeableness, and conscientiousness) (Feist,2019). Supporting this concept, Angelina Sutin et al. (2019) showedpositive relationships between openness and verbal fluency, another indicatorof cognitive functioning related to creativity. People high in openness mayeven have more gray matter in the brain (cortical thickness), as observed byDefence Research and Development Canada’s Oshin Vartanian and colleagues(2019).

Thisresearch leads right into the Openness-Fluid-Crystallized-Intelligence (OFCI) model(Ziegler et al., 2018). The OFCI model proposes that people higher inpersonality openness also have more varied interests and improved ability toassess situations, strengths that are reflected in higher scores on measures ofintelligence as they develop through adulthood. More openness, this modelproposes, leads to more “learning opportunities,” which in turn stimulates thecognitive processes that underlie intelligence.

Withthese findings in mind, then, here are the five reasons you need to open yourown personality as well as your routines to stretch your own comfort zone,bit by bit:

1.Improve your adaptability. Giving yourself that extra emotional push frombeing willing to look at your feelings in a range of situations can wake yourcardiovascular system enough to learn to adapt to real stress.

2. Feel younger. When you are open to new experiences, you freshen your perspective. It’s especially useful if you adopt this perspective in re-examining whether you can squeeze in more time for exercise, rather than sticking to your tried-and-true excuse that you’re too busy (hint: most people aren’t)

3. Expandyour verbal horizons. Research showing the relationship between verbal fluencyand personality openness highlights the value of adopting a mentallyflexible approach to life.

4. Becomemore creative. Feeling “stuck” is one of the chief reasons why peoplefeel their creativity is stifled. By being willing to consider new ideas andapproaches, you can think yourself out of that constraining mental box.

5.Strengthen your intelligence. As the OFCI model proposes, people higher inpersonality openness get more out of their experiences, allowing them to expandtheir intelligence more than their comfort zone-loving age peers.

You maybe wondering how to go about making these transformations, now that you knowwhy it’s worth doing so. The answer is to look at personality openness as alearnable skill. Train yourself to look in new ways at your world, yourfeelings, and even your most cherished daily schedules by taking off yourstraight and narrow blinders.

To sumup, fulfillment in life can come from the sources of comfort you’ve grownto love, but as the research on personality openness shows, some stretching ofthat comfort zone can enrich your life even more.

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