Topley’s Top Ten – February 10, 2020

Author

Matt Topley
February 10, 2020

1.Energy Drops to 3.8% Weighting in S&P

Dividend Yields 4-7%  Barrons

Energy Stocks Might Finally Have HitBottom. It’s Time for Investors to Get In.  By Andrew Bary 

2.Coronavirus Drops the Baltic Dry Shipping Index to All-Time Lows.

Baltic Dry Index – BDI By BEVERLY BIRD What Isthe Baltic Dry Index – BDI?

TheBaltic Dry Index (BDI) is a shipping and trade index created by theLondon-based Baltic Exchange. It measures changes in thecost of transporting various raw materials, such as coal and steel.

Membersof the exchange directly contact shipping brokers to assess price levels for given shipping paths, aproduct to transport, and time to delivery or speed. The Baltic Dry Index is acomposite of three sub-indices that measure different sizes of dry bulkcarriers or merchant ships: Capesize, Panamax, and Supramax.

KEYTAKEAWAYS

  • The Baltic Exchange calculates the index by assessing multiple shipping rates across more than 20 routes for each of the BDI component ships.

  • Members contact dry bulk shippers worldwide to gather their prices and they then calculate an average.

  • Many investors consider a rising or contracting index to be a leading indicator of future economic growth.

  • The index can experience high levels of volatility because the supply of large carriers tends to be small with long lead times and high production costs.

3.Money Pours into U.S. Bonds…U.S. Dollar Hits New Highs.

Dollar +2.3% YTD vs. Emerging Markets -5% International Continues to underperform as dollar stays strong

4.Emerging Market Currencies Tumble

5.Coronavirus and Apple…381 of 775 Manufacturing and Supply Chain Locations in Apple’s Global Supply Chain Located in China.

Barrons-Coronavirus Could Bring Tech Supply Chainsto a HaltBy Eric J. Savitz

6. Speculative Paper Called Payment-In-Kind or PIK Securities Returns.

Barrons–Casein point: the return of particularly speculative paper called payment-in-kind, or PIK, securities.Instead of paying interest in cash, the borrower simply issues more debt to theinvestor. During the crazy days of the mortgage bubble that led to thefinancial crisis, home buyers would take on interest-only mortgages to get intohouses they couldn’t afford. With PIK securities, corporate issuers don’t evenhave to pay interest; they just issue more paper, effectively going deeper intohock.

Such deals, in which backers extract their equity, weren’tuncommon in 2005-07, before the financial crisis, notes Cliff Noreen, head ofglobal investment strategy at MassMutual. The big insurer is a major investorin corporate credit, with $567 billion under management. The return of PIKsreflects investors’ hunger for yield in today’s low interest-rate environment,which includes negative yields abroad.

“As an investor, I believe these are great for the issuer butnot the bond buyer,” he writes in an email. In essence, buyers are gettingbondlike returns for private-equity-like risks, he adds. Adding to the dangersof what Moody’s notes is a highly leveraged transaction: The bonds are issuedby a holding company, not the operating company itself, Noreen points out.

Tesla’s Manic Rally Isn’t the Only Sign of aMarket BubbleBy  Randall W. Forsyth

7.U.S. 10 Year Treasury Yield Holds Lows.

8.Economic Growth By President

9.Percentage Change in U.S. Energy Produced Relative to 2010

10.Leaders Go First

Whenever I propose an outlandish idea, I volunteer to go first.

By Mickey Mikitani, Founder, Chairman and CEO of Rakuten, Inc.

“That will never work. It’scrazy!”

I hear it a lot.

Even as CEO, there are plentyof times when someone looked at me and told me that the thing I’ve just said —a deadline, a goal, a new idea — is simply nuts.

I’m used to it. What’s more,I have a tried-and-true plan to combat it. Whenever I propose an outlandishidea, I volunteer to go first.

So when I announced to myTokyo-based company in 2010 that from this point on, the official language of Rakuten would be English, Ilistened while everyone said I was making a huge mistake and it wouldn’t work.And then I went first.

All my meetings, all myinteractions in the company, were conducted in English. This was not easy. Inthe early years of using English there was quite a variance in language skillswithin the company. Many times in the middle of senior level meetings someonewould turn to me and say: “This next part is difficult so can I just say it inJapanese?”

Certainly I wanted to hearwhat my team had to say. But I stayed firm. What good is a bold new idea if I’mnot willing to do it myself? If we want everyone in this company to speakEnglish, then that means me, too. Even with my senior leadership team. Evenwhen it is difficult. I gave the “crazy” order and I was willing to go first.

Last year, when weintroduced mandatory programming training forall new grads, some of our young recruits were undoubtedly nervous. However,they embraced the challenge head-on with the knowledge that I myself hadlearned to code during the early days of the company.

“WILLINGNESS TOGO FIRST — TO DO THE WORK YOU ASK OTHERS TO DO — IS A CRITICAL ELEMENT OFLEADERSHIP.”

This is my standard practice.When I decided it would be a good team bonding exercise to climb Mount Tanigawa(local nickname: Mountain of Death), I went up in the first group. When, someyears ago, I decided it would be a good idea for Rakuten to adopt a formal dresscode until we improved our e-commerce performance, I was the first to show upin a suit. As Rakuten Mobile began to rollout the radio antenna base stationscrucial to the new network launch, I made sure to be on the ground checking newinstallations at locations across the country.

This willingness to go first— to do the work you ask others to do — is a critical element of leadership.And it is particularly important when you’re asking people to do something thathas never been done before. Often, people are apprehensive when faced with anew idea or direction. It’s scary to think that the boss may be leading thecompany into uncharted territory. So it’s an important inspiration to bewilling to get out in front and go first.

This doesn’t only apply tothose in the corner office. When new recruits join Rakuten, they are treated toan early lesson on this topic. One which many refer to by an old advertisingadage: Eat your own dog food. That means, when you are a part of Rakuten, youshould be comfortable using all the services in the Rakuten ecosystem. Byplaying around with our digital content services like Rakuten TV or our globalmessaging app Viber, new discoveries can be made. If we want customers tofollow us, we must be willing to go first.

“THERE ARE PLENTYOF TIMES WHEN SOMEONE WILL LOOK AT ME AND TELL ME THAT THE THING I’VE JUST SAID— A DEADLINE, A GOAL, A NEW IDEA — IS SIMPLY NUTS.”

Going first is an importantinspirational process, but it is also an important yardstick for my owncreative process. I have new ideas all the time. As I turn them around in myhead, I think of many things. Will this be profitable? Will this provide a benefitto society? Will this reflect positively on the Rakuten brand? But in myprocess I must also consider: Would I do this myself? Am I willing to beCustomer No. 1? Next time you have a business idea, perhaps you can askyourself the same questions.

There are many benefits togoing first. It allows me to gain critical firsthand intelligence. It helpsinspire others in the company to embrace something different and challenging,regardless of how unusual it can initially seem. And of course, when the idea issuccessful, it allows me to be the first to say: I told you so.

This article was originallypublished on Rakuten.today and also appeared on LinkedIn.com

—Published on February 3, 2020