Topley’s Top Ten – July 1st, 2019

Author

Matt Topley
July 01, 2019

1.S&P Top 10 and Bottom 10 Performers YTD.

Retailers Bunched Up in Bottom 10

From Nasdaq Dorsey Wright  www.dorseywright.com

2.Another Stock Group that is Well Below Highs….Microcaps.

Microcap ETF well below highs…Private Equity Holds All the Microcap Today

3.July 1 2019 Kicks Off Official Longest Economic Expansion Since WWII.

Tomorrow is July, which means that we will officially beentering the longest economic expansion the U.S. has ever seen. https://www.axios.com/newsletters/axios-edge-b333a2bd-e9ac-4a7b-ba5d-bca2a660a9b1.html?chunk=5&utm_term=twsocialshare#story5 …

4.What Factors are Cheap and Expensive Versus 10 Year and 35 Year History

Value and Small Cap Cheap?

5.The Median Age of Tech Companies Going Public in 1999 was 4; Last Year it was 12

Barrons

 Initial offerings could raise a record level of capital in2019, potentially breaking the nearly $97 billion record set in 2000. ButWainwright, and IPO investors, have returned wiser and more disciplined.

In a sense, the IPO market has simply grown up. For one thing,the median age of tech companies going public in 1999 was four; last year, itwas 12. And having been burned in the bubble years by IPOs for wildlyspeculative and ultimately failed businesses, such as theGlobe.com and eToys,investors have tightened their standards. They now want established businesseswith substantial revenue and high growth.

The RealReal Is No Pets.com andToday’s IPO Market Is Not the Next Dot-Com BubbleBy Eric J. Savitz

Flashback to 1990’s IPO Boom

6..80% of the stock market is now on autopilot

PUBLISHED SAT, JUN 29 2019  8:30 AM EDTYunLi@YUNLI626

KEY POINTS

  • Passive investments control about 60% of the equity assets,while quantitative funds — those relying on trend-following models instead offundamental research — now account for 20% of the market share, according toestimates from J.P. Morgan.

  • Passive funds have attracted $39 billion of inflows so far thisyear, whereas active funds lost a whopping $90 billion in 2019, the bank said.

It’s no secret thatmachines are taking up a bigger and bigger share of investing, but the extentof their influence is approaching shocking proportions. It is as high as 80%,according to one major investing firm.

Passive investments suchas index funds and exchange-traded funds control about 60% of the equityassets, while quantitative funds, those which rely on trend-following modelsinstead of fundamental research from humans, now account for 20% of the market share,according to estimates from J.P. Morgan.

This means so much ofstock trading is now in the hands of automated buyers and sellers that themarket is increasingly sensitive to headlines and more prone to sharp priceswings, many notable investors believe.

Omega Advisors founderLeon Cooperman previously said computer trading is creating a  “Wild West” with themarkets, calling for an investigation by the Securities and ExchangeCommission.

DoubleLine Capital CEOJeffrey Gundlach has taken a shot at passive investing, saying it is causingwidespread problems in global stock markets. He called it a “herding behavior.”

“I’m not at all a fan ofpassive investing. In fact, I think passive investing … has reached maniastatus as we went into the peak of the global stock market,” Gundlach said in December.

While algorithmic modelshave gained popularity on Wall Street, low-cost passive vehicles keep raking inassets from Main Street. Passive funds have attracted $39 billion of inflows sofar this year, whereas active funds lost a whopping $90 billion in 2019,according to J.P. Morgan.

“The pace of outflowsfrom Active is at a cycle high while the pace of passive equity inflows hasbottomed and [is] beginning to reaccelerate,” Dubravko Lakos-Bujas, J.P.Morgan’s chief U.S. equity strategist, said in a note on Friday.

7.Can The Fed Cut With Stocks Up Big?

Postedby lplresearch

TheFederal Reserve (Fed) will likely cut rates at its next meeting in late July.This begs the question: Will the Fed really cut rates with stocks up so muchyear to date and near all-time highs? “It might sound strange for the Fed tocut rates with stocks up a lot for the year,” explained LPL Senior MarketStrategist Ryan Detrick. “But since 1975, the Fed has cut rates 26 times withthe S&P 500 Index up at least 15% for the year, most recently in 1995 and1998.”

Here’s the catch: Ayear after those cuts, the S&P 500 was higher 23 out of 26 times—with avery solid average gain of 13.4%. So it would appear monetary policy could be acontinued tailwind.

As our LPL Chart ofthe Day, “Will the Fed Really Cut Rates When Stocks Are Up Big?”,shows, rate cuts when stocks have been up big for the year have actuallyoccurred quite often over the years.

8.Oregon Supply of Weed Running 2x Demand

OregonHas So Much Extra Weed it Could Take Years to Smoke it All

MAY 31, 2019

SALEM,Ore. — Oregon is awash in pot, glutted with so much legal weed that if growingwere to stop today, it could take more than six years by one estimate to smokeor eat it all.

Now,the state is looking to curb production.

Fiveyears after voters legalized recreational marijuana, lawmakers are moving togive the Oregon Liquor Control Commission more leeway to deny new pot-growinglicenses based on supply and demand.

Thebill, which passed the Senate and is now before the House, is aimed not just atreducing the huge surplus but at preventing diversion of unsold legal marijuanainto the black market and forestalling a crackdown by federal prosecutors.

“Theharsh reality is we have too much product on the market,” said Democratic Gov.Kate Brown, who intends to sign the bill if it wins final passage as expected.

Supplyis running twice as high as demand, meaning that the surplus from last year’sharvest alone could amount to roughly 2.3 million pounds of marijuana, by theliquor commission’s figures. That’s the equivalent of over 1 billion joints.

9.Amazon Share of Digital Advertising.

THE RISE OF AMAZON ADVERTISING: This is exactly what Amazon isdoing to siphon billions of ad dollars from Google and Facebook and why brandslove it

Jun. 4,2019, 1:07 P

10. 5 PRINCIPLES FOR MAKING BETTER LIFE DECISIONS

Mark Manson

Onemassive plot of land out in the frigid wasteland of the northern Yukon andbuild a vast complex of unnecessarily poorly-designed buildings. There will beno roads that lead there. No utilities. No central heating. And insufficientstaff to maintain the structure. I’ll then call it, “The Hall of Fame of BadDecisions.”

It will be perfect. Because not only willthe hall itself be a bad decision, but anyone who ever attempts to visit itwill clearly be making a bad decision as well.

Inside the hall, we will have exhibits forall of the worst decisions ever made. There’d be one for that time when Kodak,despite owning 90% of the market share of the camera industry and inventing thedigital camera, decided not to sell them and went bankrupt as a result.There will be another for the time when Decca Records passed on signing The Beatles becausethey thought “guitar bands are on the way out.” There will be a whole wing forstupid military leaders who tried to invade Russia. And we’ll have a special“Tiger Woods” wing where we rotate in/out celebrities who wreck their own careersby doing something exceedingly dumb.

It’ll be great.

And I guess, while people are there, we’lltrot out a speaker or two and give seminars on how to not make suchawful choices. They’ll offer some principles on how to make better lifedecisions.

Maybe that seminar would go something likethis:

1. UNDERSTANDVALUE AND BIASES

All tough decisions are essentiallyabout weighing values. There’s financial value, emotional value, social value, intellectual value, andso on. You have to consider all of them, weighing them appropriately. And notjust in the short-term, but in the long-term as well.

This “weighting” of values is incrediblydifficult, largely because we struggle to see things clearly.

As a general rule, we are all heavily biasedtowards the short-term rewards and towards emotional value. We are biased towards ourpre-existing beliefs and protecting our reputation. And we’re also bad atseeing long-term rewards clearly because it’s difficult to look past ourimmediate fears and anxieties. Our emotions color everything we see.

Our “default” decision-making also makes itincredibly painful emotionally to give up on something we’ve worked a long timeon, or to consider that we may have been wrong for years.

The fact is, we’ve all been wrong for years. We’re all wrong aboutour value estimates. And until we can be honest about how wrong we were in thepast, we won’t learn to make better value judgments moving into the future.

Our “default” decision-making alsoencourages us to avoid short-term failures, even if that means missing out onlong-term successes.

No, the sweet spot in decision-making is tofind the short-term failures that enable the hugelong-term successes to happen in the first place. Because this is what mostpeople are bad at. And because people are bad at it, this is where most of theopportunity lies…

2. LOSE ONPURPOSE (SOMETIMES)

Ever hear those stories of wildly successful entrepreneurs andhow they had, like, 23 failed businesses before they made it big?

The lesson we’re all supposed to take fromthis is that persistence and hard work is the key to extraordinary success.

And sure, whatever…

Usually, we can’t help but look at them andthink about how “lucky” they got.I mean, Amazon! Who knew?!

What we don’t consider is that out of thosedozens of failed, half-baked business ideas were all wagers with limiteddownside and extremely high upside. That is, if they lose, they lose a little.But if they win, they win a lot.

Let’s say I gave you a pair of dice and Itold you that if you roll double ones, I’ll give you $10,000. But each roll costs$100. How many times would you roll?

If you’re not bad at math, you would knowthat you should spend all the money you have rolling those damn dice.

Most people look at each decision as asingle roll of the dice. They don’t think about the fact that life is a never-ending sequence of dice rolls. And a strategythat loses a lot per roll can actually make you a big winner in the long run.

Yes, you will lose the dice game way morethan you win. But when you win, your winnings will far outstrip your losses,making it a worthwhile wager.

You can apply the same “risky” behavior inyour life to achieve more optimal long-term results:

  • Propose “moonshot” ideas at work knowing that 90% of them will get shot down, but also that if one of them gets accepted it will be a huge boost to your career.

  • Expose your kids to difficult subjects at an early age, knowing that most likely they won’t take to it. But if they do, it will give them a huge advantage throughout their life.

  • Be excessively bold in your dating life, stating exactly who and what you want, knowing that the vast majority of people will not be compatible.

  • Buy a bunch of difficult books expecting that most of them won’t be useful or comprehensible to you, but also that, occasionally, one will completely change your life.

  • Say yes to every invitation knowing that most of the events/people will be kind of dull and you’ll just go home early, but that occasionally you’ll meet someone really important or interesting.

When you think purely in terms of theimmediate result, you cut yourself off from the biggest potential gains inlife. And the reason most of us do this is because of our pesky emotions. Our emotions are short-term biased.They are obsessed with the present moment. And this prevents gooddecision-making.

3. TREAT YOUREMOTIONS LIKE YOU’D TREAT A DOG

Here’s one thing I’ve noticed over theyears: shitty dogs almost always have shitty owners. The dog’s level ofdiscipline is reflected in the owner’s emotional maturity and self-discipline.It’s very rare to see a dog that’s wrecking the house, eating all the toiletpaper and pooping all over the couch and the owner hastheir own shit together.

This is because our connections with dogsare purely emotional. And if we suck at dealing with our own emotions, thenwe’ll suck at dealing with our dogs. It’s that simple. If you don’t know how tolimit yourself and tell yourself “no” when necessary, then, well, don’t get adog. And if you do, don’t fucking move into my building.

Our emotions are kind of like our dog that’sliving inside our head. We have this part of ourselves that just wants to eat,sleep, fuck and play, but has no conception of future consequences or risks.

That’s the part of ourselves we need totrain.

Our emotions are important. But they’re alsokind of dumb. They’re not able to think through consequences or considermultiple factors when acting.

Our emotions overreact to things by design.They evolved to keep us alive when we were hunting water buffalo on thesavannah and shit like that. When we’re scared we want to run away or hide.When we’re angry we want to break stuff.

Thankfully, our brains evolved logic and theability to consider the past and the future and all that great stuff. That’swhat makes us humans. And not dogs.

The problem is, our “dog brain” is actuallywhat controls our behavior. You can intellectually know that eating ice creamfor breakfast is a bad idea, but if your dog brain wants fucking ice cream forbreakfast, then that’s ultimately where your body is going to go.

It’s only by training your dog brain withyour people brain, “No, bad Mark, ice cream for breakfast is bad, go dosomething else that feels good and is healthy,” that your dog braingradually learns.

Do that enough and you have a well-behaveddog brain.

Emotions are great for giving you that umphof passion and spirit, the same way a dog is greatfor running and fetching stuff and being a great friend and barking whensomeone weird is hanging out by your bedroom window.

But the dog is limited. It needs context anddirection to behave well and function. And that’s your job as the dog owner.Similarly, your dog owner brain must train the dog brain to sit down and shutup when necessary. You must give yourself context and direction. Train yourselfto adopt the correct habits and make betterdecisions. Reward and punish yourself.

Love your dog brain (i.e., love yourself),accept your dog brain (i.e., accept your emotions), but also discipline them.

And every once in a while, indulge yourself…that’s a good boy. Yeah, who’s a good boy? Who’s a good boy? Yes, you’re a good boy.

4. OPTIMIZE YOURLIFE FOR FEWEST REGRETS

Regret is sometimes called a “rationalemotion” by psychologists. And not really because regret itself makes us morerational—at least not directly—but rather the way we predictregret is often donein a rational-looking way.1

In making decisions, we’ll often considerthe options available to us, imagine our future selves after choosing one ofthese options, and then try to feel how much regret we experience in thissimulated future state. We then run this simulation again, choosing a differentoption, and compare that simulated state of regret/non-regret to the others.

This ability is both a) fucking amazing whenyou think about it and b) incredibly useful as long as we use the most accurateand complete information available to us (by using all the ideas we’re coveringhere, of course).

Most of us are afraid of failing or screwing something up. But werarely ask, “Would I regret that failure?” If the answer is “no,” then that isabsolutely a risk you should pursue.

Similarly, a lot of us loveenvisioning massive success. Butif we ask, “Would I regret never having that success?” usually we find that theanswer is “no.” Only when it’s “yes” should we probably make the sacrifices toachieve it.

Sometimes, the right decision becomescrystal clear when put into these terms. Legend has it that Jeff Bezos left hiscushy, high-paying job to start Amazon because it was so obvious to him thathe’d regret it if he got old and didn’t at least try this whole“internet thing.” Staying at his job, on the other hand, carried a lot offuture regret that was apparently quite palpable for Bezos.

I personally know a lot of people—myselfincluded—who ultimately made big life decisions largely based on the path ofleast regret. These decisions are almost always described as the best decisionsthey’ve ever made. Go figure.

Instead of basing your decisions aroundsuccess/failure, or happiness/pain, base them around regret avoidance. Ourregrets are usually the best measurement of what is actually valuable to us inthe long-run.

5. WRITE SHITDOWN

The best way to help you sort out all ofyour emotional drivel from actual decision-making is to write things down.

Writing things down is a simple but powerfulway to clarify everything that’s swirling around in your head. I get emailsfrom readers all the time with long screeds about the issues in their livesonly to have them say at the end that they don’t need a reply because writingit all out was so cathartic and revealing for them.

The act of writing forces you to organizeand make concrete all the emotional turbulence swirling around in your brain.Vague feelings become structured and measured.  Your self-contradictionsare laid bare. Rereading what you write reveals your own logic (or lackthereof). And it often reveals new perspectives you hadn’t considered.

And when it comes to mulling over adecision, there are a few specific things you can write about to help you ifyou’re having difficulties:

  • What are the costs and benefits? First, take some time and do a good old-fashioned cost-benefit analysis of your decision. But don’t just do the old-fashioned “pros” and “cons” list. Add a couple more columns. Separate your “pros” into both long-term and short-term. Add a column for regrets associated with each decision. And note if there is any long-shot potential for success (see Principle #2).

  • What is your motivation behind the decision and is that a value you want to cultivate in yourself? All the decisions we make, big or small, are motivated in some way or another by our intentions. Sometimes this is very straightforward.

Last night, I wasmotivated by hunger to eat something and there was a burrito in front of me, soI shoveled it into my face hole.

Sometimes it’s notso straightforward though. Problems arise when our intentions a) aren’t veryclear to us and/or b) conflict with our core values.

For example, are youbuying that car because you would genuinely benefit from owning it, or becauseyou’re trying to impress the people around you?

Or are you filingfor full custody of your kids because you think it’s truly in their bestinterest, or are you trying to get revenge on your ex after finding out theyare dating someone new?

Are you tryingto start a business becauseyou enjoy the challenges and ups and downs of making your own way, or are youjealous of your friends that have successful businesses and feel like you don’t quite measure up to them?

If you identify someulterior motives when weighing a decision, stop and ask yourself if yourintentions align with who you want to be.

And if you’re askingyourself, “Well shit, I’ve never thought about who I want to be. Whatshould I do?” Then I think you should take out a fresh piece of paper and startwriting that down.

For instance, here’s my Horrible DecisionsHall of Fame Table:

So there you have it. No “Horrible DecisionHall of Fame.” Why? Because it’s a horrible decision.

HOW TO KNOW WHO YOU REALLY ARE

We all think we know ourselves well, but psychological studiesshow otherwise. In fact, most of us are somewhat deluded about ourselves. I puttogether a 22-page ebook explaining how we can come to know ourselves better,just fill out your email in the form.

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