Topley’s Top Ten – July 25th, 2019

Author

Matt Topley
July 25, 2019

1.U.S. Debt Since 1790

2.Boeing Earnings

With all the headlines on BA…2 years ago it was trading below $200

3.Gundlach on Junk Bonds Vs. Investment Grade.

Jeff Gundlach comments at Advisor Perspectives

Avoid high-yield bonds, according toGundlach, which are more sensitive to economic weakness that other bond marketsectors. He said that junk market resembles late 2006 early 2007. He recalledthat, in late 2006, he said, “It’s okay to dance the risk dance, but you betterbe dancing near the exits.” Six months later he said to “get out now.”

Investment-grade bond prices have risenmore than junk prices, based on the LQD and JNK ETFs. That is a bad sign, hesaid, and is showing there is more risk than the stock market reflects.

He was asked how negative monetary policycan go before there is a run on a bank. Based on Deutsche Bank, he said, it is “notfar from now.”

The dollar has “lots of room to do down,” Gundlachsaid, because Fed policy will support that movement.

LQD Rally on Fed Lowering Rates

4.Bloomberg Startup Barometer.

I am not familiar with this measure.

.

Description of Barometer

5.Muni Bond Yields at 15 Year Lows and A Few Players Dominate.

By Heather Gillers and Gunjan BanerjiJuly 24, 2019 5:30 am ET

A few behemoths areincreasingly dominating the municipal market,helping to lower prices for many investors but also sparking worries aboutconcentration and influence.

Therehas been a mammoth shift in the $4 trillion muni market over the past decade asinvestors have increasingly used professional money managers to invest in bothhigh- and low-grade state and local government debt. Mutual-fund holdings ofmunicipal bonds now total $738.6 billion, according to Federal Reserve data, amore than 50% increase since 2009.

The Municipal-Bond Market Is Now Controlled by Just a Few Firms

Concentrationbenefits firms like Nuveen and Vanguard, as well as some investors, but criticssee risks if the market cools

6.Nasdaq 100 New Highs….Adds 2000 Points Since Dec. 18 Lows.

NDX +33% from lows.

7.Bitcoin Doubles Off Lows…Dec. 2017 was All-Time Highs.

8.You May Have Longer Than You Think to Invest For Retirement

Posted July 23, 2019 by Ben Carlson

Maybeone of the reasons collective retirement savings statistics are so depressingis because retirement is really only a few generations old. Most people in thepast never had 20, 30, or 40 years of life after work to plan for. There aren’tmany real-life examples people can point to when trying to plan for this stuff.

So retirement will likely be differentthan most people expect. Some will have to work longer. Others will never beable to stop working. And still others are going to need their money to lastmany decades. Here’s a new piece I wrote at Fortune that deals with expandinglife expectancies and what it means for retirement planning.

Retirement is still is a relatively newconcept.

In the past, most people simply workeduntil they died, with little time for leisure in their later years. In the year1870, for those who lived past age 65, the labor force participation ratio formales was close to 90%. Today it’s less than 20%. Well into the nineteenthcentury, about 50% of all 80-year-old men in America were still working tosupport themselves or their families.

One of the reasons people didn’t plan fortheir golden years back then is because not many people expected to live verylong. In 1800, among all babies who were ever born, roughly half died duringtheir childhood. Life expectancy was just 30 years and no country had a lifeexpectancy above 40. Life expectancy at birth was only 45 years in 1870. Theaverage life expectancy around the world today is 72.

In the year 1900, close to 20% of malesborn in the U.S. died before their first birthday. Today the mortality ratedoesn’t reach that high until you get to age 62. The average American nowretires at age 62 while 100 years ago, the average American died at age 51.

The gains have slowed in recent decades,but you can still see an upward trajectory in the data:

Andfor those who do make it to retirement age, your life expectancy could be inthe two-to- three-decade range:

Thereare a number of investor and market implications from this data.

9.Madoff Scheme Lasted 45 Years.

A decade after Bernie Madoff’s arrest, FBIagents reveal more about his Ponzi scheme

by ErinArvedlund, Posted: December 6, 2018

Youmay have heard of Wall Street scammer Bernard “Bernie” Madoff, who rippedoff investors for the colossal sum of  $64.8 billion.

Whatyou may not know? His crimes lasted roughly 45 years, according to FBI agentsnow speaking publicly about the case for the first time, a decade afterMadoff’s arrest.

SpecialAgent Patrick J. Duffy of the FederalBureau of Investigation helped oversee the government’s probe. A South Jersey native and 2002 LaSalle University graduate, Duffy worked as a KPMGaccountant in Philadelphia until joining the FBI in 2008.

He andSpecial Agent Paul E. Roberts, who trained as an actuary, presentregularly to business and fraud investigator conferences about the FBI’s six-year-longMadoff investigation. But this is the first time FBI case agents have publiclybroken down the notorious Madoff crime, which required the efforts of 14agents, forensic accountants and financial analysts, not to mention a platoonof prosecutors.

Theyalso describe what it took to convict Madoff and his fraudster co-conspirators and aspects of theinvestigation not released to the public, such as the duration and scale of thecrime. It’s a fascinating study of a scandal that costvictims billions and a trial that resulted in the convictions of five Madoffemployees on 31 guilty counts.

But inmany ways, the scandal was not a surprise to the investors who were fleeced.“A lot of Madoff victims thought it was too good to be true. But theywere OK with that, they went along with it,” Roberts said.“Greed can silence people.”

Dec. 11, 2008

Duffyhad only recently joined the FBI when he got a call from Pat Carroll,supervisor of a white-collar crime squad. With an accounting background, Duffywas quickly assigned to the investigation of Madoff, who had confessed tostealing a staggering $64.8 billion.

Duffy’sfirst thought: “Who’s Bernie Madoff?”

TheFBI would soon learn that the Wall Street financier had pulled off a crime forthe ages. He promised investors that he would never lose money, and his hedgefund delivered enviable 10 percent annual returns even when the markets tanked.

“Whenwe talk to groups about the case, their eyes widen. A lot of people knowMadoff’s name, but not the scale of the crime,” Duffy said.

Netcash lost? About $20 billion. Roughly $15 billion has been recovered, about 75cents on the dollar.

“It’shard to know the true number, because there were so few bank account recordsbefore 1981,” Roberts said.

“We’revery proud of that” recovery, Duffy added. “In most Ponzi schemes,the rate of recovery is zero.”

Howmany victims? At least 10,000 investors lost money.

Andthe biggest surprise? Madoff’s crime dated to the Lyndon Johnson presidency andpossibly earlier.

“In the early to mid-1960s, the scam began after Madoff opened up shop,” and later his brother Peter Madoff joined, Roberts explained. He kept raising new money to pay off earlier investors.

Touncover the truth, FBI agents spread out in Madoff’s offices on the17th floor of New York’s Lipstick Building on the city’s tony east side toinvestigate.

“Weknew it was ground zero for the fraud. We needed a chain of custody for all thedocuments. It was important to organize,” Roberts said.

There,the FBI discovered nearly 1,500 boxes of paper documents and the keys to aQueens, N.Y., warehouse storing an additional 10,000 boxes of records — much ofwhich the team combed through by hand.

Howdid Madoff get away with the crime for decades?

Morethan a dozen Madoff employees helped manufacture phony statements, accountbalances, and profits, the agents found. Madoff kept his darkest secrets fromeveryone — his investors, regulators and financial examiners, and even theworkers upstairs at the legitimate broker-dealer one floor up.

At thetime that Madoff started his phony hedge fund, Bernie and his brother Peterstarted a legitimate trading firm that grew to represent as much as 10 percentof all the volume on the New York Stock Exchange. Though successful for someyears, the brokerage ended up becoming just a storefront for the Ponzi scheme.

Apathological liar, Madoff held no regard for his investors. He would kick themout when they revealed that he was their money manager. Agents said hisattitude was typified by Soft Screw, alarge table-top Claes Oldenburg sculpture that sat by his officewindow. Madoff would hide the giant screw in the bathroom ceiling whenregulators and investigators showed up.

“Thejudge wouldn’t allow it into evidence at trial, but we think it’s evidence ofhis frame of mind,” Roberts said.

Madoffwould turn down Palm Beach and Hollywood millionaires, knowing the rejectionswould attract them even more. And it worked on everyone from director StephenSpielberg and actor Kevin Bacon to former Eagles owner NormanBraman and Mets owner Fred Wilpon.

TheInquirer interviewed many of Madoff’s victims after his sentencing to prison for 150 years. Amongthem were middle-class Pennsylvanians such as Michael DeVita and his elderly mother, Emma. TheDeVitas, of Chalfont, had opened accounts with Madoff in the early 1990s,believing the fund was a great retirement savings opportunity. “TheSecurities and Exchange Commission failed me,” Emma DeVita told me atthe time.

OthersI won’t forget: a woman at Madoff’s sentencing who resorted to dumpster-divingfor food, and Holocaust survivor Elie Wiesel, whose foundation lost $15 millionto Madoff.  Wiesel said afterward: “We have seen worse.”

10.11 crucial things that many people don’t know.

At age69, with perhaps too much of it spent thinking about what’s important, andtrying ideas out on clients, friends, and myself, I offer 11 things I deeplybelieve are true, important, and little recognized.

Spendtime with people who bring out the best in you. Sure, you may be forced tospend time with coworkers or family members who are deleterious to you but,when you have discretion, rather than succumb to a rescuer fantasy or a feelingthat you deserve to be treated poorly, spend as much time as you can withpeople who bring out the best in you. Or be alone. Indeed, solo time can beamong the most rewarding and pleasurable. The statement, “Man is a social animal”is an oversimplification.

Be pickyabout who you date and much moreso still before marrying,despite any socialpressure to marry. It’s infinitely better to stay single than to be trapped inan even just mediocre marriage, let alone a bad one.

Time istreasure. Many people treat it like dross. Many of the people who are mostsatisfied with their life and are most contributory tend to make the most ofevery hour, even every minute. Sure, they spend some time unproductively butthey make the choice to do so consciously. It’s central  that you betime-conscious: Decide whether an activity is a wise use of your time orwhether this is a time that you want to be unproductive.

Procrastination is a career and personal life decimator. It’s likerunning a race while wearing leg weights. Keeping procrastination under controlcomes down to forcing yourself, yes forcing yourself, to take baby stepsforward. Take that onerous task you’re tempted to procrastinate, break it intobaby steps, and take the first one.

If youneed more structure, try the Pomodoro Technique: Work for 20minutes, break for 5, work for 20, break for 5, work for 20, break for 10. Thatconstitutes a “Pomodoro.” After four Pomodoros, take a long break.“Pomodoro” is “tomato” in Italian. The technique was named afterthose tomato-shaped kitchen timers but, of course, you can use any timerincluding the one in your phone. Or use one of the Pomodoro apps.

Chooseyour career early. After just modest exploration, the benefits ofadditionally keeping your options open are usually outweighed by the time youcould have spent becoming expert as well as by the likelihood that after allthat exploratory time, you won’t find anything sufficiently better. As they sayabout answering multiple-choice questions, your first instinct is usuallyright.  Except within broad categories (e.g., people- vs word- vsdata-centric careers), career success and happiness are more about the diligence you apply toyour career than to which career you apply it to.

Learnoutside of school. School is a bizarrely inefficient way to learnanything: You’re being taught a mass of information selected by an oftentheory-rich, practicality-light professor, only a small percentage of which youlikely perceive of value, and an even smaller percentage of which you’llremember and use in your life. And a course’s pace is often too fast or tooslow.

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Yes, thepiece of paper that colleges dispense has value, even is a necessity for somecareers, but its value is often outweighed by the cost in time, money, andcrucially, in opportunity cost: what you otherwise could have been doing withthe time and money: for example, self-study of articles and videos unearthed ina YouTube search, augmented perhaps by a tutor, short courses offered onLinkedIn Learning, Udemy, Udacity, and Coursera, learning on the job and/orwith a mentor.

Spendmodestly, especially on the big things: housing, education, and cars, but also on vacations, clothes,furniture, etc. The benefit and pleasure of the extra spend are too smallrelative to the costs: reduced financial security, eliminating enjoyable butnot lucrative career options from consideration, increased ethical temptations,and distraction from what’s more likely to contribute to the life well-led:making a difference. And spending on the not-essential is addictive, requiringan ever larger dose to get Shopper’s High.

Acceptyour weight. Most dieters gain it all back and often more—dangerous.And dieting is no fun, nor is seeing the weight creepback and being unable to fit into the new skinny clothes you bought. Yes, tryto eat moderately but avoid diets. If your BMI is over 30 or you have otherpotentially relevant health conditions, your situation may be more complicatedand so a talk with your health practitioner may well be wise.

Do notdo drugs, and yes that includes marijuana. Weed is far more dangerous than theBig-Tobacco-funded or -cheered PR campaigns would have you believe. (Seereviews of the literature that are not sponsored by the tobacco industry, forexample, THIS and THIS.

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Thinktwice before expressing politically incorrect views, especially regardingrace, gender, ethnicity, and immigration. We’re living in inordinatelycensorious and censurious times. People who disagree with you too often exertpowerful retribution, even distorting things said years ago in a perfectlydefensible context. But that context is often inadequately reported or isdownplayed. Instead, some people and yes some in the media use, for example,the free and easy yet powerful social media to assault a person with weaponizedwords such as “sexist” and most powerful today, “racist.”

Competewith your best self, not with others.  Focusing on keeping up withthe Joneses is foolish. Their stature may be unattainable or they’re not worthkeeping “up” with. Far better to spend the time trying to be your bestself.

I readthis aloud on YouTube.