Topley’s Top Ten – July 8th, 2019

Author

Matt Topley
July 08, 2019

1.Vanguard Total International Bond ETF—20 of Top 30 Holdings Yield Less Than Zero.

BNDX Rally in 2018

Jim Grant in Barrons.Jim Grant: The Trouble With Austria’s 100-Year Bonds By James Grant

2.Junk Bonds 2019 Break Out of 2 Year Sideways.

HYG Junk Bond ETF

Correlation with stocks increasing

Junk Bonds Vex Portfolios, But Investors Love Them Their recent surge inpopularity leaves high-yield debt buyers unusually vulnerable By Nir Kaissar

3.Above Points are the Reason for Gold Breaking to New 5 Year Highs.

Gold hedge against possible failure of QE….$17 Trillion in negative yielding bonds

4.Most Heavily Shorted S&P 500 Stocks

Tue, Jul 2, 2019

Below is a list of the 29 stocks in the S&P 500 that have more than 10% of their share float sold short.  Luxury retailer Nordstrom (JWN) currently tops the list with 22% of its float sold short.  The stock is down 33.86% YTD and 55% from levels seen last November.  Tax-prep company H&R Block (HRB) is the second most heavily shorted stock with 20.55% of its float sold short.  HRB is followed by sports retailer Under Armour (UAA), Snap-On (SNA), and Kohl’s (KSS).  While JWN and KSS are both down big YTD, HRB, UAA, and SNA are all up nicely on the year.  There are plenty of other notables on the list, including Macy’s (M), Campbell Soup (CPB), TripAdvisor (TRIP), Gap (GPS), Western Union (WU), and Foot Locker (FL), but one common characteristic among many of them is that they are retailers.  On average, these stocks with 10%+ short interest as a percentage of float are up 8.5% on the year, which is well below the 17% gain that the S&P 500 has seen.

BESPOKE INVESTMENT GROUP

5.Growth vs. Value….3x as Many S&P 500 Stocks Trading Below 10x P/E than 3 Years Ago.

The broad S&P 500 index traded recently at 16.7 timesprojected earnings for the next four quarters, up from 15.5 times earnings fiveyears ago. Yet at the end of June, 67 of the index’s constituent companies hadprice/earnings ratios below 10, more than three times as many as five yearsago.

  1. Cheap Stocks to Buy as the Market Hits New Highs By Jack Hough

2019-16.7x not cheap but not bubble territory

6.Wage Growth Missed Estimates Last Week…Fed Watching this Statistic Closely.

At the same time, wage growth appears to beflattening out, albeit at a still-strong level. Average hourly earnings rose0.2% from the prior month, missing estimates, following an upwardly revised0.3% gain, while annual wage gains held at 3.1%.

Strong U.S. Hiring Rebound Dilutes Case forLarger Fed Cut

7.FRED CHARTS-Consumer Price Index for Apparel is Still Below 1990’s Levels.

8.Trump says ‘favored-nations clause’ on drug prices is on its way…

President Donald Trump, speaking to reporters on theSouth Lawn of the White House before his departure Friday for Bedminster, N.J.,promised executive action to help cut drug prices. Photo by Yuri Gripas/UPI | License Photo

July 5 (UPI) — President Donald Trumpon Friday said his administration intends to announce a plan to decreaseprescription drug costs based on the lowest price other countries pay.

He called it a “favored-nations clause.”

“As you know, for years and years, other nationspaid less for drugs than we do,” he told reporters gathered on the SouthLawn of the White House. “We’re working on it right now, we’re working ona favored nations clause, where we pay whatever the lowest nation’s priceis.”

Trump said he will sign an executive order to implementthe plan.

“Why should other nations, like Canada, … pay muchless than us?” he asked. “They’ve taken advantage of the system for along time, pharma.”

The announcement comes less than two weeks after Trumpsigned an executive order to improve the transparency of healthcare costs. The orderrequires hospitals and insurance companies to tell patients their rates formedical services and what patients will be expected to pay out of pocket beforeundergoing treatment.

Since his inauguration, Trump has made reducingprescription drug costs a priority of his administration.

In May, Health and Human Services Secretary Alex Azarannounced a rule that requires pharmaceutical companies to reveal theprices of drugs they advertise in television ads. The same month, though, theTrump administration tabled the implementation of a proposal to cut drug pricesfor Medicare patients.

In October, Trump signed a pair of bills lifting so-called gag orders that preventpharmacists from telling customers how to save money on prescription drugs.

A study released in March 2018 found that the costs of certainbrand-name drugs are increasing at 10 times the rate of inflation. The reportfound prices increased an average of 12 percent every year for the Top 20 mostcommonly prescribed brand-name drugs under the Medicare Part D program from2012 to 2017.

9.Buffett Taken for $800m in Solar Ponzi Scheme.

The Couple Who Feds Say Scammed Berkshire Hathaway For Millions

Jeff Carpoff had a lot to celebrate as friends andbusiness associates gathered at his company’s Christmas party last year.

The onetime auto mechanic and his wife, Paulette, hadstarted a solar company about a decade earlier that was doing remarkably well— so well that it could count Warren Buffett’s Berkshire Hathaway Inc. as aninvestor in its funds. Their business, making mobile solar generators, hadafforded them lavish goodies. They owned more than 90 cars, from classic Fordsand Plymouths to Bentleys, at least 20 properties, and even a professionalbaseball team in Martinez, just northeast of San Francisco.

 And now as the year came to a close,here was Pitbull, the rapper from Miami, headlining their Christmas party at aswanky Fairmont hotel, according to people familiar with the matter. The event,tweeted Kyle Larson, a race-car driver once sponsored by a Carpoff company, wasthe “best holiday party I’ve ever been to by far!!”

A few days later, when law enforcement agentsshowed up at their front door, the Carpoffs’ extravagant life came crashingdown. It was an edifice largely built on an alleged fraud — a Ponzi-typescheme, in essence, say federal authorities — that was as elaborate and brazenas their spending habits.

Their company, DC Solar, is now out of business, mostof its 100-strong workforce unemployed. Their home in Martinez, asprawling 4,100-square-foot affair, is in foreclosure, the swimming poollittered with leaves. When FBI agents visited the home on that day in lateDecember, they took many of the luxury cars. They also seized a pile ofcash — $1.8 million in all — that had been secreted away in a safe andelsewhere in one of the couple’s offices.

The Carpoffs, authorities contend, had managed toparlay a do-good incentive to encourage solar investments into an $800million fraud scheme. Promising big federal tax credits and profits, theirpitch enticed sophisticated investors, even though it came from an enterpriselittle-known outside of California and the car-racing world.

Not only did Berkshire bite, sinking $340 millionalone, but so did insurer Progressive Corp.  It had to reverse taxbenefits worth more than $150 million due mostly to its DC Solar investments. Ahalf-dozen or so regional banks were financial backers, too, including EastWest Bancorp Inc., Valley National Bancorp and United Financial Bancorp Inc.All plunked their money in funds set up by DC Solar that affordedsignificant tax credits and possible profits.

The company was supposed to use the money to buildmobile generators, which supply power at sporting events and other outdoor venues.But evidence suggested DC Solar “engaged in nearly no legitimate business,” thegovernment said. The company built and leased only a fraction of the more than12,000 mobile units it had claimed were in use, the FBI said. Instead, thecompany allegedly used much of the money from new investors to pay off oldones — and to fund the couple’s spending. 

DC Solar’s precipitous fall is now forcing many of theinvestors to take charges on tax breaks that they thought were worth millionsof dollars. It’s also putting the spotlight on the federal tax credit, whichsince 2006 has helped fuel solar’s surge from an alternative electricalresource to the U.S. mainstream. Dozens of the country’s biggestcompanies, from JPMorgan Chase & Co. and Bank of America Corp. to evenpaint maker Sherwin-Williams Co., now invest in renewable energy tobenefit from the tax credits. (Sherwin-Williams was among DC Solar’sinvestors.)

While the program has been largely free ofirregularities, the DC Solar tale now stands as a warning sign of howinvestors, perhaps too hungry for the credits, may be lax in scrutinizing thehealth of the underlying business. Indeed, the alleged scam started to crackonly when a former employee told federal authorities that they believedthe number of leased mobile units claimed by DC Solar was false, according to acourt filing.

READ FULL STORYTheCouple Who Feds Say Scammed Berkshire Hathaway For Millions

10.How Finding Your Calling Changes Everything

By JohnC. Maxwell | July 1, 2019 | 0 

I want to start byasking you a question: How do you currently think about what you do fora living?

Yale professor AmyWrzesniewski has done research with employees in the workplace and observedthat people tend to fall into three groups. What’s remarkable is thatindividuals sort into these categories regardless of the industry, the socialstatus of their profession, their pay or their title.

In a study, roughly equalnumbers of administrative assistants surveyed fell into these three categories,and employees who mopped floors in a hospital were just as likely to seethemselves aligning in one of these three groups. Think about which bestdescribes you.

1. You do a job.

When you have a job, yourmain goal is to earn a living and support your family. You may not think aboutit beyond the time you spend on the clock. You may do your job with excellenceor you may simply mark time, but either way, when you finish your day or yourshift, you walk away and don’t think about it.

Satisfaction andfulfillment for people who have a job-only mindset comes from activitiesoutside of work. And while people in this group may hope to advance, they don’tthink in terms of a strategy of career building.

It’s been said that if youchoose a job you love, you will never have to work a day in your life. Andwhile I think that’s good advice, it should be a starting point, not an endinggoal. A job is not a calling, no matter how much money you make or how itallows you to serve people. A job is merely a vehicle with the potential totake you toward your calling. That’s the way you should think of it.

Finding your calling is likefinding your why—the reason you exist, your purpose for living. When you dothat, it changes everything.

2. You build a career.

Most people wouldacknowledge it’s a step forward to be building a career rather than simplyholding a job. When you have a career, the implication is that you are headingin a direction. You’re making progress attaining positive achievements. Anupward trajectory of skill mastery, greater responsibilities and increasedearnings are all marks of a successful career.

3. You fulfill your calling.

Author Frederick Buechnersaid that our purpose is at “that place where your deep gladness meets theworld’s deep need.” Your calling, when you find and embrace it, will result inthe merging of your skills, talents, character traits and experiences. It willmake use of every ability you have at your disposal and all the lessons you’velearned. It will be represented by a deep desire to create, lead, inspire andmake a difference.

Are you appreciating thedifferences between a career and a calling? A career is mainly about you, butyour calling is focused on others. A career you could take or leave, but acalling never leaves you. Careers are measured by success. Callings aremeasured by significance.

Wouldn’t you like to findand fulfill a calling that makes a difference and gets you excited every dayfor the rest of your life? Finding your calling is like finding your why—thereason you exist, your purpose for living. When you dothat, it changes everything

So what is your calling?Do you already know it, or do you need some help finding your way? If you havenot already discovered it, then you have come to a fork in the road. I hope youwill take the bold way, the radically different path that represents yourcalling. It may be frightening. It may be uncomfortable. It may feel uncertain.

But I can assure you thatif you find your calling, you will never regret thedifficult journey taken to pursue it, because there’s nothing else like it.

When I was in a class incollege, the professor asked three questions to help us understand ourselvesand find pathways for our lives. Since I first heard them, I have asked them ofmyself repeatedly. Those three questions are:

  1. What do I sing about? What fills my heart?

  2. What do I cry about? What breaks my heart?

  3. What do I dream about? What lifts my heart?

These questions set me onthe journey that enabled me to discover my calling. As time went by, Iexperienced moments that spoke to me at a deep level of purpose.

  • Singing moments: times when I knew that my leadership was making a positive difference for people.

  • Crying moments: times when I wept because I saw that bad leadership misused or abused people.

  • Dreaming moments: times when I dreamed of training leaders who would make a significant impact on people.

You’ll notice that all ofthese moments related to leadership, because that’s where my calling is. So Iask you: Where do you experience singing, crying and dreaming moments in yourlife?

I don’t know what phase oflife you’re in today. If you’re lucky, you might be in the season of life whereyou already know your calling, and you’re either working out what to do withit, or you’re living it every day.

But maybe you’re simplydoing a job and hoping for more. Perhaps you’ve developed a career yet stilllong for something deeper. If either of those is true, keep working your waytoward your calling.

In either of those cases,my best advice is to be attentive. Pay attention to your feelings. Take time toreflect. Learn from your experiences. Never dismiss your dreams. And when yourmoment comes, embrace it.