Topley’s Top Ten – July 9th, 2019

Author

Matt Topley
July 09, 2019

1.APPLE Never Returned to Highs

APPLE Makes 2nd Lower High on Chart

Apple Downgraded to Sell at RosenblattSecurities

(Bloomberg) — WallStreet hasn’t been this down on Apple Inc. in a long time.

RosenblattSecurities downgraded the company to sell on Monday, bringing the total numberof bearish analysts up to five, among the 57 ratings tracked by Bloomberg. Fiveis the highest number of sell ratings the iPhone maker has had since at least1997, according to historical data compiled by Bloomberg. To put that intocontext, Apple wouldn’t release its iMac computer until August 1998, and theiconic iPod wouldn’t debut until October 2001.

In another sign ofthe growing caution around the company, Apple’s consensus rating — a proxy forthe company’s ratio of buy, hold, and sell ratings — is currently 3.76,according to Bloomberg data. That’s the lowest since 2004.

Skepticismsurrounding the company has accelerated in 2019, with all five of the sellratings coming in this year. Both New Street Research and HSBC lowered theirratings on the stock to sell in April, and in January, the number of firms withbuy ratings dropped below 50% for the first time since 2004.

The caution hasbeen largely driven by uncertainty surrounding demand for the company’scritical iPhone line, with the U.S.-China trade war seen as a particularheadwind. In January, Apple cut its revenue outlook for the first time inalmost two decades, in large part because of iPhone weakness. Apple’sthird-quarter results are currently expected to come out on July 30.

According to datacompiled by Bloomberg, more than 60% of Apple’s 2018 revenue was related to theiPhone, while roughly 20% came from China, which is also a critical part of itssupply chain. Last week, Citi wrote that Apple’s China sales “could be cut inhalf” due to “a less favorable brand image desire.”

Rosenblatt’sdowngrade came as analyst Jun Zhang expects the company “will face fundamentaldeterioration over the next 6-12 months,” based on disappointing sales trends.The downgrade pushed Apple stock lower by as much as 2.9% in Monday trading.

Still, thesell-equivalent ratings hardly represent a consensus view. A plurality of 23firms recommend buying the stock, while another 21 have hold ratings, accordingto data compiled by Bloomberg.

The 2019 cautionhasn’t really been reflected in Apple’s stock performance. Shares are up morethan 40% from its January low, though they remain about 14% below recordlevels.

The news was notentirely negative for Apple on Monday, however, as Wedbush wrote it was“incrementally more positive on global iPhone demand” following checks in Asia.“We saw a ‘slight uptick’ out of Apple suppliers during our checks althoughoverall handset demand remains challenging,” analyst Daniel Ives wrote. Heaffirmed his outperform rating and $235 price target.

(Adds context in secondparagraph, consensus rating in third, and stock performance in ninth.)

To contact thereporter on this story: Ryan Vlastelica in New York at [email protected]

To contact theeditors responsible for this story: Catherine Larkin at [email protected], Steven Fromm

For more articleslike this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

2.European Min-Vol ETF Hits All-Time Highs.

EAFE Min-Vol

EFAV EURO MIN Vol. Vs. EFA Europe 5 year

3.A Couple Interesting Charts Comparing Manufacturing Numbers to World Market Returns.

Percy AllisonDesk Strategist Jefferies LLC

Source: Jefferies TradingDesk

Source: Jefferies TradingDesk

4.South Korea at 16 Year Low Versus World Markets…

5.Term Premium at Lowest Level Since the Data Started

What does term premium mean?

Term Premium. Theamount by which the yield-to-maturity of a long-term bond exceedsthat of a short-term bond. … The amount of a term premium dependson the interest rates of the individual bonds.

Any conversation about thelevel of long rates in the US – including discussions about the usefulness ofthe yield curve as a predictor of future recessions – has to start with thischart below. Why is the term premium so low? The reasons are: 1) US pensionfund demand, 2) uncertainty about the macro impact of trade war policies, 3) QEby the Fed, ECB, and BoJ, 4) fewer risk-free assets globally, 5) global savingsglut and associated central bank buying, and 6) new rules requiring insurancecompanies, pension funds, and banks to hold more safe, longer-term bonds. Forthe term premium and rates to move meaningfully higher, we need to see areversal of some of these forces.

Torsten Sløk, Ph.D.Chief EconomistManaging Director

6.European Financials…Lower Highs…

Increase in Negative Interest Rate Debt….Fear that QE No Longer Effective.

Easy-money policies are sweeping the globe — one bigproblem: they’re losing potency

By Mark DeCambrePublished: July 3, 2019 1:11 p.m. ET

International Monetary Fund (IMF)Managing Director Christine Lagarde

Globalcentral bankers are confronting a nettlesome problem. Attempts to inject freshlife into anemic regional economies are proving increasingly less effective,argues Torsten Slok, chief economist at Deutsche Bank Securities in a recentreport titled “QE no longer works”.

Whilethat assumption is debatable, so-called quantitative-easing measures have beenin place for more than a decade in much of the developed world, in theaftermath of the 2008-09 mortgage-bond crisis that rocked global economies andled the Federal Reserve, under then-Chairman Ben Bernanke, to start cuttinginterest rates in mid-August of 2007 for the first time since 2001, in a moveto stave off “downside risks to growth” that had “increased appreciably.”

Althoughthe U.S. central bank has raised its benchmark federal funds rate nine timessince the end of 2015, and it currently stands at a range between 2.25%-2.50%,expectations are growing that the Fed may need to reduce policy rates at leastonce in 2019 to combat “cross-currents” produced by the import tariffs imposedby the U.S. and China.

Back in 2007, benchmark ratesstood at a range of 5.75%-6.25% and the 10-year Treasury note TMUBMUSD10Y, +0.20%  yielded4.68%, according to FactSet data.

On Wednesday, 10-year benchmarkU.S. debt was yielding a mere 1.95%, its lowest since 2016, even as the DowJones Industrial Average DJIA, -0.43% the S&P500 index SPX, -0.48% and theNasdaq Composite Index COMP, -0.78% closed at all-time highs in ashortened trading session ahead of Independence Day holiday on Thursday, when markets will be closed.

Slok,pointing to academic research reports about the efficacy of monetary policy,says jawboning by central bankers has had a greater effect than the raft ofpolicy measures that most central banks have rolled out.

“Most ofthe papers below find that it was the announcement effects of QE, which had thebiggest impact on long rates and on inflation expectations,” Slok wrote.

Roughly12 years after the global economic recession, global bankers are stillstruggling to demonstrably boost economic growth and combat stubbornly lowinflation, which has mostly hung below the 2% annual target that most policymakers in developed countries deem reflective of healthy economies.

Investorsare betting that more stimulus may be on the way after Christine Lagarde,current head of the International Monetary Fund, was nominated to replace MarioDraghi as head of the European Central Bank and President Donald Trumpnominated Judy Shelton and Christopher Waller to take influential governanceposts on the Federal Reserve.

Slok saysthe shock-and-awe stimulus of the past isn’t likely to occur this time aroundin the 11th year of a history-setting expansion in the U.S. “Given the currentlevel of inflation expectations and the current level of rates, doing QE againis not going to create the same surprise effects,” he wrote.

Easy-money policies have resultedin some $13 trillion in government debt offeringa negative yield.

A Jan. 30 academic paper byMarkus K. Brunnermeier, Edwards S. Sanford Professor at Princeton Universityand Yann Koby, says the “reversal interest rate,” or the point at whichaccommodative monetary policy has a negative effect, can occur even beforenegative interest rates are achieved.

“Quantitativeeasing (QE) increases the reversal interest rate, as it takes long-term fixedincome holdings out of bank balance sheets. Consequently, QE should only beemployed after interest rate cuts are exhausted,” the academics conclude.

Among anumber of issues, the Princeton researchers say a persistently easy-moneyenvironment provides little leeway for stimulus if inflation proves preternaturallysluggish, as it has thus far. 

7.Deutsche Bank No Rally on Restructuring….We have Mentioned DB Derivs Book Many Times in Past Letters.

Deutsche Bank derivative dumbnessBy: Jamie Powell

In financial markets, there’s always a new reason to worry.

Over the weekend, Deutsche Bank announced a new “strategictransformation” after a decade of woeful underperformance. The headline-grabbingfigure was 18,000 — the number of jobs it expects to cut as part of therestructuring. You can read the FT story here, there and just about everywhere.

But of course, it’s a large bank. So that means it poses systemic risks.Which means bad news for everyone, or something. So cue a pack of market bearsover the weekend speculating over the bank’s long-term health, and what itmight mean for the broader market.

And that means, of course, citing Deutsche Bank’s notional derivativeexposure, which as of Dec 31 2018, according to the bank’s annual report, stood at a terrifying €43.5tn.

8. 5 SKILLS TO HELP YOU DEVELOP EMOTIONAL INTELLIGENCE

Here are five ways to start doing it.

1. PRACTICESELF-AWARENESS

Like with most things emotional, you can’tget better at them until you know what the fuck they are. When you lackself-awareness, trying to manage your emotions is like sitting in a tiny boatwithout a sail on top of the sea of your own emotions, completely at the whimof the currents of whatever is happening moment by moment. You have no ideawhere you’re going or how to get there. And all you can do is scream and yellfor help.

Self-awareness involves understanding yourself andyour behavior on three levels: 1) what you’re doing, 2) how you feel about it,and 3) the hardest part, figuring out what you don’t know aboutyourself.

  • Knowing what you’re doing.You would think this would be pretty simple and straightforward, but the truth is that in the 21st century, most of us don’t even know what the fuck we’re doing half the time. We’re on auto-pilot—check email, text BFF, check Instagram, watch YouTube, check email, text BFF, etc., etc.

Removing distractions from your life—like, you know, turning off your damn phoneevery now and then and engagingwith the world around you is a nice first step to self-awareness. Findingspaces of silence and solitude, while potentially scary, are necessary for ourmental health. Other forms of distraction include work, TV, drugs/alcohol,video games, cross stitching, arguing with people on the internet, etc.

Schedule time inyour day to get away from them. Do your morning commute with no music orpodcast. Just think about your life. Think about how you’re feeling. Set aside10 minutes in the morning to meditate. Delete social media off your phone for a week. You’lloften be surprised by what happens to you.

We use thesedistractions to avoid a lot of uncomfortable emotions, and so removingdistractions and focusing on how you feel without them can reveal some kind ofscary shit sometimes. But removing distractions is critical because it gets usto the next level.

  • Know what you’re feeling. At first, once you actually pay attention to how you feel, it might freak you out. You might come to realize you’re often actually pretty sad or that you’re kind of an angry asshole to a lot of people in your life. You might realize that there’s a lot of anxiety going on, and that whole “phone addiction” thing is really just a way to constantly numb and distract yourself from that anxiety.

It’s important atthis point to not judge the emotions that arise. You’ll be tempted to saysomething like, “Ick! Anxiety! What the fuck is wrong with me!” But that justmakes it worse. Whatever emotion is there has a good reason to be there, evenif you don’t remember what that reason is. So don’t be too hard on yourself.

  • Knowing your own emotional bullshit. Once you see all the icky, uncomfortable stuff you’re feeling, you’ll begin to get a sense of where your own little crazy resides. For instance, I get really touchy about being interrupted. I get irrationally angry when I’m trying to speak and the person I’m speaking to is distracted. I take it personally. And while sometimes it is just them being rude, sometimes shit happens and I end up looking like a total dickface because I can’t stand going two seconds without every word I speak being respected. That’s some of my emotional bullshit. And it’s only by being aware of it that I can ever react against it.

Now, just being self-aware is not sufficientin and of itself. One must be able to manage their emotions too.

2. CHANNELINGYOUR EMOTIONS WELL

People who believe that emotions are thebe-all-end-all of life often seek ways to “control” their emotions. You can’t.You can only react to them.

Emotions are merely the signals that tell usto pay attention to something. We can then decide whether or not that“something” is important and choose the best course of action in addressingit—or not.

There’s no such thing as a “good” or “bad”emotion—there are only “good” and “bad” reactions to your emotions.

Anger can be a destructive emotion if youmisdirect it and hurt others or yourself in the process. But it can be a goodemotion if you use it to correct injustices and/or protect yourself or others.

Joy can be a wonderful emotion when shared withpeople you love when something good happens. But it can be a horrifying emotionif it’s derived from hurting others.

Such is the act of managing your emotions: recognizing what you’refeeling, deciding whether or not that’s an appropriate emotion for thesituation, and acting accordingly.

The whole point of this is to be able tochannel your emotions into what psychologists call “goal-directed behavior”—orwhat I prefer to call “getting your shit together.”

3. LEARN TOMOTIVATE YOURSELF

Have you ever lost yourself completely in anactivity? Like, you start doing something and get immersed in it and when yousnap out of the quasi-hypnotic state you’ve somehow induced in yourself, yourealize three hours have passed but it felt like fifteen minutes?

This happens to me when I write sometimes. Ilose my sense of time and I get this cascade of subtly-layered feelings whenI’m fleshing out ideas in my head and putting them into words. It’s like afeeling of fascination mixed with slightly frustrated intrigue mixed withlittle bursts of dopamine when I feel like I just came up with a great line orfunny poop joke or somehow got my point across withoutcursing.

I love this feeling, and when I achieve it,it motivates me to keep writing.

Notice something important here,though: I don’t wait for that feeling to arise before I start writing.

I start writing and then that feeling startsto build, which motivates me to keep writing, and the feeling builds a littlemore, and on and on.

This is what I call the “Do Something Principle” and it’s probably one ofthe simplest yet most magical “hacks” I’ve ever come across. The Do SomethingPrinciple states that taking action is not just theeffect of motivation, but also the cause of it.

Most people try to look for inspirationfirst so they can take some momentous action and change everything aboutthemselves and their situation. They try to pump themselves up with whateverflavor of mental masturbation is in style that week so they can finally takeaction. But by next week, they’ve run out of steam and they’re back at itagain, jerking off to another “method” of motivation.

But I like to turn this on its headcompletely. When I need to be motivated, I just do something that’s evenremotely related to what I want to accomplish and then, action begetsmotivation begets action, etc.

When I don’t feel like writing, I tellmyself I’ll just work on the outline for now. Once I do that, it often makes methink of something interesting I hadn’t thought of yet that I want to includeand so I write that down and maybe flesh it out a little.

Before I know it, I’m halfway through adraft and I haven’t even put on pants yet.

(NOTE: This is just because I never wearpants.)

The point is that in order to use youremotions effectively to get your shit together, you have to do something.

If you don’t feel like anything motivatesyou, do something. Draw a doodle, find a free online coding class, talkto a stranger, learn a musical instrument, learn something about a really hardsubject, volunteer in your community, go salsa dancing, build a bookshelf,write a poem. Pay attention to how you feel before, during, and after whateverit is you’re doing and use those emotions to guide your future behavior.

And know that it’s not always “good” feelings that will motivate you, too.Sometimes I’m frustrated and really fucking annoyed that I can’t quite sayexactly what I want to say. Sometimes I’m anxious that what I’m writing won’tresonate with people. But for whatever reason, these feelings often only makeme want to write more. I love the challenge of wrestling with something that’sjust a little bit out of my reach.

4. RECOGNIZEEMOTIONS IN OTHERS TO CREATE HEALTHIER RELATIONSHIPS

Everything we’ve covered so far deals withhandling and directing emotions within yourself. But the whole point ofdeveloping emotional intelligence should ultimately be to foster healthier relationships inyour life.

And healthy relationships—romantic relationships, familialrelationships, friendships, whatever—begin with recognition andrespect of one another’s emotional needs.

You do this by connecting and empathizing withothers. By both listening to others and sharing yourself honestly withothers—that is, through vulnerability.

To empathize with someone doesn’tnecessarily mean to completely understand them, but rather to accept them as they are, even when you don’t understandthem. You learn to value their existence and treat them as their own end rather than a meansfor something else. You acknowledge their pain as your pain—as our collective pain.

Relationships are where emotional rubberhits the proverbial pavement. They get us out of our heads and into the worldaround us. They make us realize we’re a part of something much larger and muchmore complex than just ourselves.

And relationships are, ultimately, the waywe define our values.

5. INFUSE YOUREMOTIONS WITH VALUES

When Daniel Goleman’s book cameout in the 90s, “emotional intelligence” became the big buzzword in psychology.CEOs and managers read workbooks and went to retreats on emotional intelligenceto motivate their workforces. Therapists triedto instill more emotional awareness in their clients to help them get a handleon their lives. Parents were admonished to cultivate emotional intelligence intheir children with the aim of preparing them for a changing,emotionally-oriented world.2

A lot of this sort of thinking misses thepoint, however. And that is that emotional intelligence is meaninglesswithout orienting your values.

You might have the most emotionallyintelligent CEO on the planet, but if she’s using her skills to motivate heremployees to sell products made by exploiting poor people or destroying theplanet, how is being emotionally intelligent a virtue here?

A father might teach his son the tenets ofemotional intelligence, but without also teaching him the values of honesty andrespect, he could turn into a ruthless, lying little prick—but an emotionallyintelligent one!

Conmen are highly emotionally intelligent.They understand emotions quite well, both in themselves and especially inothers. But they end up using that information to manipulate people for their own personal gain. Theyvalue themselves above all else and at the expense of all others. And thingsget ugly when you value little outside of yourself.3

Lisa Nowak, for all of her brilliance andexpertise, couldn’t handle her own emotions and valued the wrong things.Therefore, she let her emotions drive her off the proverbial cliff, going fromouter space to incarcerated space.

Ultimately, we’re always choosing what we value, whether we know it or not. Andour emotions will carry out those values through motivating our behavior insome way.

So in order to live the life you truly wantto live, you have to first be clear about what you truly value because that’swhere your emotional energy will be directed.

And knowing what you truly value—not justwhat you say you value—is probably the most emotionally intelligent skill youcan develop.

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.