Topley’s Top Ten – March 13, 2020

Author

Matt Topley
March 13, 2020

1.European Banks Hit 1988 Levels.

Wolf Street

2.Nasdaq Bank Index …-45% from Late 2018 Highs

Everything Is Going Wrong All at Once for U.S. Banks

Epidemictriggers risks from low interest rates, slow loan growth and sliding stock andenergy prices

3.Boeing High was $432…$154 Last Price.

BA -64% from highs

BA spent a ton of cash in stock buyback bonanza now shortcash…Look for more companies to have this problem if market downturn continues.

Wolf Street

This mad scramble for cash and the existentialurge to “preserve cash in challenging periods” comes after this master offinancial engineering – instead of aircraft engineering – blew, wasted, andincinerated $43.4 billion on buying back its own shares, from June 2013 untilthe financial consequences of the two 737 MAX crashes finally forced thecompany to end the practice. That $43.3 billion would come in really handyright now:

4.High-Yield ETF Energy Exposure 8.5%

$88 Billion in energy bonds due this year

Exposure Sector Breakdown

5.NY FED will Infuse $1.5 Trillion into Market.

6.Bitcoin No Safe Haven…Plunges -27% in One Day.

8.Great Charts From Torsten Slok on Doctors and Nurses.

The capacity of thehealthcare system in different countries is becoming very important, see chartsbelowand also the piece here from my colleagues in healthcare research: CrossHealthcare Research – DB’s Initial Covid-19 Projections

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Let us know if you would liketo add a colleague to this distribution list.

Torsten Sløk, Ph.D.Chief Economist

9.Mortgage rates increased

The rise in mortgagerates had nothing to do with markets and everything to do with lenders

Rates on 30-yearmortgages rose this past week as lenders grappled with a surge in refinancedemand.

Even as concernsmounted regarding the coronavirus pandemic, mortgage rates increased this pastweek as lenders sought to stem the tide of people looking to refinance theirhome loans.

The 30-year fixed-rate mortgage averaged 3.36%for the week ending March 12, up from 3.29% the previous week, Freddie Mac FMCC, -22.09% reportedThursday.

The 15-year fixed-ratemortgage, meanwhile, fell two basis points to an average of 2.77%. The 5-yearTreasury-indexed adjustable-rate mortgage averaged 3.01%, down sharply from3.18% last week.

Last week, 30-yearfixed-rate mortgages hit an all-time low since Freddie Mac started trackingloan rates in 1971. That triggered an avalanche of mortgage applications fromborrowers looking to lock in the lowest interest rates they’ve likely seen intheir lifetimes. Refinancing volume hit its highest level since April 2009, theMortgage Bankers Association reported Wednesday.

Mortgage rates were driven lower largely by thesteady decline in bond yields in response to concerns about the economic impactthe COVID-19 coronavirus outbreak would have. Mortgage rates typically trackthe yield on the 10-year Treasury note TMUBMUSD10Y, 0.846% ,which actually touched an all-time low of 0.39% this past week.

So, why then didmortgage rates increase? That comes down to a lender’s capacity. Experts hadwarned that most lenders did not have the staff to handle an increase, in partbecause lenders had been letting go of employees in 2018 and 2019 inanticipation of higher rates causing lower demand for loans. “Most big lenderswere scaling back their mortgage business,” said Vishal Garg, founder and CEOof Better.com, an online direct mortgage lender.

‘Each employee is processing 2.5 to 3 times as many loans asthey were a year ago.’

— Tendayi Kapfidze, chief economist at LendingTree

Without the staff to handle the deluge ofapplications, lenders are facing an uphill battle to close loans. Somecompanies are now offering rate locks as long as 100 days, in anticipation ofhow long it may take to close loans at the moment, said Tendayi Kapfidze, chiefeconomist at LendingTree TREE, -10.58% .

“Basically, each employeeis processing 2.5 to 3 times as many loans as they were a year ago,” he said. “Thatreally tells you the kind of jam lenders are in.”

Therefore, lenders haveturned to the main tool in the arsenal to reduce demand: Rates. Many majorlenders have opted to increase rates in an effort to dissuade people fromapplying for mortgages right now and give them a chance to work through theapplications they’ve already received.

But those who arelooking to buy a home or refinance their existing mortgage who have not appliedyet need not despair. The Mortgage Bankers Association now expects that lenderswill write $1.2 trillion in refinances this year, double its previous forecast.That would represent the largest volume of refinances since 2012. Therefore,economists expect that rates will remain low, and possibly go down again, forthe foreseeable future.

“All else equal, if refinancing activity beginsto slow, then rates will almost certainly trend back down,” said Zillow ZG, -14.93% economistMatthew Speakman.

“But of course, allelse is not equal, and markets are now in the midst of their most tumultuousstretch since the financial crisis,” Speakman added. “More dramatic moves formortgage rates appear likely, as investors continue to try and best positionthemselves to deal with the challenges posed by this environment.”

Analysts have said that the housingindustry could be a bright spot amidst the turmoil that hassent the Dow Jones Industrial Average DJIA, -9.98%, S&P 500 SPX, -9.51% andNasdaq COMP, -9.43% intobear-market territory, but much will depend on whether the outbreak rattlesconsumer confidence to the point where people refrain from buying homes.

10.3 Core Critical Thinking Skills Every Thinker Should Have

ChristopherDwyer Ph.D.

Criticallythinking about critical thinking skills

Irecently received an email from an educator friend, asking me to brieflydescribe the skills necessary for critical thinking. They were happy tofill-in-the-blanks themselves from outside reading; but, wanted to know whatspecific skills they should focus on teaching their students. I took this as agood opportunity to dedicate a blog entry here to such discussion, inorder to provide my friend and any other interested parties withan overview.  

Tounderstand critical thinking skills and how they factor into critical thinking,one first needs a definition of the latter. Critical thinking (CT) is ametacognitive process, consisting of a number of skills and dispositions, thatwhen used through self-regulatory reflective judgment, increases the chances ofproducing a logical conclusion to an argument or solution to a problem (Dwyer,2017; Dwyer, Hogan & Stewart, 2014). On the surface, this definitionclarifies two issues: first, critical thinking is metacognitive – simply, itrequires the individual to think about thinking; second, its main componentsare reflective judgment, dispositions and skills. Below the surface, thisdescription requires clarification; hence the impetus for this entry – what ismeant by reflective judgment, disposition towards CT and CT skills? Reflective judgment (i.e. an individuals’understanding of the nature, limits, and certainty of knowing andhow this can affect their judgments [King & Kitchener, 1994]) and disposition towards CT (i.e. an inclination,tendency or willingness to perform a given thinking skill [Dwyer, 2017;Facione, Facione & Giancarlo, 1997; Ku, 2009; Norris, 1992; Siegel, 1999;Valenzuela, Nieto & Saiz, 2011]) have both already been covered on thisblog; so, consistent with the aim of this piece, let’s discuss CT skills. 

CT skillsallow individuals to transcend lower-order, memorization-based learningstrategies to gain a more complex understanding of the information or problemsthey encounter (Halpern, 2014). Though debate is ongoing over the definition ofCT, one list stands out as a reasonable consensus conceptualization of CTskills. In 1988, a committee of forty-six experts in the field of CT gatheredto discuss CT conceptualisations, resulting in the Delphi Report; within whichwas overwhelmingly agreement (i.e. 95% consensus) that analysis, evaluation and inference werethe core skills necessary for CT (Facione, 1990). Indeed, over 30 years later,these three CT skills remain the most commonly cited.

1.Analysis

Analysisis a core CT skill used to identify and examine the structure of an argument,the propositions within an argument and the role they play (e.g. the main conclusion, the premises and reasonsprovided to support the conclusion, objections to the conclusion andinferential relationships among propositions), as well as the sources of thepropositions (e.g. personal experience, common belief and research). When itcomes to analysing the basis for a standpoint, the structure of the argumentcan be extracted for subsequent evaluation (e.g. from dialogue and text). Thiscan be accomplished through looking for propositions that either support orrefute the central claim or other reasons and objections. Through analysis, theargument’s hierarchical structure begins to appear. Notably, argument mapping can aid the visualrepresentation of this hierarchical structure and is supported by research ashaving positive effects on critical thinking (Butchart et al., 2009; Dwyer,2011; Dwyer, Hogan & Stewart, 2012; van Gelder, Bisset & Cumming,2004).  

2.Evaluation

Evaluationis a core CT skill that is used in the assessment of propositions and claims(identified through the previous analysis) with respect to theircredibility; relevance; balance, bias (and potential omissions); as well as thelogical strength amongst propositions (i.e. the strength of the inferentialrelationships). Such assessment allows for informed judgment regarding theoverall strength or weakness of an argument (Dwyer, 2017; Facione, 1990). If anargument (or its propositions) is not credible, relevant, logical and unbiased,you should consider excluding it or discussing its weaknesses as anobjection. 

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Evaluatingthe credibility of claims and arguments involves progressing beyond merelyidentifying the source of propositions in an argument, to actually examiningthe ‘trustworthiness’ of those identified sources (e.g. personal experiences,common beliefs/opinions, expert/authority opinion and scientific evidence).This is particularly important because some sources are more credible thanothers. Evaluation also implies deep consideration of the relevance of claimswithin an argument, which is accomplished by assessing the contextual relevanceof claims and premises – that is, the pertinence or applicability of oneproposition to another.

Withrespect to balance, bias (and potential omissions), it’s important to considerthe ‘slant’ of an argument – if it seems imbalanced in favour of one line ofthinking, then it’s quite possible that the argument has omitted key, opposingpoints that should also be considered. Imbalance may also very well imply somelevel of bias in the argument – another factor that should also be assessed.However, just because an argument is balanced does not mean that it isn’tbiased. It may very well be the case that the ‘opposing views’ presented havebeen ‘cherry-picked’ because they are easily disputed (akin to buildinga strawman); thus, making supporting reasons appearstronger than they may actually be – and this is just one example of how abalanced argument may, in fact, be biased. The take home message regardingbalance, bias and potential omissions should be that, in any argument, youshould construct an understanding of the author or speaker’s motivations andconsider how these might influence the structure and contents of theargument.   

Finally,evaluating the logical strength of an argument is accomplished throughmonitoring both the logical relationships amongst propositions and the claimsthey infer. Assessment of logical strength can actually be aided throughsubsequent inference, as a means of double-checking the logical strength. Forexample, this can be checked by asking whether or not a particular propositioncan actually be inferred based on the propositions that precede it.A useful means of developing this sub-skill is through practicing syllogisticreasoning.   

3.Inference

Similarto other educational concepts like synthesis (e.g., see Bloom et al., 1956;Dwyer, 2011; 2017), the final core CT skill, inference, involvesthe “gathering” of credible, relevant and logical evidence based on theprevious analysis and evaluation, for the purpose of drawing a reasonableconclusion (Dwyer, 2017; Facione, 1990). Drawing a conclusion always impliessome act of synthesis (i.e. the ability to put parts of information together toform a new whole; see Dwyer, 2011). However, inference is a unique form ofsynthesis in that it involves the formulation of a set of conclusions derivedfrom a series of arguments or a body of evidence. This inference may implyaccepting a conclusion pointed to by an author in light of the evidence theypresent, or ‘conjecturing an alternative’, equally logical, conclusion orargument based on the available evidence (Facione, 1990). The ability to infera conclusion in this manner can be completed through formal logic strategies,informal logic strategies (or both) in order to derive intermediateconclusions, as well as central claims.

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Anotherimportant aspect of inference involves the querying of available evidence, forexample, by recognising the need for additional information, gathering it andjudging the plausibility of utilising such information for the purpose ofdrawing a conclusion. Notably, in the context of querying evidence andconjecturing alternative conclusions, inference overlaps with evaluation to acertain degree in that both skills are used to judge the relevance andacceptability of a claim or argument. Furthermore, after inferring aconclusion, the resulting argument should be re-evaluated toensure that it is reasonable to draw the conclusion that was derived.

Conclusion

Overall,the application of critical thinking skills is a process – one must analyse,evaluate and then infer; and this process can be repeated to ensure that areasonable conclusion has been drawn. In an effort to simplify the descriptionof this process, for the past few years, I’ve used the analogy of pickingapples for baking. We begin by picking apples from a tree. Consider thetree as an analogy, in its own right, for an argument, which is often hierarchicallystructured like a tree-diagram. By picking apples, I mean identifyingpropositions and the role they play (i.e. analysis). Once we pick an apple, weevaluate it – we make sure it isn’t rotten (i.e. lacks credibility, is biased)and is suitable for baking (i.e. relevant and logically strong). Finally, weinfer – we gather the apples in a basket and bring them homeand group them together based on some rationale for construction –maybe four for a pie, three for a crumble and another four for a tart. By theend of the process, we have baked some apple-based goods, or developed aconclusion, solution or decision through critical thinking.

Of coursethere is more to critical thinking than the application of skills – a criticalthinker must also have the disposition to think critically and engagereflective judgment. However, without the appropriate skills – analysis,evaluation and inference, it is not likely that CT will be applied. Forexample, though one might be willing to use CT skills and engage reflectivejudgment, they may not know how to do so. Conversely, though one might be awareof which CT skills to use in a given context and may have the capacity toperform well when using these skills, they may not be disposed to use them(Valenzuela, Nieto & Saiz, 2011). Though the core CT skills of analysis,evaluation and inference are not the only important aspects of CT, they areessential for its application.