Topley’s Top Ten – November 12, 2019

Author

Matt Topley
November 12, 2019

1.Record Short VIX Positioning Reflects a Ton of Fear Elsewhere

By Luke Kawa 

  • Sharesoutstanding in long-volatility ETPs are at record highs

  • Sheer sizeof VIX short contracts still shy of 2019 peak

Bearish bets on stock volatility are close to a recordhigh, raising investor concern that the market is ripe for turmoil. There’s a morebenign explanation.

Futures linked to the measure of S&P 500’s impliedvolatility, known as the “fear gauge”, tend to move inversely to equities. Thenet non-commercial position — long contracts outstanding less short positions— sank to minus 187,948 last week, its lowest level ever.

2.Foreign Holdings of U.S. Stocks Hits a Record High…$7.7 Trillion.

Foreignprivate holdings of U.S. stocks hit a record high of $7.7 trillion as of July,the most recent data available, according to Treasury Department figures. Thedata for foreign funds excludes holdings from sovereign-wealth funds andcentral banks, meaning overall international holdings are likely substantiallyhigher.

“You’reseeing a real divergence between growth prospects in the U.S. equity market andthe rest of the world,” said Hannah Anderson, global market strategist at J.P.Morgan Asset Management in Hong Kong.

Foreign Money Supports U.S. Stocks’ Rally Back to Record Highs–By 

Steven Russolillo

Manyforeign investors feel they have no choice but to pile in

3.Term Premium Biggest 3 Month Increase Since 2016

(Bloomberg)— A bond-market warning light that glowed green for years is suddenly flashingred. The bad news for bondholders is that the last time this happened, it wasaccompanied by the biggest sell-off since the aftermath of the global financialcrisis.

Thatindicator is the term premium, which, for both Treasuries and German bunds, hassnapped back from last quarter’s record lows. The U.S. gauge is now on trackfor the biggest three-month increase since late 2016.

After a stellar rally throughAugust, global bonds have pulled back in recent weeks as thawing trade tensionslightened the global economic gloom, sapping demand for the safety of sovereigndebt. Rebounding term premiums now signal the sell-off has further to run —the measure of extra compensation for holding longer-term debt versus simplyrolling over a short-tenor security for years is in an uptrend that investorsand strategists say has only just begun.

4.Shorts Still Piling on Weed Stocks

Shortpositions in Tilray Inc. TLRY, +5.31%, whichis based in Toronto but listed only on Nasdaq, have increased to 38% of thefloat on Wednesday from about 22% on Jan. 1, according to S3 data.

Formarket leader Canopy Growth Corp. CGC, +12.47%  , WEED, +12.69%  whichtrades on the Toronto Stock Exchange and the New York Stock Exchange, shortinterest has increased to an aggregate 25% from about 14% in January.

TLRY–Shorts are 38% of stock float

CGC-Shorts are 25% of float

Short sellers are increasing bets oncannabis stocks even after summer selloff-Ciare Lianne

5.2019 Global hedge fund industry outlook

November 11,2019 6:00am by Barry Ritholtz 

Source: Barclays

Diving intosome data on Hedge Funds, I happened across some research by Barclays. This was thenoteworthy paragraph:

“Investorsremain committed to hedge funds despite the recent poor performance. For 2019we expect to see a significant amount of reallocations, roughly $350 billion of‘money in motion’ from investors’ reallocations across strategies and managers.However, on a net basis, we are projecting outflows from the industry of $20-50billion.”

I find itfascinating how hedge funds have performed since the Great Financial Crisis:For the two decades prior,  hedge funds had significantly outperformedtheir benchmarks over. AUM had risen to $1.4 trillion in total assets by 2008.That great run ended post-financial crisis. By 2015, assets doubled to nearly ~$3trillion. But the performance, for reasons still being debated, faltered.

Hedge fundshave seen 6 continuous quartersof capital outflows. This is unprecedented — greater than even the outflows duringthe GFC.

Onealternatives losses are another’s gains, and the outflows from HFs mostly seemto be going to private equity.

Barry RitholtzThe Big Picture

6.Cold Snap Not Helping Natural Gas Prices.

New Lows Were Made in August.

7.Stat of the Day….Most AMZN Lost $1B in 2000….UBER Loses $7.4B in 9 Mos.     

Amazon never lost that much as a public company. The technologygiant grew as fast as it could while staying just above break-even. The companylost more than $1 billion just once, in 2000, as the dot-com bubble wasbursting. Compare that with the $7.4 billion net loss from Uber in just ninemonths this year, in a relatively strong economy.

  • Uber’s CEO Wants the Company to Be Magical. The Market JustWants Profits.-Tae Kim

AMZN Vs. UBER 3 Months.

8.Ranking U.S.companies by the priorities of Americans

DealBook

Just Capital and Forbes have rated U.S. firms based onfactors that matter most to the American public, like fair pay,ethical leadership, customer privacy, environmental impact and job creation.

Here are the top 10 most just U.S. companies accordingto their analysis:

1. Microsoft

2. Nvidia

3. Apple

4. Intel

5. Salesforce

6. Alphabet

7. Anthem

8. PayPal

9. P&G

10. VMware

Microsoft’s top spot is aresult of its “particularly strong track record on howit serves its workers, communities, and the environment,” according to JustCapital.

Compared with averages for theRussell 1000, the 100 companies in the listing pay their median workers 31percent more, give 8.4 times as much to charitable causes, have 25 percent morewomen on their board, and are 32 percent more likely to have establishedenvironmental policies. They also score a higher return on equity, by sixpercentage points.

9.Townhome Starts Hook Downward…Starter Homes Can’t Get Momentum

10.Managers, It’s Not Enough for Your Team to “Deliver” — Here’s How to Help Them Innovate

Why it’s so hard to be creative at work, and how to get better at it.

By Jessica Hicks, Editorial Fellow at Thrive Global

Being creative atwork can present a conundrum: Your work life consists of tight deadlines, non-essentialmeetings, and a focus on delivering rather than thinking outside thebox — and yet, you’re still expected to keep your creative juices flowing all the time.This can be frustrating, and may even be causing you to feel stuck.

According to a Gallupworkplace study of more than 16,000 employees, 35 percent ofworkers say they’re only given the opportunity to be creative a few times ayear. Considering that nearly 30 percent of workers strongly agree thatthey’re expected to be creative, there is a huge disconnect between thedemand for new ideas, and workplace structures that can actually prevent theirgeneration. 

If you’re a manager, you’velikely been given the difficult task of discouraging your direct reports frommaking simple choices just so they can meet deadlines. Instead, you want toencourage them to propose unconventional ideas that truly move the needle foryour company. But how exactly should you pull people out of autopilot and givethem the tools they need to fully participate in, appreciate, and value thecreative process? Believe it or not, a few simple changes in the way you holdmeetings and hold your direct reports accountable can make all the differencein their ability to be creative. 

Replace brainstorming with “brainwriting” 

While the aim of a creativebrainstorming session is to shed light on the ideas of many, a lot of yourmeeting discourse probably happens with a select few. In her research,Leigh Thompson, Ph.D., a professor of dispute resolution and organizations atNorthwestern University, has found that in a six-person meeting, two peoplewill do over 60 percent of the talking. And this phenomenon, which Thompsonrefers to as a “doom loop,” only worsens when more people are in the mix. “Thepeople who are not quite as dominant don’t speak, because they’ve given up, andthe overly dominant people take over. It just becomes this self-perpetuatingcycle,” Thompson tellsNorthwestern’s Kellogg School of Management. 

Thompson’s solution to afailed brainstorm is called “brainwriting.” “Brainstorming is the simultaneousoral generation of ideas. Brainwriting is the simultaneous written generationof ideas,” she explains. The next time you call for group idea generation, haveyour colleagues write their ideas down — without attaching their names. Thatway, everyone will have a chance to bring their thoughts to the tableand engage in an open, honest conversation.

Schedule flexible check-ins

Risk-taking is essential tocreative endeavors, yet risk-taking can take a lot of time and even more trust. Gallupfound that only 18 percent of employees strongly agree thatthey can take risks at work that would lead to new solutions. When employeesfeel like they can’t take risks, their companies can lose out on opportunitiesand novel outcomes. To give your direct reports more time to think creativelyand take chances (and give you the chance to tracktheir progress and develop a stronger rapport), try integrating creativecheck-in points into your workflow. That way, your direct reports can try newthings, seek and solicit feedback, and course-correct where necessary.

Transform a “delivery mindset” into “divergentthinking” 

When you’re short on time andin need of quick solutions, it becomes all too easy to fall into a “deliverymindset” — or as defined by the Institutefor Management and Development, a pattern of “rushing to quickanswers” that fall within our comfort zone. Having a delivery mindset cancelsout creative efforts, and pushes us to return to the same solutions over andover again. As a manager, push your team members to practice “divergentthinking” instead. According to the IMD,divergent thinking is “a process for identifying new opportunities, findingmultiple creative ways to address intractable issues or abstract problems andchallenging the organizational status quo.” When faced with a problem,challenge your team members — withcompassionate directness — to identify creative solutionsthey’ve never tried before. Work together with them to create a timeline andoutline specifics, and help them put their plan into action. 

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—Published on November 11, 2019