Topley’s Top Ten – November 5, 2019

Author

Matt Topley
November 05, 2019

1.75% of S&P Beating Earnings.

BIG SPLASH– Earnings are making their biggestsplash in the stock market in years – Investors are sharply bidding upthe shares of companies that beat expectations—and appear more willing tooverlook some of the misses—helping to pull the stock market out of its recentlull.  More than three-quarters of the 358 companies in the index thatreported through Friday have beaten estimates. And 66% have risen in subsequenttrading sessions, a five-year high.

Shares of companies that toppedforecasts rose an average of 2% in the two days after reporting results,beating the five-year average of 1%, according to data compiled by FactSet. Those thatfell short have averaged a 2.1% pullback, below the half-decade average of 2.6%, WSJ reports

From Dave Lutz at JonesTrading

2.Leveraged-Loan Downgrades Spike, Collateralized Loan Obligations Get Cold Feet, Selloff in B-Rated Loans Ensues

by Wolf Richter • Nov4, 2019 • 0 Comments • Email to afriend

“Sell first, ask questions later.”

The $1.2-trillion US leveraged loan market is starting to getdowngrade-indigestion. So far this year through October 11, of the 1,460leveraged loans in the S&P/LSTA Index, 282 issues were downgraded, alreadyexceeding the 244 downgrades for the entire year of 2018, and blowing past the33 downgrades in 2017, according to LCD of S&P Global MarketIntelligence.

On a rolling three-month basis, the ratio ofdowngrades-to-upgrades spiked to 4.9, by far the highest ratio since theFinancial Crisis. In the chart below via LCD, a value greater than 1(horizontal green line) means downgrades exceed upgrades. A value blow 1 meansupgrades exceed downgrades.

Collateralized Loan Obligations get cold feet.

The hot-button issue at the moment with leveraged loans is a one-stepdowngrade from B-, or a 2-step downgrade from B (“highly speculative”), to triple-C (“substantial risk,” see my cheat sheet for corporate bond and loan credit ratings byratings agency).

It’s a hot-button issue because managers of Collateralized LoanObligations (CLOs) currently purchase about three-quarters of the leveragedloans that banks are syndicating and hold about 55% to 60% of all leveragedloans outstanding, according to LCD. But CLOs have limits as to how much inCCC-or-below-rated loans they can hold.

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3.Money Still Pouring into Private Capital Funds.

David Haarmeyer Linkedin

4.Volume of Trading in Privately Held Shares Growing 100% Per Year.

You Want a Piece of That Hot Pre-IPO? It’s GettingEasier.By Eric J. Savitz

While the IPO market has temporarilyground to a halt, there are still opportunities for the intrepidinvestor to buy shares of hot companies like AirBnB, Snowflake Computing andImpossible Foods that haven’t actually offered stock to the general public justyet.

That’s what Forge does—arrangestrades in pre-IPO shares. The San Francisco-based company is one of severalplayers in this growing niche market, allowing long-standing insiders and ventureinvestors to get out while creating a path for institutionaland high net worth individual investors to bet on fast growing privately-heldcompanies.

The fact that Forge andrival SharesPost even existreflects the dramatic changes that have unfolded in the last few years ininitial public offerings. Companies are staying private longer—10 years or morefrom inception, in many cases—and often generating hundreds of millions ofrevenue before filing.

Thatleads to higher market caps at IPO—many tech companies have been launching withvaluations in the billions. Meanwhile, with most IPOs, insiders can’t trade onday one due to lock-up restrictions, leading to stocks with big market caps butthin floats and wildly trading shares.

Thatcombination leads to frustration for both early investors, who can’timmediately sell shares, and for institutions who want to own the stocks butcan’t get enough initially to establish meaningful positions.

All of that helps explain thegrowing interest in Forge. There have been transactions in pre-IPO stocks formany years, but the friction has historically been high, requiring companies tosign off on any transactions in their shares, and with challenges in matchingbuyers and sellers in a way that allows for efficient price discovery. But ascompanies stay private longer, shareholders are pushing harder for anopportunity to sell shares—and institutions are eager to get involved inhigh-growth opportunities ahead of an initialoffering.

ForgeChief Executive Officer Kelly Rodriques says his company has arranged about $2billion in trades over the past 18 months, working with most of the top 100privately-held, venture-backed companies as ranked by valuation. He says Forgewill do about $100 million in revenue in 2020.

Rodriquessays the volume of trading in privately held shares is growing at better than100% a year. “Today you are seeing more company-structured liquidityprograms for their employees, and you are also seeing more venture capitalinvestors selling positions while companies are still private,” he said in arecent interview with Barron’s. “Thetraditional IPO ‘pop’ is now happening 18 months before companies actuallybecome a public company.”

5.HELOCs Half of 2008

HELOCs are so 2007; Americans aren’t using homes aspiggy banks anymore

The home equity line of credit, or HELOC, has become less popular since the housing crash and Great Recession.(Getty Images)

By GWEN EVERETT, SHAHIEN NASIRIPOURBLOOMBERG NOV. 3, 20193 AM

Aonce-popular loan Americans use to finance home renovations and college tuitionis slowly dying, slashing a lucrative source of revenue for the nation’slargest banks.

Home equity lines of credit,open-ended loans that homeowners tap for cash using their properties ascollateral, exploded in the run-up to the housing crash a decade ago, doublingin volume from 2003 to 2006, according to the Federal Reserve Bank of NewYork.

Rapidly climbing property pricesled homeowners to use their homes as piggy banks, fueling consumer spending.

But a resurgent housing marketafter the Great Recession hasn’t brought with it a return to HELOCs, as they’recommonly known.

Home equity lines have fallen byalmost half in the last decade, New York Fed data show. The loans, whichconstituted 5% of the nation’s banking assets in 2009, now account for lessthan 2%, according to the Federal Deposit Insurance Corp.

Record levels of home equity — spurredby soaring home prices and stagnant mortgage borrowing — haven’t promptedhouseholds to use a ready resource as a way to fund big-ticket purchases orhome improvements. Finance executives have spent years researching the issue,commissioning surveys and studies to figure out how to jump-start a businessthat had always been a reliable and relatively low-risk source of earnings.

Fallout from the housing bubbleappears to have had a lasting effect on consumers’ willingness to keep usingtheir homes as ATMs. Just 4% of households had an open home equity line in2016, according to the Federal Reserve’s most recent comprehensive survey ofhouseholds’ finances, a far cry from the 10% that annually borrowed against theequity in their homes during the 2000s.

“The HELOC market has been indecline since 2008,” said Otto Pohl, a spokesman at Figure, a financialtechnology firm that offers a type of HELOC. In the “bubble years,” Pohl said,banks almost as a matter of course added home equity lines along with aborrower’s initial mortgage.

Those days are gone.

At Bank of America Corp., thenation’s second-laregest bank by assets, HELOCs produced $552 million ofinterest income in the third quarter, down two-thirds from a decade ago.Interest rates on the loans were the third-highest among the lender’s varioustypes of assets, trailing only credit cards and a catch-all category called “other.”

U.S. homeowners collectively had$6.3 trillion of housing equity they could borrow against as of June, accordingto analytics firm Black Knight Inc., more than double the $2.6 trillion totalin 2009.

Finance industry executives citethree culprits they think are probably responsible for the gradual demise ofHELOCs: an unusual trend in interest rate spreads, easy access to unsecuredpersonal loans from online lenders and psychological scars from the housingbust.

Home equity lines function likecredit cards, in that lenders set a maximum amount that homeowners can borrowat any one time. Also like credit cards, they’re based on the prime rate, withlenders charging a bit extra depending on a borrower’s creditworthiness. Theprime rate, now at 5%, moves with the federal funds rate set by the Fed.

That’s more expensive than thetypical 30-year mortgage, an interest rate that generally tracks the yield onthe 10-year Treasury note. The average rate on a new HELOC was 6.45% as ofSept. 30, according to Informa Financial Intelligence. Borrowers looking toexchange equity for cash in a refinancing are being offered an average rate of3.99%.

When mortgage rates are at least 1percentage point lower than the rate on HELOCs, borrowers looking to pullequity from their homes typically opt for a cash-out refinancing over a homeequity line of credit, said Rutger van Faassen, a vice president of consumerlending at Informa. Add to that the fact that a new mortgage offers a fixedrate instead of the variable rate on a HELOC, and the option becomes even moreattractive, he said.

Unsecured personal loans poseanother threat to the HELOC business. Many online lenders offer cash in a day,and years of quick turnaround times with their online purchases haveconditioned consumers to expect speed when they access credit, said Mark Ford,head of personal lending and card solutions at SunTrust Banks Inc.

Home equity lines require adaunting pile of paperwork and the added headache of a new home appraisal.Typically it takes about 45 days from the date of the application for aborrower to get the cash, according to Informa.

Another obstacle: Borrowers whodefault on a HELOC, unlike on a personal loan, probably lose their homes.

Lauren Anastasio, a financialadvisor at Social Finance Inc., the lender better known as SoFi, said herclients often pick personal loans over HELOCs, despite the higher interestrate, because of the quicker processing time.

A recent survey by J.D. Powerfound that consumers rated online lenders above home equity providers when itcame to customer satisfaction.

Banks are responding. CitizensFinancial Group Inc. has reduced its processing times by half, to 35 days,according to Brendan Coughlin, head of consumer deposits at the Providence,R.I.-based bank. Bank of America will allow prospective borrowers to applyonline, said Steve Boland, head of consumer lending.

Those efforts may never return thehome equity industry to its glory days. Too many homeowners were scarred by thehousing bust, and they’ve reduced their borrowing as a result.

Overall household debt has fallenover the last decade, after adjusting for inflation, New York Fed data show.And some borrowers are wary about putting their house on the line, Van Faassensaid.

“It’sreally the perfect storm,” SoFi’s Anastasio said, citing interest rates andpersonal loans as key drivers working against HELOCs. Sentiment could change ifmortgage rates go up, but for now, “each one of those has an advantage relativeto HELOCs.”

6.4 reasons why analysts are cautious on Saudi Aramco’s IPO

PUBLISHED MON, NOV 4 20199:29 AM ESTUPDATED MON, NOV 420198:20 PM EST

KEY POINTS

  • Saudi Aramco may have finally fired the starting pistol on itsinitial public offering (IPO), but some analysts still believe investors shouldthink carefully before jumping on board.

  • The company, the most profitable in the world, announced Sundaythat it’s planning to list on its local stock market, the Tadawul, in December.

  • But a lack of details on the listing, which eventually could bethe largest on record, has left some analysts cold.

SaudiAramco may have finally fired the starting pistol on its initial public offering(IPO), but some analysts still believe investors should thinkcarefully before jumping on board.

Thecompany, the most profitable in the world, announced Sunday that it’s planningto list on its local stock market, the Tadawul, in December.

But a lackof details on the listing, which eventually could be the largest on record, hasleft some analysts cold. And they believe there are plenty of reasons whyinternational investors should be wary.

Lack of details

Aramco saidSunday that “the final offer price, number of shares to be sold and percentageof the shares to be sold will be determined at the end of the book-buildingperiod.” The company’s IPO prospectus will be released on November 9.

As such,analysts were left speculating on the finer details of the offering, and thesecould make all the difference to investor interest, they said.

“Yes, it’s(the IPO has) been confirmed but at this point in time they haven’t reallygiven us a set timetable as to when the transaction is going to get under wayor complete,” David Lennox, resources analyst at Fat Prophets, told CNBCMonday.

Previous reports have suggested the kingdom will list 1%to 2% of Aramco on its local stock exchange, and then listanother slice on an international exchange at a later date — with a totalpublic sale of roughly 5% of the company. Exchanges in New York, London, HongKong and Tokyo have all been vying for the international listing.

Lennox saidthe valuation could make all the difference to investors. “We’ve also not seenany form of valuation, (although) we’ve seen quite wide numbers from $1trillion to $2 trillion. We think it’s about $1.4 trillion so you can take yourpick,” he said.

“The otherfactor we don’t know at the moment is just how much of it are they going tofloat? … So there are a lot of questions we’ve yet to really have answeredbefore one can say we’re going to see this IPO go ahead,” he said.

Dividend

The IPO hasbeen closely-anticipated in the last few years but has been delayed amid oilprice volatility, valuation uncertainty, the location of the share listing andgeopolitical events such the drone and missile attack in September.

The publiclisting could be the world’s largest, and if it achieves a valuation of $1.5trillion Saudi Aramco would far exceed the market capitalization of giants likeApple and Microsoft.

The companysaid one of its priorities was delivering “sustainable and growing dividendsthrough crude oil price cycles” and that “subject to the board’s discretionafter consideration of a number of factors, the board intends to declareaggregate ordinary cash dividends of at least $75.0 billion with respect tocalendar year 2020, in addition to any potential special dividends.”

How farthat dividend goes will be subject to the amount of shares the company decidesto list. “We’ve got the dividend amount but we just don’t know the amount ofshares,” Lennox said, noting that “if they issue a bucket load of shares thenthat dividend amount is not going to go far.”

Meanwhile,analysts at Bernstein noted that it was hard to evaluate a company like Aramco,which it likened to a “monster oil” company.

They citethe fact that Saudi Aramco is the most profitable company in the world — in2018 its net income was $111 billion, five times bigger than Exxon or Shell.The analysts also note it has an oil reserve life of 52 years and its reservesare the cheapest to extract.

“What’sfair value for a company with access to 201 billion barrels of proven oilreserves, produces 1 in every 8 global oil barrels, is instrumental insupporting oil prices and owns the world’s 4th largest integrated Downstreamsystem pointing at Asia? While we’re used to valuing Big Oil, Aramco is MonsterOil, so this is literally the trillion-dollar question,” Bernstein SeniorAnalysts Oswald Clint and Neil Beveridge said in a note Monday.

Geopolitics

Geopoliticalfactors, like Saudi Arabia’s tense relationship with regional rival Iran, couldalso dampen investor sentiment.

“If youlook at it from the perspective of international investors, there are obviouslyconcerns,” Bob Parker, investment committee member at Quilvest WealthManagement, told CNBC’s “Squawk Box Europe” Monday.

“Do youwant to invest in a region where the relationship with Iran is fraught?,” heasked. “We’ve also had infrastructure risk related to (the drone and missileattack) a few months ago and a large part of Saudi Aramco infrastructure beingdamaged.”

Inaddition, Parker said the valuation might also be a factor adding tointernational investors’ concerns.

“Internationalinvestors might say well perhaps I need a discount to warrant my investment inSaudi Aramco … But that discount doesn’t seem to be there,” he said. Parkeradded that he also believed oil prices were going to be subject to downwardpressure.

“All ofthose factors I think means that this is going to be a difficult IPO,” hewarned.

Oil prices

Oil prices slumped in mid-2014 amid aglut in global supply and lackluster demand. Prices fell dramatically and majorglobal oil producers like Saudi Arabia, and other OPEC producers decided to cutback on production to help stabilize supply and demand, and prices.

U.S. shaleproducers have not cut back production meanwhile, and there are still concernsover supply dynamics and demand, particularly amid an ongoing trade war betweenthe U.S. and China that has dampened global growth. On Monday, oil prices weretrading at $62.22 per barrel for Brent crude and $56.62 for West TexasIntermediate (WTI). Both were comfortably over $100 a barrel around five yearsago.

Analystslike Fat Prophets’ David Lennox feel that the IPO could be coming too late; “Wethink this IPO is probably several years too late. You’ve now got in the U.S. awell-established competitor producing 12 million barrels of oil a day whereasseveral years ago that wasn’t even around,” Lennox said.

“There’s alot of questions that we’ll have to sit down and look at,” he added.

7.Payroll Numbers Show Economy Still Chugging

Another Solid Month for the Job Market

Postedby lplresearch

Economic BlogNovember 1, 2019

TheU.S. labor market stood strong against headwinds in October.

Nonfarmpayrolls increased 128,000 last month, higher than consensus estimates for an85,000 gain. October’s payrolls beat expectations despite a 42,000 slide inautomaker payrolls, largely from the General Motors strike. August andSeptember’s job gains were also revised up by 95,000.

Asshown in the LPL Chart of the Day, payrolls have grown an average of 175,000over the past 12 months, around the average pace for this economic expansion.

SolidOctober jobs data shows the engine of the U.S. economy is humming along despiteelevated global uncertainty, a good sign for future growth as improving hiringconditions fuel consumer spending and confidence. Payrolls growth has moderatedthis year, but we’ve also expected some slowing in hiring as the cycle ages andthe labor market tightens further.

8.Microsoft experimented with a 4-day workweek, and productivity jumped by 40%

Lisa Eadicicco21 hours agoSnapchat

MicrosoftCEO Satya Nadella. Microsoft

  • Microsoft foundthat implementing a four-day workweek led to a 40% boost in productivity, thecompany announced as part of the results of its “Work-Life ChoiceChallenge.”

  • Thesummer project examined work-life balance and its effect on productivity andcreativity.

  • Aspart of the experiment, Microsoft’s Japan subsidiary closed every Friday inAugust, resulting in higher productivity than in August 2018, the company said.

  • Visit Business Insider’shomepage for more stories.

An experiment thatinvolved reducing the workweek by one day led to a 40% boost in productivity ina Microsoft subsidiary in Japan, the technologygiant announced last week.

The trial was part ofMicrosoft’s “Work-Life Choice Challenge,” a summer project thatexamined work-life balance and aimed to help boost creativity and productivityby giving employees more flexible working hours.

Microsoft Japan closed itsoffices every Friday in August and found that labor productivity increased by39.9% compared with August 2018, the company said. Full-time employees weregiven paid leave during the closures.

The company said it alsoreduced the time spent in meetings by implementing a 30-minute limit andencouraging remote communication.

Microsoft isn’t the firstto highlight the productivity benefits of a four-day workweek. Andrew Barnes,the founder of a New Zealand estate-planning firm, Perpetual Garden, said heconducted a similar experiment and found that it benefited both employees andthe company, according toCNBC. It has adopted the four-day workweek permanently.

Studies have found there’sdemand for a shorter workweek. Last year, in a study ofnearly 3,000 workers in eight countries by the Workforce Institute at Kronosand Future Workplace, most said their ideal workweek would be four days orless.

It’s not just theemployees who benefited from Microsoft’s four-day-workweek experiment —Microsoft found that it helped preserve electricity and office resources aswell. The number of pages printed decreased by 58.7%, while electricityconsumption was down by 23.1% compared with August 2018, the company said.

9.Blue spaces: why time spent near water is the secret of happiness

Coastal environments have been shown to improve our health, body and mind. So should doctors start issuing nature-based prescriptions?

 ‘People who visit thecoast at least twice weekly tend to experience better general and mentalhealth,’ says Dr Lewis Elliott. Composite: Getty Images

After her mother’s suddendeath, Catherine Kelly felt the call of the sea. She was in her 20s and hadbeen working as a geographer in London away from her native Ireland. She spenta year in Dublin with her family, then accepted an academic position on thewest coast, near Westport in County Mayo. “I thought: ‘I need to go and get myhead cleared in this place, to be blown away by the wind and nature.’”

Kelly bought a little house in a remote area and surfed, swamand walked a three-mile-long beach twice a day. “I guess the five or six yearsthat I spent there on the wild Atlantic coast just healed me, really.”

She didn’t understand why that might be until some years later,when she started to see scientific literature that proved what she had longfelt intuitively to be true: that she felt much better by the sea. For the pasteight years, Kelly has been based in Brighton, researching “outdoor wellbeing”and the therapeutic effects of nature – particularly of water.

In recent years, stressed-out urbanites have been seeking refugein green spaces, for which the proven positive impacts on physical and mentalhealth are often cited in arguments for more inner-city parks and accessiblewoodlands. The benefits of “blue space” – the sea and coastline, but alsorivers, lakes, canals, waterfalls, even fountains – are less well publicised,yet the science has been consistent for at least a decade: being by water isgood for body and mind.

Proximity to water – especially the sea – is associated withmany positive measures of physical and mental wellbeing, from higher levels ofvitamin D to better social relations. “Many of the processes are exactly thesame as with green space – with some added benefits,” says Dr Mathew White, asenior lecturer at the University of Exeter and an environmental psychologistwith BlueHealth, a programme researching the health and wellbeing benefits ofblue space across 18 (mostly European) countries.

An extensive 2013 study on happiness in natural environments –to White’s mind, “one of the best ever” – prompted 20,000 smartphone users torecord their sense of wellbeing and their immediate environment at randomintervals. Marine and coastal margins were found by some distance to be the happiest locations,with responses approximately six points higher than in a continuous urbanenvironment. The researchers equated it to “the difference between attending anexhibition and doing housework”.

 The benefits of ‘blue space’ –the sea, but also rivers, lakes, canals, waterfalls, even fountains – are lesswell publicised than green space. Photograph: tottoto/Getty Images

Although living within 1km (0.6 miles) of the coast – and to alesser extent, within 5km (3.1 miles) – has been associated with better generaland mental health, it seems to be the propensity to visit that is key. “We findpeople who visit the coast, for example, at least twice weekly tend toexperience better general and mental health,” says Dr Lewis Elliott, also ofthe University of Exeter and BlueHealth. “Some of our research suggests aroundtwo hours a week is probably beneficial, across many sectors of society.” Evensea views have been associated with better mental health.

White says there are three established pathways by which thepresence of water is positively related to health, wellbeing and happiness.First, there are the beneficial environmental factors typical of aquaticenvironments, such as less polluted air and more sunlight. Second, people wholive by water tend to be more physically active – not just with water sports,but walking and cycling.

Third – and this is where blue space seems to have an edge overother natural environments – water has a psychologically restorative effect.White says spending time in and around aquatic environments has consistentlybeen shown to lead to significantly higher benefits, in inducing positive moodand reducing negative mood and stress, than green space does.

People of all socioeconomic groups go to the coast to spendquality time with friends and family. Dr Sian Rees, a marine scientist at theUniversity of Plymouth, says the coastline is Britain’s “most sociallylevelling environment”, whereas forests tend to be accessed by high-incomeearners. “It’s not seen as being elite or a special place, it’s where we justgo and have fun.

“By spending time in these environments, you’re getting what wecall ‘health by stealth’ – enjoying the outdoors, interacting with the physicalenvironment – and that also has some different health benefits.”

Even a fountain may do. A 2010 study (of which White was leadauthor) found that images of built environments containing water were generallyrated just as positively as those of only green space; researchers suggestedthat the associated soundscape and the quality of light on water might beenough to have a restorative effect.

Although participants rated large bodies of water higher thanother aquatic environments (and “swampy areas” were rated significantly lesspositively), the study suggested that any water is better than none –presenting opportunities for beneficial blue space to be designed orretrofitted. “You can’t change where the coast is, but when we’re talking abouttranslating the benefits to other types of environments, there is nothing tostop a well-designed urban fountain,” says Elliott.

“People work with what they have,” says Kelly. When she lived inLondon, she would head for the Thames when she had a spare 10 minutes “andrecalibrate”. Then, four times a year, she would go to Brighton “and thebenefits would keep me going for the next few months – so I didn’t get into aplace of being overwhelmed or stressed, just keeping myself topped up”.

The coast does seem to be especially effective, however. Whitesuggests this is due to the ebb and flow of the tides. He points out thatrumination – focusing on negative thoughts about one’s distress – is anestablished factor in depression. “What we find is that spending time walkingon the beach, there’s a transition towards thinking outwards towards theenvironment, thinking about those patterns – putting your life in perspective,if you like.”

 To go to the sea is synonymouswith letting go. Photograph: James Galpin/Getty Images

When you are sailing, surfing or swimming, says White, “you’rereally in tune with natural forces there – you have to understand the motion ofthe wind, the movement of the water”. By being forced to concentrate on thequalities of the environment, we access a cognitive state honed over millennia.“We’re kind of getting back in touch with our historical heritage,cognitively.” Water is, quite literally, immersive.

As well as an academic, Kelly is a wellness practitioner whoteaches classes in “mindfulness by the sea”. She says the sea has a meditativequality – whether it is crashing or still, or you are in the water or observingfrom the shore. “You can immerse yourself in it, which you can’t really do witha green space. You’re present in that moment, you’re looking at something withintention, and whether that’s for two minutes or half an hour, it gives you thebenefits in that moment.”

In the future, she believes time in blue space will be amainstream, formalised response. “The mental health crisis isn’t goinganywhere,” she says.

Rees says support for the idea of “blue” or “green”prescriptions for individuals is growing. A “surfing for mental health” groupin north Devon is one example she gives of how “nature-based interventions” canwork.

By working to characterise and quantify benefits, BlueHealth’s cross-disciplinary teamhopes to establish how “blue infrastructure” – the coast, rivers, inland lakes– can help tackle major public health challenges such as obesity, physicalinactivity and mental health disorders. A 2016 paper – which White co-authored –put the monetary value of the health benefit of engaging with the marineenvironment at £176m.

Harnessing the power of blue space could also potentially helpto alleviate inequality. “One of our recent papers finds that the benefits ofcoastal living are strongest for people living in the poorest areas,” saysElliott. For that reason, it is crucial to ensure everyone has access. Withproximity to water associated with at least a 10% premium in house prices,White is concerned by the exclusivity of seaside urban development. “What willhappen is you’ll get this kind of gentrification, where the people who benefitmost will get squeezed inland.”

Access provisions under the revised Marine and Coastal AccessAct, which is due to be completed next year, will help, says White. But seasidecommunities are particularly vulnerable, imminently from seasonal fluctuationsin income and environmental degradation, and, in the longer term, sea level rise and extreme weather due to climate change.

Rees says that the benefits of marine environments for ourwellbeing are tied to the health of those environments, and that conservationefforts need to factor in the “natural capital” of blue space in supporting ourwellbeing. Kelly’s work has found a link between a sense of personal connectionto the sea and environmentally friendly behaviours; researchers hope that wemay be more inclined to protect blue space if the health benefits are proven.

“To go to the sea is synonymous with letting go,” says Kelly.“It could be lying on a beach or somebody handing you a cocktail. For somebodyelse, it could be a wild, empty coast. But there is this really human sense of:‘Oh, look, there’s the sea’ – https://www.theguardian.com/lifeandstyle/2019/nov/03/blue-space-living-near-water-good-secret-of-happinessand theshoulders drop.”

10.Things That Matter: Three Useful Principles for Life

The bestlife advice is: Be wary of life advice.

Life,observed the writer Amos Oz, evades every formula. If that’s the case (and itis), then so-called guides for life—those lists of rules, owner’s manuals, andhow-to books—are bound to be found wanting. In other words, the best lifeadvice is to be wary of life advice.

Thatbeing said, those of us who toil in the teaching profession are charged withpreparing our students for life. Such preparation requires that we equip themwith some useful tools for navigating the terrain. What should those be?

I oftenbegin my introductory classes by talking about three general principles thatcan, in my judgment, be quite helpful on the journey of learning and living. Ispeak of ‘principles’ rather than ‘rules’ because rules, by definition, arespecific and rigid prescriptions, often imposed from the outside under threatof punishment. Trying to capture, anticipate, and addressthe infinite complexity of life and its manifestations with specific and rigidrules is unwise. Life advice is more palatable, and useful, when it articulatesguiding principles, since principles are broader, more flexible, and tend totake the form of internal convictions rather than external impositions. ‘Finishall the food on your plate’ is a rule. ‘Be mindful of wastefulness’ is aprinciple. The latter is better life advice. With that in mind, here goes:

1.Knowledge Matters

Theassumption that knowledge has value is quite uncontroversial, and fundamentalto the work of teaching. Yet the point deserves emphasis, for several reasons.First, American culture is big on opinions. Speech, after all, is free. Andfree things tend to get used much, often wastefully. Many of my students aretold throughout their early years that they always have a right to an opinion,that their opinions matter a lot, and that all opinions are created equal. Thisof course is untrue. Indeed, everyone is entitled to their opinions, yet thatdoes not mean that all opinions matter, or that they matter equally. To wit: Ihave an opinion about how Amazon should be run. So does Jeff Bezos. His opinionmatters more. In a well-run life (be it individual or social), a knowledgeableopinion matters more than an ignorant one. 

Second,American society is also big on feelings. Many of my young students are taughtthat how they feel is of prime importance in terms of discerning what’s goingon and how they should respond. This is problematic. Now granted, feelings areimportant. Our emotions provide useful information in our effort to navigatethe world. Everyone is entitled to feel what they feel, and there’s oftenbenefit in reflecting on and communicating our feelings honestly. At the sametime, feelings are mind events, not world events. The fact that you feel scareddoes not necessarily mean you are in danger. Recognizing the difference isimportant, and will require knowledge of the situation, not merely an awarenessof your feelings. The fact that you hurt does not necessarily mean that you’vebeen wronged. The fact that you feel good does not necessarily mean you aredoing good. If you feel like a great driver, you have a feeling, notnecessarily driving skill. In a well-run life, your driving skill–that is,your actual knowledge–is more important than your feeling. Knowledge matters.

Ofcourse, this principle is violated often—as when people who have acquiredpower, wealth, or fame in one area get a pass on spouting ignorant nonsenseabout another (a phenomenon known as the ‘halo effect’). This seems to havebecome more common in recent years, as the current cultural conversationappears to devalue knowledge in favor of other currencies that photographbetter, such as celebrity, wealth, outrageous opinions, and outraging feelings.Yet violating the principle comes at a cost. A process that devalues expertisebegets inferior quality product. Failing to gather—or ignoring—the evidencebegets error and injustice.

Anotherreason why knowledge matters is because what you know defines the parameters ofyour world. Thought experiment: You come home from work to find your wife inbed with your brother. Now, this is a situation in which you’ve just acquired anew bit of knowledge. At this point, you face some choices; you have many waysin which to react to these new data–you may storm out, start a fight, faint,or join in on the fun. Whatever. It’s a free country. Yet one thing you cannotdo is go back to being who you were before that moment. The knowledge haschanged you; it has changed your understanding of yourself, and of your wife,and of your brother, and of relationships, and of the world. And the change isirreversible. You may mend things with both your brother and your wife, but youcannot un-see what you saw. You cannot un-know what you know. Even if yourecover completely and become whole again, you are not whole in the same wayyou were before. This is why, as hinted well in the biblical story of Adam andEve, knowledge is dangerous. It is consequential. It matters.

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2.Context Matters

This isperhaps the most important and most often overlooked guiding principle forsound thinking and judgment: Nothing has meaning independent of context. Humanaffairs in particular cannot be meaningfully reduced to the study (ordescription) of the individual alone. Granted, we may speak of an object sanscontext heuristically, in the abstract, for the didactic purposes ofsimplification or illustration. But to arrive at a practical understanding thatcan inform successful movement in the world, speaking of anything sans contextis unhelpful. For example, pregnancy happens inside the womb. But the womb isnested inside a body that contains a brain–that is to say, a person. And theperson is involved in certain specific relationships, in a certain community,inside a culture, at a certain historical time. You can’t understand themeaning and implications of pregnancy without knowing something about all ofthose layers.

As theabove example shows, a complicating factor here is that human phenomena existwithin multiple contexts at once. Which of those we choose to emphasize willmatter to our understanding. Three types of context that tend to mattergreatly to our understanding of human events are the sociocultural, historical,and situational contexts. The sociocultural context refers to the culturaltraditions, social expectations, and group processes in which one’s individuallife is embedded. Similar gestures, words, or decisions have different meaningsin different cultures. Two adult males walking hand in hand means verydifferent things depending on whether it happens in Uganda (where it signalsmale friendship) or the US (where it signals homosexuality).

Moreover,just as public behavior is given meaning by the culture, so does private,individual behavior. There is no ‘I’ in ‘Alone.’ But there is ‘I’ in ‘Tribe.’This is to say that selves are built out of cultural materials, using culturaltools. Sociocultural influences are internalized in the socialization processand become parts of our integrated sense of self. The very concepts you use todefine yourself—or, for that matter, your very idea of self—have been providedto you by society. Take language, for example. Your culture gave you the giftof language, and now, you consider that language your own. In other words, youhave internalized and integrated culture.

This iswhy even your most private intimate moments carry a cultural stamp. Forexample, when you make love to your partner in the privacy of your bedroom,your society is right there with you. After all, your understanding of whatlovemaking means and how to go about it were taught to you by your culture.Everything about your love making session: the expectations you and your loverhave of each other, the scripted dance of dating and mating that brought you here, the thingsyou have come to consider attractive, acceptable, or necessary for arousal,the sex toys and contraceptives you use—these are notof you. They were gifted to you by the sociocultural milieu. Contextmatters.

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Anothertype of context is historical. Clearly, similar behaviors have differentmeanings at different historical times. Ideas that were once taken for grantedtruths are now considered folly. And vice versa. The wealthiest, most powerfulperson in the world five hundred years ago did not have access to thetechnology our poorest citizens take for granted today. This is one reason whyevaluating the past in terms of the present devolves quickly intomeaninglessness. Our ancestors look like backward barbarians to us. But theydid not think of themselves as such, and were not such compared to theirancestors. People 500 years from now will look at us as backward barbarians.

Judginghuman phenomena without regard to the times in which it took place is seductivesince hindsight is 20/20, and comparisons to the past often reflect well on thepresent. But such comparisons often muddy our analysis. To wit: I’m quitecertain that Bill Gates abhors the idea of slavery. Thomas Jefferson, on theother hand, embraced it. That does not mean that Gates is good and thatJefferson was evil. Both of them are, in fact, normative in the context oftheir historical time and particular culture. Thus, they are more alikethan different. In other words, if Gates lived in Jefferson’s time he’d bea slave master, too. Person-(or event or object)-in-context is the lowestmeaningful unit of analysis. Thus, it is fairer to compare our ancestors intheir context to us in ours.

The thirdimportant context is situational. Clearly, different situations call fordifferent behaviors. And the same behavior acquires different meaningsdepending on the situational context in which it is emitted. Indeed, one of theways we judge mental health and illness is by noting a mismatch betweenbehavior and situation, as when someone laughs at the funeral, or takes hispants off in public.

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Even themeaning of things we assume to be absolute, universal, or self-evident are infact tethered to situational context. Telling the truth, for example, isbroadly seen as a good thing. Yet in some contexts—for example, if you’rehiding Jews in your basement in Europe during WWII, and the SS soldiers are atyour door asking you if you’re hiding any Jews—truth-telling would be immoral.This is why we say that in psychology, the correct answer to most everyquestion is ‘it depends.’ On what? On context.

3. ThingsAre Not What They Seem

This ideais neither new nor original. An essence of humanity is embodied in our tendencyto want to look under the hood or to peek behind the curtain; our curiosityabout how, and to what ends, the myriad appearances around us are produced.Many grand historical ideas involve upending the obvious:

Freud’s notion of the unconscious is one example. Per Freud, the truemeaning of the things we do is hidden from others and also from ourselves. Thewoman doting incessantly over her baby is motivated not by love, but byresentment.

Darwin’sgreat insight involved the realization that nature, which many Victorians sawas beautiful, harmonious and graceful in its various manifestations—is actuallya brutal, ceaseless war for survival.

Marx’sgrand theory was premised on the notion that capitalism, the seemingly winingeconomic system, was in fact doomed by its very own structure, as theproletariat, upon whose labor the wealth of the bourgeoisie depends, were boundto eventually revolt against their exploiters.

And soon.

Thereason that things are not what they seem has to do with the structure of ourevolved brain. We all must rely on our senses when taking in the world. We haveno other means by which to commerce with the ‘there’ that’s out there. Oursenses are systems. All systems have boundaries, that is to say limitations,that is to say, certain things they cannot do (for example, we can’t breatheunderwater). All systems also have a character, that is to sayspecifications, that is to say certain things they do better than other thingsthey do (for example, we see better in daylight than at night).

Evolutionhas shaped our senses to include certain useful tendencies. We learn certaintasks (e.g.: to fear a snake) more easily than others (to fear atable). We are drawn to and prefer certain things over others (babiestrack a moving object at birth; they prefer symmetry, and the smell of vanillaover ammonia). These sensory adaptations serve a survival purpose, but they arein essence biases, and thus, by definition, distortive.

Moreover,it is by now common knowledge that our senses do not passively transmit,record, and store information from the outside world but rather activelyparticipate in shaping the form and meaning of these data. We act on the worldas it acts upon us.

Your memory, thus, is not a recording of your life events,even though it seems so. Rather, it is a story constructed about those eventsin retrospect. You don’t remember all of what happened to you. You remember aversion you’ve constructed. That version omits certain parts, emphasizes others,and makes up some others for good measure. In other words, what you rememberwill depend not just on what actually happened, but also on factors such asyour mood at the time of the event, your level of arousal at the time, yourmood at the time of recall, and on how you are asked to remember, when, bywhom, and how often.

Anotheraspect of this principle refers to the role of expectations. Everyone has heardthat seeing is believing. And this is in part true. Humans rely on vision to agreat extent, and so we use this sense to verify things for ourselves. Fewerpeople though realize that the opposite of this equation is also true:Believing is seeing. That is to say, what you expect to see, hope to see, andbelieve you will see, you tend to see, independently of what’s actually there.People who believe in God see his good works everywhere. People who don’t failto find him anywhere.

Thoughtexperiment: Imagine two equally matched teams. One anticipates a loss. Theother believes it is going to win. At some point in the game, eitherteam may fall behind. Yet the team that expects to lose will see that asprophecy fulfilled, an inevitability, a signal, while the team that expects towin will see falling behind as a temporary setback, an error, random noise.Now, which team is more likely to win? The one that expected to. This resultwill seem right to both teams. But it isn’t, insomuch as it reflects not theirtrue (evenly matched) abilities, but their (distorted) expectations.

In sum,while neither comprehensive nor exhaustive, the three principles describedabove are useful to consider as one labors to survive intact the typhoon ofexistence. How may these principles be translated into action? Well,knowledge matters, so try to learn something. Context matters, so in beholdingthings, consider too the environment in whichthey’re embedded. And things are not what they seem, so don’t trust yourvision blindly. Examine things again