Topley’s Top Ten – October 15,2019

Author

Matt Topley
October 15, 2019

1.3Q Earnings Preview….Energy and Tech Biggest Projected Declines. uu

Higher input and labour costs areexpected to have further crimped profit margins. The average net profit marginis expected to fall to 11.3 per cent in the third quarter from 12.1 per cent inthe same quarter last year, according to FT  – Energy is poised for thebiggest drop in earnings after a fall in US crude prices in the third quarter.The tech sector, caught up in the US-China trade war, is next with EPSprojected to fall by more than one-tenth, according to FactSet. Revenues areestimated to increase an anaemic 0.3 per cent.

From Dave Lutz at Jones Trading

2.This Chart Shows Your Euro Currency vs. U.S. Dollar….New Lows.

3.U.S Dollar vs. Currency Basket at Highs.

Normally when the greenback gets this strong, something gives,and other currencies start to strengthen, observed Nicholas Colas, co-founderof DataTrek Research. “If they don’t, it means something is very different thistime around. And ‘different’ in this case probably doesn’t mean ‘good’ when itcomes to investor risk appetites,” he said.

The currency measure Colas prefers is called the Trade WeightedU.S. Dollar Index: Broad, Goods, and it’s hovering around all-time highs —although data only goes back to the mid-1990s. The index tracks how wellAmerica’s currency is performing against currencies for other countries withwhom the U.S. has a trading relationship.

The biggest contributors to the index are in the graphic above.And for some context, here’s a chart showing the index’s level over its fullhistory:

The question of what, exactly, it means for a currency to“perform against” others is important, and anyone who pays attention toPresident Donald Trump’s Twitter tirades about the dollar has a sense of bothits significance and its ambiguity.

Factcheck: true. It does make it harder forAmerican companies that export to remain profitable when the currency ishigher. But focusing only on manufacturers misses a lot of the bigger context,as well as why things are so complicated right now for the dollar.

Why a strong dollar could be a warningsign in this market–Andrea Riquier

4.International Dividend Payers Close to Breaking Out to New Highs.

5.Turkish Sanctions by U.S.

BULENT KILIC/AFP via Getty Images

TURKEY ETF -32% from highs

6.America’s Great Shale Oil Boom Is Nearly Over–Julian Lee

View photos

(BloombergOpinion) — America’s second shale boom is running out of steam. Butdon’t panic just yet, a third one may be coming over the horizon.

The U.S.Energy Information Administration published its latest short-term energyoutlook last week and has cut its forecast of oil production by the end of 2020for the fourth straight month. It now expects American output to rise by just370,000 barrels a day over the course of next year. That will be the slowestgrowth in four years and is yet another indicator that the latest periodof rapid shale expansion is faltering.

The number of rigs drilling for oilin the U.S. has fallen in each of the last 10 months, dropping by a total of20% since November. And productivity gains are waning. Drilling in thePermian, the most prolific of the shale basins, fell by 11% in the nine monthsto August, according to the EIA.

7.Apple (AAPL) Back on Top

BESPOKE I

When Apple (AAPL) overtook Microsoft (MSFT) in size back in 2010, a lot of people thought Microsoft’s best days were behind it.  By late 2012, Apple’s market cap had eclipsed $600 billion while Microsoft was still trending lower and lower towards the $200 billion level.  The tide for MSFT finally started to turn in 2013, and since current CEO Satya Nadella took over in February 2014, the company has seen its market cap increase by 2.5x from $300 billion up to its current size of $1.068 trillion.  During the fourth quarter rout for US equities in 2018, Apple (AAPL) shares tumbled much more than Microsoft (MSFT), which allowed MSFT to slip ahead of AAPL in terms of size.  While the two battled it out during the first quarter recovery this year, Apple shares got hit extra hard in May when the US/China trade war really heated up, allowing MSFT to take a commanding lead in market cap.  Recently, though, it has been Apple that has been surging as Microsoft has traded more sideways.  Apple hit a new all-time high again last week, and on Friday the company managed to close the week with a market cap that was just under $1 billion higher than that of Microsoft.  Today we’re seeing the gap widen a little more as Apple’s market cap trades at $1.072 trillion versus MSFT’s cap of $1.068 trillion. When you’re talking in the trillions, though, what’s four billion between friends.  With levels that are so close, one up day for MSFT and down day for AAPL could give MSFT the lead again, but for now, Apple has regained its title as the world’s largest company.  Start a two-week free trial to Bespoke Premium to sample our most actionable investment research.  If you use this checkout link, you’ll receive a 10% discount on an annual membership if you stick with it past your trial period.

8.Private equity firms go small after string of big deals collapse

Recessionfears and poor financing conditions force firms to look for modest transactions

Eric Platt in New York andKaye Wiggins in London OCTOBER 12 2019Print this page12 Cash-rich privateequity firms are pouring money into smaller transactions following the collapseof a string of big deals, with the total value of investments of $1bn or lesssurging to a record this year. According to data provider Refinitiv, privateequity buyouts and investments with a price tag below $500m are also at arecord, and now account for more than 30 per cent of the industry’s dealmakingby value, the highest level in almost a decade.

9.Millennials are about to trigger a major ‘changeover point’ for the US economy, asset manager says

PUBLISHED MON, OCT 14 20197:17 AM EDTUPDATED MON, OCT 1420199:34 AM EDT

KEY POINTS

  • U.S. adults aged between 21 and 38 years old will prioritize“necessity spending” over the next decade, Bill Smead told CNBC’s “Squawk BoxEurope” on Monday.

  • It comes after a 10-year period in which the same age group has“lived off discretionary spending.”

  • He said this will mean young adults will soon start to move awayfrom buying “Apple devices, craft beer and Chipotle burritos” and instead spendtheir savings on big-ticket items such as houses and cars.

Afundamental shift in the spending habits of U.S. millennialswill have an incredible impact on the world’s largest economy, according to theCEO of Smead Capital Management.

U.S. adultsaged between 21 and 38 years old will prioritize “necessity spending” over thenext decade, Bill Smead told CNBC’s “Squawk Box Europe” on Monday. It comesafter a 10-year period in which the same age group has “lived off discretionaryspending.”

He saidthis will mean young adults will soon start to move away from buying “Apple devices,craft beer and Chipotle burritos” and instead spendtheir savings on big-ticket items such as houses and cars.

“That willbe a whole different ball game” for the U.S. economy, Smead said.

‘Changeover point’

Hiscomments come at a time when millennials are thought to be on the cusp ofsurpassing Baby Boomers as the largest living adult generation in the U.S.

A report published by Pew Research in March2018, which cites the latest available data from the U.S. Census Bureau, said itexpected millennials to overtake Boomers in population in 2019.

Meanwhile,Generation X was projected to pass the Boomers in population in 2028.

The PewResearch report defined millennials as aged 20 to 35 in 2016, with Boomers aged52 to 70 and Generation X aged between 36 to 51.

“We justlove this circumstance because it is very possibly the changeover point now forwhat we have been waiting for a long time,” Smead said.

“So, wehave got 89 million people in between 21 and 38 years old that are about tostart their lives, form households, do incredibly economically impactful thingsand we don’t need anybody from outside the United States to cause that tohappen.”

“And we aregiving them the lowest interest rates in the history of the United States ofAmerica to form their lives. We are practically giving them the money to buyhouses and buy cars etc,” he added.

The U.S.central bank has already cut interest rates twice in 2019, in part because ofweakness in the global economy.

Policymakersat the Federal Reserve are scheduled to meet atthe end of the month, with investors broadly expecting a rate cut. Marketexpectations for lower borrowing costs by the end of October were at 77.5% onMonday, according to the CME Group’s FedWatch Tool.

U.S.economic growth has been slowing this year with many economists citing theongoing U.S.-China trade war. The Fed expects GDP (grossdomestic product) for 2019 to come in at 2.2%, down from 2.9% in 2018. Thecentral bank has also warned U.S. economic growth could deteriorate if thetrade war continues.

‘Just do the math’

“Thevelocity of money has declined. The reason is because the necessity spending ofthe largest adult population group has not happened yet — so they haven’tbought the houses and the cars yet. As soon as they buy the houses and thecars, the banks lend $10 for every $1 deposit, and that velocity of money picksup,” Smead said Monday.

“Just dothe math, there’s 89 million millennials in a 330 million population of theUnited States of America. And then the group behind them — this is crazy — isjust as big.”

“In 20years, there is going to be way more payers into the social security system andthere is going to be way fewer taker-outers — and that problem will solveitself through demographics,” Smead said.

10.Why a Healthy Mindset Is the Key to Successful Entrepreneurship

Better yourself andyour mindset to open career possibilities on your path to success.

GETTYIMAGES

By Shay Berman, CEO and founder of Digital Resource

Asa kid, I believed you had to do things that far surpassed the ordinary if youwanted to be extraordinary. I saw others succeed due tolong-term vision, an incredible work ethic and a willingness to take risks. Ifigured I would hit my entrepreneurial milestones in record timeas long as I went the extra mile.

It’strue that being a successful entrepreneur involves drive, discipline anda willingness to go above and beyond. What Ididn’t understand is that those traits are wasted if you don’t also maintain ahealthy mindset. You can push yourself to the brink of exhaustion and strivefor greatness, but you’ll burn out if your brain isn’t balanced.

Don’ttake my word for it: Researchers such as Dr. Barbara Fredrickson at theUniversity of Michigan have been studying how humans can use positiveemotions to increase productivity and creativity. Entrepreneursand other leaders face no shortage of challenges, so developing the tools andskills to maintain a positive attitude can give you unmatched staying power.

Learning the Hard Way

Iran smack-dab into a mountainous hurdle when my fledgling company grew fast —it felt bigger than I could handle. I began to believe my employees wereruthless opponents who wanted to take me down and that clients lived to causefrustration. I interpreted every action as an attack, and it began to eat awayat my health and happiness.

Fortunately,I had the support of a longtime mentor who counseled me to reframe events asopportunities instead of threats. He said I was making wild assumptions basedon my experiences while simultaneously ignoring the experiences of others. Tohelp myself along, I started to practice mindset shifts. I learned to talkmyself out of the flight-or-fight stage and embrace the notion of opportunityover fear.

Whenour next client wanted to quit, I didn’t get mad. Instead, I asked what wecould do to improve. The client ended up sticking around because I wascompassionate and genuine. This experience showed to me that a combative,fearful mindset would only hurt my chances of success.

How to Develop the Right Mindset

Ifyou’re ready to make a similar change toward a healthier mindset, take thefollowing steps.

1. Enact the ‘rule of 3.’

WhenI approach leadership — and life — with the following three principles, Itend to have a healthier, more productive mindset. First, always expressgratitude. Authentically offer others your thanks and appreciation.

Second,seek to understand instead of judge. This can be a game-changer for managersand direct supports. Your employees will pick up on the idea that you want tounderstand them and not challenge or dismiss them. As a result, you’ll buildmore trusting relationships.

Finally,remember that there is no right or wrong. Those concepts don’t exist in a worldof gratitude and empathy. Instead of harping on mistakes or assigning blame,focus on solutions.

2. See your role as an opportunist.

Doyou feel like a victim? That mentality will keep you down for the long haul.When negative things happen, take a step back to get a 10,000-foot view. Treatsetbacks as chances to get better.

Whereare the opportunities in the bigger picture? Perhaps you didn’t say “no” whenyou should have. Rectify your choices in the future to avoid encountering thesame problem twice. Feel like pointing fingers elsewhere? Learn to accept someresponsibility and move on.

3. Stop picking fights.

Rememberthat everything boils down to perception. A cynical, combative environment willsink your ship faster than any market force — but your leadership will make adifference.

Becomeaware of your moods and triggers. When you begin to sense pain or discomfort,reaffirm your desire to be more optimistic. Over time, this process will becomemore natural and self-fulfilling.

4. Conduct daily and weekend wellness check-ins.

Itmight sound a little new age, but evaluating your happiness on a routine basislets you observe whether your thoughts and feelings are lining up in positiveways. Spend time getting to know the real you, and you’ll be better able tokick your professional motor into high gear.

Whenyou feel grateful, you push out emotions like frustration, fear and hate. It’sso much simpler to let go of negatives when positives are abundant. As a reportfrom the Association for Psychological Science notes, people who were more awareof their mind-body connections were more apt to win a friendlycompetition.

Whenyou begin your entrepreneurial journey, you’ll hear a lot of advice abouthustling and failing fast. That’s well and good, but just make sure you don’tlose your ability to smile while navigating the rat race. Otherwise, you won’tbe able to enjoy that hunk of cheddar at the end of the tunnel.

Shay Berman is the CEO and founder of Digital Resource, a full-service digital marketing agencylocated in South Florida.

PUBLISHED ON: SEP19, 2019

The opinions expressed here by Inc.comcolumnists are their own, not those of Inc.com.

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