Topley’s Top Ten – September 12, 2019

Author

Matt Topley
September 12, 2019

1.Real Yields (inflation adjusted) Go Negative.

Prior forays into negativeterritory during this cycle (in 2011, 2012, 2013, and 2016) have accompaniedsigns of slowing, but have also reflected the broader interest rateenvironment. Slower global growth, increasingly accommodative central banks,and some flight to safety due to trade uncertainty have all conspired to pushrates lower.

Theexpected inflation rate implied by 10-year TIPS sits at about 1.5%, lowhistorically but still higher than the cycle low and well above the near 0% hitin the heart of the last recession. Slower growth has minimized inflationarypressure, but over the last three months we have seen a modest pickup ininflation and wages.

2.Sept./Oct. Combo Monthly Return History.

BLACKROCK

3. Commodity Index Broke Thru Dec. 2019 Lows…..Touching on 2017 Lows.

CRB-Commodity Index-Showing Zero Inflation

4.Another Look at Momentum/Value Trade….Look at Dramatic Fall Off of Value Verse Other Factors in Last 18 Months.

Value Starting Reversion to the Mean Trade ?

Kolanovic: What Just Happened “HasOnly Occurred On Two Days In History”by TylerDurden

5.Why do complexity and length sell when simplicity and brevity will do?

A few reasons.

1. Simplicity feels like an easy walk. Complexity feels likemental CrossFit.

If the reps don’t hurt when you’re exercising,you’re not really exercising. Pain is the sign of progress that tells youyou’re paying the unavoidable cost of admission. Short and simple communicationis different. Richard Feynman and Stephen Hawking could teach math with simplelanguage that didn’t hurt your head, not because they dumbed down the topicsbut because they knew how to get from A to Z in as few steps as possible. Aneffective rule of thumb doesn’t bypass complexity; It wraps things you don’tunderstand into things you do, like a baseball player who – by keeping a ball level in his gaze –knows where the ball will land as well as a physicist calculating the ball’sflight with precision.

The problem with simplicity is that the reps don’thurt, so you don’t feel like you’re getting a mental workout. It can create apreference for laborious learning that students are actually OK with because itfeels like a cognitive bench press, with all the assumed benefits.

2. Length is often the only thing that can signal effort andthoughtfulness.

The U.S. constitution is 7,591 words. A typicalbusiness management book covering a single topic is perhaps 250 pages, orsomething like 65,000 words.

The funny thing is the average reader does notcome close to finishing most books they buy. Even among bestsellers, average readers quit after afew dozen pages. Length, then, has to serve a purpose other thanproviding more material. My theory is that length indicates the author hasspent more time thinking about a topic than you have, which can be the onlydata point signaling they might have insight you don’t. It doesn’t mean their thinkingis right. And you may get enough of their thinking after two chapters. But thepurpose of chapters 3-16 is often to show the author has done so much work thatchapters 1 and 2 might have some insight. Same for research reports and whitepapers.

3. Things you don’t understand create a mystique around people whodo.

If you say something I didn’t know but canunderstand I might think you’re smart. If you say something I can’t understandI might think you have an ability to think about a topic in ways I can’t, whichis a whole different species of admiration. When you understand things I don’tI have a hard time judging the limits of your knowledge in that field, whichmakes me more prone to taking your views at face value.

4. Complexity gives a comforting impression of control, whilesimplicity is hard to distinguish from cluelessness.

In most fields a handful of variables dictate the majority of outcomes. But only paying attentionto those few variables can feel like you’re leaving too much of the outcome tofate. The more knobs you can fiddle with – the 100-tab spreadsheet, or the BigData analysis – the more control you feel you have over the situation, if onlybecause the impression of knowledge increases. The flip side is that onlypaying attention to a few variables while ignoring the majority of others canmake you look ignorant. If a client says, “What about this, what’s happeninghere?” and you respond, “Oh, I have no idea, I don’t even look at that,” theodds that you’ll sound uninformed are greater than the odds you’ll sound likeyou’ve mastered simplicity.

Williston once recognized that no body part, oncelost to evolution, will ever come back. New organs can arise, and those thatremain adapt and change. But once nature finds a way to do more with less, thecast is set, you’re never going back. “Acharacteristic once lost is lost forever,” he wrote.

Complexity Sells

Aug 20, 2019 by Morgan Housel

6.U.S. Median Household Income Flat for 1yr.

WSJ

WASHINGTON—American incomes remainedessentially flat in 2018 after three straight years of growth, according toCensus Bureau figures released Tuesday that offer a broad look at U.S.households’ financial well-being.

Median household income was $63,179 in 2018, an uptick of 0.9%that census officials said isn’t statistically significant from the prior yearbased on figures adjusted for inflation. The poverty rate in 2018 was 11.8%, adecrease of a half percentage point from 2017, marking the fourth consecutiveannual decline in the national poverty rate. It was the first time the officialpoverty rate fell significantly below its level at the start of the recessionin 2007.

Median U.S. Household Income Showed No Growth in 2018

Medianincome was $63,179, essentially flat from a year earlier after three years ofincreases

7.Men’s “Real” Earnings Below 1973 Level: Census Bureau

by Wolf Richter • Sep 10,2019 • 164 Comments • Email to a friend

Top 20% households made out like bandits, bottom 40% got crushed.

The median earnings of men working full time year-round in 2018ticked up to $55,291. Adjusted for inflation, this was below the amount theyearned in 1973, according to the annual data trove released bythe Census Bureautoday. Inother words, there has been a “real” income decline for menover the past four-plus decades!

Women have seen a lot of progress in their real earnings, but theystarted out much lower, and they still haven’t caught up with men – whoseearnings are sitting ducks. The median earnings of women working full-timeyear-round in 2018 ticked up to $45,097, a new record. Since 1973, women’searnings adjusted for inflation have surged by 40%. The female-to-male earningsratio hit a record in 2018 of 81.6%, up from 56.6% in 1973:

Read Full Story

8.Big City Middle-Class Budget

Living a middle-class lifestyle on $350,000 a year

Below isan example budget of a dual-income household with two kids. The budget has beenvetted by thousands of readers on my personal finance website, FinancialSamurai, who also raise families in expensive cities like SanFrancisco, Los Angeles, New York, Boston and Washington, D.C.

Gross income review

In orderto make $350,000 a year, both parents must be working. In this example, eachparent puts away $19,000 in their respective 401(k)s for a combined $38,000 ayear. After getting their standard $24,000 deduction, they pay $92,160 in totaltaxes and are left with $221,840.

Becausethis couple earns less than $400,000, they can receive a tax credit of $2,000 per child.Since they have two children, they get a $4,000 credit.

Expenses review

  • Childcare:$2,450 per month. There’s no getting around this expense when both parentsare working. Their childcare center costs $2,200 a month for full-time care.The couple then spends an extra $250 a month for some babysitting help.

  • Preschool:$2,000 per month. The second child goes to preschool full-time.The $2,000 per month does not include the suggested $3,000 per child donationthe school asks each year to help fund new construction. The parents’ ultimateplan is to send both children to private grade school, which costs about$35,000 from K-8 and about $45,000 from 9-12.

  • Food:$2,129per month. It makes little sense to spend hours cooking when you’realready tired and want to reserve your remaining energy for taking care of yourkids. The budget includes expenses like groceries, eating out and fooddelivery.

  • Mortgage: $3,900 per month. Thisamount isn’t bad for a $900,000 mortgage with a 3.25% interest rate; $2,000 outof the $3,900 goes toward paying down principal and building net worth.Therefore, this couple is adding $24,000 a year in forced savings to theirannual 401(k) savings.

It now costs $350,000 a year to live a middle-class lifestyle in a big city—here’s a sad breakdown of why

9.U.S. Poverty Rate Hits Lowest Level Since 2001

Newdata from the Census Bureau shows poverty has continued to decline, even ashousehold incomes have been more stagnant.

By Gaby Galvin, Staff Writer Sept. 10, 2019, at2:18 p.m.

Poverty Rate Hits Lowest Level Since 2001

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Althoughthe poverty rate fell last year, the median household income in 2018 wasn’tstatistically different from 1999.(BRETTZIEGLER FOR USN&WR)

MEDIAN HOUSEHOLD INCOME in the U.S. stalledin 2018, even as median earnings rose and the poverty rate fell to its lowestlevel in nearly two decades, according to new data released by the U.S. CensusBureau.

The median household income was$63,179 last year, statistically insignificant from the median of $62,626 in2017. The share of people who had no health insurance alsorose for the first time in about a decade, even as workers’ median earningsincreased 3.4% and an additional 2.3 million people became full-time,year-round workers.

“Wehave found quite a big increase in full-time, year-round work that would tendto bring up incomes for working people,” Trudi Renwick, an assistantdivision chief at the Census Bureau, said Tuesday in a call with reporters.

However,after adjusting for changes to the agency’s data collection and analysismethods, Renwick said the median household income in 2018 was “notstatistically different from either 2007, the year before the most recentrecession, or 1999, which is (the) peak income year in our historicaltimesets.”

The poverty rate was 11.8% in 2018, itslowest mark since 2001 and the first time the rate has been significantly lowerthan it was in 2007, the new data shows. Across the U.S., there were 1.4million fewer people living in poverty last year than in 2017, but recovery hasbeen sluggish in some parts of the country. The South was the only region notto see its poverty rate fall between 2017 and 2018.

Meanwhile,the supplemental poverty rate – which considers the effect of public programslike refundable tax credits and the Supplemental Nutrition Assistance Programand serves as a broader indicator of the nation’s economic well-being – was13.1% last year, not significantly different from 2017, the new data shows. Sixteenstates and the District of Columbia saw supplemental poverty measures higherthan their official poverty rates.

Thenew data indicates that in 2018, Social Security “continued to be the mostimportant anti-poverty program, moving 27.3 million individuals out ofpoverty,” according to the Census Bureau.

Healthinsurance coverage trends also shifted between 2017 and 2018, with theuninsured rate rising from 7.9% to 8.5% for the first year-over-year increasesince 2009, according to the Census Bureau. That uptick was largely driven by adecline in public health coverage for low-income people, with Medicaidenrollment falling 0.7 percentage points to 17.9% in 2018.

Mostpeople get their health insurance through their employers, and roughlytwo-thirds of people were privately insured in 2018. The share of peopleinsured through Medicare – which primarily covers adults 65 and older anddisabled people – rose by 0.4 percentage points to 17.8%, due in large part tothe country’s aging population.

Inall, there were 27.5 million people – including about 4.3 million children –who lacked health insurance for the entirety of 2018.

“Healthinsurance coverage is affected by a variety of different factors, includingchanging economic conditions, shifts in the demographic composition of thepopulation, as well as policy changes at the state and federal level,” saidLaryssa Mykyta, chief of the Census Bureau’s Health and Disability StatisticsBranch.

10.How I Thrive: Top CEO Robert Glazer on “Time Blocking” and Other Tips for Success

The CEO of Acceleration Partners and forthcoming author reveals his time-tested tips for success.

By Alexandra Hayes, Multimedia Reporter

Instead of offering a cashbonus to one of his top-performing employees, Robert Glazer sent her and herdaughter to Greece. It’s part of a wish-granting system that Glazer, who wasranked #2 on Glassdoor’s list of “Top CEOs of Small and Medium Companies in theU.S.” in 2018, has implemented at his company, performance marketing agencyAcceleration Partners, as a more meaningful, end-of-year incentive thantraditional bonuses. “She had spoken about how her grandmother lived in Greecebut had only met her daughter once, and she regretted that they hadn’t spentmore time together,” Glazer explains to Thrive. The initiative is one of the many ways Glazerinvests in his employees. “It’s about finding out what’s important to people,and then giving them something that reflects that.” 

Glazer’s human-centricapproach to leadership is highlighted in his forthcoming book, Elevate: Push Beyond Your Limits and UnlockSuccess in Yourself and Others, which provides readers with aframework to achieve their greatest potential. Each chapter — which have titleslike “Build Your Intellectual Capacity” and “Build a Better Path — are completewith action steps (much like Microsteps!) to helpreaders get started. “For me, frameworks are always helpful to improve in a lotof areas of life,” he says. “Even if it’s just one percent better, thecumulative effect of that improvement will make a huge impact two years downthe line.”

Below and in Glazer’s “How IThrive” video, he shares tips on productivity, managingstress, and dealing with micromanagement. 

You’ve mastered some of the rules of effectivemanagement. What advice do you have for new managers?

A lot of new managers areused to doing and controlling. They have a hard time letting go of the reigns.So one of the things I always tell new managers, and this was true for me, isthat things will never be 100 percent how you want them to be. You need to becomfortable with it being 85 percent how you want it. Also, I think a lot of new managers try todelegate, and then they say, “everyone did it wrong,” or “that’s nothow I would have done it.” They need to spend a little more time upfront,explaining how they’d like things to be done.  

What should an employee do if they feelthey’re being unfairly micromanaged?

Micromanagement isdebilitating. It’s the thing that exhausts people the most. But I think theyneed to understand the “why.” We [at Acceleration Partners] really push onunderstanding the “why” and maybe saying to the manager, “Hey, you’re veryinvolved in this. Help me understand why. Am I doing a bad job, am I not doingit how you would like it?” The person should really always dig in. When you ask“why” one, two, or three times in a discussion, you really get down to atotally different level with the other person. And they may have a veryvulnerable and authentic moment, and say something like, “I’m sorry, I’m justnot good at letting go, and I didn’t know that it was bothering you thismuch.” 

Your company is entirely remote. What tips doyou have for people who worry about staying connected while working remotely?

First, if you would muchprefer to work in an office, and that’s how you get your energy and you’re veryextroverted in that way, then I probably would do that. Second, if you want towork remote, I think that you should plan intentionally. Maybe you want to goto a class in the middle of the day, maybe you join the gym, maybe you’re ableto join a group, or a hobby or running club. You can definitely get yoursocialization in other ways if you plan for it. And look, there are some peoplewho try working remotely and they say, “it’s not for me.” But overwhelmingly,people have been surprised by how much they actually prefer it. A lot ofbusinesses just operate in a meeting culture: you go to work, you meet withpeople all day, and at the end, people are like, “I’m not sure what I actuallygot done.” 

What are your tips for hiring the rightpeople? 

Good hiring is really acombination of aptitude and attitude. So first and foremost, it’s: Does thisperson have and live our company’s core values? If they don’t, it’s just notgoing to work. And then second: Can they do the job? Do they have the aptitude?Our interviews are really split up into a lot of questions and discussions,trying to figure out whether they meet our core values, and then we usuallyhave some work or exercise that really mimics the type of work that they’regoing to do. For example, we ask people in the client service space to editsomething, and a lot of people come back and say “it wasn’t enough time,” andthat they didn’t understand it, and all this stuff. They’re saying they wantanother chance. And our answer is like, “That is exactly the work that you’regoing to have, and the other five people that did it aced it.” So it’s probablyjust — it’s not any judgment — but there are certain environments and rolesthat are just better for different people. 

What are your tips for dealing with stress?

I’m a big fan of having amorning routine and being intentional with that. Not looking at technology,focusing on what you’re going to do for the day and your priorities. I thinkmeditation is hugely helpful. Scheduling in breaks, and putting them in yourcalendar. Like, “hey, it’s 1:00, I’m going outside for 15 minutes.” There’s alot of science around that, about air and rest. And I also think you need awind-down time at the end of the night. You need to close the technology down,leave it downstairs, give yourself a window before you go to bed to sort ofrelax and unwind and focus on the stuff that’s important to you and that bringsyou energy. If you’re doing stuff all day that drains your energy, it’sdefinitely going to hurt your stress levels. And I think there’s a lot ofscience around exercise, too. Strenuous exercise, getting outside, I think allof that helps you manage stress. 

Do you have any productivity hacks? 

Ithink one of the most powerful ways to get things done is this concept of “timeblocking.” It’s where you purposely block off [on your calendar] the time thatyou want to spend on team meetings, exercise, thinking time, writing time.You’re designing your life in terms of how you want to spend it. You willnever have free time but you can schedule freetime. I have a coach that works with me on this. People reach out and say,“Hey, can you chat tomorrow at 2:00?” Often times the answer is “no,” and it’sbecause I have done time blocking, even if that time is just dedicated to rest.I time block my schedule four to six weeks ahead. “Here’s what I want to do formeetings, here’s what I want to do for exercise, here’s what I want to do forthe other stuff. Here’s my actual thinking and working time.” We all havesomething in our company we call “GSD”, which is “get shit done” time. You’llsee that in people’s calendars and you know it doesn’t mean “hey, you can havethis time from me,” it means, “hey, I’m actually doing the stuff that I neededto deliver to everyone.”