Topley’s Top Ten – September 9, 2019

Author

Matt Topley
September 09, 2019

1.REIT Index +25% vs. S&P +19%

VNQ vs. S&P

2.Spreads Between REIT and Utility Yields and 10 Yr. Treasury Yield at 15 Year Low.

3.Euro Banks Index 10 Years Net Negative Returns….Below 2008-2009 Lows.

An index of European bank stocks has fallen almost 60% sinceearly 2018, and stands below 2008-09 levels. Japan’s bank-stock index is downmore than 40%, and U.S. banks trade at levels of almost two years ago,notwithstanding an estimated $100 billion of stock buybacks in the past two tothree years.

4.Coal ETF Breaks Below 3 Year Lows.

KOL-Coal ETF

U.S. Coal Production 1990-2018

5.Coal Shrinking But Still #2 Electricity Source.

6.Vanguard Manages $1 Trillion in Active Funds…10 Years Ago They Managed More Active than Passive

Yes,index funds are free-riders but so what? CliffAsness wrote a wonderful piece for Bloomberg a fewyears ago about the idea of index investors being free riders:

Theuse of price signals by those who played no role in setting them may becapitalism’s most important feature. That most of us and most of our dollarsdon’t have to pick stocks, or to price air conditioners, is a great benefit andtaking advantage of it makes us honest smart capitalists, not commissars.”

Yes,index investors are free riders, but this is the way most markets work. Wedon’t go to the grocery store to bid on prices of oranges against one anotherto set an equilibrium. The market does that for us.

Doyou really think every investor in the market has the ability to accurately setprices?

There’sroom for both. It’s also worth pointing out the success of indexing doesn’tmean all active management is useless or bad. In fact, Vanguard itself stillhas a ton of money in active funds. Here’s the breakdown of assets in indexfunds for the firm (also from Bogle’s book):

The trend is easy to spot butthe firm still has more than $1 trillion in actively managed funds. They justhappen to manage their active funds using strategies that employ low turnover,long holding periods, and lower than average fees.

Won’tit be a net positive for the end investor that indexing will force the assetmanagement industry to adapt?

Debunkingthe Silly “Passive is a Bubble” Myth by Ben Carlson

7.Difference Between “jobs plentiful” and “jobs hard to get” up to 1999 Levels

The Daily Shot-WSJ

8.Goldman Sachs analyzed 4,481 IPOs over 25 years and concluded that these 5 attributes can make or break a newly public company

Daniel Strauss Sep. 8, 2019, 08:11 AM Hollis Johnson/Business Insider

The public markets have seen a long-awaited influx of initial public offerings this year.

While many IPOs are outperforming the market, some of the most high-profile new listings such as Uber and Lyft have struggled.

Goldman Sachs analyzed 4,481 IPOs over 25 years and determined the five attributes that are a key to a successful IPO.

2019has been a monster year for initial public offerings.

Darlingsof Silicon Valley such as Uber, Lyft, and Pinterest haveentered the public markets after years of raising private capital.

Thebroader IPO market is also outperforming most of the major stock indexes.The Renaissance IPO ETF,which tracks the performance of new listings, has climbed more than 33% sincethe beginning of the year. Comparatively, the S&P 500 hasrisen about 19%.

Butsome of the most closely followed public offerings are struggling. Uberand Lyft haveboth dipped below their offering prices. Investors have begun to question therising costs of their business models, and whether or not they can ever achievesustainable profitability.

Thesame questions are being asked about upcoming public offerings from Peloton andWeWork. Many of the venture-backed startups that are approaching the publicmarkets are pursuing new, unproven business models. That can make it difficultfor investors to predict the success of a particular IPO.

Goldman Sachs analyzedmore than 4,400 IPOs over 25 years and determined the most important attributesthat can determine the success of recent public offering.

Hereare the five key factors the firm says can make or break an IPO:

9.65+ Population Explosion is Global

By 2030, 360 million Chinese—more than currently live in theU.S.—will be older than 60.

What Americans Can Learn From theRest of the World About Retirement-Barrons By Reshma Kapadia

10.6 Ways to Diffuse Workplace Conflict

FROM EARLYTO RISE

Does this sound familiar?

By many measures, you’re asuccessful start-up. You have fewer than 10 employees, but you’ve been hiringfairly steadily since you launched a year or so ago. If you’re not making aprofit, you’re at least breaking even—which is better than most one-year-oldstartups can say.

But not all things are going well.You don’t yet have the money for a dedicated human resources manager, sopersonnel administration is spread among the team. Most of the time, the honorsystem works for things like PTO, and job reviews are handled when you have aspare hour—though seldom at regular intervals.

Still, there are no team complaintsand, therefore, little reason to change.

Then, you hit a snag. A conflicterupts between two of your employees. Arguments mount and tensions escalateuntil both of them come to you separately with the same concern: “So-and-so isdisrupting the work environment and antagonizing me. Can you address this?”

You’re the CEO, CFO, COO, andMarketing Director all rolled into one. You don’t have time to deal with humanresource conflicts. What do you do?

1. Make time for your team

You may think you hold a lot offlags as the owner of your own company, but what’s more important than the teamthat makes your success possible? Your commitment is, first and foremost, totheir success. So, make time to deal with this.

Ideally, you have built in meetingsscheduled with your team—such as weekly staff meetings or monthly check-ins. Ifthis is not a good time to address tensions, then schedule a group meeting withthe concerned employees for an hour, or with each one for half an hour.

2. Ask your employees to definethe problem

You weren’t trained as an HR rep,so you may think your role in conflict resolution is limited. But that’s nottrue. Most of what you need to do is guide the employees to their own resolution, and thatstarts with defining the problem. This is often best done in separate meetingswith each employee involved, but can be done in a group meeting as well,depending on the severity/nature of the conflict.

Let everyone clearlyexpress—constructively and without antagonizing others—what they see as thecore problem. Step in to moderate as needed and ask for clarification.Specifics are important, so be sure you get the details of what’s ACTUALLYhappening and not what employees THINK is happening.

3. Encourage your employees toresolve the problem on their own

In most cases, this works well.Resolution can happen when you’re present (if time allows), or it can be doneon the employees’ own time. But if each employee fully understands the natureof the problem, then finding a resolution will be easier.

Suggest that they meet togetheroffsite over lunch, or in a neutral space like the office conference room.Nobody should have a “home field” advantage in these discussions.

Encourage them to reference thestanding employee handbook if there is question about office policy.

Also, set parameters. If theconcerned employees can’t come to a resolution in a set amount of time (~30minutes), then tell them to bring the issue back to you with a CLEARexplanation of WHY they could not reach a resolution. The collaborationrequired to define the continuing  disagreement is a not-so-subtle way ofencouraging positive interaction.

Finally, insist on diplomacy andcivility. Remind each individual that they are a professional, and that as arepresentative of your company, you expect them to actaccordingly—communicating clearly but diplomatically while always respectingfellow employees.

4. If the conflict comes backto you, make a quick decision

Pushing the conflict off on toother employees or stalling is not good leadership. At this point in theresolution process, you should know exactly what’s going on and how best toresolve it.

Take action quickly, communicate it clearly, and modelthe same diplomacy and respect you ask of your employees. Once a resolution hasbeen reached, make it known that future disruptive conflict will haveconsequences.

Remember: A strong leader sees allsides of a conflict before making a decision, is conscious of his/her bias inreaching a resolution, and respects the individuals concerned. Knowing allvariables and the desired end point will go a long way to facilitating aneffective, positive resolution.

5. Document the conflict andresolution

He said-she said banter can hauntyou as a busy CEO, so don’t let it. Record your interactions in conflictresolution situations so you can always point to concrete evidence of employeeinteractions and actions taken toward resolution. Store these in employee filesfor ongoing reference.

6. Maintain ongoingcommunication training with your employees, and model that communication foryour team

Communications training doesn’thave to be drawn out. It can be as simple as a 5-minute, quick-hit tip or storyoffered during weekly staff meetings. MindTools offers some dynamic (and short) gamesthat you can use to promote positive work interaction.

Let your employees know yourcommunication expectations, and model that behavior yourself. If you’re not livingup to those expectations, invite them to call you out—in a diplomatic way thatencourages constructive communication in tense situations. The same should alsobe true of your employees; consequences should be clearly defined andguidelines enforced for improper communication.