S&P 500 Weekly Update: A Good Dose Of Fear And A Void In Common Sense

“The most important consideration when investing in the stock market is the primary trend of the equity markets.”Richard Russell (Dow Theory Letters)

As we enter the final month of 2018, it is a good time to take a peek back at this very unique year. It’s hard to remember a year that started out of the gate so strong only to see a correction of 10% from record highs within weeks. Then, shortly after rebounding all the way back to new all-time highs again, the S&P 500 dropped another 10%.

Bespoke Investment Group tells us that in the S&P 500’s history dating back to 1928, there have only been four other periods where the S&P 500 had two 10%+ corrections from an all-time high within a 12-month stretch. Of those four prior periods, there was only one where the two 10%+ corrections occurred in the same calendar year. That was in 1990.

While 1990 saw the S&P decline by 3% and close the year at 334, there wasn’t another down year until 2000. In the interim, the S&P rallied and closed 1999 at 1,248, some 373% higher. Now I’m not suggesting that will happen this time around. I simply posted that today as a gentle reminder to the Bears that are nipping at the heels of the Bulls, nothing is certain.

I have always stressed the importance of having a strategy, a process, and of course sticking to it. Completing the first part is much easier than the second. The up and down emotional market swings this year have posed unique challenges to investors. Buy these corrective dips, sell these new highs?, or watch and wait. Investment plans were surely tested.

It is one thing when personal situations arise that may change your investment ideas. That is understandable, and when those issues arise, priorities can and will change.

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In the last few years, however, many seasoned investors have altered their plans for no other reason than being caught up in the worries. This year leads the pack in that regard. A run to new highs early in the year met with the first mention of trade issues. A correction that was said to be the start of the next bear market. A run back to new highs and then it’s time to complain that the Fed is on a mission to bring the economy to recession and more trade talk added to that conclusion. The complaining continues now with the chant that nothing seems to be working.

Well, I am not so sure about that. Perhaps for those that make calls for S&P 3,000, then change to S&P 2,200, and now reverse course again, nothing is working. If they actually followed that whipsaw strategy for the first eleven months of the year, it is easy to see their frustration. On the other hand, anyone that has been patient, watched the price action, never getting too high or low with their emotions has survived the extremes.

There is no shortage of strategies and/or indicators to follow. Successful investors should lean to one that will not have leave them prey to emotional swings on every 5-10% move in the indices. It also means they should employ the traits every successful investor possesses. Flexibility in an approach, be open minded and confident. When I see a plan change because of ONE issue or because ONE indicator has changed, it tells me blinders are in place.

The investment community has this penchant for taking the easy way out. That leads to mistakes. Of course, then it becomes routine to blame the issues for their mistakes. That would not happen if their plan was grounded instead of being influenced by every headline and every indicator.

My approach is centered around consistency. Eliminating the tendency to make major changes in investment strategy until the primary trend in place is indeed changing. It avoids extrapolating any issue to an extreme positive or an extreme negative, and there is never any guessing that a trend is about to change. It’s not infallible, but in my view, it beats what many other profess as the “only way to proceed”.

In the last 5 years or so, we have seen many of those pundits disappear. The stock market has a way of neutralizing those that like to flow with the wind.

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Scott Grannis shares his wisdom in his recent article discussing the yield curve and the thought of an impending recession. For years market participant have been hearing about the onset of the next recession. Suffice to say that we will continue to hear warning after warning now about the state of the economy.

In addition to all of the signals that investors have and will continue to hear about the onset of the next recession, we all need to realize that recessions are born to take out the excess that have built up during the expansion that preceded them. Therein lies the issue that the naysayers will have to deal with. There are none. I am of course referring to excesses. Well, none that would suggest a bubble like backdrop, or a feeling that “all is so good what could possibly go wrong” mentality. In fact it is just the opposite, it’s more like what could possibly go right?

No reason at all to jump to any conclusion now. After all the yield curve hasn’t even inverted yet, and I’m not one to listen to the “its inevitable” talk. Sure there could be an imminent inversion, but there are many times in history where the curve stayed flat for months on end. While market participants should not put their heads in the sand, it may be worthwhile to wait until it actually happens before any significant changes to an investment strategy are pursued.

U.S. Markit manufacturing index fell 0.4 points to 55.3 in November for the final reading (55.4 preliminary), after inching up 0.1 point to 55.7 in October. The index has faded from its cyclical high of 56.5 in April, but remains at a robust level.

Chris Williamson, Chief Business Economist at IHS Markit said:

“Despite the headline PMI slipping to a three-month low, November saw manufacturers enjoy another encouragingly solid month of improving business conditions. Dig deeper behind the headline number and the picture brightens further. New orders rose at the fastest rate for six months, prompting manufacturers to continue to expand capacity to meet demand. The pace of job creation remained among the highest seen over the past decade.”

“The survey acts as a reliable guide to the official manufacturing data, and suggests that factory output is growing at an annualized rate of around 1.5% so far in the fourth quarter, providing a material but by no means impressive contribution to GDP. As such, the data corroborate the flash PMI’s signal that the economy will likely see growth slow to a 2.5% rate in the fourth quarter.”

The bounce for ISM Manufacturing to 59.3 in November reversed the October drop to 57.7 from a slightly higher 59.8 in September and a 14-year high of 61.4 in August. Analysts saw a prior 14-year high of 60.8 in February, and a 9-month low of 57.3 in April.

Construction spending was much weaker than expected in October falling 0.1%, with downward revisions to prior months.

U.S. factory data tracked estimates with 0.3% October non-durable increases for shipments and orders after a September trimming to 0.5% from 0.6%.

A flat Michigan sentiment reading at the same 97.5 seen in November left the index still between the 14-year high of 101.4 in March and the 7-month low of 96.2 in August.


Sentiment towards the present is increasing, and feelings about the future in decline, the spread between the two indices remains at extremely high levels. In prior periods when this spread topped 50, it quickly reversed and a recession wasn’t far behind.

Source: Bespoke

The only exception was in the late 1990s/early 2000s where the spread reached stratospheric levels before finally reversing. When this spread starts to reverse in the future, it will be a signal that a recession is likely on the horizon, especially if it is accompanied by a turn lower in the Jobs Plentiful index.

Friday’s headline jobs number missed the mark, and the trend of job creation reported by the BLS is definitely slowing. It’s important to emphasize that slowing job growth does not mean this report was weak. The wage growth story has continued to gather steam, with wage growth for non-managerial positions hitting new cycle highs and another solid month for total private wages. Slower jobs growth combined with higher wage growth is not a sign of a weakening economy.


Bespoke Investment Group reports:

“With housing indicators starting to roll over, it naturally raises concerns that a recession could be around the corner. Throughout history, New Home Sales have typically started to roll over, not right before the onset of a recession, but usually years before. Therefore, as a timing tool, New Home Sales is not a very good recession indicator.”

“Another important point to keep in mind is that at their peaks so far in this recovery, most residential housing indicators barely reached their historical long-term averages, which suggests that the downside is a bit more limited.”

Source: Bespoke

Global Economy


Markit Eurozone Manufacturing PMI showed the weakest growth of the manufacturing economy since August 2016. Final Eurozone Manufacturing PMI at 51.8 in November (Flash: 51.5; October Final: 52.0). Chris Williamson, Chief Business Economist at IHS Markit:

“November’s PMI data underscore the extent to which manufacturing conditions have become more challenging, indicating that production could act as a drag on the eurozone economy in the fourth quarter. Manufacturers reported that demand is now falling in Germany, France and Italy, while only modest growth was recorded in Spain. The darker outlook is linked to trade wars and tariffs as well as intensifying political uncertainty and has led to increased risk aversion and a commensurate cutting back on expenditure, notably for investment. Producers of investment goods such as plant and machinery reported the steepest drop in demand in November, with reduced capital spending by companies compounded by ongoing disruption of business in the autos sector.”


Caixin China General Manufacturing PMI output remains stable in November. The headline seasonally-adjusted Purchasing Managers’ Index, a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy, was little changed from October’s reading of 50.1 at 50.2 in November. This signaled a further fractional improvement in the health of China’s manufacturing sector.

Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group:

“The Caixin China General Manufacturing PMI inched up to 50.2 in November from the previous month. The sub index for new orders continued to rise, pointing to improved demand, which may be due to a recent raft of government policies aiming to support the private sector. The gauge for new export orders dropped further into contraction territory in November, indicating the impact of the Sino-U.S. trade friction on exports.”

“The employment sub index likewise dipped further into negative territory. The output sub index dropped to the dividing line of 50 that separates expansion from contraction, marking its lowest level since June 2016, which implied production was facing a slowing trend. One key reason for the slowdown may be the obvious increase in stocks of finished goods.”

The Caixin China Composite PMI data (which covers both manufacturing and services) pointed to a stronger rise in total business activity across China in November. Notably, the Composite Output Index rose from a 28-month low of 50.5 in October to 51.9 in November to signal a modest rate of expansion.

Rising from 53.0 in October to 54.5 in November, the seasonally-adjusted Nikkei India Composite PMI Output Index pointed to the fastest expansion in private sector activity since October 2016. Growth was stronger in manufacturing than in services, though quicker increases were noted across both sectors. The seasonally-adjusted Nikkei India Services Business Activity Index rose from 52.2 in October to 53.7 in November, signaling a solid upturn in output that was the strongest since July.

Pollyanna De Lima, Principal Economist at IHS Markit:

“Growth in India’s dominant service sector increased to a four-month high in November, thanks to solid increases in new work at home, which in turn led to a continued rise in job numbers. The welcoming news complement similar upbeat results in the manufacturing industry, released earlier in the week, and so far suggest that the private sector economy will provide impetus to Q3 FY18 GDP results.”

“Keeping up with levels of new work and increased activity, additions to the workforce were maintained for the sixteenth month running. So far, 2018 proved to be the strongest year for employment growth for a decade.”


The headline Nikkei Japan Manufacturing Purchasing Managers Index, a composite single figure indicator of manufacturing performance, fell from 52.9 in October to 52.2 in November, therefore pointing to a slower rate of improvement in business conditions. The latest reading for the headline index was the lowest since August 2017. Joe Hayes, Economist at IHS Markit:

“The fall in Japan’s manufacturing PMI tells us that October’s bounce-back was indeed a transitory jump back to normality following weather-related disruptions in September. The underlying picture remains subdued, with momentum tilting towards a slowdown. New orders rose at just a slight pace as goods producers raised concerns about the demand environment. Subdued sales performances reflected fragile conditions both domestically and abroad. According to firms, weak demand from China and parts of Europe hampered export growth.”

“As such, expectations for future growth were reduced, with business confidence towards the year-ahead sliding for a sixth straight month to the lowest in two years.”

Weaker service activity growth in tandem with a slower rise in manufacturing production resulted in the Nikkei Composite Output Index edging slightly lower to 52.4 in November from 52.5 in October.

The slowdown in business activity growth was highlighted by a fall in the headline seasonally adjusted IHS Markit/CIPS UK Services PMI Business Activity Index to 50.4 in November. This was down from 52.2 in October and the lowest reading since July 2016.


Brexit has turned ugly. Another issue is the fact that the UK’s Brexit agreement looks very unlikely to pass Parliament, meaning the UK will be forced to either unilaterally revoke Article 50 and end the current process of exiting the EU, try and negotiate a better deal (unlikely to succeed), re-try the bill under the pressure of collapsing asset markets, or crash out in a hard Brexit

Monday, the EU’s top court released an advisory opinion indicating that Article 50 can be unilaterally revoked, giving the UK a potential emergency out if Parliament is unable to agree on the transition arrangement negotiated by Prime Minister May.

On Tuesday, British House of Commons voted 311 to 293 to hold May’s government in contempt. Theresa May’s government will now have to turn over the legal advice to Parliament. It will then be looked over to make sure that it doesn’t contain any confidential information before being released to the public. Critics of Brexit suspect that these documents must contain predictions that Brexit will not go as well as May’s government has been predicting since they were not released immediately.


Canadian Manufacturing PMI reached the highest level in three months. The index registered 54.9 in November, up from 53.9 in October. Christian Buhagiar, President and CEO at SCMA:

“Canadian manufacturers enjoyed an overall rebound in growth during November, with business conditions improving at the strongest pace for three months. Stronger rises in output and new orders were supported by the fastest upturn in employment numbers since the survey began in October 2010. The latest robust increase in staffing levels was widely linked to capacity pressures and a subsequent rise in investment spending across the manufacturing sector.”

“Survey respondents commented on a boost to sales from improving U.S. economic conditions. However, there were also signs that worldwide trade frictions continued to hold back client demand, with new export order growth still weaker than seen on average in the first half of the year. Canadian manufacturers signaled that business optimism remained close to the lowest seen over the past two years, which many linked to heightened global economic uncertainty.”

Earnings Observations

FactSet Research Weekly Update:

Earnings Scorecard: For Q3 2018, with 99% of the companies in the S&P 500 reporting actual results for the quarter, 77% of S&P 500 companies have reported a positive EPS surprise and 62% have reported a positive sales surprise.

For Q4 2018:

  • Estimated earnings growth rate for the S&P 500 is 13.4%. If 13.4% is the actual growth rate for the quarter, it will mark the fifth straight quarter of double-digit earnings growth for the index.

  • Valuation: The forward 12-month P/E ratio for the S&P 500 is 15.4. This P/E ratio is below the 5-year average (16.4) but above the 10-year average (14.6).

For 2019, the bottom up EPS estimate, which reflects an aggregation of the median EPS estimates for all the companies in the index, is $176.51. If $176.51 is the final number for the year, it will mark a record high EPS result. The question that investors want an answer to, what is the likelihood that $176.51 will be the final EPS number 2019?

Over the past 20 years (1998-2017), the average difference between the bottom up EPS estimate at the beginning of the year (December 31) and the final EPS number for that same year has been 8.3%. In other words, industry analysts on average have overestimated the final EPS number by 8.3% one year in advance. However, during that time period, there have been outliers like the 9/11 tragedy, and of course, the 2008/2009 financial crisis.

If one applies the average overestimation of 8.3% to the current 2019 EPS estimate, the final value for 2019 would be $161.81. If we do exclude those outliers, the average overestimation would be about 3.5%. S&P 500 Earnings would then be in the range of $170. EPS of $170 would reflect a record high EPS for the S&P 500. Simple math using a conservative multiple of 17 yields an S&P value of 2,890, suggesting stocks are fairly valued today.

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The Political Scene

No sooner than the U.S. delegation plane landed back here in the U.S., rumors, innuendos, tweets, etc. became the norm. People wanted details. Apparently they wanted to see how much every item on every grocery shelf in the country was going to increase by.

It has always been common sense that when leaders of their respective countries sit down to talk on ANY topic, it is at the HIGHEST level of discussion. The details are left for later, as is the situation now. Hence the 90-day halt on more trade tariffs until the crux of a deal is forged. The stock market didn’t seem to like that at all. At the moment, common sense is not part of the equation. Market participants threw a tantrum taking down all of the indices this week.

Believing that years of trade issues between China and the U.S. will be solved in a matter of weeks/months is simply not a reasonable approach. The entire trade tariff issue remains overblown. All of the media rhetoric is pure NOISE. Including the arrest of a Chinese national whose company may have been involved in bank fraud and possible violations of sanctions against Iran. Somehow that is being viewed as a negative to the ongoing trade negotiations. It is what it is, and nothing more. An incident that has come to fruition after a long investigation that more than likely started before there was a hint of trade tariffs being imposed.

All of this fits PERFECTLY with a backdrop where every piece of news is extrapolated to the worst possible outcome, and we wonder how and why emotion plays a big part of the trading action. I have NOT HEARD ONE viable news story come out of any news agency on this topic since last week. Instead it is “this means that”, “they said this“, “apparently this means something“, “we don’t have details, so it has to be bad news“, and on and on.

At times it is like listening to a room full of 5-year-old children, that can’t figure out when recess begins, and they start flailing their arms in frustration. The media is feeding into the fear factor with commentary that amounts to complete nonsense.

NOTHING has changed on the trade front since the end of the G20 meeting. That is unless one is buying into the pundits hammering innuendo, their personal agendas, and rampant speculation. Did anyone actually think we were going to get what the new tariffs will be on each and every item, the day after the high level meeting?

The current state of affairs on trading with China has been in effect for so long, it is NOT about to be figured out in days, weeks, or even months. Here is the bottom line, per the Office of the United States Trade Representative, tariffs will cost the average American family $127 per year.

Now that can be construed as an agenda as well. I suppose we are somewhere between that and the average American eating eat cat food to survive because of the tariffs being imposed. It’s time for a reality check. Investors eagerly await the arrival of the adults entering the room to apply some common sense to the situation.

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The Fed and Interest Rates

The yield curve has flattened, the yield curve has flattened!! The article in the link is a little dated (December 2017) and makes my point that it isn’t necessary to overreact just yet. However, they are words that start many conversations about the state of the financial markets these days.

Wait a minute, I thought the most common sense way to measure a true yield curve inversion was to measure the difference between the 2-year and 10-year yields. That difference now is 12 basis points. That is called a flat yield curve. A flat yield curve does NOT mean lower stock prices. There were many instances during the secular bull market in the 1990s where stocks rose with a flat curve backdrop.

However, today it has been deemed that we all MUST look at the difference between the 2- and the 5-year or the 3- and 5-year Treasury yields primarily because they have indeed inverted and easily makes the Bear case. Prescribing to the 3-year versus 5-year spread as a reason to be concerned is walking out on a ledge. If one wants to use that as their holy grail, be my guest. There have been 73 unique instances of inversion of those two data points in the past 64 years and only 9 recessions.

A yield curve inversion (short rates above long rates) has foreshadowed a recession with near flawless predictive abilities for the past 50 years. Historically, it’s taken about a year to go from current levels to an inverted curve, with the market rallying in the interim on every occasion.

It’s still early to use this one data point to start making portfolio changes. A wait-and-see attitude is what I believe to be the best course of action. First Trust Economics agrees when speaking to the angst over the shape of the yield curve:

“These concerns are overdone. It’s true that an inverted yield curve signals tight money, but inversions typically don’t happen until the Fed pulls enough reserves out of the system to push the federal funds rate above nominal GDP growth. Right now, that’s about 3.5%, which means the Fed is likely at least two years away. And, the banking system is still stuffed with over $2 trillion in excess bank reserves. Monetary policy, by definition, is not tight until those excess reserves are gone.”

Recent history suggests that the greatest risk of recession occurs if the Fed continues to tighten after the initial inversion of the yield curve, which happened prior to the last two recessions. The Fed’s rapid policy reversal in 1995 prevented the tightening cycle from evolving into a recession. What economists will now debate is how much tightening remains before the Fed inverts the yield curve. Please remember by definition the yield curve that is used to measure the possibility of recession has NOT inverted just yet.

Over a year has gone by and we have come full circle, right back to this topic. Every pundit wants to be the person that sniffs out the exact time to be out of stocks, the hero, the genius. Of course, they look at the yield curve and say that will be their signal. But staying invested has actually proven to be the more rewarding approach.

Historically, in the year before yield curve inverts, global stocks have always posted gains and those gains have almost always been in the double digits.

An inverted yield curve is not a sell signal. Recessions aren’t automatically around the corner. And it takes a while for them to arrive after the inversion, during which time stocks often rally.

Moreover, the spread between the federal funds rate and 2-year Treasury yields remains close to 50 basis points, not flat, but rather accommodative.

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Individual investor’s outlook on markets from the AAII survey actually saw a bump in bullish sentiment this week. Bullish sentiment rose for the second week in a row to 37.94% from last week’s 33.88%. This is off of one of the lowest readings of the year from only a few weeks ago.


Crude Oil

Crude oil’s decline over the last 40 trading days has been nothing short of extraordinary.

Source: Bespoke

In the span of just 40 trading days, WTI traded at a multi-year high and then proceeded to lose more than a third of its value in what can only be described as a relentless decline.

The EIA weekly inventory report showed the first decline in inventories in 10 weeks. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 7.3 million barrels from the previous week. At 443.2 million barrels, U.S. crude oil inventories are about 6%, above the five-year average for this time of year. Total motor gasoline inventories increased by 1.7 million barrels last week and are about 4% above the five-year average for this time of year.

Crude oil dropped initially, then rebounded as OPEC met this past week and decided to cut production. WTI closed the week at $52.64, up $2.00. Traders and investors will continue to look at the $50 level as support.

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The Technical Picture

The week started off in rally mode, then ran into the resistance we spoke about last week, the 2,750-2,760 level. The rally off the lows (6% in 6 trading days) had left the index slightly overbought in the short run.

Chart courtesy of FeeeStockCharts.com

Half of that rally was corrected in one day with a 90-point drop in the S&P on Tuesday, and most of what was left of that rally wiped out as the week went on. One positive, the sell-off stopped just above the late November lows.

The trading range for the S&P that has been with us since the beginning of the year remains in place, but the index is back to testing the lower end of that range. It feels ugly BUT nothing has changed for the short to intermediate view as far as support or resistance. S&P 2,815 is the level to watch on the upside. A decisive break and close above that level portends good things can follow for the Bulls. The lower support area that is a key remains at S&P 2,603.

The back and forth trading will continue. Investor sentiment is at lows, there is little to no direction in any sector as many are paralyzed by trade discussions, and the over-hyped incorrect talk of an inverted yield curve.

We wait and see, never jumping to conclusions, BUT if the lows that we just saw this past week hold, then I will be leaning to having more conviction on the BUY side. A break below support and we reassess. Stay tuned.

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Individual Stocks and Sectors

I look around and I hear that the semiconductor cycle is over and of course that is a precursor to a slowing economy, then recession. I do wonder then how do we explain the comments that we are hearing from some executives in the industry. For sure, there are pockets of weakness here, but there are also pockets of strength.

Consider the recent earning report this week from Broadcom (AVGO). A beat on both the top and bottom line, a 50% dividend increase, and a $6 billion share repurchase program. Forward yield on the stock is now 4.6%.

Hock Tan, President and CEO of Broadcom Inc.:

“Strong operating performance in the fiscal fourth quarter caps a year of solid results that continues to reinforce the sustainability of our business model. Revenues grew 18% to nearly $21 billion on the back of strong demand for our networking, enterprise storage, wireless and industrial products while operating margin continued to progressively expand to 50%.”

“Looking forward to fiscal year 2019, we expect another year of double digit revenue growth. Sustained demand within our semiconductor segment will be augmented by the newly acquired mainframe and enterprise software businesses to our infrastructure software segment. We also expect operating margin to hit another record in fiscal year 2019 driven by improved operating leverage.”

Tom Krause, CFO of Broadcom Inc.:

“Free cash flow from operations grew 50% in fiscal year 2018 to $8.2 billion. As a result, we are raising our target dividend by 51 percent to $2.65 per share per quarter for fiscal year 2019.”

“Looking ahead for the year, we expect sustained revenue growth and improving operating leverage to accelerate cash generation from operations. Our capital allocation strategy remains unchanged for fiscal year 2019. We plan to return 50% of our prior fiscal year free cash flows to stockholders in the form of dividends and use the balance of our free cash flows to buy back stock and support additional acquisitions, while remaining focused on maintaining our investment grade credit rating.”

Hardly an outlook that presents an industry in decline. Please allow me to add. Intel (INTC) the 800-pound gorilla in the room has beat earnings estimates and raised its forward guidance for THREE straight quarters.

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How quickly markets can change these days. Last week, I wrote about a positive tone that started to emerge; this week it is anything but a positive tone in the markets. The rally off the lows has for the most part been taken back. Volatility in times of uncertainty. Now it all depends on how much uncertainty is real and how much is being conjured up. The investors that arrive at the correct answer to that question will wind up reaping rewards in the near term.

With the S&P now 10% from record highs, many will argue that it is time to pull out, and not be an owner of equities. I’m being told there are issues out there that I may be ignoring. Pundits are still calling to ramp up the downside protection. For sure there are “some issues” for an investor to monitor, and then there is the bushel basket of concerns that are simply NOISE. Of course, investors can extrapolate these issues and the technical picture to become a major concern. If an investor decides to base an investment decision based on a “feeling,” they may be in for a rude awakening.

One situation that is very real and has been discussed here for months now is the weakening of global economic data. Before we jump to a conclusion, the period of 2015/2016 was mired in troublesome data. We survived that time period without an “official” bear market. The outcome this time around is still up in the air. One thing we are well aware of, we will need to see the global picture improve if we can expect higher stock prices here in the U.S.

With all of the negativity around, investors need to stay grounded. There are positives and they should also be acknowledged.

  • Inflation remains in check.

  • The Fed is not acting in a hostile manner.

  • Everyone is looking over their shoulder. There is NO euphoria.

  • Earnings growth will slow BUT earnings are still growing.

  • Consumers represent 70% of the economy and they are in good financial shape.

Unless this time is different, these are not signs that appear at the END of a BULL market.

At the end of any bull market, the primary trend will flatten then roll over. The evidence for that is quite obvious in the 2000 and 2008 time periods. No such evidence exists today. A successful investor will monitor, then react, not react then monitor.

A moment to reflect the passing of our 41st president, George H.W. Bush.

I would also like to take a moment and remind all of the readers of an important issue. In these types of forums, readers bring a host of situations and variables to the table when visiting these articles. Therefore, it is impossible to pinpoint what may be right for each situation. Please keep that in mind when forming your investment strategy.

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to all of the readers that contribute to this forum to make these articles a better experience for everyone.

Best of Luck to All!


My portfolios are ALL positioned to take advantage of the bull market with NO hedges in place.

This article contains my views of the equity market, it reflects the strategy and positioning that is comfortable for me. Of course, it is not suited for everyone, as there are far too many variables. Hopefully it sparks ideas, adds some common sense to the intricate investing process, and makes investors feel more calm, putting them in control.

The opinions rendered here, are just that – opinions – and along with positions can change at any time.

As always I encourage readers to use common sense when it comes to managing any ideas that I decide to share with the community. Nowhere is it implied that any stock should be bought and put away until you die. Periodic reviews are mandatory to adjust to changes in the macro backdrop that will take place over time.


I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

U.S. accuses Huawei CFO of Iran sanctions cover-up

VANCOUVER/LONDON (Reuters) – Huawei Technologies Co Ltd’s chief financial officer faces U.S. accusations that she covered up her company’s links to a firm that tried to sell equipment to Iran despite sanctions, a Canadian prosecutor said on Friday, arguing against giving her bail while she awaits extradition.

The case against Meng Wanzhou, who is also the daughter of the founder of Huawei, stems from a 2013 Reuters report here about the company’s close ties to Hong Kong-based Skycom Tech Co Ltd, which attempted to sell U.S. equipment to Iran despite U.S. and European Union bans, the prosecutor told a Vancouver court.

U.S. prosecutors argue that Meng was not truthful to banks who asked her about links between the two firms, the court heard on Friday. If extradited to the United States, Meng would face charges of conspiracy to defraud multiple financial institutions, the court heard, with a maximum sentence of 30 years for each charge.

Meng, 46, was arrested in Canada on Dec. 1 at the request of the United States. The arrest was on the same day that U.S. President Donald Trump met in Argentina with China’s Xi Jinping to look for ways to resolve an escalating trade war between the world’s two largest economies.

The news of her arrest has roiled stock markets and drawn condemnation from Chinese authorities, although Trump and his top economic advisers have downplayed its importance to trade talks after the two leaders agreed to a truce.

A spokesman for Huawei had no immediate comment on the case against Meng on Friday. The company has said it complies with all applicable export control and sanctions laws and other regulations.

Friday’s court hearing is intended to decide on whether Meng can post bail or if she is a flight risk and should be kept in detention.

The prosecutor opposed bail, arguing that Meng was a high flight risk with few ties to Vancouver and that her family’s wealth would mean than even a multi-million-dollar surety would not weigh heavily should she breach conditions.

Meng’s lawyer, David Martin, said her prominence made it unlikely she would breach any court orders.

“You can trust her,” he said. Fleeing “would humiliate and embarrass her father, whom she loves,” he argued.

Huawei CFO Meng Wanzhou, who was arrested on an extradition warrant, appears at her B.C. Supreme Court bail hearing in a drawing in Vancouver, British Columbia, Canada December 7, 2018. REUTERS/Jane Wolsak

The United States has 60 days to make a formal extradition request, which a Canadian judge will weigh to determine whether the case against Meng is strong enough. Then it is up to Canada’s justice minister to decide whether to extradite her.

Chinese Foreign ministry spokesman Geng Shuang said on Friday that neither Canada nor the United States had provided China any evidence that Meng had broken any law in those two countries, and reiterated Beijing’s demand that she be released.

Chinese state media accused the United States of trying to “stifle” Huawei and curb its global expansion.


The U.S. case against Meng involves Skycom, which had an office in Tehran and which Huawei has described as one of its “major local partners” in Iran.

In January 2013, Reuters reported that Skycom, which tried to sell embargoed Hewlett-Packard computer equipment to Iran’s largest mobile-phone operator, had much closer ties to Huawei and Meng than previously known.

Slideshow (9 Images)

In 2007, a management company controlled by Huawei’s parent company held all of Skycom’s shares. At the time, Meng served as the management firm’s company secretary. Meng also served on Skycom’s board between February 2008 and April 2009, according to Skycom records filed with Hong Kong’s Companies Registry.

Huawei used Skycom’s Tehran office to provide mobile network equipment to several major telecommunications companies in Iran, people familiar with the company’s operations have said. Two of the sources said that technically Skycom was controlled by Iranians to comply with local law but that it effectively was run by Huawei.

Huawei and Skycom were “the same,” a former Huawei employee who worked in Iran said on Friday.

A Huawei spokesman told Reuters in 2013: “Huawei has established a trade compliance system which is in line with industry best practices and our business in Iran is in full compliance with all applicable laws and regulations including those of the U.N. We also require our partners, such as Skycom, to make the same commitments.”


The United States has been looking since at least 2016 into whether Huawei violated U.S. sanctions against Iran, Reuters reported in April.

The case against Meng revolves around her response to banks, who asked her about Huawei’s links to Skycom in the wake of the 2013 Reuters report. U.S. prosecutors argue that Meng fraudulently said there was no link, the court heard on Friday.

U.S. investigators believe the misrepresentations induced the banks to provide services to Huawei despite the fact they were operating in sanctioned countries, Canadian court documents released on Friday showed.

The hearing did not name any banks, but sources told Reuters this week that the probe centered on whether Huawei had used HSBC Holdings (HSBA.L) to conduct illegal transactions. HSBC is not under investigation.

U.S. intelligence agencies have also alleged that Huawei is linked to China’s government and its equipment could contain “backdoors” for use by government spies. No evidence has been produced publicly and the firm has repeatedly denied the claims.

The probe of Huawei is similar to one that threatened the survival of China’s ZTE Corp (0763.HK) (000063.SZ), which pleaded guilty in 2017 to violating U.S. laws that restrict the sale of American-made technology to Iran. ZTE paid a $892 million penalty.

Reporting by Julie Gordon in Vancouver and Steve Stecklow in London; Additional reporting by Anna Mehler Paperny in Toronto, David Ljunggren in Ottawa, Karen Freifeld in New York, Ben Blanchard and Yilei Sun in Beijing, and Sijia Jiang in Hong Kong; Writing by Denny Thomas and Rosalba O’Brien; Editing by Muralikumar Anantharaman, Susan Thomas and Sonya Hepinstall

Why You Need to Start Tracking Your Time Every Day

Time tracking is a controversial topic. It evokes images of teams clocking in and out of a factory floor or being tethered to their desks for 60 hours a week. Of course, those scenarios are awful. I don’t want to dismiss the very real ways that time tracking can become a horrible way to run a team, but I do want to tell you why I believe it should be used–and how.

Before we get into the rationale, I want you to question your assumption that time tracking makes you a control freak or a micromanager.

For a brief moment, let’s imagine together an alternative way of looking at this, in which you have time tracking set up not because you don’t value your team’s time (and their ability to finish their days on time and have a life afterward), but because you do. Time tracking is the path toward work-life balance, not away from it. The only way to do that is by understanding how their time is being spent–and what it’s being spent on.

Still with me? Here are three reasons you should use time tracking–not just for your business’ benefit, but also for your employees’ benefit.

1. Tracking your employees’ time helps you make good spending decisions.

Businesses often view the use of internal resources as “free” and the use of external resources as an investment. I believe that’s foolish. Let’s say you have an employee who has never built a website before, and your business needs a website built. If you aren’t considering the value of your employee’s time, you could easily assign them this job, and then they spend 100 hours learning, tweaking, and finally refining a project that an outside specialist could have done in 10 hours.

Assuming your internal and external resources receive about the same hourly rate, this is a huge mistake for your business from a return on investment perspective, and an error that is all too common. And, it’s not great for productivity.

Now, take that one step further. Imagine you decide to do a content marketing campaign, which will mean your employee is writing two articles per week for 10 weeks. In order to acquire the same number of customers, you could also run a Google AdWords campaign for $500. How will you know what’s the best spending decision if you aren’t tracking time?

2. Time tracking means better management of working hours.

The natural assumption is that managers use time tracking to see if their team is working enough. In my experience, that’s never the issue. But, if you think your team isn’t working enough, time tracking isn’t going to solve or diagnose that problem–you’ve got a deeper underlying problem that starts with either motivation or poor hiring technique.

In an office environment, it wouldn’t be uncommon for a manager to walk around the halls in the evening and encourage the team to go home if they felt that people were working too hard. But in a remote setting, there is no similar way to know if work hours are getting out of hand. Time tracking provides early warning signs for burnout or the need to hire additional resources.

3. Time tracking will help you pinpoint priorities.

What’s most interesting to me is not how much people are working (unless, of course, we’re worried about burnout), but the potential of each individual to manage their own use of time.

Time tracking allows me to hold myself accountable to whether or not I have focused on my most important work each week. Without monitoring, there’s no real way to see that. Giving employees the power to see this for themselves grants them agency over their workday which naturally increases productivity.

With great data comes great responsibility. If you do set up time tracking, you need to make sure you are using it for good, not evil. Time tracking has a bad rap because some micromanagers use it to push people to work more or turn the business into a (virtual) face time culture. What they should be doing is using it to foster work-life balance for members of their team.

So, if the reason you want to use time tracking is to get more hours out of your team or catch someone using Facebook, this is not the tool for you. However, if you buy into Stephen Covey’s belief that “the key is in not spending time, but investing it,” then the natural solution is to get better visibility of how your business uses time, which can only be done effectively through time tracking.

Kroger Just Made the Sort of Massive Decision That'll Make Competitors Scramble In Panic

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

There’s panic in the supermarket aisles.

For once, it’s not a vegan who can’t find the right strain of cabbage.

No, this is the panic of supermarket chains worried that the game has changed and no one will tell them the new rules.

Amazon‘s tentacles seem to be wrapping themselves around everything and everyone and the more traditional chains need to react. But how?

In Kroger’s case, the answer seems to be to stop people shopping at Kroger.

Or, rather, to make it not entirely necessary.

The chain has announced that it’ll be perfectly happy if you go to Walgreen’s instead.

In essence, this supermarket within a drugstore will contain “a curated assortment of 2,300 products” that’ll take up around a third of the space in your average Walgreen’s.

Which wise people will do the curating, I hear you cry. 

Oh, not so much people, but “customer data and insights provided by Kroger subsidiary 84.51.”

In 13 Northern Kentucky Walgreen’s, you’ll be able to pick up essentials such as chicken or beef. Or, for the especially adventurous, Home Chef meal kits.

Some might see this as two big brands feeling threatened and huddling together for a little warmth.

This is your number 2 and number 6 biggest American retailers getting together.

But if you’re up against the twisted might of Amazon and Whole Foods, what are you going to do?

You’re going to think about where people regularly go and try and make things easier for them to buy your wares. 

People are lazy. They’re getting lazier. Help them solve their own little daily problems that, for so many, tend to involve surviving more than thriving.

Other chain stores have found it harder to find huddle-partners.

It’s trying to get foot traffic, after all.

And who’s next? Safeway and CVS? 

How about Costco and H&M? 

You have to think creatively about these things. Amazon’s getting into food and fashion. It’s creeping its way into your kitchen, living room and bedroom with its Echo.

There are only so many means of escape.

Qualcomm says China comment will not revive NXP deal

(Reuters) – U.S. chipmaker Qualcomm Inc (QCOM.O) said on Monday it was not looking to revive its abandoned $44 billion acquisition of Dutch peer NXP Semiconductors NV (NXPI.O), a day after the White House said China would reconsider clearing a deal if it was attempted again.

Qualcomm, the world’s biggest smartphone-chip maker, walked away from its agreement to buy NXP in July, after failing to secure Chinese regulatory approval. The planned deal was first agreed between the two companies in October 2016.

Qualcomm, headquartered in San Diego, California, and NXP, based in Eindhoven, the Netherlands, needed China’s blessing for their deal because of their presence in that country.

After high-stakes talks on Saturday between U.S. President Donald Trump and Chinese President Xi Jinping in Argentina, the White House said in a statement that China was “open to approving the previously unapproved” deal for Qualcomm to acquire NXP “should it again be presented”.

But Qualcomm said there was no prospect for the acquisition to be revived.

“While we were grateful to learn of President Trump and President Xi’s comments about Qualcomm’s previously proposed acquisition of NXP, the deadline for that transaction has expired, which terminated the contemplated deal,” a Qualcomm representative said via email.

“Qualcomm considers the matter closed.”

NXP declined to comment.

On Monday, White House economic adviser Larry Kudlow told reporters that President Trump put the issue of the acquisition on the table in the talks with the Chinese president.

Kudlow added that the Chinese president’s openness to the deal was a sign of further cooperation on multiple issues, including corporate mergers. Xi’s reported comment could embolden some potential acquirers in the semiconductor space to explore transactions, corporate dealmakers said.

“Although that acquisition cannot be resuscitated, Xi’s comment reveals in plain sight that Chinese antitrust policy is inherently politicized,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies in a blog post.

FILE PHOTO: A sign on the Qualcomm campus is seen, as chip maker Broadcom Ltd announced an unsolicited bid to buy peer Qualcomm Inc for $103 billion, in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake

Qualcomm shares closed up 1.5 percent at $59.14 in New York on Monday, while NXP shares ended up 2.75 percent at $85.67.

Qualcomm and NXP did not lobby for the Trump administration to bring up the abandoned deal in its meeting with Xi and other Chinese officials on the sidelines of the G20 summit in Buenos Aires on Saturday, which was dominated by negotiations over trade tariffs, according to sources close to the companies.

The two companies were surprised to see that the terminated deal resurfaced as an issue, the sources added, requesting anonymity to discuss confidential deliberations. Qualcomm was given just an hour’s notice by the Trump administration about Xi’s comment on the NXP deal, and its inclusion in the White House statement, according to two of the sources.

The Trump administration had unsuccessfully lobbied the Chinese government earlier this year to give its blessing to the deal.

China’s foreign ministry declined to comment on Qualcomm during a regular media briefing on Monday.

Qualcomm had sought to purchase NXP because of its market position as a dominant supplier to the automotive market, as car makers add more chips to vehicles each year. Qualcomm is now focused on developing its own chips for the automotive market, according to one of the sources.

Qualcomm had to pay NXP a $2 billion fee to terminate the deal. To appease its shareholders, Qualcomm has also embarked on a $30 billion stock repurchase plan to return to them most of the money that would have been used for the NXP deal. It has spent more than $20 billion in share buybacks in the last 12 months. NXP has also announced its own $5 billion share buyback program.


Several deals by semiconductor companies were put on ice after the Qualcomm/NXP deal fell through, simply because they had a footprint in China and required regulatory approval there. Now, chip companies may be more optimistic about their regulatory chances in China.

One example could be Xilinx Inc (XLNX.O), a U.S. provider of chips used in communications network gear and consumer electronics that has a big presence in China. Xilinx is currently vying to acquire Israeli chip maker Mellanox Technologies Ltd (MLNX.O) after it decided to run an auction to sell itself, according to people familiar with the matter. A successful acquisition of Mellanox could prove an important test of China’s appetite to approve such deals. A representative for Xilinx declined to comment. Mellanox did not immediately respond to requests for comment.

A more near-term test being watched by dealmakers is KLA-Tencor Corp (KLAC.O) pending acquisition of fellow semiconductor equipment maker, Israel’s Orbotech Ltd (ORBK.O). The $3.4 billion deal, announced in March, is still awaiting Chinese regulatory approval. KLA-Tencor’s CEO said on the company’s last earnings call that he expects the deal to close by year end.

Thus far, other high-profile mergers and acquisitions involving U.S. companies in other sectors have received Chinese approval. Last month, China approved United Technologies Corp’s (UTX.N) $30 billion purchase of aircraft parts maker Rockwell Collins Inc and Walt Disney Co’s (DIS.N) $71.3 billion deal to buy most of Twenty-First Century Fox’s (FOXA.O) entertainment assets.

Acquisitions of U.S. companies by Chinese companies, on the other hand, have been few and far between in the last year, after the Committee on Foreign Investment in the United States (CFIUS), a government panel that scrutinizes deals for potential national security risks, shot down more of these deals, such as Ant Financial’s plan to acquire U.S. money transfer company MoneyGram International Inc (MGI.O). U.S. lawmakers also passed reforms earlier this year that increased CFIUS’ scrutiny of deals.

Reporting by Liana B. Baker in New York and Kanishka Singh in Bengaluru; Aditional reporting by Greg Roumeliotis in New York, Michael Martina in Beijing and Jeff Mason in Washington, D.C.; editing by Diane Craft

U.S. indicts Iranian hackers responsible for deploying 'SamSam' ransomware

WASHINGTON (Reuters) – The United States on Wednesday indicted two Iranians for launching a major ransomware cyber attack known as “SamSam” and sanctioned two others for helping exchange the ransom payments from Bitcoin digital currency into rials.

The 34-month long hacking scheme wreaked havoc on hospitals, schools, companies and government agencies, including the cities of Atlanta, Georgia, and Newark, New Jersey, causing over $30 million in losses to victims and allowing the alleged hackers to collect over $6 million in ransom payments.

The deployment of the SamSam ransomware represented some of the most high-profile cyber attacks that have occurred on U.S. soil, including one in 2016 that forced Hollywood Presbyterian Hospital in Los Angeles to turn away patients and one last year that shut down Atlanta courts and much of its city government.

The six-count indictment, unsealed Wednesday in the U.S. District Court for the District of New Jersey, charges Iran-based Faramarz Shahi Savandi, 34, and Mohammad Mehdi Shah Mansouri, 27 with one count of conspiracy to commit wire fraud, one count of conspiracy to commit fraud related to computers, and other counts accusing them of intentionally damaging protected computers and illegally transmitting demands related to protected computers.

The Treasury Department, meanwhile, said it had sanctioned Ali Khorashadizadeh and Mohammad Ghorbaniyan for exchanging digital ransomware payments into rials.

Neither Khorashadizadeh nor Ghorbaniyan were named in the indictment, though the indictment appeared to reference their activities.

“The allegations in the indictment unsealed today—the first of its kind—outline an Iran-based international computer hacking and extortion scheme that engaged in 21st-century digital blackmail,” said Assistant Attorney General Brian Benczkowski, in announcing the criminal charges on Wednesday.

Reuters could not immediately locate the four Iranians named by the U.S. government, and it will likely be difficult to hold them accountable in a federal court because the United States does not have an extradition treaty with Iran.

However, Deputy Attorney General Rod Rosenstein told reporters at a press conference that he remains confident they might one day be brought to justice.

“These defendants are now fugitives from American justice,” Rosenstein said. “American justice has a long arm and we will wait and eventually, we are confident that we will take these perpetrators into custody.”

According to the Treasury, the SamSam ransomware scheme targeted more than 200 victims.

In addition to Atlanta and Newark, other victims cited by the Justice Department included healthcare companies such as Laboratory Corporation of American Holdings, the Colorado Department of Transportation, Medstar Health, the port of San Diego and the Nebraska Orthopedic Hospital.

Reporting by Sarah N. Lynch; Additional reporting by Lisa Lambert, Makini Brice and Timothy Ahmann in Washington, Jim Finkle in New York and Babak Dehghanpisheh in Geneva; Editing by Susan Thomas

Can Innovative Technology Fill Your Jewelry Box?

Self-proclaimed serial entrepreneur and tech disruptor Pamela Norton put together a handful of innovative tech things most people know nothing about, to build a business prepped for the modern world of luxury coupled with crypto, nano, and securitization. Before I profile her unique launch, let’s take a quick walk down memory lane.

Jump Back 10 (or 30) Years

There’s a reason cryptocurrency and the blockchain is catching so much attention now. Point blank, that reason is trust… or a lack thereof. Curious and brave types have been dabbling in encryption and crypto potentials since the 1980’s. Bitcoin has actually been around since 2009, so it didn’t just pop on the scene, and today, there are over 1,600 cryptocurrencies out there.  And if entrepreneurs have learned anything from then until now it’s that funding is a huge hurdle, and partnering with funds you can trust isn’t guaranteed.

Checks + Balances + Control

This lack of trust has created an absolute gap in the marketplace. Usually the gaps we see are more product geared and less financial, but this time it’s different. This time, this gap, has everything to do with the missing connection between security, transparency, and financial sustainability. That’s why Pamela Norton’s business is so unusual. Borsetta.io is a secure supply-chain platform that makes it easy to inventory and authenticate high-value, mission critical assets with unique, tamper-proof signatures. The short of it: they protect physical assets using blockchain and nanotechnology.

Criminals Are Getting Smarter

If there’s something good to steal, you can bet someone out there is trying to steal it. In the case of luxury items and funds, it’s usually a lot of thieves. According to Norton and Borsetta, counterfeit is the largest criminal enterprise in the world- $1.7 Trillion and growing to $4.2 Trillion by 2022. Security and protection are huge concerns, and it isn’t only big businesses who are looking to protect their assets.

Smart Contracts, Securitization & Luxury Items

A patented decentralized security protocol to protect, secure, tokenize, and transact physical assets is a solution that includes nanotechnology, hardware, software, a patented protocol layer and even a developer toolkit. The Borsetta platform can also connect with Ethereum, Hyperledger, Hedera, and other blockchain solutions while supporting QR, RFID, and other third-party applications and unique signatures.

What’s Jewelry Got To Do With It?

Luxury, eco-conscious jewelry and lab cultivated diamonds got Norton questioning why there wasn’t transparency in the market that dominates around $30 billion in profits every year. When she entered the business, she was shocked at all the holes, gaps, and lack of transparency in such a massive market. She found herself wondering how she could connect the physical assets to the digital titles on the blockchain? How could she  validate these luxury or high value items? How could she protect them? And how could she put our assets to work for us? How could she revolutionize the value in our lives?

These Are Smart, But So Are You

Don’t let the terms fool you. These are just smart technologies, allowing transactions to take place that protect everyone involved, from start to finish. The marketplace now allows for too much corruption, counterfeits, theft, rip-offs, dishonesty, and unsustainable methods. Norton wants to be part of the movement to minimize those things, to give the value to the creators, to protect assets, and to ensure transparency.

Get On Board

As we wait around for the blockchain technology to take off, and the digital infrastructure to show up, we can dream about a future full of protection, securitization, smart contracts, and the real-life applications just over the horizon. The next industrial revolution is upon us, and we must adopt to adapt, or be left behind

Try Landing InSight on Mars (Without Exploding)

NASA just parked its InSight lander on Mars. Yes, Mars. This is a pretty big deal since quite a few Mars missions didn’t make it. It’s no wonder I get super excited about missions to Mars.

For this particular mission, the lander, protected by a heat shield, used the Mars atmosphere to slow down. After that, it deployed a high-speed parachute to further decrease the speed. Finally, the lander detached from the parachute and traveled the last part of the journey using rockets to control its descent.

Now for the real question, though: Could you be in charge of the InSight landing? What if you did a manual landing, would the robot survive? Let’s find out.

Before getting into the game, let’s go over the basic physics. Too keep this manageable, I’m focusing on the rocket-powered landing portion of this mission. During the spacecraft’s descent, there are basically two forces acting on it. There is the downward gravitational force and an upward force from the spacecraft’s rockets. The gravitational force just depends on the local gravitational field and the mass of the spacecraft. On Mars, this gravitational field is a bit lower than on Earth, with a value of around 3.71 Newtons per kilogram (compared to 9.8 N/kg on Earth). This gravitational field is essentially constant in strength as long as you are close to the surface of Mars.

Although the gravitational field is constant, the mass of the spacecraft is not. As it uses its rockets, it loses mass (because the rocket engine works by shooting out fuel). This means that the gravitational force also changes a little bit—but of course the whole spacecraft isn’t made of fuel. The total mass of the fuel is only about 16 percent of the total mass.

The changing mass of the spacecraft also has an impact on its motion. According to the momentum principle, the total force (gravitational plus rocket) is equal to the time rate of change of the momentum. However, the momentum is defined as the product of mass and velocity. So, a constant net force on the spacecraft will mean a momentum that changes at a non-constant rate since the mass is changing. Yes, it gets tricky.

OK, let’s jump into the game. Here’s how it works.

  • Start with the spacecraft fully fueled and 50 meters above the ground.
  • You get to adjust the rocket thrust.
  • The change in rocket velocity depends on the amount of thrust.
  • The change in fuel mass also depends on the amount of rocket thrust.
  • You want to get the rocket to reach the ground while traveling less than 1 m/s (it should actually be even slower).

That’s it. Click “run” to start and then adjust the slider at the bottom for the rocket thrust. The program also displays the vertical velocity and the amount of fuel you have left. This is essentially a dimensional version of the classic video game—Lunar Lander.

This is more difficult that it seems. The problem is that we often think of a direct connection between force and motion such that a greater force makes it move faster. Aha! Not so fast. Actually, a greater force makes a greater CHANGE in motion. As the lander is moving down, you need to increase the force to prevent it from speeding up as it falls. But if you give it too much thrust, the lander slows down so much that it actually starts to speed up in the opposite direction. That’s not landing—that’s taking off.

Now for some homework. See if you can get the lander to the ground (safely) in the least amount of time. Now try creating an algorithm for the magnitude of the thrust (not user-controlled) that makes the shortest time landing. It will be fun.

More Great WIRED Stories

To Find Passion In Your Work You Need To Find This First

What do Cody Bellinger, center fielder for the Los Angeles Dodgers, and a low-level cleric with the propensity for healing have in common? Both are positions I would hold today if I had held out and pursued my “passions” as a youth. 

All our lives, we are told to focus on activities or ideals that bring passion to our work, with the idea that passion is at the root of a successful career or profession. That is all fine, but the problem for me was that I could never effectively hit a curve ball and seating up with a table full of D&D characters hardly paid my bills. 

So how do we square our passions with finding meaningful work that still provides a means of sustenance? 

Recently, I had the opportunity to be part of a leadership institute that promotes a strengths finding program called CliftonStrengths. It is a practice of identifying core strengths and understanding how to apply them to find a career for which we are best suited. 

CliftonStrengths is an assessment developed by Don Clifton, the former chairman of Gallup, an organization that uses data and insights to help organizations better understand and utilize their human resources. After conducting a survey and collecting data on millions of professionals, the assessment ranks strengths on 34 themes of talent, which can then be used to organize, understand and lead teams and “maximize human potential by developing people to become great at what they’re naturally good at,” according to the Gallup website. 

After doing the assessment myself, I did not see center fielder or magic in my rankings, but I did walk away with a much better understanding of my strengths, which turned out to be very suited to my passions. 

Although taking the survey requires a fee and at least 30 minutes of uninterrupted time, it is incredibly useful in guiding you to organize and interpret your strengths. You can start for free, however, by at considering the four individual characteristics Gallup uses to describe how people and teams best use their talents.  

Strategic Thinking 

These are the types of people who absorb and synthesize large amounts of information well. They find connections between ideas and data points and can effectively analyze large amounts of information and apply the results to making better business decisions. 


This talent relates to the type of people who are very effective at getting things done. These individuals are dependable and able to act with certainty and quickness, especially when an important action and deadline is looming.  


Individuals with this talent are great communicators and able to simplify complex information or abstract ideas and turn them into meaningful actions. These are the people you depend on to motivate and inspire a team to achieve goals, even when the vision or strategy is not clear. 

Relationship Building 

Team members who prioritize the inclusion of others and get satisfaction from reducing conflict, motivating and encouraging colleagues fall into this group. These are typically the people who are nurturing and supportive and hold a team together. 

From reading these descriptions, you can probably determine which category you fall into. Of course, the temptation might be to include yourself into all of them, but after years of collecting data, it has been shown that we are strongest in one or two. In these cases, you should focus on goals and actions that fit to your strengths, which will ultimately help you find work that you are passionate about — because you will be great at it. 

For me, my leaning toward “strategic thinking” may not fit into my dream of becoming a demigorgon-fighting center fielder for the Dodgers, but it has definitely helped me focus my goals on finding projects and work that I excel in and, as it turns out, I am passionate about. 

Where do you fall into these categories? Share your thoughts and insights with me on Twitter

Should Investors Be Concerned Over Altria's Cigarette Volume Declines?


I doubt there is any industry in history that has, or possibly ever will, create such vast amounts of wealth for their shareholders whilst facing a near constant onslaught as the tobacco industry. Even though smoking rates have been declining for decades, the strong price inelasticity of their products has allowed tobacco companies to continuously increase prices to offset lower volumes. Since they’re operating in an industry facing a secular decline, it’s critical to ensure their volume declines are remaining steady and thus able to be offset by price increases.

Earlier this year when Altria (MO) released their second quarter results, I was rather alarmed to see a year-on-year volume decline of 10.8%. Whilst this was largely a result of significant trade inventory movements, it prompted me to collect and analyse their historical cigarette volumes to provide context and ensure their recent volumes are within an expected steady secular decline rate.


My methodology was quite simple, albeit time-consuming and involved collecting Altria’s quarterly domestic cigarette volume data dating back to 1994 from their SEC filings, linked further down. Whilst this date may appear rather arbitrary, it was the earliest date I was able to access and still provides ample data to analyse. I also collected the retail United States market share of their flagship Marlboro brand cigarettes, which have been the world’s top-selling brand since 1972.

After graphing this data, I was able to derive an exponential trend line, which should represent the expected secular decline rate for their cigarette volumes going forward. The R-squared value indicates the percentage of observations explained by the trend line, with a higher value being viewed favorably and allowing for more accurate judgments regarding their current and future volumes. If the secular decline in their cigarette volumes has been steady and predictable thus far, the R-squared value for the trend line should be quite high. A value of one is technically the maximum, however, this would be practically impossible to obtain.

Similar to all models, there are limitations with my model stemming from its reliance on historical data that may not necessarily be indicative of the future. Even though the trend line currently fits quite well, the future is unknown and various events could affect the accuracy of any projections. There are currently two events on the horizon that could materially affect Altria: the FDA’s proposed plans to lower nicotine levels and ban menthol cigarettes.

Whether either of these proposals will be legislated remains to be seen, however, in the case of the menthol ban, I feel the current fears are unjustified. I outline my thoughts on this topic in my recent article and whilst it centers on British American Tobacco (BTI), the same principals apply to Altria.

Results And Discussion

Altria Cigarette Volumes 1

Image Source: Author.

I initially began the model using Altria’s quarterly domestic cigarette volumes which are quite volatile, see above. It can be seen that despite the weakness earlier this year, their volumes never deviated from the trend line anymore significantly than during the past decades. Since more quarters of data have now been released, it can be seen their volumes have recovered and appear to be still tracking the expected secular decline rate. Finally, the R-squared value of 0.9067 indicates the trend line is explaining 90.67% of the observations and whilst I would consider this adequate, given the volatile data, I felt it could be improved.

Altria Cigarette Volumes 2

Image Source: Author.

To improve the accuracy of the model, I changed to using Altria’s annual domestic cigarette volumes, which removed a significant portion of the volatility and noticeably improved the R-squared value to 0.9503. Despite what appeared to be weak volumes earlier in the year, their annual volumes are very closely tracking the expected secular decline rate.

When calculating the annual volumes for 2018, I combined the first nine months with the previous model’s expected value for the fourth quarter. Since the first nine months was known, estimating the remaining three months has a minimal effect on accuracy. After reviewing this data, I noticed that from 1994 to 1997, their volumes were climbing year on year, which negatively affected the accuracy of the trend line.

Altria Cigarette Volumes 3

Image Source: Author.

The final step taken to improve the accuracy of the model was to remove the first three years and begin in 1997 when their cigarette volumes peaked. This improved the R-squared value even further to 0.9747 and indicates the vast amount of observations can now be explained by the trend line and thus future projections should prove accurate.

Aside from further supporting the notion their current volumes are still following the expected secular decline rate, it can now be observed their current volumes are actually slightly higher than expected. This implies their recent ‘weak’ volumes were a case of them returning to the expected results, rather than falling into the abyss. When evaluating their results in future reporting periods, I’ll continue using this model.

Based on the forecast provided by this model, it appears during 2030 Altria should still be selling approximately 71.9 million cigarettes annually. This represents an average yearly decline of 3.7% from my estimated 2018 volumes. Whether this will be adequate to support their current earnings remains unknowable, however, I believe this will be the case given their track history and the inelastic nature of their products. Since 1997, their domestic tobacco operating profit has increased 4.78% annually to 2017, despite their volumes declining 3.45% annually.

Altria Cigarette Volumes 4

Image Source: Author.

A final aspect I find interesting to review is the market share of their flagship Marlboro brand cigarettes in the United States market. Despite the recent stagnation, they have clearly grown in popularity over the long term and amassed an impressive market share of 43.2%. Even though they have occasionally taken a hit in the past, such as earlier this decade and the early 2000s, they have always bounced back.

Given their strong track history, I’m confident the managers running Altria will continue to maintain and hopefully grow their market share over the coming decade. Notes: Unless specified otherwise, all figures in this article were taken from Altria’s SEC filings contained in the following two links (1) (2) and all calculated figures were performed by the author.


To briefly summarize, I see no reason to be concerned about Altria’s cigarette volumes as thus far they are still in line with what I expect based on their historical secular decline trend. I will be concerned if their volumes begin consistently falling below this expected trend, however, there is no evidence of this occurring to date. Obviously, future events could upset this trend and whilst no one knows the outcome of the FDA’s recent proposals, I believe Altria will be capable of traversing any rough waters as they have consistently in the past.

Disclosure: I am/we are long MO, BTI.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.