Cocktail Investing

The mainstream media is focusing on the newly formed government in Italy, the Eurozone's third-largest economy. The reason centers on the new regime's plan to boost fiscal spending while cutting taxes at a time when Italy's debt to GDP is 130% and the economy is one of the slower in the Eurozone. Investors are hearing this and thinking Greece on steroids.

In this week's podcast, team Tematica leverages the boots on the ground view had by Chief Macro Strategist Lenore Hawkins, who over the last six years has spent the bulk of her time in Italy. This insight offers a unique perspective on not only how the new government came to power and why Italy is having a difficult time getting its economy to catch fire, but also why the long view is it simply isn't going to end well.

Several keywords from this episode are "ripple effects and ramifications" and when applied to the developing situation in Italy, it means implications for the Eurozone, the euro, the US stock market, the dollar and Treasuries.

Resources for this podcast:

• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• TematicaResearch – https://www.tematicaresearch.com
• Themes Report:https://www.tematicaresearch.com/whatisthematicinvesting

This week resident mixologists, Chris Versace, Chief Investment Office and Lenore Hawkins, Chief Macro Strategist focus on the two key issues driving the stock market as we enter the second half of 2Q 2108. With the March quarter earnings season winding down, trade and the Fed have once again taken center stage in a big way, reigniting investor worries.

As Chris and Lenore discuss, they see the bluster emanating from the White House and President Trump's Twitter feed over new potential import tariffs on auto and cancelling the June 12 meeting North Koreaas the latest negotiating tactics in the Trump playbook. Pretty much it's Trump: The Art of the Dealon the accelerating escalator and it's bringing rising uncertainty back into the market. As we discuss on the podcast it's likely to be a long road to overhauling trade with China and nuclear disarmament North Korea.

Turning to the Fed, it's latest FOMC meeting minutesall but guarantee a June rate hike, and the market is already anticipating another in September. While the Fed thinks the economy can handle these rate hikes, Lenore and Chris are far more concerned with the consumer that is already devoting more of his and her disposable income to servicing consumer debt than in the depths of the Great Recession. More rate hikes, higher interest costs, less disposable income, more credit card delinquencies and more people living paycheck to paycheck that can't handle a $400 emergency expense. On the podcast they share how and why this growing pain point is a tailwind for Tematica's Cash-strapped Consumer investing theme.

Resources for this podcast:

• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• TematicaResearch – https://www.tematicaresearch.com
• TematicaResearch: _@TematicaGroup
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting

This week resident mixologists, Chris Versace, Chief Investment Office and Lenore Hawkins, Chief Macro Strategist headed to New York City where they met with Yasmin Dahya, Head of Americas Beta Specialist team at JP Morgan Asset Management to talk about the evolving world of Exchange Traded Funds (ETFs).

By the end of 2017, more than $2.5 trillion dollars had been invested in ETFs around the world. As those investment vehicles have increasingly gathered assets in the last few years, we've seen the world of ETFs evolve from simple, passive funds that reflected standard indices such as the S&P 500 into ones reflecting specific trends such as cyber security, or commodities such as wheat and corn, giving investors a growing set of investing tools to use in their portfolios. As you'll learn from Yasmin, this world is continuing to change and bringing with it more exciting ways for the individual investor to build a portfolio that reflects their wants, needs and view of the world.

For anyone who is interested in using ETFs in their portfolio, this is one you don't want to miss.

Resources for this podcast:

• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• Tematica Research – https://www.tematicaresearch.com
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting

As we head towards the close of earnings season, there is no shortage of drama to challenge investors. Our resident mixologists, Chris Versace, Chief Investment Office and Lenore Hawkins, Chief Macro Strategist pour over the data and the headlines and distill it all down in our latest episode of Cocktail Investing.

As of the end of last week, 81% of the companies in the S&P 500 had reported their results for the March quarter with 78% reporting actual EPS above the mean EPS estimates (above the 5-year average of 70%). If this percentage, or better, ends up being the final for the quarter, it will be the highest percentage of S&P 500 companies reporting actual EPS above estimates since FactSet began tracking the metric in Q3 2008. For top line sales, 77% have reported actuals above, which is a tie with the prior quarter, Q4 2017, for the highest beat rate.

Strong results, yet share prices are not being rewarded. Chris and Lenore discuss why they think investors aren't rewarding share prices and what surprises they think may be in store for investors in the coming quarters. Lenore talks about how the global economic acceleration narrative is falling apart while Chris digs into what nuggets of insight he was able to mine from earnings calls this season.

Tune in for all this and more.

Resources for this podcast:

• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• TematicaResearch – https://www.tematicaresearch.com
• Themes Report:https://www.tematicaresearch.com/whatisthematicinvesting

A Discussion with Interos Solutions CEO Jennifer Bisceglie When most people think of the words "supply chain" they harken back to the class room definition — the sequence of steps and processes involved in the production and distribution of a commodity or product in a factory. While that's true, over the last several decades the move toward low cost outsourcing has dramatically changed where companies source their components and finished products as well as the multitude of players that supply them. Factor in the rise of software and networks, and the downside of this operational focus is it has kicked the door wide open for bad actors to exploit the supply chain in the form of cyber and other attacks. In today's podcast, Tematica's Chris Versace discusses all of this with Interos Solutions CEO and President Jennifer Beisceglie, who recently testified before the U.S.-China Economic and Security Review Commission Hearing on "China, the United States, and Next Generation Connectivity." As Chris and Tematica's Chief Macro Strategist, Lenore Hawkins have shared before, the migration deeper into our Connected Society investing theme opens the door for pain points associated with our Safety & Security investing theme. Jennifer not only reaffirms that view, but reveals several aspects that few have likely considered despite how widespread cyberattacks on the supply chain have become. As Jennifer points out, along with the growing incidents of attacks and notable high-profile ones at Merck & Co. (MRK), FedEx (FDX), Renault SA and others following the NotPetya destructive ransomware attack in 2017, supply chain security and vendor risk management is escalating across the corporate landscape, becoming a focal point in the Board room. Simply put, digital supply chain vulnerability is impacting the physical supply chain via a range of risks from intellectual property theft, to counterfeit components, and even human trafficking. Jennifer explains why with 5G and the Internet of Things soon to become reality, companies should brace themselves for another layer of concern when it comes to their supply chain security and vendors. The implications are simply staggering, ranging from companies losing their strategic advantages and having investments stolen, to the need to ramp up security spending and added aspects to M&A due diligence that could alter the terms of a deal if not scuttle it all together. Recall how last year Verizon (VZ) renegotiated its deal to acquire Yahoo by $350 million following the revelation of security breaches with the Verizon network. Jennifer and Chris also talk about Facebook's (FB) current challenges, which could be viewed as a breakdown in its supply, and why it's a situation that Jennifer is "surprised at how surprised everyone is that it happened." And lastly, because it wouldn't be a podcast without some discussion on Bitcoin or the Blockchain, Chris asks Jennifer for her view on the Blockchain and gains some insights into why it isn't the likely cure-all for supply chain security. Resources for this podcast:

• Interos Solutions
• Interos Solutions Twitter: @InterosSolution
• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• TematicaResearch – https://www.tematicaresearch.com
• Themes Report:https://www.tematicaresearch.com/whatisthematicinvesting

Download Episode Amid the ups and downs of the stock market, it comes as little surprise to us here at Tematica that thematically well-positioned companies are M&A takeout candidates. We've seen it before, and odds are we will see it again. If you've been listening to CNBC or FOXBusiness, we are once again hearing that Boxed, a company that sits at the crosshairs of our Connected Society and Cash-Strapped Consumer investing themes, is once again in those crosshairs. Again, no surprise to us given we see Boxed as a cross between Amazon (AMZN) and Costco Wholesale (COST). With Walmart (WMT), Target (TGT), Kroger (KR) and others looking to catch Amazon, we see the logic. For more on Boxed, here's the conversation between Tematica's resident mixologists, Lenore Hawkins and Chris Versace with Boxed CEO Chieh Huang. It's a conversation filled with confirming data points as well as some movie references to keep it fun and one that will leave you understanding why any of those companies we mentioned above could benefit from the addition of Boxed. Resources for this podcast:

• Boxed
• Boxed CEO Chieh Huang @AstroChief
• EP 57: Why Thematics and Global Macro are the Chocolate & Peanut Butter of Investing
• EP 56: How and Why the Thematic Approach Helps You Make Better Investments
• Ep 55: The Global Macro Economy – What exactly is it and why its important when it comes to being a successful investor
• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• Tematica Research – https://www.tematicaresearch.com
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting

Download Episode This is the final episode in the trilogy of episodes in which Tematica's resident mixologists Lenore Hawkins and Chris Versace discuss how the combination of thematics and global macro is truly one plus one is more than three when it comes to investing. During the conversation, Chris and Lenore talk about the synergies to be had from the intersection of this top down, bottom up combination. They also share a few examples of how that intersection has led to spirited debate between them, culminating in a better decision-making process. Remember, positive returns are as much about picking the right investment, but also avoiding pitfalls. Resources for this podcast:

• EP 56: How and Why the Thematic Approach Helps You Make Better Investments
• Ep 55: The Global Macro Economy - What exactly is it and why its important when it comes to being a successful investor
• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• TematicaResearch – https://www.tematicaresearch.com
• Themes Report:https://www.tematicaresearch.com/whatisthematicinvesting

Download Episode During this week's Cocktail Investing episode, Tematica's Chief Macro Strategist, Lenore Hawkins interviews our own Chris Versace to understand how he developed the thematic investing approach and why it works so well. We hear how during the dotcom boom of the late 1990s, Chris was in the trenches with many in Wall Street who found that traditional ways of looking at investing were no longer producing results. He looked around at the traditional sector-focused investment strategies that were missing not only opportunities, but unable to capture meaningful signals from the marketplace – thus the birth of Tematica's investment approach. While Chris walks us through how he identifies themes and implements them, he also shares what he has learned as a university professor and a soup actor. Yes, you read that right, his days as a soup actor are oddly right in line with the way he sees the investing world. You know you have to listen in now, don't you? While the ways in which we communicate, consume news and entertainment, shop, travel and even order take-out has changed, the sector-based investing approach has barely changed. Chris shows us how a thematic lens captures the evolving landscape in a way that sector investing simple cannot see. Then we get a bit personal, but for that you'll just have to listen in! Resources for this podcast:

• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• TematicaResearch – https://www.tematicaresearch.com
• Themes Report:https://www.tematicaresearch.com/whatisthematicinvesting

Books we're currently reading:

• Versace:100 Plus: How the Coming Age of Longevity Will Change Everything, From Careers and Relationships to Family and Faith
• Hawkins:

Download Episode During this week's Cocktail Investing episode, Tematica's Chris Versace interviews none other than Tematica's Chief Macro Strategist, Lenore Hawkins, to discuss among other things how the global macro landscape fits into our thematic lens and why it is so important to investors and business folks alike. During the conversation, Lenore reveals how she became fascinated with understanding the economy, as well as the why behind it. In sharing her biggest misstep with the economy, Lenore shares how listeners can benefit from those learnings as well as what tools she uses to not only stay on top of all the data, but how to put it into perspective. As Lenore explains, in today's increasingly faster and faster world, taking the time to understand the underlying data, what it means and why it is happening makes all the difference when constructing view be it for the global economy or your investing portfolio. Lenore also shares, where she thinks we are in the current business cycle, how to spot the start of the next one and which country she thinks will be the key driver of global GDP in the coming years. More than a few times, Lenore and Chris come back to how their two different perspectives overlap and how that gives rise to our various investment themes. You'll also learn a few things about Lenore, including what is her favorite cocktail, as she's faced with several of the now famous questions used by Inside the Actor's Studio host James Lipton. Finally, as Lenore volunteered there are several books and authors listed below that she things are helpful when it comes to understanding the global macro landscape. Economics is more art than science, and more a system of beliefs than objective laws. This is because we cannot, as we do in science, hold all else constant and change just one variable so that we understand the economic impact of something. Because of this, to understand the economy, one needs to understand what it is that the majority believes to be true. To understand that, one needs to understand the various theories out there. We cover that major schools of thought in a pretty succinct manner early on in our book, Cocktail Investing, but here is a selection of my (Lenore) favorites. Books on the global macro economy:

• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns (Of course we'd include this one!)
• The Leading Indicators: A Short History of Numbers That Rule Our World
• Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics
• The Causes of Economic Crisis
• Knowledge and Power: The Information Theory of Capitalism and How it is Revolutionizing our World
• Antifragile: Things That Gain from Disorder
• Hidden in Plain Sight
• The Ascent of Money: A financial History of the World
• This Time Is Different: Eight Centuries of Financial Folly
• The Making of Modern Economics: The Lives and Ideas of the Great Thinkers
• Selected Essays on Political Economy (This one is seriously awesome despite the horrible name)
• History of Economic Theory

Resources for this podcast:

• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• TematicaResearch – https://www.tematicaresearch.com
• Themes Report:https://www.tematicaresearch.com/whatisthematicinvesting

Books we're currently reading:

• Versace:100 Plus: How the Coming Age of Longevity Will Change Everything, From Careers and Relationships to Family and Faith
• Hawkins: Hidden in Plain Sight: The fundamental link between relativity and quantum mechanics

Download Episode During this week's Cocktail Investing episode, Tematica's mixologists Lenore Hawkins and Chris Versace take the bull by the horns discussing the topic that has gripped headlines and jacked stock market volatility this – President Trump's proposed steel and aluminum tariffs. While there is much being said over these proposed tariffs, Lenore and Chris explain why they think Trump is using the negotiating tactics he laid out in his 1987 book, Art of the Deal. Drawing on what we are seeing in the heavy truck market and the pain homebuilders are poised to face given the current lumber shortage, Chris and Lenore game out what is likely to happen if those tariffs move past the proposal stage. Shortages. Price Increases. Inflation concerns. Consumer spending pressures. Economic growth risks. And then there is how the Fed will see it all as it gets ready for this Mar. 20-21 monetary policy meeting. You know, the one where new Fed Chair Jerome Powell will have his first formal press conference as chairman and share the Fed's latest economic and policy forecast. The bottom line is Trump is playing a dangerous game of trade war chicken. Like most games, there tends to be a winner and a loser, and while it's possible that Trump comes out ahead on this, the risk he runs will impact the American consumer, the domestic economy and at least certain stocks if not the overall market. Thematic Signals shared during this episode

• With Lumber in Short Supply, Record Wood Costs Are Set to Juice Home Prices
• Credit-Card Losses Surge at Small Banks
• Due Diligence on Cybersecurity Becomes Bigger Factor in M&A

Companies

• AK Steel (AKS)
• AMC Theater (AMC)
• Anheuser Busch (BUD)
• Apple (AAPL)
• Arconic (ARNC)
• Boeing (BA)
• Caterpillar (CAT)
• Century Aluminum (CENX)
• Coca-Cola (KO)
• Cummins (CMI)
• R. Horton (DHI)
• Deere (DE)
• Dell
• Ford (F)
• Gap (GPS)
• General Motors (GM)
• M. Smucker (SJM)
• Lennar Corp. (LEN)
• McDonald's (MCD)
• Molson Coors (TAP)
• Navistar (NAV)
• Paccar (PCAR)
• PepsiCo (PEP)
• Ross Stores (ROST).
• Steel Dynamics (STLD)
• Toll Brothers (TOL)
• Tyson Foods (TSN)
• Whirlpool (WHR)

Resources for this podcast:

• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• TematicaResearch – https://www.tematicaresearch.com
• Themes Report:https://www.tematicaresearch.com/whatisthematicinvesting
• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns

Books we're currently reading:

• Versace:100 Plus: How the Coming Age of Longevity Will Change Everything, From Careers and Relationships to Family and Faith
• Hawkins: Hidden in Plain Sight: The fundamental link between relativity and quantum mechanics