October 2020 performance update
Happy Halloween, everybody! Let’s get right to it. Stoney Point had another solid month. Just as our Prime and Select picks beat the market in September, they did it again in October. By my calcs:
The Prime picks we announced on September 30 beat SPDR’s S&P 500-tracking “SPY” ETF by 3.14 percentage points in October (-0.16 percent return in the month for Prime, -3.30 percent for SPY).
The Select picks we announced on September 30 beat the SPY ETF by 0.29 percentage points in October (-3.01 percent return in the month for Select, -3.30 percent for SPY).
These are not small beats. On an annualized basis, they amount to beating the market by 42.5 percentage points for Prime and 3.3 percent for Select (based on 22 trading days in October and 252 in an average year: 0.425 = (1+0.0314)^(252/22)-1 and 0.033 = (1+0.0029)^(252/22)-1). Over 10 years, outperforming the market by these magnitudes on a monthly basis amounts to cumulative outperformance of a gargantuan 3,354.3 percent and an also-large 39.0 percent for Prime and Select, respectively (33.54 = (1+0.0314)^(10*252/22)-1 and 0.39 = (1+0.0029)^(10*252/22)-1). Being only six months into this endeavor, it’s certainly too early to quantify an expected average outperformance going forward or do any sort of forecasting; but these numbers do put the October returns in perspective.
It’s worth noting that these beats come in the face of some very turbulent market conditions as coronavirus infections surge in the U.S. and globally and as we inch closer daily to what is being billed as possibly one of, if not the, most contentious American presidential election in recent memory. Indeed, the CBOE’s “VIX” index—a forward looking measure of expected volatility derived from options prices—shot up in the last week of the month, indicating that investors anticipate choppy waters downstream for the stock market in November. At the same time, stocks in general had their worst week since March this past week.
The chart below shows the cumulative performance of Stoney Point’s picks against the SPY ETF and the hypothetical “Bogleheads” portfolio to date per my calculations. It’s not obvious from the chart, but Select seems to be coming back. Earlier this week it had returned to about parity with the SPY ETF before hitting a wall in the last two trading days of the month. Prime continues to crush the market, despite risk characteristics that suggest it should only be performing about as well as the market. Let’s hope for good things in November.
That’s all for now. You can check out the position-level October performance for our Prime and Select picks on our performance page and our picks for November here to get in on the action. Of course, if you haven’t already, follow Stoney Point on Twitter for the latest updates (@StoneyPointCap).
What we’re reading (10/31)
“Stocks Just Wrapped Up Their Worst Week Since March” (CNN Business). “It has been a messy week for the stock market. With only four days to go until Election Day, rising Covid-19 infections and uncertainty about further government stimulus to help the economy, there's plenty for investors to worry about. Stocks had their worst week since March, when the market tumbled under the first wave of coronavirus infections and lockdowns -- and one of their worst weeks of the year as a whole. All three major indexes also recorded the second straight month of losses.”
“We’re Halfway Through Earnings Season, Here’s What We’ve Learned” (Dealbreaker). “Beer sales in bars and restaurants remain under pressure, but Anheuser-Busch InBev said yesterday consumers have ‘quickly adjusted to the new reality’ of at-home imbibing…[s]treaming giant Spotify is officially in the groove, reporting a revenue jump of 14% yesterday…[c]able and entertainment conglomerate Comcast said yesterday its net profit fell 37% in Q3 with a potpourri of trends…[Royal Caribbean] came into port with negative (yes, negative) $34 million in revenue as it processed refunds, cancellations, and penalties.”
“Inside the Wild Stock Market For Politics Where Traders Bet On Our Next President” (Marker). “Right now someone, somewhere, is trying to make money off the latest news cycle. When the coronavirus pandemic began sweeping the globe, people began flipping hand sanitizer, while fashion brands pivoted to selling masks. When nationwide protests against police brutality and systemic racism erupted in the wake of George Floyd’s murder, some retailers saw an opportunity to sell merch, such as Black Lives Matter–themed wine stoppers and garden gnomes. And when President Trump tweeted on October 2 that he had tested positive for Covid-19, traders looking to earn quick cash on yet another campaign hiccup turned to PredictIt, an online prediction market where people buy and sell shares of what are essentially futures contracts for political events like elections, nominations, and presidential pardons.”
“‘Cash Is Trash,’ So Let’s Bet $425 Million On Bitcoin” (Wall Street Journal). “In volatile markets, you can use cash as offense or defense. MicroStrategy Inc., which recently had half-a-billion dollars in cash sitting around, thinks it can do both. The company could have gotten rid of its excess cash by paying a big dividend or by buying back much of its stock. Instead, MicroStrategy bet half its total assets on bitcoin. So is this a publicly traded company or is it a hedge fund?”
“The Man Who Wants To Help You Out Of Debt—At Any Cost” (The Guardian). “Dave Ramsey, America’s most influential personal finance guru, drives a pickup truck that, he says, will eat your electric car. He wears a .45 on his hip with a hollow-point in the chamber. He is an older white male, a self-described ‘capitalist pig’, and an evangelical Christian who almost always votes conservative. He hates government intervention in his life – and yours. His mortal enemy, however, is personal debt, and he has spent the last three decades on a crusade against modern usury, in the form of credit card companies (scum), payday lenders (the scum of the earth), and debt collectors (‘some good people’, but largely ‘complete scum’). Ramsey believes that as long as you have one red cent of debt – credit card debt, student loans, car payments, mortgages, medical bills – you can never be free. The day you take scissors to your credit cards is the beginning of your financial salvation.”
What we’re reading (10/30)
“Big Tech Companies Reap Gains as Covid-19 Fuels Shift In Demand (Wall Street Journal). “Tech giants including Amazon.com Inc. and Google reported strong quarterly sales and profits that showed how pandemic-era demand for their digital services and gadgets is driving them to new heights even in the midst of a debate about their market power.”
“Delta And Pilot Union Reach Preliminary Deal To Avoid Furloughs Until 2022” (CNBC). “Delta Air Lines and the union that represents its pilots have reached a preliminary cost-cutting agreement that would avoid furloughs until Jan. 1, 2022, the union said Thursday. The agreement still needs approval from Delta’s early 13,000 pilots. The agreement would reduce monthly minimum guaranteed hours by 5%. The company had planned to furlough up to 1,941 pilots. Airline employees who are furloughed generally retain rights to be recalled by the company, but given the industry’s downturn in the pandemic, it’s not clear when that could be.”
“Economy’s Big Rebound Leaves A Shortfall As Progress Slows” (New York Times). “U.S. economic output increased at the fastest pace on record last quarter as businesses began to reopen and customers returned to stores. But the economy has climbed only partway out of its pandemic-induced hole, and progress is slowing. Gross domestic product grew 7.4 percent in the third quarter, the Commerce Department said Thursday. The gain, the equivalent of 33.1 percent on an annualized basis, was by far the biggest since reliable statistics began after World War II.”
“What GDP Can And Cannot Tell You About The Post-Pandemic Economy” (The Economist). “Pity the world’s chartmakers. For years, normal economic fluctuations will be dwarfed by the extraordinary gyrations of 2020, such as the third-quarter gdp figures that are now rolling in. These data are informative—measures of output today are in part a reflection of governments’ success or failure in controlling the spread of covid-19. Yet they can easily mislead, and should be treated with care.”
“‘I’d Like To See It For Myself’ - Meet The ‘Dark Tourists’ Booking Trips To Wuhan” (Vice). “A controversial vacation trend, “dark tourism” refers to travel to sites connected with death and atrocity. This could be places like Auschwitz-Birkenau and the Chernobyl Exclusion Zone, but arguably also school trips to World War Two memorials or a visit to the Berlin Wall. Wuhan, the former epicentre of COVID-19, is the latest destination for dark tourism trips. After the city’s 76-day lockdown ended in April, residents have attempted to return to some kind of normality, with recent GDP data now suggesting that China may be the first major economy to recover from the pandemic. And as the country’s economy improves, so does Wuhan’s tourism sector, attracting visitors curious about the deadly virus’s initial focal point.”
November Prime + Select picks available now
The new Prime and Select picks for November are available starting now, based on a model run put through today (October 30). As a note, we’ll be measuring the performance on these picks from the first trading day of the month, Monday, November 2, 2020 (at the mid-spread open price) through the last trading day of the month, Monday, November 30 (at the mid-spread closing price). If you’re following the strategy perfectly, you’d want to close out your October positions by end-of-trading today, and re-balance at the start of the first trading trade of next month.
You can check out the latest picks here.
What we’re reading (10/29)
“A Biden Win Could Renew A Democratic Split On Trade” (New York Times). “As the Biden transition team begins gearing up to select the people who might staff the administration, the progressive wing of the party is pushing for appointees with deep ties to labor unions and congressional Democrats. And they are battling against appointees that they say would seek to restore a “status quo” on trade, including those with ties to corporate lobbyists, trade associations and Washington think tanks that advocate more typical trade deals.”
“Business Exit During The COVID-19 Pandemic: Non-Traditional Measures In A Historical Context” (Board of Governors of the Federal Reserve). “Given lags in official data releases, economists have studied "alternative data" measures of business exit resulting from the COVID-19 pandemic. Such measures are difficult to understand without historical context, so we review official data on business exit in recent decades. Business exit is common in the U.S., with about 7.5 percent of firms exiting annually in recent years, and is countercyclical (particularly recently). Both the high level and the cyclicality of exit are driven by very small firms. We explore a range of alternative measures and indicators of business exit, including novel measures based on payroll events and phone-tracking data, and find tentative evidence that exit has been elevated during 2020. Evidence is somewhat mixed, however, and exiting businesses do not appear to represent a large share of U.S. employment.”
“U.S. States Face Biggest Cash Crisis Since The Great Depression” (Wall Street Journal). “Nationwide, the U.S. state budget shortfall from 2020 through 2022 could amount to about $434 billion, according to data from Moody’s Analytics, the economic analysis arm of Moody’s Corp. The estimates assume no additional fiscal stimulus from Washington, further coronavirus-fueled restrictions on business and travel, and extra costs for Medicaid amid high unemployment.”
“A Spice Boom Has Left Manufacturers Scrambling, And Packaging Materials Can’t Keep Up” (Washington Post). “The most sought-after at times have been as costly as precious metals. Their allures set world exploration in motion, fueled sailing expeditions around the Cape of Good Hope, precipitated the establishment of colonies. And now, more than 4,000 years after the initial fervor, we are living through a new spice boom.”
“Hedge Fund Invests In Allegedly Defrauded Anti-Fraud Specialist” (Dealbreaker). “For years, and indeed as recently as earlier this year, venture capital firms threw money hand over first at a company called NS8. This made a certain amount of sense, insofar as NS8 was a promising player in the ever-growing field of cyber-fraud prevention. But, in one of those delightful turns of events, what they were apparently financing was a fraud in and of itself, as their decision to buy $17.5 million worth of shares from founder Adam Rogas was based on allegedly bogus financials provided to them by Rogas.”
What we’re reading (10/28)
“Social Media CEOs To Come Under Senate Scrutiny” (Wall Street Journal). “Chief executives of the largest social media companies will testify Wednesday before the Senate Commerce Committee in a hearing examining their platforms’ role in shaping political discourse. Less than a week before Election Day, members of the Republican-led panel are expected to question Facebook Inc. CEO Mark Zuckerberg, Twitter Inc. CEO Jack Dorsey, and Sundar Pichai, CEO of Google and YouTube owner Alphabet Inc., about their treatment of politically charged content, from advertising to news to candidates’ posts.”
“Nasdaq and Invesco: Mothers of Innovation” (CNBC). A couple of new tech-focused funds from Invesco and Nasdaq: “The Invesco NASDAQ-100 ETF (QQQM) is designed for easier inclusion in mutual funds and dedicated plans, and appeals to long-term, buy-and-hold investors such as people saving for retirement. Expanding beyond the Nasdaq-100 ecosystem, the Invesco NASDAQ Next Generation 100 ETF (QQQJ) looks at those companies next in line to join the Nasdaq-100, and offers exposure to mid-cap companies that will be the next generation of leading innovators. The Invesco Nasdaq-100 Mutual Fund (IVNQX) is a mutual fund to help advisors and defined contribution providers tap Nasdaq-100 innovation. And the Invesco Nasdaq-100 Unit Investment Trust (QQQG) provides advisors with a pre-determined expiration date and dividends of a unit investment trust.”
“Why Dunkin’ Is Worth Nearly $9 Billion” (DealBook). “Dunkin’ Brands is close to a $8.8 billion deal to sell itself to Inspire Brands, the restaurant operator backed by the investment firm Roark Capital. A deal could be announced as soon as today, sources say. Here’s everything you need to know about the scoop[.]”
“Crop Prices Dragged Lower As Weather Improves In Key Growers” (Bloomberg). “Prices for most major agricultural commodities fell as key weather forecasts improved and crop futures joined a broader global selloff. Wheat fell for a third day in Chicago, the longest rout in seven weeks, while corn dropped the most in more than a month. Cocoa, sugar, cotton and coffee all traded lower.”
“Billionaire Blasts ‘Gilligan’s Island’ On A Loop To Annoy Neighbor, CA Suit Says” (Sacramento Bee). “A billionaire investor is being sued by his next-door neighbor in Laguna Beach and is accused of blasting the “Gilligan’s Island” theme song at all hours of the night in a feud over a $1 million sculpture. Bill Gross, the co-founder of Pimco, and his partner, Amy Schwartz, reportedly erected a 22-foot-long sculpture with netting to protect it from damage, according to the lawsuit. Gross’ neighbors Mark Towfiq, a tech entrepreneur, and his wife, Carol Nakahara, allege that the couple didn’t get permission from the city to build the statue…[t]he lawsuit states that Towfiq called the city and complained about the structure, which was installed in 2019…[t]he city sent Gross a letter on July 28 about the sculpture and netting, saying that it lacked permits. That’s when the neighbors say the music started.”
What we’re reading (10/27)
“AMD Agrees To Buy Rival Chip Maker Xilinx For $35 Billion” (Wall Street Journal). “AMD and Xilinx on Tuesday said the companies reached an all-stock deal that would significantly expand their product range and markets and deliver a financial boost immediately on closing. The Wall Street Journal previously reported the two were close to an agreement. The U.S. semiconductor industry is going through a seismic transformation, driven both by a wave of corporate transactions and a pandemic that has supercharged demand for some chips”
“S&P CoreLogic Case-Shiller: US Home Prices Up 5.2% in August” (U.S. News & World Report). “U.S. home prices posted a robust gain in August — another sign that the American housing market remains strong despite economic fallout from the coronavirus pandemic. The S&P CoreLogic Case-Shiller 20-city home price index, released Tuesday, showed that home prices climbed 5.2% in August from a year earlier, accelerating from a 4.1% gain in July. The gain was stronger than economists had expected.”
“Robinhood Co-CEO Says Young Traders See Market Downturns As Buying Opportunities For The Long Term” (CNBC). “The young customers of Robinhood are actually smart, long-term oriented investors who recognized that the market sell-off in March was a buying opportunity, according to the zero commission pioneer’s co-founder. ‘What we’ve seen is they typically see volatility and market downturns as buying opportunities, just because they’re at the beginning of their investing journey and think they recognize that there’s many, many decades for things to, to smoothen out in front of them,’ co-founder and co-CEO Vlad Tenev told CNBC’s “Squawk Box.’”
“The Data of Long-Lived Institutions” (The Long Now Foundation). “I’ve been collecting data on all of the longest lived institutions in the world. As you look at these, there’s a few things that stick out. Notice: brewery, brewery, winery, hotel, bar, pub, right? And also notice that a lot of them are in Japan. There’s been a rough system of government there for over 2,000 years (the Royal Family) that’s held together enough to enable something like the Royal Confectioner of Japan to be one of the oldest companies in the world…[i]n the West, most of the companies that have survived for a very long time are basically service companies. It’s a lot easier to reinvent yourself as a service-oriented company than it is as a commodity company when that particular commodity goes out of use…Something else that came out of this research is the fact that the length of company’s lives is shrinking at almost one year per year. In [1950], the average company on the Fortune 500 had been around for 61 years. Now it’s 18 years. Companies’ lives are getting shorter.”
“Will Steve Cohen, A Symbol Of Wall Street Malfeasance, Own The New York Mets?” (New Yorker). “Cohen and S.A.C. Capital [his former hedge fud] were, for several years, at the center of one of the most high-profile financial-fraud investigations ever conducted, which resulted in the indictment of the company. Cohen was never charged personally, but his firm paid $1.8 billion in forfeitures and penalties, and Cohen was required to shut it down. He also was barred from managing outside investor money until January, 2018. Martoma, a former S.A.C. portfolio manager, was sentenced to nine years in prison for insider trading at S.A.C., in what was billed as one of the largest cases of its kind. In the indictment of S.A.C., the U.S. Attorney for the Southern District of New York, Preet Bharara, was sweeping in his condemnation of the company: in the course of more than a decade, the indictment alleged, numerous employees engaged in insider-trading offenses involving more than twenty publicly traded companies, which generated hundreds of millions of dollars in ill-gotten profits for the fund. Cohen micromanaged the company’s operations, and, in the years he supervised, it became ‘a veritable magnet for market cheaters.’”
November picks available soon
Reminder: we’ll be publishing our Prime and Select picks for the month of November on 10/30. As always, we’ll be measuring SPC’s performance for the month of October, as well as SPC’s cumulative performance, assuming the sale of the October picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Friday, October 30). Likewise, performance tracking for the month of November will assume the November picks are bought at the open price (at the mid-point of the opening bid and ask prices) the first trading day of the month (Monday, November 2).
Stay tuned for the new picks and the performance updates
What we’re reading (10/26)
“The World-Changing Technology of Textiles” (Wall Street Journal). “From cave-dwellers twisting plant fibers into string to scientists embedding computer chips into threads, the story of textiles is the story of human ingenuity in all its manifestations: technical, artistic, economic and cultural. The conflict between highly productive new technologies and fears of mass unemployment—’the robots are taking our jobs’—started with textiles. The Luddites, English weavers who smashed mechanical looms in the early 19th century, gave their name to technological resistance. Ironically, however, those weavers owed their own well-paid jobs to an earlier disruptive technology: spinning machines, which produced the yarn that weavers turned into cloth.”
“How The Virus Slowed The Booming Wind Energy Business” (New York Times). “The wind energy business was growing about 10 percent a year before the pandemic. But industry officials now fear that projects under construction might be postponed or canceled because of the pandemic. The industry had hoped Congress might provide aid to renewable energy, but it got little from the stimulus bills passed in the spring…‘[e]verybody is trying to figure out how everything is going to land,’ said Benoit Rigal, a vice president of engineering and construction for EDF.”
“How Bookstores Are Weathering The Pandemic” (Vox). “The pandemic arrived early for Emily Powell, owner of Powell’s Books in Portland, Oregon. The state had one of the first confirmed cases of Covid-19 in the US in February. As she watched more cases pop up across the country, ‘I felt an increasing sense of panic and crisis,’ she said. On March 15, she abruptly closed her stores in the middle of the day. She immediately shrank her staff from 500 to 60 who were ‘just helping us turn the lights off and put out-of-office messages on the website.’ Almost overnight, she shifted her business entirely to online orders.”
“Worried About Contested Election? Here’s What Went Down In Stocks During 2000 Bush-Gore Battle” (CNBC). “The last time there was a contested presidential election, the S&P 500 and technology stocks tanked. Can it happen again? Many Americans are wondering how long it will take for the winner of the presidential election to be declared. Fears about a contested election and battles over ballots that could end up in courts, as well as a president who has not said he will accept the results, could unnerve investors. That may be especially true with stocks near all-time highs in spite of so many existing headwinds, including a pandemic and massive job losses and uncertain progress on vaccines and more federal stimulus. And the top tech stocks in the S&P 500 representing as much as 20% to 25% of the index in this bull market.”
“Investors Are Pushing Into ESG For Predictable Reasons: And It Has Nothing To Do With Saving The Manatees” (Dealbreaker). “According to a recent survey by investment manager Nuveen, 53% of investors cited higher returns as the primary motivation for investing in ESG [environmental, social, and governance] funds…[w]hatever the motivation, the industry is listening. Seventeen new ESG-focused ETFs have launched so far this year, up from 10 in all of last year. ESG funds have raked in over $4.1 billion in October, on track for their best month since at least 2013…[but] [t]he Securities and Exchange Commission does not regulate how the "ESG" label is applied, and it is increasingly being used as a marketing tactic.”
What we’re reading (10/25)
“Quibi Is Hollywood’s Biggest Short-Form Failure—But Not It’s First” (Wall Street Journal). “The demise of the mobile-streaming platform Quibi a mere six months after it went live is the latest example of Hollywood’s struggles in making a business out of short-form content. Quibi may be the best-known and best-funded attempt to crack the short-form riddle, but it is far from the only one. The media industry is littered with the carcasses of short-form streaming platforms.”
“Rising Rates Seem To Signal A Recovery Is Near, But Investors Wonder Whether They Can Be Believed” (CNBC). “Bonds, it would seem, are speaking the bulls’ language. Treasury yields rolled to a four-month high last week, the 10-year note reaching 0.84%, as U.S. economic data continue to arrive generally better than expected and the markets anticipate further fiscal-support worth trillions either sooner or later, under this administration or the next…[s]till, it’s worth considering other drivers of the backup in yields and related equity reactions.”
“Influencers’ Next Frontier: Their Own Live Shopping Channels” (The Verge). “2020 has been the year of live shopping for US tech companies. Amazon launched Amazon Live for influencers in July, and Instagram and Facebook launched live shopping features in August. Google’s R&D division, Area 21, also launched Shoploop, which isn’t live but offers shoppable stories, and smaller startups continued their efforts to make live shopping not just a thing, but the future of retail. On every platform, it ends up looking like a modern twist on QVC — but with influencers instead of celebrities, and those influencers getting a cut of the sales.”
“Minimum Wage Laws During A Pandemic” (Marginal Revolution). A bit of a counterpoint to the article I posted yesterday arguing for a $15/hour minimum wage. According to Prof. Tyler Cowen at GMU: “Put in whatever exotic assumptions you wish, a basic model will spit out a lower optimal minimum wage for 2020-21, again for small business at the very least. This is the advice that leading Democratic economists should be offering to Biden.”
“Convicted User of Material Non-Public Information Pretty Pissed About Other Use Of Material Non-Public Information” (Dealbreaker). “Some years ago, The New York Times and Wall Street Journal published some fun little stories about passing some tidbits of material non-public information on the greens and fairways. These were especially fun because the beneficiaries of these tips were Phil Mickelson and a professional gambler named Billy Walters, and even more so because the alleged tipper may have been none other than Carl Icahn. These reports did not make Icahn very happy. But they arguably made Walters even more unhappy, because while Icahn was eventually cleared of wrongdoing, Walters went to trial and then jail for it, a series of events set in train by those articles, which were themselves set in train by a chatty FBI agent. And as far as Billy Walters is concerned, that means he shouldn’t be a convicted insider-trader anymore.”
What we’re reading (10/24)
“CNN President Jeff Zucker Faces What Might Be His Last Lap” (Wall Street Journal). “CNN President Jeff Zucker survived plenty of corporate intrigue since telecom giant AT&T swallowed up the cable network’s parent company two years ago. Now that is changing, leaving Mr. Zucker frustrated and his future at the cable news network in doubt. Mr. Zucker, who has overseen CNN for seven years, felt blindsided by a recent restructuring carried out by parent WarnerMedia, and has had friction with its chief executive, Jason Kilar, according to people familiar with the situation.”
“Morning Brew, The Business Newsletter Publisher For Millennials, Is In Talks To Sell Itself To Business Insider” (Recode). “Two college students started Morning Brew five years ago. Now they’re in talks to sell their business newsletter company to Business Insider, according to sources familiar with the two companies. It’s unclear how much Business Insider intends to pay for Morning Brew, which says it will turn a profit on revenue of $20 million this year. But people who have talked to the company’s founders believe they expect to sell it for more than $50 million, and possibly much more; the Wall Street Journal reports that the deal could be worth more than $75 million…The deal would also underscore the media industry’s current fascination with email newsletters, which are a very old distribution model that’s once again in favor. For instance: Axios, the politics-focused startup that launched in 2017, is reportedly on track to do $58 million in revenue this year, largely on the backs of its popular newsletters.”
“The Republican Antitrust Lawsuit Against Google Is A Progressive Dream” (Reason). “[T]he complaint—filed Tuesday in the U.S. District Court for the District of Columbia—employs a loose conception of monopoly and barely bothers trying to offer a theory of consumer harm. The complaint's big beef with Google is basically that it's big, as well as useful, stubbornly popular, and extremely profitable…[t]he lawsuit against Google does not accuse it of conspiring with its competitors or of acting unilaterally to block new entrants into the market. Nor does it cite common political gripes about Google, such as the idea that it's working too many different hustles and needs to be "broken up," or the claim that Google search and YouTube are ideologically biased. Rather, it accuses Google of unfairly dominating the U.S. markets for general search services, search advertising, and general search text advertising, mainly through distribution deals that give Google apps or search preset default status on some browsers and mobile devices.”
“Meet The Woman Who Could Lead The Treasury In A Biden Administration” (CNN Business). “The US election is still more than a week away, but speculation about who might lead the Treasury Department under a Biden administration is already in full swing. Analysts from Washington to Wall Street say a leading contender would be Lael Brainard, a current Federal Reserve governor with years of practical experience for the job. Brainard, who could replace Steve Mnuchin, would be the first woman to serve in the role. Despite some concerns from experts that she might look to impose tougher regulations on big banks, she's not nearly as progressive as Senator Elizabeth Warren, another rumored contender. ‘There could be a tug of war between progressives and more moderate Democrats, but many people would prefer someone with both a deep background in economics and monetary policy,’ said Quincy Krosby, chief market strategist at Prudential Financial. Brainard checks both of those boxes, a variety of experts agree.”
“Increasing The Minimum Wage Would Help, Not Hurt, The Economy” (NBC News). “Business groups have argued that raising the minimum wage forces business owners to fire workers, a claim echoed by Trump in the debate. The reality is more complex: The evidence of job loss is inconsistent, and the benefits are accrued by some of the country’s most vulnerable populations. In terms of reducing income and wealth disparities, a rising minimum wage is a good thing. ‘The benefits in terms of reducing inequality — getting money into people's pockets, stimulating the market — are very well proven,’ said Till von Wachter, professor of economics and director of the California Policy Lab at the University of California, Los Angeles. ‘The best evidence is that judiciously set minimum wages make a lot of sense. They raise earnings, reduce individual and family poverty, and have no measurable negative effects on employment,’ said David Autor, an economics professor at MIT and co-chair of the MIT Task Force on the Work of the Future.”
What we’re reading (10/23)
“Stocks Typically Climb, Regardless Of Who’s In The White House” (Wall Street Journal). “Stocks tend to go up regardless of which party controls Washington. From 1929 through 2019, one party controlled both chambers of Congress and the presidency in 45 of those years. The S&P 500 on average rose 7.45% during those years, according to Dow Jones Market Data. The index was up 30 times and down 15 times. In the other 46 years when there was a split government, the index climbed 7.26% on average, rising 29 times, falling 16 times and remaining unchanged once.”
“Recession Risk Grows [In Europe] As Covid-19 Cases Continue To Surge” (CNN Business). “The world's top economies took huge steps in recent months to recover from the worst recession in a generation. Now, with coronavirus cases surging again, that progress could be reversed. What's happening: Business activity has fallen back into decline in Europe, according to the latest reading of the Purchasing Managers' Index from IHS Markit, which tracks the manufacturing and services sectors. Earlier this week, both Spain and France — which are deep into the second wave of the pandemic — surpassed 1 million recorded coronavirus cases.”
“Uber And Lyft Face Setback In Case To Reclassify Workers, But It’s Far From Over” (CNBC). “Uber and Lyft must comply with a preliminary injunction requiring them to stop classifying drivers as independent contractors pending further action, an appeals court ruled Thursday. But the order won’t take effect right away and an upcoming ballot measure could still undermine the entire case.”
“A Chasm Deepens In America’s Credit Markets, Swallowing Smaller Firms” (Bloomberg). “Times are tough at SeaWorld, home of killer whales and bottlenose dolphins. But they’re even tougher at GeckoParx, a few hours down the Florida Turnpike. Both amusement parks were forced to close temporarily when the coronavirus pandemic struck. Despite setback after setback, SeaWorld Entertainment Inc. — a publicly traded corporation — easily secured something that every business needs: credit. It borrowed almost $730 million in the capital markets. And smaller GeckoParx? It’s shutting its doors after burning through nearly all of its money.”
“Are We Trading Our Happiness For Modern Comforts? (The Atlantic). “One of the greatest paradoxes in American life is that while, on average, existence has gotten more comfortable over time, happiness has fallen…[t]here are several possible explanations for this paradox: It could be that people are uninformed about all of this amazing progress, that we can’t perceive progress very well when it occurs over decades, or that we are measuring the wrong indicators of ‘quality of life.’ I suspect the answer is all three. The last idea, however, is especially important to understand in order to improve our own happiness. There’s nothing new about the idea that consumption doesn’t lead to happiness—that concept is a mainstay of just about every religion, and many philosophical traditions as well. Arguably, Karl Marx’s greatest insight came from his theory of alienation, in part defined as a sense of estrangement from the self that comes from being part of a materialistic society in which we are cogs in an enormous market-based machine.”
What we’re reading (10/22)
“I Should Have Worn A Mask” (Wall Street Journal). Op-ed in the WSJ from Chris Christie today: “For seven months I was very careful about mask wearing, social distancing and hand washing. As someone with asthma, I knew I faced heightened risk. Then, at the Rose Garden nomination event for Judge Amy Coney Barrett, and during debate preparations with President Trump, I let my guard down and left my mask off. I mistook the bubble of security around the president for a viral safe zone. I was wrong. There is no safe zone from this virus.”
“Weekly Jobless Claims Slump To The Lowest Level Since The Pandemic” (CNBC). “New filings for jobless claims in the U.S. totaled 787,000 last week, the lowest total since the early days of the coronavirus pandemic. Economists surveyed by Dow Jones had been expecting 875,000 for the week ended Oct. 17. The total reflected a decline of 55,000 from the downwardly revised 842,000 from the previous week. The last time the weekly claims total was lower was the 282,000 on March 14, just before an avalanche of layoffs that occurred in conjunction with efforts to combat the virus.”
“Asset Managers in $300bn Drive To Build Private Lending Funds” (Financial Times). The “shadow banking system” is coming out of the shadows a bit, it seems: “Asset managers are seeking to raise almost $300bn to plough into private lending deals with groups such as Goldman Sachs and Oaktree hoping to lure investors away from frothy public markets. Publicly traded debt and equity securities have surged in price this year after central banks and governments across the world unleashed trillions of dollars worth of stimulus to dull the economic blow from the pandemic. Managers argue that private credit — including funds set up to lend directly to companies — is one area that has not yet become saturated. It has also benefited from post-financial crisis regulations that pushed banks to tamp down lending to riskier clients.”
“Airlines Don’t Deserve Another Taxpayer-Financed Bailout” (Los Angeles Times). “Congress and President Trump, having doled out $25 billion in payroll grants plus a similar sum in low-interest loans to the airline industry in April, are seeking a second bailout, possibly as part of a general stimulus bill. The urge to rescue the airlines flows from good intentions, but it is not a smart way to help the economy and it will reward CEOs for serial mismanagement and self-enrichment.”
“Turkey Farmers Fear That, This Year, They’ve Bred Too Many Big Birds” (Washington Post). “The coronavirus pandemic will interrupt 50 years of steadily increasing turkey consumption, threatening to change holiday traditions forever. Social distancing and travel challenges will mean more, smaller holiday gatherings this November — thus smaller home-cooked turkeys on the table, fewer holiday restaurant reservations and, in an increasing number of households, no turkey at all.”
What we’re reading (10/21)
“Google’s Exclusive Search Deals With Apple At Heart Of U.S. Lawsuit” (Wall Street Journal). “Inside Google, they called the scenario “Code Red,” so stark was the prospect of losing the search engine’s lucrative pipeline from Apple Inc.’s iPhone. Now that possibility is officially on the table. Google’s partnership with Apple is at the heart of the U.S. Department of Justice antitrust lawsuit claiming that the Alphabet Inc. unit misused its power in an anticompetitive manner, potentially threatening a major revenue stream for both tech giants.”
“When Start-Ups Go Into The Garage (Or Sometimes The Living Room)” (New York Times). “It is the folksiest of Silicon Valley origin stories: Tech start-up makes it big after a wide-eyed entrepreneur builds a prototype in his garage. But Colin Wessells could never have imagined that a pandemic would force him back into the garage just to keep his company going. Dr. Wessells, 34, is one of the founders and the chief executive of Natron Energy, a start-up building a new kind of battery. In March, when social distancing orders shuttered his company’s offices in Santa Clara, Calif., he and his engineers could no longer use the lab where they tested the batteries. So he packed as much of the equipment as he could into a sport utility vehicle, drove it home and recreated part of the lab in his garage.”
“Complacency Warning? ‘Election Premium’ In Currency Markets Collapses Much Like It Did In 2016” (MarketWatch). “Poll-watching currency traders are growing more relaxed about the prospect for market volatility in the aftermath of the Nov. 3 presidential election, according to the options market. Are they getting too relaxed? The ‘election premium,’ derived from measures of implied volatility via the FX options market, has largely collapsed as Democratic challenger Joe Biden holds a wide lead over President Donald Trump which is seen reducing the chances of a muddled or contested election outcome that could spark market turmoil, said Olivier Korber, a currency strategist at Société Générale, in a Tuesday note. But a similar collapse in the ‘election premium’ in the runup to the 2016 election…means traders could be getting ‘complacent,’ he warned.”
“Mortgage Demand From Homebuyers Falls For The Fourth Straight Week” (CNBC). “Homebuyer demand is incredibly strong compared with last year, but there appears to be a slight pullback this month. A drop in buyer demand caused total mortgage application volume to fall 0.6% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.”
“Are Inventors Or Firms The Engines Of Innovation?” (Management Science). “In this study, we empirically assess the contributions of inventors and firms for innovation using a 37-year panel of U.S. patenting activity. We estimate that inventors’ human capital is 5–10 times more important than firm capabilities for explaining the variance in inventor output. We then examine matching between inventors and firms and find highly talented inventors are attracted to firms that (i) have weak firm-specific invention capabilities and (ii) employ other talented inventors. A theoretical model that incorporates worker preferences for inventive output rationalizes our empirical findings of negative assortative matching between inventors and firms and positive assortative matching among inventors.”
What where reading (10/20)
“The Justice Department Files Long-Awaited Lawsuit Against Google” (New York Times). “The Justice Department accused Google of maintaining an illegal monopoly over search and search advertising, in the government’s most significant legal challenge to a tech company’s market power in a generation. In a lawsuit, filed in a federal court in Washington, D.C., on Tuesday, the agency accused Google, a unit of Alphabet, of using several exclusive business contracts and agreements to lock out competition.”
“Goldman Sachs To Pay $2.8 Billion, Admit Wrongdoing To Settle 1MDB Charges” (Wall Street Journal). “Goldman Sachs Group Inc. will pay the U.S. government about $2.8 billion and admit wrongdoing in a Malaysian bribery scandal, settling charges stemming from its work with a corrupt government investment fund. A Goldman subsidiary tied to the misconduct in Asia is expected to plead guilty this week, according to people familiar with the matter. The bank’s parent company will admit fault but won’t face prosecution under the agreement, the people said, avoiding a guilty plea that could have crippled its ability to do business.”
“Pelosi Says Dems And White House Are Moving Closer To A Stimulus Deal, Downplays Tuesday Deadline” (CNBC). “House Speaker Nancy Pelosi said Democrats and the White House have moved closer to a coronavirus stimulus deal ahead of her latest call with Treasury Secretary Steven Mnuchin on Tuesday afternoon. The California Democrat downplayed the importance of a deadline she had set to strike an agreement before the end of the day, signaling she would keep talks going. To have legislation ready before Election Day, lawmakers would have to come to a deal and write a bill before the end of the week, she added.”
“Securing Posterity” (Works In Progress). Interesting argumentative essay on risk, growth, and stagnation in the new online journal Works in Progress. “To the extent that we [society] are at a crossroads between continued growth with—potentially risky—innovation on the one hand, and stagnant decadence in the name of comfort and safety on the other hand, those concerned for posterity should respond with a unified voice: we choose growth.”
“Travis Kalanick Finds New Industry To Put Out Of Business” (Dealbreaker). “Having helped rid the world of the scourge of taxis (and a fair number of cab drivers along with them), Uber founder and former CEO Travis Kalanick has been on the lookout for other industries to disrupt into extinction. Luckily for him, the global pandemic has served up the restaurant business right on a plate. Or, rather, a plastic tray.”
What we’re reading (10/19)
“Coronavirus Tanked The Economy. Then Credit Scores Went Up.” (Wall Street Journal). “Millions of Americans lost their jobs and skipped debt payments this year. You wouldn’t know it looking at consumer credit scores. While the coronavirus was pummeling the U.S. economy, Americans’ credit scores—a metric used in nearly every consumer-lending decision—were rising. The average FICO credit score stood at 711 in July, up from 708 in April and 706 a year earlier, according to Fair Isaac Corp.”
“CVS To Hire Thousands Of Pharmacy Techs As It Prepares For More COVID-19 Cases, Rollout Of Vaccine” (CNBC). “CVS Health said Monday that it wants to immediately hire 15,000 employees to prepare for an expected rise in Covid-19 and flu cases this fall and winter. More than 10,000 of those will be full-time and part-time licensed pharmacy technicians who can help dispense medications and administer Covid-19 tests.”
“Lockdowns In Europe Are A Warning To The United States” (CNN Business). “The coronavirus is surging again in Europe, forcing harsh new restrictions in London and Paris as governments carefully weigh their next steps. That's bad news for the region's economic recovery — and puts the United States on notice ahead of a difficult winter.”
“For Long-Term Investors, Small Things Like Presidential Elections Don’t Matter” (New York Times). “In a year of serial crises, solace for many people has come from an unlikely source: the stock market. Despite periodic jitters and a horrendous downturn earlier in the year, the stock market has been a surprisingly sturdy refuge. Though there is heartbreak almost everywhere else you look, most of the time stocks rise anyway. Through Friday, the S&P 500, a benchmark for the shares of big American companies, was up almost 8 percent this year. And this stock market prosperity in a time of general desperation isn’t an outlier. With important exceptions, the stock market has generated rich returns for decades, regardless of the outcome of portentous events, including presidential elections.”
“The Smart Money Just Reversed Bets Against Tech Stocks In A Huge Way” (MarketWatch). “The 33rd anniversary of the “Black Monday” stock-market meltdown is upon us, and if hedge-fund managers are scared of history repeating itself, you certainly wouldn’t know it from the massive overhaul in their positions they’ve undertaken over the past week…After establishing one of their biggest short positions in U.S. tech stocks in more than a decade earlier this month, hedge-fund managers poured their money into Nasdaq futures at a near-record rate, according to Commodity Futures Trading Commission data cited by Bloomberg.”
What we’re reading (10/18)
“Joseph Sullivan III Helped Create Chicago Options Exchange” (Wall Street Journal). “Mr. Sullivan, who was a Wall Street Journal reporter before moving to the Chicago exchange, was assigned to look into the feasibility of plywood futures. That idea flopped, but he embarked on a much more promising project: creating a new exchange to trade stock options, then an obscure corner of the financial markets. It took more than four years for Mr. Sullivan and colleagues to overcome skepticism and resolve all the technicalities. In 1972, he became president of the new Chicago Board Options Exchange. Trading began April 26, 1973, in what had been a smoking lounge next to the vast commodity trading floor…Mr. Sullivan, who had respiratory ailments and had apparently recovered from a bout with Covid-19 in August, died Oct. 2 at his home in Knoxville, Tenn. He was 82.
“Few People Are Flying. What Is An Airline To Do? Lots Of Fine-Tuning.” (New York Times). “Every airline is struggling, but each struggles in its own way…[w]hen the virus devastated travel in March and April, United took hundreds of planes out of circulation. Since July, it has brought back more than 150, including those flown by regional carriers, but about 450 are still stashed away.”
“Inflation Is Totally Out Of The Control Of Central Banks” (The Market). An interview with Nobel Laureate and the “father of modern finance” Eugene Fama. One quote getting a lot of attention: “[e]very day we hear a story about the movement of stock prices. But the story is different each day. So basically, these stories are made up after the fact. But when we look at it systematically, we don’t see a big effect of Fed actions on real activity or on stock prices or on anything else. That’s why I use to say that the business of central banks is like pornography: In essence, it’s just entertainment and it doesn’t have any real effects.”
“Warren Buffett Plowed $5 Billion Into Bank of America During The Debt Crisis. Here's The Story Of How The Investor Helped The Bank And Made A Fortune In The Process” (Business Insider). Funny introduction to this story: “Buffett was taking a bath in late August 2011, reflecting on his investments in American Express and Geico during difficult periods for both companies, when he had the idea to bet on Bank of America, Fortune reported. The investor tried to get through to the bank's CEO, Brian Moynihan, but was initially blocked by a call-center worker. ‘Warren asked to speak to me and of course they don't transfer everybody who calls the call centers to the CEO's line,’ Moynihan told David Rubenstein in a Bloomberg interview last year.”
“China’s Gulags” (The Economist). “‘IS THERE A God?’ Answer yes, and you will get a beating. As we report this week, that is just one of the humiliations inflicted on Uyghurs, a disaffected, mostly Muslim ethnic minority of 12m people in the far west of China. A handful have carried out terrorist attacks, but none since 2017. The Chinese state has in effect locked them all in a vast open-air prison. Many are in detention centres. Even those outside must attend indoctrination sessions. Evidence suggests that hundreds of thousands of children have been separated from their parents. Women have been forcibly sterilised. This persecution is a crime against humanity.”
Mid-October 2020 performance update
At the end of last month, I mentioned that I would be including a second comparison portfolio in Stoney Point’s performance updates (besides the SPY ETF). That second comparison portfolio would be based on a recommendation from the “Bogleheads”—that is, devotees of the investment philosophy embodied by the so-called “index” mutual funds introduced to investors by Jack Bogle and Vanguard decades ago. In particular, I mentioned that I would be including a comparison portfolio proffered by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf in The Bogleheads’ Guide To Investment (a book blessed by Jack Bogle himself, in as far as he wrote the forward) as “A Young Investor’s Asset-Allocation” and considered appropriate for a typical young investor. Per Larimore, et al., that portfolio comprises (1) domestic large-cap stocks, (2) intermediate-term bonds, and (3) domestic mid-cap stocks (I swapped out #3 with international stocks last month to capture some advice from other corners of the Bogle-sphere, see, e.g., here).
I think it’s worthwhile to say a little more about the Bogleheads’ index-investing philosophy and, in particular, why I’m including it as a comparison portfolio for Stoney Point’s Prime and Select models along with the S&P 500. In a nutshell, I interpret the Bogleheads’ investment philosophy to encapsulate, broadly speaking, the basic premise of passive index fund investing: that the most efficient portfolio is a perfectly diversified “market” portfolio. (Here, the notion of a portfolio being maximally efficient refers to maximizing expected excess returns for a given level or volatility, i.e., risk, or, equivalently, minimizing risk for a given expected excess return). Put simply: it’s really hard to beat the market, and most professional investment managers fail to do that once you include fees, especially over long periods of time. It’s worth noting that this premise is generally consistent with some of the earliest and most influential asset pricing theories and is also supported by a huge empirical literature finding that investors are often better off paying low fees and getting the “market return” than paying higher fees to some manager who probably can’t beat the market anyway.
But don’t take my word for it, here’s what the Bogleheads themselves say in the introduction to their book, describing Vanguard founder Jack Bogle:
What Jack Bogle has made possible for the individual investor is truly extraordinary. Thanks to his creation of no-load, low-cost, tax-efficient mutual funds, millions of investors enjoy significantly greater returns on their investment dollars than they otherwise would have. His introduction of the first index fund for retail investors was labeled Bogle’s Folly by its detractors. Today, that same fund, Vanguard’s 500 Index fund, is the largest mutual fund in the world. Thanks to Jack Bogle, more of each investor’s money is put to work for them instead of going into the pockets of brokers, fund managers, or the taxman. For the everyday investor this translates into items such as nicer homes for families, college educations for children, more enjoyable retirements for seniors, and more money to be passed on to loved ones and causes they care about. Although a few other investment fund families have joined the low-cost revolution, it was Jack Bogle who sounded the bugle and led the charge, and it’s Vanguard that continues to lead the way.
So why am I including the Bogleheads portfolio in the performance updates going forward? Clever readers may have noticed I’m using the term “comparison portfolio” instead of “benchmark” in this post to describe the portfolio. I may not always clearly make that distinction in future posts (so please forgive me in advance!), but I’m doing it now to convey the technical point that I’m not claiming the Bogleheads portfolio will be of comparable riskiness to Prime and Select portfolios. As I mentioned in the September performance update and discuss further below, the Bogleheads portfolio includes a 20 percent allocation to bonds, which by itself might reasonably lead to an expectation that the portfolio will be less risky and generate lower returns over the long term than either the Stoney Point portfolios or the S&P 500 (which are all-equity portfolios). The Bogleheads portfolio is, however, arguably a salient and plausible alternative investment portfolio for readers of this site, so it’s worth considering how Stoney Point’s portfolios stack up against it. Such is my aim going forward. It will simply be important to recall that the Bogleheads portfolio is likely less risky than the Stoney Point portfolios and the S&P 500 and therefore should, in principle, generate lower returns. To the extent that’s true, comparing the returns of the Bogleheads portfolio to these portfolios can seem a bit unfair to the Bogleheads, so, in the interest of transparency and clarity, we’ll be presenting some information periodically about how all of these portfolios compare on a risk-adjusted basis using Sharpe ratios.
One other quick, but important note about all this: at the end of last month I mentioned that I may play a little bit with the asset allocation for the “Bogleheads” portfolio. It wasn’t immediately clear what Larimore, et al. were recommending for a specific implementation of the “Young Investor’s Asset-Allocation” portfolio, as they only listed broad asset classes. Taking another look at the Larimore, et al., book, however, they do in fact offer a recommended portfolio for a “[y]oung [i]nvestor” based on specific Vanguard index mutual funds: a portfolio comprising an 80 percent allocation to Vanguard’s Total Stock Market Index Fund (VTSMX) and a 20 percent allocation to Vanguard’s Total Bond Market Index Fund (VBMFX). Going forward, I’m going to be using that portfolio as my representation of the Bogleheads’ expert recommendation, with one modification: mutual funds only trade once per day after the market close, unlike stocks and ETFs, so instead of VTSMX and VBMFX, I’m going to use their ETF analogues, VTI and BND, respectively, which will enable me to look at market-open and intraday pricing. Looking at market-open prices will be important because I’ll calculate the performance of the Bogleheads portfolio assuming re-balancing back into an 80-20 allocation at the beginning of each month (at the open price) for comparability with the re-balancing frequency of the Prime and Select portfolios.
Without further ado, below are some mid-month performance charts (current as of the close on October 16) so you can see what the structure of these tables will look like going forward.
Stoney Point Prime Performance
(10/1/20-10/16/20)
Stoney Point Select Performance
(10/1/20-10/16/20)
What we’re reading (10/17)
“Tech’s Influence Over Markets Eclipses Dot-Com Bubble Peak” (Wall Street Journal). “Technology companies are set to end the year with their greatest share of the stock market ever, topping a dot-com era peak in the latest illustration of their growing influence on global consumers. Companies that do everything from manufacturing phones to operating social-media platforms now account for nearly 40% of the S&P 500, on pace to eclipse a record of 37% from 1999, according to a Dow Jones Market Data analysis of annual market-value data going back 30 years.”
“More Volatility Is Likely Ahead As Rising Cases, Lack Of Stimulus Overshadow Strong Earnings” (CNBC). “Another volatile week may be in store for traders as coronavirus cases rise in the U.S. and Europe while Democrats and Republicans remain at an impasse over new fiscal aid. The Dow Jones Industrial Average and S&P 500 fell for three straight days this week. That slide was the longest losing streak for the averages since mid-September. The two market benchmarks eked out slight gains on Friday to snap their losing streak.”
“The ‘MAGA’ ETF Is Trailing The Market For One Major Reason” (CNN Business). “With less than three weeks until Election Day, President Trump is trailing Joe Biden in the polls. And an ETF whose ticker is the acronym for Trump's famous campaign slogan is lagging the market, too. The Point Bridge GOP Stock Tracker ETF (MAGA), which trades under the symbol MAGA, is down 8% this year -- in sharp contrast to the benchmark S&P 500, which is up 7%.”
“Earnings Were Supposed To Lift The Markets. What Happened?” (Fortune). “Global stocks and U.S. futures are moving in opposite directions with the latter pointing to a weak open. COVID and labor market jitters are weighing heavily on investor sentiment as the stimulus talks bog down. Earnings beats, so far, are failing to lift risk appetite.”
“Will New York Go For Another Wall Streeter As Mayor"?” (Dealbook). “The veteran deal-maker Ray McGuire announced Thursday that he was stepping down as Citigroup’s vice chairman to join the crowded race for New York City mayor. His fellow finance executives sing his praises, but it’s unclear whether that helps or hurts his bid to run a city whose voters have shifted away from the centrist politics of leaders like Mike Bloomberg toward the progressive views of Representative Alexandria Ocasio-Cortez.”
What we’re reading (10/16)
“Morgan Stanley Powers Through Coronavirus Recession With Higher Profit, Revenue” (Wall Street Journal). The banks seem to be doing OK. “Morgan Stanley on Thursday said its quarterly profit rose 25% from a year ago, another big U.S. bank to skate unscathed through the rockiest economy in years. Profit of $2.72 billion, or $1.66 a share, was higher than a year ago and beat analysts’ forecasts. Revenue rose 16% to $11.66 billion.”
“Walmart CEO Doug McMillan To Congress: Get A Stimulus Deal Done” (CNBC). “Walmart CEO Doug McMillon on Thursday called on Congress to work together and pass a stimulus deal to help American families and small businesses. ‘For both sides, I think what they need to keep in mind is that there are Americans that need them, that don’t really care about politics, aren’t really tied up in this election and they just need some help,’ he said, in an interview on CNBC’s ‘Squawk Box.’”
“Amazon Just Had Its Biggest Prime Day Ever. But This Year, It’s Not Hyping That Up” (CNN Business). “Each year Amazon has held Prime Day, the retailer has touted that the savings event shattered prior Black Friday or company sales records. But this year, Amazon took a different tack in its annual announcement on results from the shopping event, playing up how small businesses benefited from Prime Day instead. The change comes as Amazon faces intense scrutiny from lawmakers about its power over independent merchants that sell goods through its website and other tactics that critics argue stifle competition.”
“‘Young And Dumb’ Traders Have Created A ‘Total Nightmare’ In The Stock Market, Fund Manager Warns” (MarketWatch). Cole Smead at Smead Capital Management thinks Millennials are dumb. But—reminder!—the market is just the aggregation of tens of thousands of individual investors’ assessments. The “wisdom of the crowd”-type thinking suggests that when the market is doing one thing and you’re doing another, you should be very cautious in assuming it’s the market that’s wrong, instead of you.
“Flashy Global Law Firm Accused Of Bilking Trusting Nebraska Senior Citizen” (Dealbreaker). “There’s no older or more successful trick in the fraudster’s playbook than selling something worthless and/or nonexistent to a credulous senior. And so when the fast-talking cosmopolitan lawyers at Jones Day were charged with selling off a German pipe maker about to go belly-up, they (allegedly) knew exactly who to turn to [Warren Buffett]].”