What we’re reading (12/29)
“The Coming Tech-Driven Productivity Leap” (Axios). “The coronavirus pandemic hit the global economy hard in 2020, but the economy may be close to consolidating years of technological advances — and ready to take off in a burst of productivity growth.”
“‘You Checked Tesla The Most’: Robinhood Recaps From A Volatile Year” (New York Times). “In 2020, wild fluctuations in the stock market caused by the pandemic turned millions of people into opportunistic investors. After stocks plunged in March, experienced traders and Nasdaq novices poured their dollars into buzzy tech companies like Tesla and Zoom, as well as businesses bludgeoned by Covid restrictions, including airlines, restaurants and cruises. To reflect a year of volatility and impulsive investments, Robinhood, the popular trading app that has spurred controversy by marketing itself to young people, released a year-end data dump for its users.”
“As 2021 Approaches, Watch Out For A Y2K-Style Stock-Market Correction, Says Strategist” (MarketWatch). “With just a handful of trading days before the year finishes, our call of the day says investors need to brace for a bumpy start to 2021 if we close out the year with stock-market records.”
“JPMorgan Is Acquiring A Major Credit Card Rewards Business In A Bet That Travel Will Rebound Next Year” (CNBC). “JPMorgan Chase has agreed to purchase one of the biggest third-party credit card loyalty operators in a bet that pleasure travel will rebound sharply after the coronavirus pandemic subsides, CNBC has learned.”
“SEC Accuses 23-Year-Old Crypto Hedge Fund Founder Of Fraud” (Reuters). “The U.S. Securities and Exchange Commission has sued a 23-year-old Australian hedge fund founder in Manhattan federal court for allegedly defrauding investors in his $92.4 million cryptocurrency arbitrage fund.”
What we’re reading (12/28)
“Investors Double Down On Stocks, Pushing Margin Debt To Record” (Wall Street Journal). “[As the market soared during the pandemic,] [s]ome investors have been tempted to chase bigger gains—and have exposed themselves to potentially devastating losses—through riskier plays, such as concentrated positions, trading options and leveraged exchange-traded funds. Others are borrowing against their investment portfolios, pushing margin balances to the first record in more than two years, to buy even more stock.”
“Dreading Or Dreaming Of A Return To The Office In 2021” (Washington Post). “The country is deep in the bleakest period of the pandemic, with thousands of Americans dying each day. That reality is not lost on affluent remote workers, who are quick to express gratitude for their own good fortune. They feel guilty complaining about Zoom fatigue and social isolation when they are working in relative safety and comfort. Yet with the Food and Drug Administration’s approval of two coronavirus vaccines, many of these remote employees find themselves imagining the new shape of their work lives in a post-pandemic America. Some glimpse a proverbial light at the end of the tunnel; others see an oncoming train.”
“Does Working From Home Make Employees More Productive?” (The Economist). “Both employers and employees have grumbled that the shift to home-working has been disruptive. But according to new research by Natalia Emanuel and Emma Harrington, two doctoral students in economics at Harvard, firms may be better off.”
“Equities Likely To Grow, But Finding Yield Remains Difficult” (CNBC). “Bottom-scraping interest rates in 2020 were a major factor fueling a stock market that, after plummeting in March from the pandemic, rallied to post a banner year. Low interest rates also vexed investors seeking yield from bonds purchased to diversify portfolios and reduce risk. But while bond yields likely will remain paltry in 2021, much higher yields are available from alternative fixed-income investments that individual investors typically overlook.”
“This Japanese Shop Is 1,020 Years Old. It Knows A Bit About Surviving Crises.” (New York Times). “Naomi Hasegawa’s family sells toasted mochi out of a small, cedar-timbered shop next to a rambling old shrine in Kyoto. The family started the business to provide refreshments to weary travelers coming from across Japan to pray for pandemic relief — in the year 1000. Now, more than a millennium later, a new disease has devastated the economy in the ancient capital, as its once reliable stream of tourists has evaporated. But Ms. Hasegawa is not concerned about her enterprise’s finances.”
January picks available soon
Reminder: we’ll be publishing our Prime and Select picks for the month of January on or before 12/31. As always, we’ll be measuring SPC’s performance for the month of December, as well as SPC’s cumulative performance, assuming the sale of the December picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Thursday, December 31). Likewise, performance tracking for the month of January will assume the January 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, January 4).
Stay tuned for the new picks and the performance updates and be sure to follow us on Twitter (@StoneyPointCap).
What we’re reading (12/17)
“Trump Signs COVID-19 Relief Package After Threatening To Derail It” (NPR). “President Trump has signed a coronavirus relief and spending package after threatening to derail the bill by calling for changes after it had passed Congress. The White House announced the signature Sunday night. The move puts an end to the uncertainty over when millions of Americans will receive the desperately needed economic relief provided by the massive package. The legislation includes more than $900 billion in aid for individuals and small businesses.”
“Search Engine Start-ups Try To Take On Google” (Financial Times). “A new batch of search engine start-ups positioning themselves as potential rivals to Google is hoping that growing regulatory pressure will finally reverse two decades of the search giant’s dominance. The latest challengers include Neeva, launched by two former Google executives, and You.com, founded by Salesforce.com’s former chief scientist, as well as Mojeek, a UK-based start-up with growing ambitions to build its own index of billions of web pages.”
“Insiders Cash Out Via IPOs As Investor Optimism Becomes Excessive, NDR Says” (Business Insider). “Company insiders are taking advantage of ‘excessive optimism’ among investors and cashing out via IPOs and secondary offerings, according to a note from Ned Davis Research. A survey conducted by the National Association of Active Investment Managers has registered above 100% invested for five weeks in a row. The survey suggests that optimism is high and active managers are fully invested.”
“New York Healthcare Provider May Have Fraudulently Obtained Vaccine Doses” (CNBC). “Doses of the coronavirus vaccine may have been wrongfully obtained and distributed throughout parts of New York, the state’s top doctor said Saturday…[t]he vaccine doses allegedly diverted for ‘members of the public’ circumvent the state’s plan to prioritize the inoculation of frontline healthcare professionals and residents of long-term care facilities, Zucker said. New York’s initial rollout of the vaccine it still limited to hospitals and nursing homes.”
“Washington’s Secret To The Perfect Zoom Bookshelf? Buy It Wholesale.” (Politico). “Books by the Foot, a service run by the Maryland-based bookseller Wonder Book, has become a go-to curator of Washington bookshelves, offering precisely what its name sounds like it does…[w]hen the coronavirus pandemic arrived, Books by the Foot had to adapt to a downturn in office- and hotel-decor business—and an uptick in home-office Zoom backdrops for the talking-head class.”
What we’re reading (12/25)
Merry Christmas!
“Are You Sure You Want To Go Back To The Office?” (New York Times). “When I talked to dozens of analysts, H.R. experts, architects, consultants, real estate agents and office furniture designers, the consensus was clear: The future of office work is flexibility. At one end of that flexibility spectrum, there will be fully ‘distributed’ companies like the software maker GitLab, with no headquarters and employees scattered across the world. At the other, there’ll be more old-fashioned organizations that demand face time in the office, but whose belief in the infeasibility of remote work has been permanently undercut. And then there’s the vast, corporate in between.”
“Covid-19 Caused Chaos For Investors In 2020. These Hedge Funds Earned Billions.” (Wall Street Journal). “For the year through November, stock picking hedge funds posted their best performance relative to the total-return of the S&P 500 since 2010, according to data provider HFR, earning 11.9%. Their strong showing in 2020 partly reversed their underperformance relative to a portfolio of stocks and bonds over a one, three, five and 10-year period, according to Goldman Sachs Group Inc.”
“Some NYSE Operations To Return To Remote Work Amid Case Surge” (NBC News). “Some New York Stock Exchange workers will return to remote working amid a surge in Covid-19 cases in the largest city in the U.S. ‘On Monday, December 28, 2020, in response to changes in the NYC-area public health conditions, NYSE Designated Market Makers (DMMs) will temporarily return to remote operations (with limited exceptions),’ the NYSE said in a statement on Tuesday.”
“Biden’s Post-Election Stock Market Bump Is Easily Beating Trump’s” (CNN Business). “The Biden era is off to a roaring start on Wall Street, even surpassing the euphoria following President Donald Trump's upset victory in 2016. The S&P 500 has surged 10% since Election Day to all-time highs. That nearly doubles the 5.5% rally during the same post-election period in 2016.”
“Michael Jackson’s Neverland Ranch Sold To Billionaire” (ABC News). “Michael Jackson’s Neverland Ranch in California has found a new owner in billionaire businessman Ron Burkle. Burkle views the 2,700-acre property in Los Olivos, near Santa Barbara, as a land banking opportunity, his spokesman said Thursday in an email. The Wall Street Journal reports the property was sold for $22 million to Burkle, an associate of the late pop star and co-founder of the investment firm Yucaipa Companies. The asking price of the property was $100 million in 2016 then dropped to $67 million a year later.”
What we’re reading (12/24)
Merry Christmas Eve!
“Stocks Pare Gains; What The Santa Claus Rally Says About The Stock Market” (Investor’s Business Daily). “The Russell 2000 jumped to a 0.9% lead in Thursday's early market but reversed lower and was off 0.4% at midday. The small-cap benchmark is still up about 10% this month, adding to a record 18% surge in November. For the year, the Russell 2000 is up nearly 20%, beating the S&P 500's 14.3% increase. The Nasdaq composite and S&P 500 had only a sliver of a gain left, trading less than 0.1% higher at midday. The Dow Jones Industrial Average was flat.”
“Britain And E.U. Reach Landmark Deal On Brexit” (New York Times). “Britain and the European Union struck a hard-fought trade agreement on Thursday, settling a bitter divorce that stretched over more than four years and setting the terms for a post-Brexit future as close neighbors living apart. The deal, which must be ratified by the British and European Parliaments, came together in Brussels after 11 months of grinding negotiations, culminating in a last-minute haggle over fishing rights that stretched into Christmas Eve, just a week before a year-end deadline.”
“Stocks Ready To Close Out Powerful 2020 As Risks Loom In January” (CNBC). “At the close of trading next Thursday, the bull market will be ready to run into 2021 but probably at a slower pace. January is the month that Wall Street tradition says sets the tone for the year—‘so goes January, so goes the year,’ as the saynig goes. This January could be challenging, with the spreading pandemic slowing the economy and the important Georgia Senate run off elections on Jan. 5.”
“States Are Doing Battle For Your Tax Dollars” (Dealbreaker). “If you've seen The Sopranos, you know it's not feasible to ‘tax’ someone outside of your jurisdiction. With work-from-home becoming a reality in 2020 (and states desperate for tax revenue) a fight is brewing in the Supreme Court over which state has the right to tax remote workers' pay.”
“Covid-19 Stimulus Package Delivers A Christmas Haul For Loggers” (Wall Street Journal). “[T]ucked inside the new $900 billion coronavirus relief package passed by Congress, but facing an uncertain fate with President Trump, is $200 million in aid for the loggers and the trucking companies that transport their wares to paper mills and other processing facilities. The reason: an only-in-Washington tale of the importance of lobbying and political connections.”
What we’re reading (12/22)
“How Amazon Wins: By Steamrolling Rivals And Partners” (Wall Street Journal). “Jeff Bezos built Amazon.com Inc. from his garage with an underdog’s ambition to take on the establishment. He imbued staff with an obsession to grow fast by grabbing customers using the biggest selection and lowest prices. Today, he has more than 1.1 million employees and a market valuation around $1.6 trillion. But Amazon never really grew up. Mr. Bezos still runs it with the drive of a startup trying to survive.”
“Goldman Sachs, Once Reserved For The Rich, Is Close To Offering Wealth Management For The Masses” (CNBC). “Goldman Sachs has for decades set its sights on the global elite when it comes to wealth management. Now, it’s opening up to everyone else. The bank has begun internal testing of a new automated investment service ahead of a broader rollout early next year, according to an email obtained exclusively by CNBC. Employees who sign on to the digital service, called Marcus Invest, will pay an annual management fee of 0.15%, according to the company memo.”
“The Stimulus Deal: What’s In It For You” (New York Times). “Another dose of relief is finally on the way for the millions of Americans facing financial distress because of the coronavirus pandemic. Congress on Monday night passed an economic relief package that will provide a round of $600 stimulus payments to most Americans and partly restore the enhanced federal unemployment benefit, offering $300 for 11 weeks. The agreement also contains provisions related to student loans, rental assistance and medical bills. The legislation, which is 5,600 pages long, would provide welcome, albeit temporary, assistance to many. How quickly the money reaches your pocket will depend on several factors, though.”
“Apple’s Market Value Grows By $102 Billion After Report Says The Company Aims To Produce Electric Cars By 2024” (Business Insider). “Apple gained 4.7% on Tuesday following a Reuters report on Monday that said the iPhone maker planned to produce electric cars by 2024. The tech giant aims to compete in the rapidly expanding electric-car market with new battery technologies to improve vehicles' safety and range, according to the report. That could ‘radically’ cut down on battery costs, a source familiar with the plans told Reuters.”
“There Is At Least One Law Danske Bank Hasn’t Broken” (Dealbreaker). “Danske Bank has certainly done a great number of things wrong. Laundering money, mostly, and lots of it, for lots of people on a list of people for whom it should most especially not been laundering money. It was also, predictably and necessarily, given the above, pretty bad at detecting money laundering or listening to those who did. And, of course, it did business with Deutsche Bank, a serious enough lapse in judgement in and of itself, even before you realize that most of that business was—you guessed it—laundering money. But one thing it does not seem to have done wrong is violate U.S. sanctions while doing all of that money laundering.”
Prime and Select crushing it again this month
A little mid-month performance update (through Friday’s close). Happy Winter Solstice!
Prime Picks v. SPY (12/1-12/18)
Select Picks v. SPY (12/1-12/18)
What we’re reading (12/21)
“Stimulus Deal Provides Economic Relief, For Now” (New York Times). “The congressional agreement on a $900 billion dose of aid to fuel the slowing economic recovery has probably spared millions of Americans from a winter of poverty and kept the country from falling back into recession…[but] [t]he injection of money comes months too late for tens of thousands of failed businesses, however, and it may not be enough to sustain unemployed workers until the labor market rebounds. Moreover, it could be the last help from Washington the economy gets anytime soon.”
“Stocks Around The World Slump As Virus Mutation Hits Economy” (ABC News). “Stocks are slumping Monday as a new, potentially more infectious strain of the coronavirus has countries around the world restricting travel from the United Kingdom, raising worries that the economy is about to take even worse punishment. The S&P 500 was 1.9% lower in morning trading, putting it on track to fall for a second day from its record set on Thursday. The Dow Jones Industrial Average was down 379 points, or 1.3%, at 29,799, as of 10:23 a.m. Eastern time, and the Nasdaq composite was 1.7% lower.”
“Wall Street Analysts Make A Big S&P 500 Call For 2021. Market History Says Ignore Them” (CNBC). “[Equity research] [a]nalysts have overestimated the year-end price for the S&P 500 in 12 of the past 15 years, according to a recent analysis from FactSet. Based on the average overestimation, the S&P 500 could actually end 2021 below its current levels.”
“Walmart Is Attempting To Solve One Of The Biggest Pain-Points Of Online Shopping” (CNN Business). “Walmart is attempting to solve one of the biggest pain-points of online shopping — the dreaded return — with a new service. The retailer announced Monday that it will pick up items shipped and sold by Walmart.com from customers' homes through a new partnership with FedEx (FDX). Walmart said the ‘incredibly convenient’ option is free and will remain in place beyond the busy holiday shopping season.”
“The Journalist And The Pharma Bro” (Elle). “Over the course of nine months, beginning in July 2018, [reporter Christie] Smythe quit her job, moved out of the apartment, and divorced her husband. What could cause the sensible Smythe to turn her life upside down? She fell in love with a defendant whose case she not only covered, but broke the news of his arrest. It was a scoop that ignited the Internet, because her love interest, now life partner, is not just any defendant, but Martin Shkreli: the so-called ‘Pharma Bro’ and online provocateur, who increased the price of a lifesaving drug by 5,000 percent overnight and made headlines for buying a one-off Wu-Tang Clan album for a reported $2 million. Shkreli, convicted of fraud in 2017, is now serving seven years in prison.”
What we’re reading (12/20)
“Here’s A Market Forecast: 2021 Will Be Hard To Predict” (Wall Street Journal). “By their nature, once-in-100-year events are hard to predict. But the real lesson of 2020 is that even correctly predicting fundamentals just isn’t enough. What mattered this year wasn’t earnings, but the speed and scale of the response by central banks and governments, alongside a recognition that the U.S. stock market doesn’t reflect the economy.”
“Are We On The Verge Of Another Financial Crisis?” (Harvard Business Review). “John Macomber, a senior lecturer in the finance unit at Harvard Business School, believes we may be on the verge of a collapse in housing prices and an ensuing financial crisis — this time caused by our failure to acknowledge and confront climate change. In a phone interview and a written email exchange, he shared his reasoning and what the incoming Biden administration can do to prevent this scenario.”
“Trump Signs Bill That Could Lead To Delisting Of Chinese Stocks Including Nio, Li, Xpeng, Alibaba” (Benzinga). “U.S. President Donald Trump has signed a bill calling for the delisting of foreign companies that don't adhere to the same accounting transparency standards that securities regulators impose on public U.S. firms…The Holding Foreign Companies Accountable Act takes aim at Chinese companies and drew rare strong bipartisan support in the U.S. Congress before arriving on Trump's desk. The act says delisting could happen if a given company doesn't comply with audit inspections three years in a row.”
“Pain, Despair And Poverty Reach Fever Pitch For Unemployed Workers” (CNBC). “It has been nine months since the coronavirus pandemic began its assault on American livelihoods. Since then, financial desperation has steadily grown for jobless Americans across the country. Almost 8 million people have fallen into poverty since the summer. Savings for many, especially the lowest earners, are either dwindling or gone. Millions of households owe thousands in back rent and utilities — and face a renewed threat of eviction in the new year. A growing share of unemployed individuals say their households don’t have enough to eat.”
“Paul McCartney As A Management Study” (Marginal Revolution). “His vocal range once spanned over four octaves, he is sometimes considered the greatest bass player in the history of rock and roll, and he was the first popular musician to truly master the recording studio, again with zero initial technical or musical education of any sort. He is perhaps the quickest learner the music world ever has seen…[h]e was a very keen businessman in buying up the rights to music IP at just the right time, making him a billionaire.”
What we’re reading (12/19)
“Startup Hedge Fund Turns To Quantamental Analysis For ESG Products” (Waterstechnology). “A newly established investment firm, Changebridge Capital, is applying a ‘quantamental’ approach, combining quantitative screening and fundamental analysis, to find ESG-related investment opportunities in misunderstood and inefficiently priced areas of the stock market.”
“Banks On Alert After Sweep Finds No Evidence Of Major Hack” (Bloomberg). “Bank executives have said for years that their worst nightmare is a successful cyberattack against the industry. Now they’re watching one unfold across government agencies in what could be one of the biggest hacks in U.S. history.”
“Tesla Jumps 6% In Heavy Volume Ahead Of S&P 500 Entry, Stock Then Falls A Bit In After Hours” (CNBC). “Shares of Tesla traded more than four times their 30-day average volume on Friday as passive funds bought the stock ahead of Tesla joining the S&P 500. The stock will be added to the benchmark index ahead of Monday’s opening bell, based on prices from Friday’s close.”
“Travis Scott Is The Latest Entrant In The (Very Crowded) Spiked Seltzer Wars” (CNN Business). “Travis Scott is partnering with Anheuser-Busch on a new agave-spiked seltzer called Cacti, bringing yet another label to the crowded spiked seltzer market. AB InBev (BUD), the brewer of Budweiser, Corona and Stella Artois, announced the new beverage on Thursday. Scott, whose record label is called Cactus Jack, says the seltzer — made with blue agave from Mexico — was inspired by his love of tequila. It will come in lime, pineapple and strawberry flavors.”
“Stuck At Home, People Are Splurging On Wine And Spirits” (New York Times). “The pandemic has been a boon to retail alcohol sales of all kinds. Beer sales are up, as are those of wine and vodka. Even the lowly vermouth — the anonymous mixer that blends with the name-brand spirits in martinis and Manhattans — has seen a spike in business as consumers substitute drinking at home for visits to local bars or restaurants.”
What we’re reading (12/18)
“A Moment Of Reckoning: The Need For A Strong And Global Cybersecurity Response” (Microsoft). “The final weeks of a challenging year have proven even more difficult with the recent exposure of the world’s latest serious nation-state cyberattack. This latest cyber-assault is effectively an attack on the United States and its government and other critical institutions, including security firms. It illuminates the ways the cybersecurity landscape continues to evolve and become even more dangerous. As much as anything, this attack provides a moment of reckoning.”
“Largest U.S. Cryptocurrency Exchange Coinbase Files For IPO As Bitcoin Soars Past $23,000” (CNBC). “Digital currency exchange Coinbase is going public as renewed investor interest in cryptocurrencies has pushed bitcoin to an all-time high. On Thursday the company announced that it has confidentially submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission. The form is expected to go into effect after the SEC completes its review process.”
“Are IPO Pops Signs Of Market Irrationality” (Marginal Revolution). “It’s all a bit like a restaurant on a Saturday night. If the place is seen as “cool” — whether because of its food and service (the product), its setting (the physical asset) or its ambience (the brand) — there will be a line out the door. Otherwise it will be fairly empty. Furthermore, the presence of a line will draw continued interest over time. It is hard or maybe even impossible to set prices so that every table is filled yet there is no line. To deploy some technical language, the demand curve may be discontinuous.”
“Landlords Are Running Out Of Money. ‘We Don’t Get Unemployment’” (CNN Business). “As the coronavirus pandemic drags on -- with unemployment still high, government support dwindling and the status of future stimulus unknown -- landlords are suffering…[a] national ban on evictions, put in place by the Centers for Disease Control and Prevention to stop the spread of the virus, has meant many landlords must continue to pay to maintain and finance their properties with less rent coming in and no recourse to remove non-paying tenants”
“Google’s Legal Peril Grows In Face Of Third Antitrust Suit” (New York Times). “More than 30 states added to Google’s mushrooming legal woes on Thursday, accusing the Silicon Valley titan of illegally arranging its search results to push out smaller rivals.”
What we’re reading (12/17)
“What Happens When The 1% Go Remote” (Bloomberg). “In the long run, cities’ ability to attract new generations of innovative and creative talent will ensure their financial survival. But if policies don’t change, their budgets will suffer in the meantime, and their least-advantaged people and neighborhoods will bear the brunt of it as budget cuts and austerity measures eliminate key services. If things get bad enough — as they did in New York in the 1970s — it could take them quite a while to restore their budgets.”
“Ten States Sue Google, Alleging Deal With Facebook To Rig Online Ad Market” (Wall Street Journal). “Ten states sued Google Wednesday, accusing the search giant of running an illegal digital-advertising monopoly and enlisting rival Facebook Inc. in an alleged deal to rig ad auctions that was code-named after ‘Star Wars” characters.’”
“China Rental Company’s Shares Have Cratered 76% This Year As The Shine Of Debt-Fueled Growth Fades” (CNBC). “Danke, founded in 2015, leases properties from owners on a long-term basis, refurnishes them, and then rents them out. The business model entails getting more money back from renters than Danke has paid to lease the apartment. Danke touts itself as a tech company, claiming that data, artificial intelligence and its IT infrastructure are the “backbone” of its business.”
“Russia’s Hacking Frenzy Is A Reckoning” (Wired). “This week, several major United States government agencies—including the Departments of Homeland Security, Commerce, Treasury, and State—discovered that their digital systems had been breached by Russian hackers in a months-long espionage operation. The breadth and depth of the attacks will take months, if not longer, to fully understand. But it's already clear that they represent a moment of reckoning, both for the federal government and the IT industry that supplies it.”
“Sheriff Of Boston-Ham Comes For Robinhood” (Dealbreaker). “[Y]ou can be sure that if you give Secretary of the Commonwealth Bill Galvin a new law with which to bludgeon the financial services industry, he’ll do so. Especially if the object of the bludgeoning has proven itself of richly deserving thereof.”
What we’re reading (12/16)
“What Happens To The Unemployed When The Checks Run Out” (New York Times). “When jobless workers get their last unemployment check, the effect on spending is sharp and swift…spending on food, clothes and other so-called nondurable goods immediately drops 12 percent, about twice as much as when they lost their job and went on unemployment insurance, University of Chicago researchers have found. Spending at drugstores falls 15 percent. Co-payments for visits to the doctor fall 14 percent. Spending on groceries falls 16 percent, or $46.30 a month, on average. Millions of Americans are less than two weeks from cutbacks like those. The last two federal emergency unemployment programs in the CARES Act, passed as the pandemic’s first wave surged in March, expire on Dec. 26.”
“Robert Shiller Calls Stocks ‘Highly Priced,’ But Wouldn’t Cash Out” (CNBC). “Nobel Prize-winning economist Robert Shiller believes the fear of missing out is fading. According to Shiller, the market phenomenon was the major narrative driving the historic rally off the March 23 low — as the world entered the throes of the coronavirus pandemic. But with big gains in the rearview mirror, Shiller isn’t turning bearish. ‘The market is highly priced, but it’s not so high that I wouldn’t consider it as an investment,’ the behavioral economics expert told CNBC’s “Trading Nation” on Tuesday.”
“There’s A Reason To Be Bullish On Stocks In 2021, Too” (CNN Business). “[T]his once-in-a-generation global health crisis was met with an almost unprecedented globally coordinated fiscal and monetary response, both of which have led to historically low interest rates and that are likely stay this way until the world can finally free itself from the pandemic. The combination of these conditions has typically supported continued stock market gains in the past, and we see no reason for 2021 to be any different.”
“Pfizer And Moderna Will Make Bank On Their Vaccines” (Dealbreaker). “Yesterday was a big day. Just over three-quarters of a year since the start of the pandemic, the inoculation process began in the U.S. Wall Street analysts predict a significant haul for Pfizer and Moderna, anticipating the firms will earn a collective $32 billion from the vaccines in 2021 alone. Talk about a shot in the arm.”
“The EU Unveils Its Plan To Rein In Big Tech” (The Economist). “A year ago Europe was being hailed as a regulatory superpower in technology. Countries around the world copied its strict new privacy law, the General Data Protection Regulation (GDPR), while America’s government scarcely tried to exercise any control over a fast-moving industry. The positions have since been reversed. This autumn the European Court of Justice quashed a €14bn ($17bn) fine on Apple levied by Margrethe Vestager, the EU’s competition chief, in a huge setback for the bloc’s antitrust strategy. And America has found new purpose. In October Congress published a lengthy report on how to update competition law.”
What we’re reading (12/15)
“Meghan Markle Is Investing In A Trendy Oat Milk Latte Company” (CNN Business). “Meghan Markle, the Duchess of Sussex, is betting big on oat milk. Markle said Monday she invested in instant oat milk latte company Clevr Brands, which sells four flavors of its powdered drink for $28 per 14-serving bag. The company says its products are sustainable, ethically sourced and healthful.”
“Pricey Stocks May Yet Head Higher As Uneven Economic Recovery Maintains Grip On U.S.” (Washington Post). “[T]he bull market may just be getting started. With the Federal Reserve planning to hold its benchmark lending rate near zero for at least three years, stocks are likely to remain attractive in comparison with bonds, according to investment strategists.”
“Tech I.P.O.s Take A Breather” (DealBook). “Wall Street is increasingly muttering the “B” word: bubble. Airbnb’s $83 billion market cap is more than that of Marriott, Hilton and Hyatt combined, while DoorDash’s $56 billion market cap is bigger than that of most restaurant chains. The median valuation of tech I.P.O.s this year is 24 times trailing revenue, the University of Florida professor Jay Ritter told The Wall Street Journal. That measure for the Nasdaq Composite Index is currently 4.3 times, while for tech I.P.O.s for most of the 2010s it averaged about six times.”
“Congress Warms To Possible Covid Stimulus Deal” (Politico). “A bipartisan group of senators finally hit paydirt in its long-running coronavirus relief negotiations. And it may provide a pathway to a deal that has eluded Congress for months.”
“Exxon Promises To Cut Greenhouse-Gas Emissions, End Flaring by 2030” (Wall Street Journal). “Exxon Mobil Corp. pledged to reduce greenhouse-gas emissions from its operations over the next five years and eliminate routine flaring of methane by 2030, responding to pressure from activists and investors to lower its carbon footprint. The Texas-based oil giant said Monday that it would cut the “intensity” of emissions from its oil-and-gas production by 15% to 20% by 2025. It didn’t provide hard numbers on exactly how much of total emissions those reductions would represent.”
What we’re reading (12/14)
“Jamie Dimon May Be Open To Relocating Chunks Of JPMorgan Chase From NYC” (New York Post). “When Jamie Dimon took over as CEO of JPMorgan Chase 15 years ago, he noticed something strange: Occupying the bank’s most expensive real estate, with prime Park Avenue views, was a floor full of computer servers. Dimon, according to JPMorgan insiders, asked why couldn’t those same servers be located in, say, Columbus, Ohio, where the real estate costs are much lower? I can’t tell you where JPMorgan eventually put those servers other than to say they aren’t located in the Big Apple anymore. And the same will soon be said of many other banks and financial businesses now seeking to move out of the once-friendly confines of New York City, which isn’t so friendly anymore.”
“The War On Cocoa: Hershey Co. Accused Of Not Upholding Sustainability Efforts In West Africa” (NBC News). “It has been a bitter holiday season for the maker of foil-wrapped Hershey's Kisses. For nearly a month, a battle has been raging between the Hershey chocolate company and the West African farmers who harvest many of its cocoa beans. And it appears that the long-disenfranchised farmers may have scored a rare win. The dispute began in November, when cocoa industry traders noticed that an unnamed source had purchased so many cocoa beans in the futures market that prices rose by more than 30 percent.”
“Google Suffers Widespread Outage Affecting Gmail, YouTube, Other Services” (Wall Street Journal). “More than a dozen Google services, including Gmail and YouTube, were offline in swaths of the globe Monday morning, interrupting access for both individuals and businesses. The Alphabet Inc.-owned company’s services showed errors for users attempting to sign in or access their emails or their files using Google’s Drive services, according to social-media postings from users. On YouTube, the home page was replaced with an illustration of a monkey with a hammer, with the title, ‘oops.’”
“A Hedge Fund Vet Makes A Fresh Start In The Pandemic” (Institutional Investor). “It’s been a good 2020 for John Thaler, who decided to stage a comeback in January after shutting down JAT Capital in 2015. After delivering eye-popping returns so far this year, Thaler’s new firm, Hampton Road Capital Management, is forming a strategic relationship with Leucadia Asset Management, the asset management division of Jefferies Financial Group…[a]ccording to an investor letter distributed early Friday and obtained by Institutional Investor, Hampton Road is up 39.4 percent net year-to-date through December 10.”
“Beware These 15 Worst States For Taxes On Your Retirement” (Yahoo! Finance). “Maybe you want to spend your retirement somewhere sunny. Or maybe a view of the mountains is more your style. But before you start making plans, it’s worth looking at the tax situation in any state you’re considering. Some places impose significantly harsher taxes on retirees than others.”
Mid-month performance update
I mentioned a few days ago we’d be putting through some updates to our historical performance stats in response to a major upgrade by our primary data provider (IEX cloud, the Intercontinental Exchange’s API service). I’m happy to write that most of the bugs in their historical pricing database seem to have been worked out by now and, accordingly, we’ve updated everything on the back end over here at Stoney Point. With that preamble, below is latest cumulative performance chart for our picks from May 4 (the first trading day for our inaugural stocks picks) through December 11 (the most recent trading day as of this writing. The chart pretty much speaks for itself: our Prime picks have blown the market out of the water to date. Our free Select picks haven’t been nearly as exciting (as expected), and are performing pretty much in-line with the Bogleheads 80-20 stock-bond portfolio recommended for a hypothetical “young investor.”
Some miscellany in regards to IEX’s platform upgrade:
IEX added a “fully-adjusted” measure of historical prices that incorporates adjustments for both splits and dividends (previously, they only offered split-adjusted prices). This will allow us to automate things quite a bit. Essentially, this measure of prices “bakes” the effect of dividends and corporate actions like stock splits into historical prices so that when you take P(t+1)/P(t)-1 your return will capture the true total return (and therefore we don’t separately need to adjust for dividends). It does mean that if you’re comparing the pricing we report to that provided elsewhere, you’ll need to be sure to compare the third parties’ adjusted prices (rather than their “raw” prices).
In a few cases, returns based on IEX’s current data appear to differ ever so slightly from what we previously reported. This could be due to minor calculation errors on our part, or it could be due to restatements or other adjustments on IEX’s side of things. In any cases, all differences were de minimis in magnitude and, in almost every case, the effect of the differences was to increase the performance of our Prime and Select picks (i.e., based on the most up-to-date data, which now is included everywhere on this site, it appears the performance of our picks has been even better than previously reported).
What we’re reading (12/13)
“U.S. Treasury Breached By Foreign-Backed Hackers: Reuters” (Bloomberg). “Hackers suspected to be working for the Russian government have been monitoring emails at the U.S. Treasury Department and a U.S. agency responsible for deciding policy around the internet and telecommunications, Reuters reported, citing people familiar with the matter.”
“The Triumphs—And Troubles—Of Citi Research” (Institutional Investor). “In just four years, Citi had risen rapidly up the rankings of investment research houses, defying the regulatory burdens and shrinking client wallets that threatened the larger sell-side industry…Citi’s improvement in the [Institutional Investor] rankings reflected an intentional investment on the part of the bank’s equities leaders, who had a stated goal of making Citi into a top-three research provider. But even as Citi analysts racked up votes in II’s surveys, cracks had started to form in the bank’s research division.”
“Elliott Management Has Significant Stake in Public Storage” (Wall Street Journal). “Elliott Management Corp. has built a significant stake in Public Storage and privately nominated six directors to the self-storage giant’s board, according to people familiar with the matter. Representatives of Elliott and Public Storage, which has a market value of $38 billion, have had multiple discussions in recent weeks about changes that could be made at the company, the people said.”
“15% Of Millennials Now Expect To Retire Early, Study Finds—Here’s Why” (Grow). “A recent study by Northwestern Mutual shows that while 20% of Americans expect that the pandemic will force them to retire later than they’d previously expected, another 10% expect to retire early. That number is even higher among millennials, 15% of whom now expect to retire early.”
“Companies Have Raised More Capital In 2020 Than Ever Before” (The Economist). “In March the corporate world found itself staring into the abyss, recalls Susie Scher. From her perch overseeing global capital markets at Goldman Sachs, a bank, she witnessed firms scrambling for money to keep going as the wheels of commerce ground to a halt amid the pandemic. Many investors panicked. Surely, the thinking went, public markets would freeze in the frigid fog of covid-19 uncertainty—and then stay frozen. Instead, within weeks they began to thaw, then simmer, kindled by trillions of dollars in monetary and fiscal stimulus from governments desperate to avert an economic nuclear winter. In the past few months they have turned boiling hot.”
What we’re reading (12/12)
“Pfizer And Moderna Could Score $32 Billion In Covid-19 Vaccine Sales — In 2021 Alone” (CNN Business). “Wall Street analysts are projecting Pfizer and Moderna will generate $32 billion in Covid-19 vaccine revenue -- next year alone. That doesn't take into account the goodwill boost these companies will receive by helping to end the worst pandemic in a century. That boost is magnified for Moderna (MRNA), a young biotech company that few people had heard of before 2020 that could now be on the cusp of getting its own FDA authorization.”
“‘Facebook Has Destroyed This F--king Town’: Facing A Legal Onslaught, Mark Zuckerberg Gets Ready To Fight Back” (Vanity Fair). “You would think that Facebook’s stock would have taken a vertiginous fall on Wednesday. That the company’s valuation would have been cut by double- or even triple-digit billions of dollars. That the sky over Facebook would have fallen, and it would have felt as if the end of the world was nigh…[a]nd yet, while Facebook’s valuation fell by a couple of percentage points on Wednesday, its stock didn’t look much different than it would on any typical day on Wall Street for the social network. That’s because Wall Street doesn’t believe that the FTC and 48 state attorneys general will, and can, break up Facebook.”
“AstraZeneca Agrees To Buy Alexion For $39 Billion” (Wall Street Journal). “The deal comes at a pivotal time for AstraZeneca, which is in late-stage development of a leading Covid-19 vaccine developed in partnership with the University of Oxford. The vaccine is being reviewed by U.K. and European drug regulators, and could be authorized for emergency use in the U.K. within weeks, scientists involved in it have said.”
“Three Of The 10 Biggest Tech IPOs Have Happened In 2020—Including Two In The Last Week” (CNBC). “[DoorDash, Airbnb, and Snowflake] each raised over $3 billion and have market caps between $55 billion and $100 billion, putting them among the 30 most valuable U.S. tech companies. Before going public they commanded valuations in the double-digit billions, attracting large checks along the way from private equity firms, fund managers, strategic investors and sovereign wealth funds.”
“Ex-Hedge Fund Manager Better Hope The Next Judge He Sees Doesn’t Think He’s A Thief And A Liar” (Dealbreaker). “When last we checked in with Dan Kamensky, he was begging his bank ‘not to put me in jail’ on account of having allegedly bullied said bank into not bidding for a thing he wanted, which higher bid would have been very good for the Neiman Marcus creditors committee on which he served, closing down that hedge fund—Marble Ridge Capital—as a result, forcing that hedge fund into the awkward position of arguing that doing so didn’t actually hurt the bankrupt retailer, and oh yea getting arrested and sued by the SEC. So, uh, how much worse can things get for the disgraced hedge fund manager? Well, quite a bit worse, actually.”
What we’re reading (12/11)
“Pandemic Villains: Robinhood” (Matt Taibbi). “It’s the perfect mousetrap, among other things because of its name. ‘That’s the other thing,’ says Brewster. ‘They call it Robin Hood.’ Instead of stealing from the rich and giving to the poor, the American version takes in the young and sells them to computer-powered hedge funds; this Robin Hood is the house that always wins. If there’s a more brilliant metaphor for capitalism in the Covid age, it’s hard to imagine.”
“The Covid Divide: The Pandemic Has Plunged Some Into Poverty, And Boosted Savings For Others” (CNN Business). “For many Americans, the economic effects of the pandemic have been devastating. Millions have lost jobs. Food and housing insecurity has soared. And roughly half of US households reported a drop in income this year, according to Bankrate.com….But others -- lucky enough to keep their jobs and even work from home -- have ended up financially better off, or at least unaffected, thanks to such factors as a rising stock market, increased savings, or a boost in demand for their business.”
“The Latest Trend Among TikTok Stars: Investing Their Popularity” (NBC News). “TikTok stars are known for setting trends on social media, but their latest isn't a dance sequence or popular video. More and more young TikTok stars are turning to venture capital investing as they turn their millions of followers and online popularity into massive fortunes.”
“Disney Unloads A Slew Of Impressive Disney+ Announcements, Announces Price Hike” (CNBC). “Disney is pulling out all the stops for its streaming services. On Thursday, the company revealed a slew of impressive Disney+ announcements, with over 100 movies and shows connected to franchises like Star Wars, Marvel, FX and National Geographic. The company’s newly minted strategy, which focuses heavily on its year-old streaming service Disney+, is all about “quality not volume,” Disney’s chairman and former CEO Bob Iger said during its Investor Day presentation. Iger, who left the helm of the company nine months ago to focus on content, said ‘quality holds value.’”
“GEs Feel-Good Accounting, Which Invented $6.2 Billion Fake Dollars, Costs Company 200 Million Real Ones” (Dealbreaker). “GE can’t afford very much at all these days, so it probably goes without saying that the $200 million check it now has to cut to the SEC isn’t ideal. Of course, it probably should have thought about that before instituting accounting practices—if you could be so generous as to call them ‘practices’—that had more to do with its former CEO’s relentlessly positive ethos than anything approaching reality.”