Stoney Point 2/1/21 Stoney Point 2/1/21

What we’re reading (2/1)

“Robinhood And Citadel’s Relationship Comes Into Focus As Washington Vows To Examine Stock-Market Moves” (Washington Post). “Robinhood routes more than half of its customer orders to Citadel, by far its largest market-making partner by volume, Robinhood disclosures show. The app also works with Virtu, G1 Execution Services, Wolverine and Two Sigma.”
“GameStop Saga Heads To Netflix And The Big Screen” (Wall Street Journal). “Separate projects at Netflix Inc. and Metro-Goldwyn-Mayer Inc. are already in development about the past week on Wall Street, in which an investing-focused group on a Reddit message board banded together to boost the share prices of struggling companies such as GameStop Corp. and AMC Entertainment Holdings Inc., in the process crippling the hedge funds that had bet against them.”
“Borrowing Costs For Risky Companies Push Towards Historic Lows” (Financial Times). “The riskiest companies in the world are enjoying the benefits of the global hunt for higher returns, sending the yield on the dollar denominated debt of some of the lowest-rated businesses close to historic lows. The average yield across US triple C rated debt in the US dropped to a recent nadir of 7.6 per cent this month, closing in on its all-time low of 7.3 per cent set in 2014, according to data from Ice Data Services. The drop in yield signals a rally in price for the assets.”
“American Jobs Won’t Return To Pre-Pandemic Levels Until 2024, CBO Says” (CNN Business). “The projection shows just how long the job market still has to go to heal after suffering the steepest loss on record in April, when 20.5 million jobs evaporated and the unemployment rate shot up to 14.7% in a single month.”
“Why Now Is The Right Time To Start Investing In Whiskey” (Worth). “When markets are shaky, investors typically pour capital into ‘safe havens’—asset classes that typically hold up during turbulent times. These are the usual suspects—gold, treasury bills, reserve currencies—tried and tested with long track records and plenty of data to spill over. This exclusive club of go-to assets rarely admits new members, but could that be about to change? An unlikely contender awaits in the wings—whiskey.”

Stoney Point 1/31/21 Stoney Point 1/31/21

January 2021 performance update

Hi folks, here with a quick January performance update. Here are the key numbers for the month:

Stoney Point Prime picks: -0.74%
Stoney Point Select picks: -1.70%
“The market” (S&P 500-tracking SPY ETF): -1.4%
“Bogleheads” (80% VTI, 20% BND): -0.71%

A few notes:

I’m booking this as a pretty solid result: Prime beat the market in a down month and Select was just behind. It’s nearly impossible to be positive every month unless you’re willing to accept really low expected returns (if you are, just buy munis or Treasuries and hold to maturity). For equities, the trick (in my view), is to not go too far below the market in the down months and crush it in the up months, on average, if what you care about is long-term risk-adjusted returns, which is what this community cares about I hope/I think.
It’s worthwhile to mention that Prime managed to outperform SPY even though Prime included TWTR this month. As I observed before, Twitter lost $5 billion in market value early in the month after the company banned former-president Trump from the platform. All told, TWTR’s monthly return was -7.27%.
It surely goes without saying, but the GME craziness in the past week doesn’t directly affect the numbers above. I suppose you could craft some theories about “sentiment” spillovers affecting supply/demand for unrelated stocks in the S&P 500 as a result of the non-stop GME news coverage, but I doubt any such effects would have a big systematic impact on asset prices. In any case, I’m not sure directionally how that would affect things. As I mentioned last week, the chaos did spark a thought that I should look into wrapping some sentiment indicators into my model. Still thinking on that.

As usual, you can check out the position-level January performance for our Prime and Select picks on our performance page and our picks for February here.

Stoney Point Total Cumulative Performance

Stoney Point 1/31/21 Stoney Point 1/31/21

What we’re reading (1/31)

“Melvin Capital Lost 53% in January, Hurt by GameStop and Other Bets” (Wall Street Journal). “Melvin Capital Management, the hedge fund that has borne the brunt of losses from the soaring stock prices of heavily shorted stocks recently, lost 53% on its investments in January, according to people familiar with the firm.”
“Silver Futures Jump 7% As Reddit Traders Try Their Squeeze Play With The Metal” (CNBC). “Futures contracts for silver surged higher on Sunday night as the Reddit-fueled boom in highly shorted stocks appears to be spilling over into the metals market.”
“What’s Next for Crypto Regulation” (DealBook). “[M]arkets and regulators have been here before. ‘The basic, overarching issue is that digital asset innovation has outpaced our regulatory framework,’ said Timothy Massad of Harvard, who is formerly the chairman of the Commodity Futures Trading Commission and has written extensively about crypto asset oversight. ‘That’s not unusual. There’s always a tension between innovation and regulation.’”
“Facebook and Apple Are Beefing Over the Future of the Internet” (Wired). “On Thursday morning, Apple CEO Tim Cook gave a speech explaining his company’s upcoming privacy changes, which will ban apps from sharing iPhone user behavior with third parties unless users give explicit consent. And he made plain that these new policies were designed at least in part with Facebook in mind. Speaking as part of a conference convened for International Data Privacy Day, Cook excoriated the social media business model, which is based on monitoring people’s behavior in order to target ads to them.”
“What Do Consumers Want Now? P&G Bets On Beard Oil, Cleaners” (ABC News). “ Procter & Gamble is cleaning up during the pandemic. The company's sales were up last year, since it happens to make just about everything people needed while staying at home: Charmin toilet paper, Bounty paper towels and Tide laundry detergent. One new product came at the right time: Disinfectant spray Microban 24 was released in February 2020, just before U.S. lockdowns began and as people rushed to find cleaning products that could keep surfaces and door knobs germ-free.”

Stoney Point 1/29/21 Stoney Point 1/29/21

February Prime + Select picks available now

The new Prime and Select picks for February are available starting now, based on a model run put through today (January 29). As a note, we’ll be measuring the performance on these picks from the first trading day of the month, Monday, February 1, 2021 (at the mid-spread open price) through the last trading day of the month, Friday, February 26 (at the mid-spread closing price). If you’re following the strategy perfectly, you’d want to close out your January positions by end-of-trading today, and re-balance at the start of trading next month.

You can check out the latest picks here, and stay tuned for a performance update for January.

Stoney Point 1/29/21 Stoney Point 1/29/21

What we’re reading (1/29)

What were reading (1/28)

“The Fed Must Step Up Again” (Project Syndicate). “The unprecedented fiscal stimulus unleashed in the United States since the start of the COVID-19 pandemic calls for commensurate additional monetary stimulus. The restrictions imposed to control the spread of the coronavirus have caused the deepest global recession since World War II.”
“The Dramatic Evolution Of Emerging Markets” (Morningstar). “Per MSCI, emerging-markets stocks made up about 13% of the global stock market (using the MSCI All Country World Investable Market Index as a proxy) as of the end of 2020. When the MSCI Emerging Markets Index was launched in 1988, these stocks represented less than 1% of the world’s investable equity market capitalization.”
“Fourth Quarter GDP To Show Businesses Spent, But Consumers Held Back” (CNBC). “Year-over-year, the economy is expected to have contracted 3.5% in 2020, according to the CNBC/Moody Analytics Rapid Update survey of economists. It was a year that saw a record pandemic-induced plunge in activity and a sharp snapback. The economy grew by 33.4% in the third quarter, after the second quarter’s sharp contraction of 31.4% The first quarter was also hit by the pandemic, contracting by 5%.”
“Apple’s iPhone 12 Helped Deliver a Record $111.4 Billion Quarter” (Wall Street Journal). “Apple Inc. finished 2020 with its most profitable quarter ever, fueled by an uptick in higher-end iPhone sales and a pandemic-induced surge in demand for its laptops and tablets.”
“Information Avoidance And Image Concerns” (National Bureau of Economic Research). “A rich literature finds that individuals avoid information, even information that is instrumental to their choices…We find that image concerns play a role in driving information avoidance, but a role that is substantially smaller than the common approach in the literature would suggest…We find evidence for other reasons why individuals avoid information, such as a desire to avoid interpersonal tradeoffs, a desire to avoid bad news, laziness, inattention, and confusion.”

Stoney Point 1/27/21 Stoney Point 1/27/21

What we’re reading (1/27)

“An ‘Angry Mob’ On Reddit Is Pushing Up GameStop's Stock Price And Pissing Off A Bunch Of Wall Street Firms” (Buzz Feed). “Investors on Reddit have launched an attack that’s both trolling and serious on Wall Street firms by purchasing shares in GameStop, pushing the stock price up over 480% in a week, costing hedge funds millions of dollars, and skyrocketing young investors’ portfolios and egos.”
“Consumer Financial Protection Bureau, Muzzled Under Trump, Prepares To Renew Tough Industry Oversight” (Washington Post). “The Consumer Financial Protection Bureau, the watchdog created after the 2008 financial meltdown and largely muzzled in the Trump era, is poised to start barking again. The agency will focus first on enforcing legal protections for distressed renters, student borrowers and others facing growing debt that its previous leadership has been lax about imposing during the pandemic.”
“Elon Musk Accuses Amazon Of Trying To 'Hamstring' SpaceX's Starlink Satellite Project, But Amazon Says SpaceX Is Trying To 'Smother Competition'” (Business Insider). “Elon Musk came after Amazon in a tweet on Tuesday, accusing it of trying to ‘hamstring’ his aerospace company, SpaceX. SpaceX and Amazon both have high-speed internet satellite projects: Starlink for SpaceX, Project Kuiper for Amazon. SpaceX is currently trying to convince the Federal Communications Commission (FCC) to allow it to bring some of its Starlink satellites to lower altitudes than originally planned. Other companies, including Amazon, have protested the request, saying the move would interfere with their own satellite launches.”
“Walgreens Taps Starbucks Exec Brewer As Its New CEO” (ABC News). “Walgreens said Tuesday it has tapped Starbucks executive Roz Brewer as its new CEO…Brewer succeeds Stefano Pessina, who served as CEO for six years following the merger between Walgreens and Alliance Boots in 2014. Pessina will transition to executive chairman of Walgreens Boots Alliance Inc.'s board. Pessina praised Brewer’s expertise in operations, customer relations, talent development and digital innovation.”
“Succession: The Real-Life Crisis, Not The HBO Series” (Worth). “Many of us were riveted by the Roys and their myriad dysfunctional dramas on HBO’s hit series Succession. While we eagerly await season three of the behind-the-scenes media empire drama, a real crisis is unfolding in the American economy. I know this from firsthand experience, but also from recent data and policy issues making business news headlines. I have a country house. Toys, too—boats, cars, a motor scooter. Over several decades, these objects have fostered relationships with carpenters, masons, roofers, electricians (both land and marine), painters, plumbers, auto mechanics, boat mechanics and landscapers. The one common denominator of these business owners? They cannot find anyone to take over when they retire. Almost all of them work alone or with labor that is not able to succeed them. Over the years, I have repeatedly asked why this is so.”

Stoney Point 1/26/21 Stoney Point 1/26/21

What we’re reading (1/26)

“Janet Yellen Is Confirmed As The First Female Treasury Secretary In US History” (CNN Business). “Lawmakers confirmed Janet Yellen as Treasury secretary on Monday, making her the first woman in American history to hold the position. As head of the Treasury, she'll be tasked with shepherding President Joe Biden's $1.9 trillion American Rescue Plan through Congress and overseeing its execution. The plan includes $1,400 stimulus checks, expanded unemployment benefits, and increased funding for Covid-19 vaccinations and testing.”
“A Fight Over GameStop’s Soaring Stock Turns Ugly” (Wired). “Today, a ware over the value of video game retailer GameStop’s stock has caused what market guru Jim Cramer called “the squeeze of a lifetime.” Howling with glee along the way, traders on the chaotic and obscene subreddit WallStreetBets helped push GameStop’s stock price up from $20 on January 11 to $73 after traditional analysts deemed the stock a clunker.”
“Baby Boomers, To Retailers’ Surprise, Are Dominating Online Shopping” (Washington Post). “Early in the pandemic, armed with step-by-step instructions, Joseph Clay committed to buying absolutely everything online. Texas toast, blueberry waffles and diet root beer are repeat orders, spliced with the occasional addition: skull-shaped bookends, slippers for his partner and one overnight purchase to placate an aching tooth. He gladly shelled out $17.21 for a tube of Anbesol, an over-the-counter pain relieving gel, which Amazon had to him before dawn.”
“Apollo CEO Leon Black To Step Down Following Review Of Jeffrey Epstein Ties” (Wall Street Journal). “Leon Black plans to step down as chief executive of Apollo Global Management Inc. after an independent review revealed larger-than-expected payments to disgraced financier Jeffrey Epstein that it nevertheless deemed justified.”
“Why Tokenized Finance Is Finally Ready To Fulfill Its Promise” (Nasdaq). “[T]he idea of tokenizing value has gained significant traction. Once the heady days of the initial coin offering era died down, innovators and entrepreneurs stopped looking for solutions without a problem. Instead, they identified blockchain’s real killer use case – decentralized finance.”

Stoney Point 1/25/21 Stoney Point 1/25/21

February picks available soon

Reminder: we’ll be publishing our Prime and Select picks for the month of January on or before 1/31. As always, we’ll be measuring SPC’s performance for the month of January, as well as SPC’s cumulative performance, assuming the sale of the January 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, January 29). Likewise, performance tracking for the month of February will assume the February 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, February 1).

Should be an interesting last week of the month as 20 percent of S&P companies are releasing their numbers from last quarter, according to Morning Brew…

Stoney Point 1/25/21 Stoney Point 1/25/21

What we’re reading (1/25)

“Tech’s ‘Last Hurrah’? If Hedge Funds Are Any Indication, It Could Be A Big Week For Apple, Amazon And Other Megacap Favorites” (MarketWatch). “According to Goldman Sachs Group’s prime brokerage, hedge funds increased their net exposure to megacaps in the technology sector at one of the fastest paces in recent years. This coming off a stretch where the ‘smart money’ was unloading some of the most prominent names.”
“Manufacturing Rebound Has Suppliers Struggling to Keep Up” (Wall Street Journal). “A quicker-than-expected recovery in U.S. manufacturing is resulting in supply disruptions and higher costs for materials used in everything from kitchen cabinets to washing machines to automobiles. Consumers unable to spend on vacations, dining out and concerts instead have opened their wallets for appliances and other improvements to their current or new homes. Car sales also rebounded faster than expected[.].”
“An ‘Aggressive’ Fight Over Containers Is Causing Shipping Costs To Rocket By 300%” (CNBC). “A critical shortage of containers is driving up shipping costs and delays for goods purchased from China. The pandemic and uneven global economic recovery has led to this problem cropping up in Asia, although other parts of the world have also been hit. Industry watchers said desperate companies wait weeks for containers and pay premium rates to get them, causing shipping costs to skyrocket.”
“When Will Taxes Go Up?” (New York Times). “President Biden has unveiled a flurry of actions aimed at unwinding much of the Trump administration’s agenda. But on his predecessor’s signature legislative accomplishment — the huge 2017 tax cut — Mr. Biden is treading much more gingerly.”
“Dan Kamensky Could Have Made 11,950% And Not Gone To Jail, Will Instead Probably Lose 100% And Go To Jail” (Dealbreaker). “Former hedge fund manager and judicially-designated thief, liar and not nice person Dan Kamensky is probably going to jail…All of that being said, Kamensky sure was right to fight for a piece of Neiman Marcus’ e-commerce business. This may be a vindication even hollower than Bill Ackman’s vis-à-vis Herbalife, but it’s a sort of vindication all the same”

Stoney Point 1/24/21 Stoney Point 1/24/21

What we’re reading (1/24)

“Bullish Stock Bets Explode as Major Indexes Repeatedly Set Records” (Wall Street Journal). “Investors are piling into bets that will profit if stocks continue their record run. Options activity is continuing at a breakneck pace in January, building on 2020’s record volumes. It is the latest sign of optimism cresting through markets as individual and institutional investors pick up bullish options to profit from stock gains and abandon bearish wagers.”
“Why International Stocks Could Outperform U.S. Markets This Year” (CNBC). “Emerging markets ‘now have some of the best growth opportunities’ on the market as they trade at relative discounts, [Jeremy] Schwartz [global head of research at WisdomTree Asset Management] said. With the dollar weakening and a new, perhaps more trade friendly Biden administration taking power, their catalysts are only adding up, he said.”
“Home Sales Hit 14-Year High In 2020, Pushing Prices To Record Levels” (CNN Business). “Last year brought skyrocketing unemployment and a global pandemic that battered the economy, but people were still buying homes. Existing home sales in 2020 rose to the highest level in 14 years as prices climbed to a record high. Home prices rose 9% in 2020 from the year before…according to a report from the National Association of Realtors.”
“Union Participation Rose Last Year, Even As Pandemic Wreaked Havoc On The Jobs Market” (Washington Post). “Despite historic job losses during the pandemic, the percentage of U.S. workers who are members of a union rose to 10.8 percent in 2020, the most significant increase in years, according to Bureau of Labor Statistics data released Friday.”
“What It’s Like To Be A Hotdogger, Oscar Mayer’s Cast Of College Grads Driving The Wienermobile Across The U.S.” (Business Insider). Potential job opportunity. They’re accepting applications through Jan. 31.

Stoney Point 1/22/21 Stoney Point 1/22/21

What we’re reading (1/22)

“Housing Market Stays Tight as Homeowners Stay Put” (Wall Street Journal). “Americans are holding on to their homes longer, and it is costing would-be home buyers. The length of time U.S. homeowners stay put has been rising steadily, a big reason why the inventory of homes for sale is at record lows and prices are near all-time highs.”
“Renewables Stocks Have Boomed. Some Have Gone Too Far, Too Soon.” (Barron’s). “Renewable energy stocks have been rising for more than a year as a shift to renewables from fossil fuels accelerates…[i]nvestors, however, have already accounted for these developments, and a recent rally in renewable energy companies could mean that the stocks will struggle to see similar gains in the near future.”
“Ten-fold Growth And A 740 Percent Stock Gain: Cathie Wood’s Breakout Year by the Numbers” (Institutional Investor). “In December, as investors pulled more than $15 billion out of active U.S. equity funds — and as half of the largest fund managers suffered outflows — six-year-old ARK Investment Management was having its best month yet. Investors allocated $8.2 billion into ARK’s exchange-traded funds last month, among the highest net inflows of any U.S. fund manager, according to Morningstar’s end-of-year fund flows report.”
“The ETF Space Race Heats Up With One Giant Leap From A Star Manager” (MarketWatch). “While it’s widely hoped that this year will turn out better than 2020, it’s hard to imagine anyone striking it so lucky, so quickly as Andrew Chanin. Chanin is the CEO of ProcureAM, which runs an exchange-traded fund focused on space exploration. Since its inception, the fund, with the out-of-this-world ticker UFO, has held a niche role as the only ETF solely focused on space exploration.”
“Harvard & Stanford MBAs Win Trump Pardons” (Poets & Quants). “In the flurry of last-minute pardons by a departing president are two graduates of the world’s best business schools: Harvard Business School and Stanford Graduate School of Business. Trump granted a highly publicized pardon to Steve Bannon, his former chief strategist, who graduated from Harvard Business School with honors in 1983….[h]e also gave a pardon Bob Zangrillo, a Miami-based developer and venture capitalist, who earned his MBA from Stanford in 1994.”

Stoney Point 1/21/21 Stoney Point 1/21/21

What we’re reading (1/21)

“How The Stock Market And Economy Performed Under Democratic Administrations” (Yahoo! Finance). “[A]ccording to historical data, stocks tend to do very well in the early goings of a Democratic presidency. In year one of a Democratic presidency, the S&P 500 has risen on average by 19.4% dating back to 1932, per data crunched by BMO Capital Markets chief markets strategist Brian Belski.”
“From Keystone XL To Paris Agreement, Joe Biden Signals A Shift Qway From Fossil Fuels” (CNN Business). “On his first day in the White House, Biden took a series of executive actions that put an exclamation point on his commitment to address climate change. Biden immediately moved to rejoin the Paris Agreement on climate change, revoke a permit that former President Donald Trump granted to the controversial Keystone XL pipeline and place a temporary moratorium on oil and gas leasing in the Arctic.”
“The Fed Under Biden: New Mandates, A Close White House Tie And Big Challenges Ahead” (CNBC). “There likely will be no nasty tweets in the middle of the night excoriating the Federal Reserve to lower interest rates. Nor will its officials be called “boneheads” should their actions not be in keeping with President Joe Biden’s wishes. But that doesn’t mean the U.S. central bank won’t face pressure as it looks to navigate its way through a new administration.”
“Why Are Apple Pay, Starbucks’ App, and Samsung Pay So Much More Successful Than Other Mobile Wallet Providers?” (Business Insider). “With [the] proliferation of options, one would expect to see a surge in adoption. But that's not the case — though Business Insider Intelligence projects that US in-store mobile payments volume will quintuple in the next five years, usage is consistently lagging below expectations, with estimates for 2019 falling far below what we expected just two years ago.”
“Royal Caribbean Won’t Go Down Without A Fight” (Dealbreaker). “There’s an old saying “the two happiest days in a boat owner’s life: the day you buy the boat, and the day you sell the boat.” The expression certainly applies here. In an effort to stay afloat during turbulent times, Royal Caribbean is jettisoning a full operating subsidiary - yesterday announcing a deal to sell the Azamara cruise line to private equity firm Sycamore Partners for just over $200 million[.]”

Stoney Point 1/20/21 Stoney Point 1/20/21

What we’re reading (1/20)

“Biden Looks To Give A Big Boost To Homebuyers And Builders” (CNBC). “Anyone looking to buy a home today is likely frustrated by sky-high prices and slim pickings. But President-elect Joe Biden, who takes office Wednesday, will aim to ease those issues as he gears up to implement his plans for the housing market. From home financing to home construction, Biden’s plans are focused on affordability. Here are some policies he could push for[.]”
“Tax Season Kicks Off Feb. 12. Here’s What To Expect.” (Washington Post). “Tax season can be frustrating and tedious even in the best of times. This year, you can bet on it being even worse. Because of the pandemic, many people will be forced to meet virtually with tax experts to calculate their numbers. Meanwhile, IRS backlogs mean millions of filers could start work on their 2020 federal return before the agency has processed their return from 2019. And those who qualified for stimulus relief because of the collapse of the economy will have to wonder how that affects their taxes, as well.”
“After 144 Years, London Metal Exchange Proposes Closing Trading Ring” (Wall Street Journal). “The London Metal Exchange is proposing closing its open-outcry ring, where traders have swapped metals like copper and lead using shouts and hand signals for 144 years, in a bid to attract more financial players to its marketplace. The LME temporarily closed the ring when Covid-19 ripped through the U.K. in March, judging the tight circle of red couches that dozens of traders crowd around to be a health risk. The exchange, owned by Hong Kong Exchanges & Clearing Ltd., is now floating the idea of shutting the ring for good.”
“The Stock Market Has Been On A Tear. Here’s How You Can Safely Invest” (CNN Business). “When a market boom hits, emotions can run high. But it's not the time to give into your FOMO, or fear of missing out. Instead, use it as an opportunity to assess your financial goals, evaluate your risk tolerance and balance your portfolio investments.”
“The Hedge Fund Industry Raked In 12.3% Last Year, Its Largest Annual Return Since 2009, As Markets Bounced Back From Coronavirus Lows” (Business Insider). Worth noting the S&P 500 was up 16.3 percent. You might think the industry underperformed the market because hedge funds hedge, so they take on less risk, but it was the hedge funds that don’t actually hedge that seem to have driven up the average.

Stoney Point 1/19/21 Stoney Point 1/19/21

What we’re reading (1/19)

“Yellen To Urge Lawmakers To ‘Act Big’ On Relief Spending” (CNN Business). “Janet Yellen, President-elect Joe Biden's nominee for Treasury secretary, is expected to urge lawmakers to "act big" on relief spending during her confirmation hearing Tuesday, underscoring the urgency and scope of the incoming administration's $1.9 trillion stimulus package. ‘Neither the President-elect, nor I, propose this relief package without an appreciation for the country's debt burden,’ Yellen will tell lawmakers, according to written testimony obtained by CNN. ‘But right now, with interest rates at historic lows, the smartest thing we can do is act big.’”
“Here’s What’s Keeping Jamie Dimon Up at Night” (Dealbreaker). “Responding to a question from an analyst, Jamie Dimon expressed concern about the growth of competition from emerging fintech players. Making note of Visa, PayPal, Ant Financial, Tencent, Facebook, Google, Apple and Amazon, Dimon acknowledged there is a long list of talented companies he is “scared ****** of". Exact quote.”
“The Wealthy Are Investing Like A Market Bubble Is Here, Or At Least Near” (CNBC). “If an investor with $1 million or more in the market thinks that a stock bubble is already here — or soon enough one will be coming — what is the correct response? According to a new survey from E-Trade Financial, the answer is to keep investing in stocks, with more emphasis on undervalued sectors of the market.”
“Automakers Forced To Cut Production Amid Global Shortage Of Computer Chips” (NBC News). “The Ford plant in Louisville, Kentucky — along with its 3,900 employees — stands idle this week, after the automaker was forced to temporarily halt production due to shortages of critical microprocessors and other computer chips. Ford isn’t alone. Fiat Chrysler is idling production at a Brampton, Ontario, plant; while Subaru will trim “several thousand” vehicles from its production schedule at plants in the U.S. and Japan due to chip shortages. General Motors, Honda, Renault, Toyota and Volkswagen are also feeling the impact — with others expected to follow.”
“Another Eleventh-Century Medieval Chinese Coin Found In England” (Dr. Caitlin R. Green blog). “The coin in question was issued between 1008 and 1016 during the reign of Emperor Zhenzong of the Northern Song dynasty and was found at Buriton, Hampshire, around 9 miles from the coast. As was the case with the other eleventh-century Chinese coin discussed here previously, the coin doesn't seem to be part of a 'suspicious' grouping of finds or deposited curated collection, and the field that it was recovered from has also produced a handful of medieval- and immediately post-medieval finds.”

Stoney Point 1/18/21 Stoney Point 1/18/21

What we’re reading (1/18)

“Is This A VC Bubble, Or Just The New Normal?” (Protocol). “The VC industry is "frothy," "overheated" or "bonkers," investors say. Whether this is the new normal or unhealthy signs of an overheated market depends on your point of view — and how well your portfolio is doing.”
“Potential Priorities for Wall Street’s Next Top Cop” (New York Times). “The Biden administration is set to tap Gary Gensler, a former financial regulator and Goldman Sachs banker, as head of the Securities and Exchange Commission…If approved, Mr. Gensler is expected to rein in Wall Street, building on his work as head of the Commodity Futures Trading Commission from 2009 to 2014. At the C.F.T.C., he pushed for more transparency around derivative trading and was at the forefront of uncovering interest-rate rigging by traders, which resulted in big fines in a number of settlements with banks. ‘Wall Street’s interest is not always the same as the public’s interest,’ he told The Times in 2010.”
“‘Sizable’ Stimulus Needed From The United States, IMF Managing Director Urges” (Washington Post). “International Monetary Fund Managing Director Kristalina Georgieva is urging the United States to go big on additional stimulus to aid the economy as the pandemic rages and to ensure low-income workers are not left behind. ‘We do need more stimulus. In the United States, fortunately, there is fiscal space to do so,’ Georgieva told The Washington Post, adding that she favored ‘sizable support.’”
“RenTech Can’t Be Wrong, So The World Must Be” (Dealbreaker). “Last year was one of the best hedge fund in history’s best years ever. Renaissance Technologies’ Medallion Fund, which firm co-founder and piss collector Robert Mercer would probably sacrifice several toes for a larger stake in, enjoyed what appears to be its third-strongest year since inception in 2020, which is saying something for a fund that’s got an annualized return of 39.1% since 1988. But last year it did almost twice that, rising 76%. The funds RenTech runs for those not employed at the firm? Not so much.”
“Nestlé Recalls 762,000 Pounds Of Pepperoni Hot Pockets” (ABC News). “Nestlé Prepared Foods is recalling more than 762,000 pounds of pepperoni Hot Pockets, the U.S. Department of Agriculture’s Food Safety and Inspection Service said. The frozen stuffed sandwiches — shipped to retail stores nationwide — are being recalled because they ‘may be contaminated with extraneous materials, specifically pieces of glass and hard plastic,’ the USDA said Friday.”

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What we’re reading (1/17)

“Investors Eye Inauguration Day, Netflix Earnings: What To Know In the Week Ahead” (Yahoo! Finance). “As traders return from the long holiday weekend on Tuesday and equity markets reopen, markets will turn their attention to the first days of the Biden administration and to another batch of corporate earnings results.”
“After Stock Surge, Investors Ask Companies What’s Ahead” (Wall Street Journal). “An epic stock rally faces a key test in coming weeks as investors learn what executives expect for profits and revenues in coming periods. Fourth-quarter earnings season kicked off in earnest Friday with better-than-expected profits from some of the nation’s largest banks. Despite a record quarterly profit at JPMorgan Chase & Co. and some bright spots at Citigroup Inc. and Wells Fargo & Co., shares of all three declined, with Wells and Citi each dropping more than 6%. The market reaction highlights the stakes as large firms begin sharing quarterly results and, more important, their outlooks for coming quarters. “
“Corporate Earnings Don’t Look Great. But The Drought May Be Over Soon” (CNN Business). “According to estimates from FactSet Research, companies in the S&P 500 are expected to report that their profits fell by about 7% in the final three months of 2020 compared to the fourth quarter of the previous year. That, however, should be the end of the earnings drought. FactSet senior earnings analyst John Butters told CNN Business that S&P 500 profits should rebound in the first quarter, with analysts forecasting a nearly 17% year-over-year jump in the first quarter and a more than 46% surge in the second quarter. For the full year, Butters said profits should rise more than 22%.”
“US Small-Cap Stocks Have Raced Ahead Of Their Bigger Peers In 2021. Experts Say A Number Of Factors Could Send Them Higher.” (Business Insider). “The stock market recovery from the coronavirus crash in the spring of 2020 was all about the biggest US names: Amazon, Apple, Facebook, Google, and Netflix. But the smaller, more unloved parts of the stock market come roaring back in the autumn and winter, and their momentum has continued in 2021. The Russell 2000 index of small-capitalization stocks has jumped 1.5%, for example.”
“How The Blenders Eyewear Founder Turned A $2,000 Loan Into A $90 Million Business In 7 Years” (CNBC). “Fisher borrowed $2,000 from his roommate and launched the sunglasses company Blenders Eyewear (named after Hornblend, the street he lived on). Fisher started to sell his product out of his backpack on the beach where he worked as a surf instructor. Within three years, Blenders made over $1 million in revenue. And in December 2019, Blenders was valued at $90 million after Italian eyewear company, the Safilo Group, announced it would acquire 70% of the company.”

Stoney Point 1/16/21 Stoney Point 1/16/21

What we’re reading (1/16)

“A Dollar Is a Dollar Is a Dollar. Except in Our Minds.” (Wall Street Journal).”We regularly divide our paychecks into pots. Sometimes they are tangible pots, such as checking accounts or glass jars. Sometimes they are virtual pots, such as Excel sheets or mental pots in our minds. We mark each pot with a label such as rent, food, entertainment, Christmas gifts or emergency funds, and refrain from dipping into pots other than designated ones. Of course, none of this is rational. Rent dollars aren’t any greener than entertainment dollars. Rationally, they should all be in one pot labeled ‘money.’”
“Bill Gates Becomes Top US Farmland Owner” (Fox Business). “Microsoft founder Bill Gates is now the owner of the most farmland in the United States, according to Land Report. The Land Report researchers concluded that Gates, now the fourth richest man in the world, and his wife, Melinda, own 242,000 acres of farmland…[a]ccording to Land Report's research, Gates and his wife had hired former Putnam Investments bond fund manager Michael Larson in 1994 to help them diversify their personal assets.”
“Massive Blackouts Have Hit Iran. The Government Is Blaming Bitcoin Mining.” (Washington Post). “Massive blackouts and smog have hit cities across Iran. It’s a toxic mix as the country, already under economic duress and suffocating U.S. sanctions, simultaneously battles the region’s worst coronavirus outbreak. Blackouts are not new in Iran, where an aging and subsidized electricity sector is plagued by alleged mismanagement. Only this time, government officials say that bitcoin mining at so-called cryptocurrency farms — the energy-intensive business of using large collections of computers to verify digital coin transactions — is partly to blame.”
“As Cookie Crumbles In Digital Advertising, Google And Apple May Benefit” (Investor’s Business Daily). “For years advertisers have feasted on cookies, those small data files that track your every click on the web. But in the name of improved consumer privacy, Google and Apple are forging ahead with plans to thwart online ad trackers. Now the stage is set for these internet giants, media publishers and digital advertisers to battle in the new cookie-free world.”
“The Most Concentrated Market In 40 Years” (Fortune Financial). “Back in the summer of 2017, I demonstrated that the weightings of the S&P 500’s top components were roughly in-line with the historical average, despite all the publicity and discussion the megacap stocks were getting. Fast forward to the beginning of 2021, and the story is very different; by just about any measure, the S&P 500 is the most top-heavy it has been in at least a generation. Consider, for example, the weighting of the top stock, Apple, which currently represents close to 7% of the S&P 500’s market capitalization[.]”

Stoney Point 1/15/21 Stoney Point 1/15/21

What we’re reading (1/15)

“Biden Outlines $1.9 Trillion Spending Package to Combat Virus and Downturn” (New York Times). “President-elect Joseph R. Biden Jr. on Thursday proposed a $1.9 trillion rescue package to combat the economic downturn and the Covid-19 crisis, outlining the type of sweeping aid that Democrats have demanded for months and signaling the shift in the federal government’s pandemic response as Mr. Biden prepares to take office.”
“Jeff Bezos’ Blue Origin Aims To Fly First Passengers On Its Space Tourism Rocket As Early As April” (CNBC). “After years in development, Jeff Bezos’ private space company Blue Origin aims to carry its first passengers on a ride to the edge of space in a few months. Blue Origin on Thursday completed the fourteenth test flight of its New Shepard rocket booster and capsule. Called NS-14, the successful test flight featured the debut of a new booster and an upgraded capsule.”
“James Simons Steps Down as Chairman of Renaissance Technologies” (Wall Street Journal). “James Simons, who helped lead a quantitative revolution that has swept the world of finance, is stepping back from his hedge fund on the heels of a terrible year for clients, but a terrific one for the firm’s employees. Mr. Simons, among the largest financial backers of Democractic candidates in recent years, told investors he was retiring as chairman of Renaissance Technologies LLC’s board of directors as of Jan. 1.”
“BlackRock Now Has A Whopping $8.7 Trillion In Assets” (CNN Business). “The record stock market run is great news for BlackRock: The owner of the super popular iShares family of exchange-traded funds reported earnings and revenue for the fourth quarter Thursday that easily topped forecasts. BlackRock (BLK), the world's largest money management firm, ended the year with nearly $8.7 trillion in total assets -- an increase of 17% from a year ago.”
“How Law Enforcement Gets Around Your Smartphone's Encryption” (Wired). “Lawmakers and law enforcement agencies around the world, including in the United States, have increasingly called for backdoors in the encryption schemes that protect your data, arguing that national security is at stake. But new research indicates governments already have methods and tools that, for better or worse, let them access locked smartphones thanks to weaknesses in the security schemes of Android and iOS.”

Stoney Point 1/14/21 Stoney Point 1/14/21

What we’re reading (1/14)

“Americans Won’t Be Banned From Investing in Alibaba, Tencent and Baidu” (Wall Street Journal). “The U.S. government is expected to let Americans continue to invest in Chinese technology giants Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Baidu Inc., after weighing the firms’ alleged ties to China’s military against the potential economic impact of banning them.”
“A Vastly Faster Vaccine Rollout” (World Spirit Sock Puppet). “When a traveler introduced smallpox to New York City in 1947, the city—and in particular its health commissioner, Israel Weinstein—apparently ran an epic vaccination campaign, reaching 5 million people in the first two weeks...[f]or covid, the first New York City vaccine was given on the 14th of December, and if I understand, by the 10th of January, twenty seven days later, 203,181 doses had reportedly been given…[t]hat’s around eight thousand doses per day. A factor of fifty fewer…[w]hy is New York fifty times slower at delivering covid vaccines in 2021 than it was at delivering smallpox vaccines in 1947?”
“J&J’s One-Shot Covid Vaccine Is Safe And Generates Promising Immune Response In Early Trial” (CNBC). “Most of the volunteers produced detectable neutralizing antibodies, which researchers believe play an important role in defending cells against the virus, after 28 days, according to the trial data. By day 57, all volunteers had detectable antibodies, regardless of vaccine dose or age group, and remained stable for at least 71 days in the 18-to-55 age group.”
“Twitter And Facebook Have Seen $51 Billion Of Combined Market Value Wiped Out Since Booting Trump From Their Platforms” (Business Insider). “Companies across sectors have responded to the president's rhetoric in recent days by pausing political donations, making statements decrying his inflammatory remarks, and pulling products with links to right-wing movements. Facebook and Twitter possibly took the biggest retaliatory steps when they indefinitely banned Trump from their platforms on Thursday and Friday, respectively.”
“SEC Charges Alleged Mastermind Of Made-Up Stuff With Fraud” (Dealbreaker). “Of course, if in spite of the names of Funds III and IV there were, in fact, no Funds I and II, no decade-long track record of overperformance, no $250 million balance sheet to cover losses…”