Stoney Point 2/15/21 Stoney Point 2/15/21

What we’re reading (2/15)

“Exxon Mobil, Aramco Texas Oil Refineries Temporarily Shut Down For Unexpected Mid-Winter Freeze” (Fox Business). “As a winter storm slams the state of Texas, some of the largest oil refineries in North America are shutting down in response to the frigid temperatures…Texas leads the nation in crude oil refining, with more than one-fifth of the nation's refineries and more than three-tenths of total refining capacity in the United States, according to the U.S. Energy Information Administration.”
“AB InBev Takes Constellation To U.S. Court Over Corona Brand Name” (Reuters). “The Mexican arm of drinks company Anheuser-Busch InBev accused U.S. firm Constellation Brands in a lawsuit filed on Monday of breaching a deal on the use of the Corona brand name by applying it to a product other than beer.”
“Russian Open To Musk’s Offer Of A Conversation With Putin Via Clubhouse, Seeks Further Details” (CNBC). “Russia hasn’t ruled out the idea of President Vladimir Putin talking to Tesla billionaire Elon Musk on social media app Clubhouse, according to multiple media reports. Kremlin spokesperson Dmitry Peskov on Monday told reporters that the proposal was ‘interesting’ but more details were needed, according to Tass news agency.”
“Apple Reportedly Approached Nissan About Making An Autonomous Car Together, But The Talks Collapsed Over Branding” (Business Insider). “Apple approached Japanese carmaker Nissan about partnering on its autonomous car, but the talks fell through after the tech giant said it wanted the vehicles to be Apple-branded, The Financial Times reported. The news comes just a week after South-Korean manufacturer Hyundai and its sister company Kia denied being in talks with Apple over the vehicle.”
“As Marijuana Stocks Light Up On Legalization Hopes, Analysts Bring Cold Water” (Investor’s Business Daily). “With a new Democratic president and Congress, the year ahead for North America's cannabis stocks will largely hinge on the prospects — and complications — of wider legalization in the U.S. Senate Majority Leader Chuck Schumer and other top Democratic lawmakers this month signaled openness to tearing down pot prohibitions. But broad U.S. legalization, analysts say, is far from guaranteed and could be years away.”

Stoney Point 2/14/21 Stoney Point 2/14/21

What we’re reading (2/14)

“Business Owners Ponder Whether To Require COVID-19 Shots” (ABC News). “As more coronavirus vaccine doses become available in the weeks and months ahead, many business owners face a difficult decision: whether to require employees to be inoculated. And if they decide ‘yes,’ they have to be ready for the possibility that some staffers will refuse.”
“Wall Street Regulators Signal Tougher Approach To Industry After GameStop Frenzy” (Washington Post). “Attorneys in the Justice Department’s criminal division are conducting a wide-ranging investigation into possible market manipulation from the trading surrounding GameStop, and recently issued a subpoena to Robinhood as part of that, a person familiar with the matter said. The probe, though, appears to be in its early stages.”
“Interior Secretary Nominee On Collision Course With Oil Industry” (Wall Street Journal). “The Democratic congresswoman from New Mexico has joined with pipeline protesters, supported the Green New Deal and opposed fracking on public lands. For a cabinet post that oversees the government’s longstanding, multibillion-dollar partnership with drillers on federal lands, Ms. Haaland’s environmental politics are in contrast to those of her predecessors.”
“Why One Big Wall Street Banker Is Betting Flying Taxis Will Replace Helicopters” (CNBC). “The current bull market in stocks has fueled concerns about speculation in too many offerings and unproven technologies, but don’t include flying taxis, according to Wall Street investment banker Ken Moelis. Flying taxis — formally referred to as electric aircraft and the urban air mobility market — are coming in the near future and they can replace helicopters, Moelis and Company CEO and founder Ken Moelis told CNBC earlier this week.”
“Gaia Was A Wildly Popular Yoga Brand. Now It’s A Publicly Traded Netflix Rival Pushing Conspiracy Theories While Employees Fear The CEO Is Invading Their Dreams” (Business Insider). “Instead of the Hollywood fare offered by the big players, Gaia's catalog is a kaleidoscopic array of wild claims, conspiracy theories, and new-age mysticism loosely classified as ‘conscious media.’ Claims of a ‘shadow government’ secretly behind the 9/11 terrorist attacks jostle with yoga instructional videos; the forbidden truths about President Dwight D. Eisenhower's secret summits with aliens in Palm Springs are presented alongside meditation techniques. The video content blends together into a hallucinatory slurry of time-traveling psychic CIA spies, purported dangers of vaccines, Bigfoot sightings, alchemists' secrets for transmuting gold, and the founder of JPMorgan's clandestine plot to sink the Titanic.”

Stoney Point 2/13/21 Stoney Point 2/13/21

What we’re reading (2/13)

“Facebook Meets Apple In Clash Of The Tech Titans—‘We Need To Inflict Pain’” (Wall Street Journal). “Facebook Inc. Chief Executive Mark Zuckerberg has groused for years that Apple Inc. and its leader, Tim Cook, have too much sway over the social-media giant’s business. In 2018, his anger boiled over. Facebook was embroiled in controversy over its data-collection practices. Mr. Cook piled on in a national television interview, saying his own company would never have found itself in such a jam. Mr. Zuckerberg shot back…[]n private, Mr. Zuckerberg was even harsher. ‘We need to inflict pain,’ he told his team, for treating the company so poorly, according to people familiar with the exchange.”
“Why Widespread Muni Defaults Are Unlikely To Happen” (Charles Schwab). “The COVID-19 crisis opened up cracks in the muni market, but we don’t expect those cracks to alter the reality that municipal bonds can be a relatively conservative investment option. Many municipalities are under stress, but that’s not a reason to avoid munis, in our view.”
“A Conversation With Lawrence H. Summers and Paul Krugman” (Princeton Bendheim Center For Finance). Larry Summers and Paul Krugman get together via Zoom to debate the new stimulus package, inflation, etc.
“Amsterdam Ousts London As Europe’s Top Share Trading Hub” (Financial Times). “Amsterdam surpassed London as Europe’s largest share trading centre last month as the Netherlands scooped up business lost by the UK since Brexit. An average €9.2bn shares a day were traded on Euronext Amsterdam and the Dutch arms of CBOE Europe and Turquoise in January, a more than fourfold increase from December. The surge came as volumes in London fell sharply to €8.6bn, dislodging the UK from its historic position as the main hub for the European market, according to data from CBOE Europe.”
“Tax Season Is Here: Your Burning Questions Answered, From Remote Work To Stimulus Checks” (NBC News). “A slew of laws passed under the CARES Act last March directly impact taxes, from expanded unemployment compensation to waivers for IRA withdrawal penalties. Customers are also wondering how to account for their stimulus checks and what the tax implications are of their remote working situations. The constantly updated guidance is keeping tax pros on their toes.”

Stoney Point 2/12/21 Stoney Point 2/12/21

What we’re reading (2/12)

“Feeling The Heat From Employees, Wall Street Banks Get Closer To Adopting Bitcoin” (CNBC). “Pressure is building on Wall Street banks to accept bitcoin as a legitimate asset class — and it’s coming from within, CNBC has learned. Last month, during a town hall meeting held for thousands of JPMorgan Chase traders and sales personnel around the world, global markets head Troy Rohrbaugh acknowledged a question that is increasingly being asked by the bank’s own employees: When will they get involved in bitcoin?”
“Elon Musk’s SpaceX Now Owns About A Third Of All Active Satellites In The Sky” (CNN Business). “SpaceX created a swarm of about thousand satellites that is circulating about 340 miles overhead, and building the constellation has put SpaceX in a "deep chasm" of expenses, according to CEO Elon Musk. The constellation has also raised concerns about potential in-space collisions and the impact on astronomers' ability to study the night sky. But for some early customers of the $99-per-month Starlink service, the satellites are already improving how rural communities access the internet.”
“GameStop Mania Highlights Shift To Dark Trading” (Wall Street Journal). “A record 47.2% of U.S. equity trading volume in January was executed outside public stock exchanges, up from 39.9% a year earlier, according to data from Rosenblatt Securities, a brokerage firm. Before 2020, the percentage of what is known as dark trading had hovered just below 40% for years. Now, on some days, more than half the shares that change hands in the U.S. are traded on various off-exchange platforms.”
“Maryland Nears Country’s First Tax On Big Tech’s Ad Revenue” (New York Times). “State politicians, struggling with yawning budget gaps from the pandemic, have made no secret about their interest in getting a bigger piece of the tech industry’s riches. Now, Maryland’s lawmakers are on the verge of taking a new slice, with the nation’s first tax on the revenue from digital advertisements sold by companies like Facebook, Google and Amazon.”
“America’s Cities Are In Crisis. They Should Be Allowed To Raise Debt To Save Themselves” (Time). “There will be no ‘roaring twenties’ without cities thriving, and federal aid, however imperative, won’t be enough. There is an obvious solution to this problem: unleash the ability of cities to borrow. Unlike the federal government, cities are highly constrained from borrowing by laws and state constitutions that either mandate balanced budgets or set low ceilings on the amount of debt that cities can take on.”

Stoney Point 2/11/21 Stoney Point 2/11/21

What we’re reading (2/11)

“GameStop Mania Is Focus Of Federal Probes Into Possible Manipulation” (Wall Street Journal). “The Justice Department’s fraud section and the San Francisco U.S. attorney’s office have sought information about the activity from brokers and social-media companies that were hubs for the trading frenzy, the people said. Prosecutors have subpoenaed information from brokers such as Robinhood Markets Inc., the popular online brokerage that many individual investors used to trade GameStop and other shares, the people said.”
“Disney Smashes Streaming Subscriber Expectations, Boosting Segments Hurt By Covid” (CNBC). “Disney said it now has almost 95 million paid subscribers to its Disney+ streaming service as of the quarter ended Jan. 2. This comes during the first quarter after Disney’s free-trial period ended for some subscribers who are also Verizon customers.”
“Bumble Spikes 85% In Trading Debut After $2.2 Billion IPO” (Business Insider). “Dating app Bumble surged as much as 85% on Thursday as shares publicly traded hands for the first time following the company's initial public offering. Bumble raised $2.2 billion in its Wednesday IPO before accounting for a possible over-allotment option. The company sold 5o million shares at $43 each, giving Bumble a market capitalization of more than $8 billion.”
“How GameStop Missed Out On Capitalizing On The Reddit Rally” (Reuters). “GameStop’s market value soared from $1.4 billion on Jan. 11 to a peak of $33.7 billion on Jan. 28. At that point, GameStop could have raised hundreds of millions of dollars through a stock sale to pay down its debt pile, which totaled $216 million net of cash as of the end of October, and fund its transformation into a digital gaming service, as sales at its mall-based stores dwindle. Yet GameStop never sold shares, the sources said, despite being egged on by many Wall Street pundits to do so.”
“Can Jane Fraser Fix Citigroup?” (DealBook). “Next month, Jane Fraser will take over Citigroup — and a major turnaround effort. ‘The sprawling institution has been limping along in third place among the four biggest U.S. banks, underwhelming its investors and irritating regulators,’ The Times’s Emily Flitter writes. She spoke with Ms. Fraser about the scale of the challenge and how she plans to tackle it.”

Stoney Point 2/8/21 Stoney Point 2/8/21

What we’re reading (2/8)

“SoftBank Turns $11 Billion Profit, Helped By DoorDash” (Wall Street Journal). “SoftBank Group Corp.’s massive tech funds are finally starting to produce golden eggs. That is how Masayoshi Son, SoftBank’s ebullient chief executive, characterized a record-breaking quarter for the Japanese company’s signature $100 billion Vision Fund.”
“It Doesn’t Get More Buzzy Than This: Tesla Is Investing $1.5 Billion In Bitcoin” (NPR). “Electric automaker Tesla and cryptocurrency Bitcoin have a lot in common. Both have seen their market value skyrocket last year, defying skeptics and thrilling fans. Both are fueled by mass enthusiasm and techno-utopian idealism. And they've both got plenty of doubters warning a giant crash could be on the horizon.”
“New Robinhood Regulations Would Stiff ‘Little Guy’” (New York Post). Not sure I agree with the opinion here, but worth a read anyway: “[o]ne boneheaded idea bouncing around is ending a practice known as ‘payment for order flow.’ The esoteric practice allows companies like Charles Schwab and Robinhood to charge low or no commissions to investors using their platforms.”
“Global Oil Prices Have Fully Recovered From The Pandemic” (CNN Business). “After a rocky 12 months, oil prices — which got crushed when Covid-19 slashed demand for energy around the world — are roaring back. What's happening: Brent crude futures, the global benchmark, have breached $60 per barrel, their highest level since January 2020.”
“Short-Sellers Fear For The Future” (DealBook). “Short-sellers have been battered by the bull market. Hedge funds that primarily bet against stocks were down 47 percent over the past year. ‘Short-sellers have been beaten up and left for dead on the side of the road,’ said Jim Chanos, the investor who famously bet against Enron ahead of its collapse.”

Stoney Point 2/7/21 Stoney Point 2/7/21

What we’re reading (2/7)

“My Column On The Stimulus Sparked A Lot Of Questions. Here Are My Answers.” (Lawrence Summers, Washington Post). “…I know firsthand the difficult choices his [President Biden’s] officials are being forced to weigh in a critical moment in our history. There are no easy answers here. In my view, there is nothing wrong with targeting $1.9 trillion, and I could support a much larger figure in total stimulus. But a substantial part of the program should be directed at promoting sustainable and inclusive economic growth for the remainder of the decade and beyond, not simply supporting incomes this year and next.”
“Zero-Commission Individual Investors, High Frequency Traders, and Stock Market Quality” (SSRN). “Contrasting with recent evidence that retail traders are informed, we find that Robinhood ownership changes are unrelated with future returns, suggesting that zero-commission investors behave as noise traders.”
“Treasury Secretary Janet Yellen Says Regulators 'Need To Make Sure' Investors Are Protected Following Gamestop Frenzy” (Business Insider). “Treasury Secretary Janet Yellen said on Sunday regulators are still examining whether new policies are needed to address recent market volatility spurred by retail investors in forums like Reddit's Wall Street Bets.”
“The Price-Value Feedback Loop: A Look At GME And AMC!” (Musings on Markets). “In the real world, there are very few people who believe in absolute market efficiency, with even the strongest proponents of the idea accepting the fact that price can deviate from value for some or many companies. When this happens, and there is a gap between price and value, there is the potential for a feedback loop, where a company's pricing can affects its value. That loop can be either a virtuous one (where strong pricing for a company can push up its value) or a vicious one (where weak pricing for a company can push down value).”
“Unfortunate Investing Traits” (Collaborative Fund). “Most of this industry [investing] is devoted to finding greatness, which is inevitable because it’s what captures attention. But an occasional great decision can quickly become irrelevant unless you consistently avoid the blunders that move the needle even more. It’s not exciting, but we should spend more effort on ensuring we’re capable of doing the average thing all the time before we spend a moment trying to do a great thing some of the time.”

Stoney Point 2/6/21 Stoney Point 2/6/21

What we’re reading (2/6)

“More Bubbles, Less shorting. What The GameStop Craziness Could Mean For The Future Of Investing” (CNBC). “‘What is new is the scale and speed of the event,’ said Veljko Fotak, associate professor of finance at the University at Buffalo. The ubiquity of smartphones on which people can download investing apps, the availability of cheap or free trading and ‘a pandemic with a lot of restless energy,’ are all factors that contributed to the video game retailer’s rally, said Dan Egan, vice president of finance and investing at Betterment.”
“A New Epoch For Retail Investors Is Just Beginning” (The Economist). “Look beyond the memes and the mania, though, and the [GameStop] story tells you something about the deep structural changes in financial markets. The fact that the fast-paced frenzy was possible is a testament to just how frictionless trading stocks has become, aided by technological advances. Shares can be bought on an app while you queue for a coffee, at a price that is whisker-close to the wholesale price.”
“Citadel Securities, Accused Of Rigging Markets, Accuses Someone Else Of Rigging Markets” (DealBreaker). “Its preemptive protestations of guileless innocence notwithstanding, the Citadel family of companies has attracted precisely the sort of attention in l’affaire GameStop it had hoped to thusly avoid: from angry Redditors and their lawyers; from unfriendly leaders in Congress; from unscrupulous attorneys general who know a thing about securities fraud themselves.”
“Global Central Bank Interventions Raise Specter Of ‘Currency War’” (MarketWatch). “Are central banks on the verge of a currency war with the U.S? That’s the question on the minds of some investors and economists as the U.S. dollar’s decline in the year has forced central banks across the world to intervene in their own currencies at the risk of attracting the scrutiny of the new Biden administration which is eager to support U.S. factories and create manufacturing jobs.”
“Elon Musk’s Dogecoin Tweeting Has Believers Barking For More” (Wall Street Journal). “The reckless abandon of the investing world has a new fixation: a cryptocurrency that began in 2013 as a joke, was mostly forgotten, and thanks to a flurry of tweets from Tesla Inc. Chief Executive Elon Musk, is suddenly worth a total of more than $6 billion.”

Stoney Point 2/3/21 Stoney Point 2/3/21

What we’re reading (2/3)

“What Is GameStop Really Worth?” (DealBook). “Believe it or not, there are real-world financials to consider.”
“Jeff Bezos Exits As CEO, But His Role At Amazon Will Likely Be Little Changed” (Wall Street Journal). “Mr. Bezos likely reversion to his role as Amazon’s strategic guide has left many Amazon shareholders sanguine that the company’s trajectory won’t change much. Amazon’s stock, which rose 76% last year was up nearly 4% so far in 2021 before sliding 2% in Wednesday trading.”
“Apple And Hyundai-Kia Pushing Toward Deal On Apple Car” (CNBC). “After years of speculation that it will eventually get into the auto business with its own vehicle, Apple is close to finalizing a deal with Hyundai-Kia to manufacture an Apple-branded autonomous electric vehicle at the Kia assembly plant in West Point, Georgia according to multiple sources who briefed CNBC on the plan.”
“Daimler To Spin Off Trucks, Change Name To Mercedes-Benz” (ABC News). “German automaker Daimler will split itself into two independent companies by spinning off its truck and bus division, a move the company said would give both the freedom to operate more nimbly in a fast-changing environment focussed on zero-emission vehicles and software.”
“JetBlue Founder David Neeleman’s New Airline Is Almost Ready For Takeoff With The Addition Of New Aircraft — Here’s What We Know About Breeze Airways” (Business Insider). “Breeze is the fifth airline started by Neeleman following the serial aviation entrepreneur's successful runs at Morris Air, later sold to Southwest Airlines; WestJet; JetBlue Airways; and Azul Brazilian Airlines. Each one had a focus on low fares and positive customer service while shaking up the industry.”

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

What we’re reading (2/2)

“Jeff Bezos To Step Down As Amazon C.E.O.” (Washington Post). “On Tuesday, Mr. Bezos, 57, said his run at the top of the Seattle-based company was over. As Amazon reported its latest set of blockbuster financial results, Mr. Bezos said he planned to hand over the reins this summer and transition into the role of executive chairman. Andy Jassy, 53, the chief executive of Amazon’s cloud computing division, will be promoted to run the entire company. The change will be effective in the third quarter, which starts in July.”
“GameStop Shares Tumble 60 Percent As Broader Market Swells” (Washington Post). “GameStop losses piled up, with shares tumbling 60 percent Tuesday while the broader market got a bounce from promising corporate earnings and ongoing coronavirus stimulus talks.”
“Remotely Competitive” (City Journal). “After decades of expert predictions that technological change would reshape the nature of employment, in just ten months the Covid-19 economic shutdowns have made full-time corporate employment from home a reality for tens of millions of American workers. Just how many of these workers will remain employed at home after the pandemic ends remains an open question, but it’s clear that many workers have become convinced that there’s little reason to go back to the old model of everyone in the office all the time.”
“One Of Uber’s Earliest Investors Says The Billions It Spent On Self-Driving Were A ‘Waste Of Money’” (Business Insider). “Uber's food-delivery business has been a massive boon for the company as the pandemic sent ride-hailing revenues down the tubes and takeout orders through the roof. One early investor in the company, Benchmark's Bill Gurley, says the company should have committed more investment to food delivery that it instead spent trying to build self-driving vehicles.”
“Google’s Cloud Business Is Losing Money” (CNN Business). “Google is providing a deeper look into the financials of its cloud business, and it doesn't look great. Google Cloud posted an operating loss of $1.2 billion in the final quarter of 2020, 4% worse than a year earlier, the tech giant reported Tuesday. The unit lost $5.6 billion for the full year, an increase of nearly 21%.”

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.”

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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.”

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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”