February 2021 performance update
Hi folks, here with a February performance update. Here are the key numbers for the month:
Stoney Point Prime picks: 1.36%
Stoney Point Select picks: 2.79%
“The market” (S&P 500-tracking SPY ETF): 1.78%
“Bogleheads” (80% VTI, 20% BND): 1.42%
A few notes:
There was a lot of volatility in February. As you can see in the chart below, valuations were a lot higher about mid-way through the month. As of Feb. 16, for example, Prime was up 6.56%, Select was up 7.98%, SPY was up 4.97%, and the Bogleheads blended ETF portfolio was up 4.40%.
Valuations dropped off sharply in the last week or so (also easy to spot in the chart). One plausible explanation is the rise in interest rates in the month. The 20-year Treasury yield rose from 1.92% to 2.25% from 2/16 through 2/25. The typical large-ish stock has a cash flow duration in the range of 10-20 years (in my experience), meaning that a 1 percent increase in Treasuries reduces value of 10-20%. From that perspective, the declines in the back half of the month make a lot of sense: SPY declined -3.19% over that period, which implies a duration of 9.9 years for the average S&P 500 stock (asset values—not just stocks, but all assets—decline when rates rise because any asset’s value is just the present value of its future cash flows, where its present value equals the sum of CF(n)/(1+r)^n as n increases, where CF(n) = cash flow in year “n” and r is the discount rate, generally equal to the “risk free rate” (Treasury rate) + a risk premium).
The rise in rates isn’t "bad” news per se. Arguably, rates rose because economic growth forecasts look really good, and the market is anticipating the Fed will raise rates in the future to avoid overheating. Those market-wide expectations about the future show up in valuations today. I.e., the overheating may simply indicate that expectations of overall economic performance look pretty good, which may ultimately be good for stocks.
With rates rising from historical lows, it naturally raises the question of whether or not anyone should really be in bonds right now (under the idea that bond values will mechanically decline as rates increase). Surely, people will not abandon bonds wholesale, but this line of thinking generally supports the idea that equities should outperform bonds for the foreseeable future.
One note about a specific pick: Twitter (a Prime pick last month) was up 51% last month. Wild.
That’s all for now As usual, you can check out the position-level February performance for our Prime and Select picks on our performance page and our picks for March here.
Stoney Point Total Cumulative Performance
March Prime + Select picks available now
The new Prime and Select picks for March are available starting now, based on a model run put through today (February 27). As a note, we’ll be measuring the performance on these picks from the first trading day of the month, Monday, March 1, 2021 (at the mid-spread open price) through the last trading day of the month, Wednesday, March 31 (at the mid-spread closing price). If you’re following the strategy, you’d want to re-balance into your March positions at the start of trading on Monday.
You can check out the latest picks here.
What we’re reading (2/27)
“Warren Buffett Defends Berkshire Hathaway’s $25 Billion In Buybacks” (Wall Street Journal). “In Mr. Buffett’s annual letter to shareholders, he defended the larger-than-usual buybacks, saying they enhance the intrinsic value for shareholders but still leave Berkshire ample funds for any opportunities. He was less than complimentary of other chief executives buying back stock. ‘American CEOs have an embarrassing record of devoting more company funds to repurchases when prices have risen than when they have tanked,’ he wrote.”
“Where Have All the Houses Gone?” (New York Times). “Much of the housing market has gone missing. On suburban streets and in many urban neighborhoods, across large and midsize metro areas, many homes that would have typically come up for sale over the past year never did. Even in cities with a pandemic glut of empty apartments and falling rents, it has become incredibly hard to buy a home.”
“Why This QE Is Different In One Chart” (Global Macro Monitor). “The Fed deserves some kudos for not letting the financial system collapse during the early days of COVID but the risk of much higher inflation is now at hand. There is just too much money created by the Fed and the credit markets chasing too few assets, goods, services, and, yes, semiconductors.”
“As Rising Treasury Yields Spook Stock Investors, March Looms Like A Lion” (MarketWatch). “Ultimately, seasonal trends suggest that March will be wobbly and could be used as an excuse for further selling, but on that downturn may be cathartic and give way to further gains in the spring.”
“ARK Funds: The Tail That Wags The Dog?” (Morningstar). “Although ARK's investment strategy is familiar, the company's sales success is not. Its inflows raise the question: Is the mutual fund tail wagging the stock-market dog? That is, have ARK funds performed so well--ARKK is up 11% this year after gaining a breathtaking 152% in 2020--because when its funds put their new monies to work, they boost the prices of the stocks that they already hold?”
What we’re reading (2/26)
“Time For A Tantrum?” (New York Times). “The S&P 500 suffered its worst single-day drop in a month yesterday, with tech stocks hard hit. But the big story is in bonds, where yields surged (and prices fell) as investors worried that the Fed wasn’t, well, worried enough.”
“How Will A Surge In Bond Yields Affect Your Mortgage, Car Loans And 401(k)?” (USA Today). “What's pushing yields higher yield? As the U.S. continues to climb out of its pandemic-induced recession, optimism has grown that further stimulus aid and widespread COVID vaccinations will help the economy expand rapidly later this year. So rising bond yields typically signal that investors are hopeful for more economic growth in the future. But they can also indicate that a potential spike in inflation is just around the corner.”
“Best Buy Just Laid Off 5,000 Workings And Will Close More Stores” (CNN Business). “Best Buy said Thursday that it laid off 5,000 workers this month and is planning to close more stores this year as more consumers buy electronics online. The news comes at a time when big chains face growing competition from Amazon and other sites that sell items like TVs and laptops. Fry's Electronics said Wednesday that it would abruptly close all of its stores overnight, ending nearly four-decades in business.”
“Beyond Meat Signs Supply Deals With McDonald’s, Yum” (Wall Street Journal). “The deals boost Beyond’s prospects as more restaurants resume in-person dining, after Covid-19 forced shutdowns and restrictions on eating out over the past year. The pandemic’s blow to the food-service industry hurt Beyond’s business, which had been heavily propelled by restaurants in recent years, and prompted the company to focus more on supermarket sales.”
“Goldman Says Stock-Transfer Taxes Aren’t All Bad, As Long As They’re Not In New York” (Dealbreaker). “There is a growing consensus: The stock transfer tax under consideration by the New York State Legislature would be a disaster. An end to New York City as we know it, because passing it would force every bank and hedge fund and financial services player to up and move to Palm Beach or Houston, permanently immiserating the capital of global capitalism. Everyone says this: the Atlanta-based New York Stock Exchange, the nominally Democratic governor’s nominally Democratic tax commissioner and, through its membership in the Securities Industry and Financial Markets Association, Goldman Sachs.”
What we’re reading (2/25)
“Red-Hot Stock Market Pushes More Companies To Go Public” (Wall Street Journal). “Last year’s increase in the number of companies listed on U.S. exchanges was the largest since the late-1990s dot-com bubble. The total is expected to surge even more this year as hundreds of companies tap everyday investors, according to data compiled by University of Florida finance professor Jay Ritter.”
“Robinhood Offers Blistering Retort To ‘Elitist’ Criticisms From Munger” (CNBC). “Robinhood fired back at Berkshire Hathaway Vice Chairman Charlie Munger, who earlier this week said the free trading app was having a ‘regrettable’ impact on investors.”
“Has McKinsey Lost Its Luster?” (New York Times). “Partners at McKinsey yesterday voted out their leader, Kevin Sneader, as the company deals with blowback over its role in the U.S. opioid crisis. It was the latest tough headline for the consulting firm, which may face growing threats to its status as a trusted adviser to companies and governments — and as a magnet for top talent.”
“Mortgage Rates Surge Higher For Second Week In A Row” (Washington Post). “The days of mortgage rates below 3 percent are fast coming to a close. According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 2.97 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount and are in addition to the interest rate.) It was 2.81 percent a week ago and 3.45 percent a year ago. The 30-year fixed average has risen 24 basis points in the past two weeks. (A basis point is 0.01 percentage point.)”
“CEOs Like Google's Sundar Pichai And Microsoft's Satya Nadella Are Among The Most Overpaid CEOs, According To A New Report” (Business Insider). “[C]ompanies that have consistently graced the list are performing worse than those that have never been mentioned. As You Sow has published this report annually since 2015, and nine CEOs have made the list every year, amounting to a total pay of $2 billion. However, these nine businesses have seen a lower annualized shareholder return compared to S&P 500 companies that have never made the overpaid CEO list.”
March picks available soon
We’ll be publishing our Prime and Select picks for the month of March on or before 2/28. As always, we’ll be measuring SPC’s performance for the month of February, as well as SPC’s cumulative performance, assuming the sale of the February 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, February 26). Likewise, performance tracking for the month of March will assume the March 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, March 1).
What we’re reading (2/24)
“150 Business Leaders, Including Google’s Sundar Pichai And Longtime Trump Ally Stephen Schwarzman, Are Backing Biden’s $1.9 Trillion Stimulus Bill In A Letter To Congress” (Business Insider). “More than 150 executives from top US companies spanning a range of industries including finance, tech, and real estate have backed President Joe Biden's $1.9 trillion stimulus package in a letter that will be sent to Congress, CNN reported Wednesday.”
“Lowe’s Tops Earnings Estimates As Same-Store Sales Jump 28%, Warns That Some DIY Trends Could Fade” (CNBC). “Lowe’s said Wednesday its fourth-quarter same-store sales climbed 28.1%, as consumers spent more on home projects during the pandemic. That’s higher than the 22% growth that analysts expected, according to StreetAccount. Even with the strong results, Lowe’s continues to expect that sales could moderate as the pandemic eases.”
“J&J’s Covid-19 Vaccine Is Safe And Effective, FDA Says, Paving Way For Approval” (Wall Street Journal). “The U.S. Food and Drug Administration found that a Johnson & Johnson Covid-19 single-dose vaccine was 66.1% effective in preventing moderate to severe virus disease, and that it had a ‘favorable safety profile.’”
“Investors Are Betting On A Macy’s Revival. Should They Be?” (CNN Business). “Retailers have been battered by the pandemic, which triggered a plunge in foot traffic and caused demand for products like work clothing to all but evaporate. But stock in Macy's is now trading close to where it was before Covid-19 rattled markets, while Kohl's has recovered all its losses. That raises the question: Are these stores on the brink of a comeback, or have investors gotten ahead of themselves? There are clear signs that the outlook for retailers is starting to brighten.”
“Future Vaccines Depend on Test Subjects in Short Supply: Monkeys” (New York Times). “Mark Lewis was desperate to find monkeys. Millions of human lives, all over the world, were at stake. Mr. Lewis, the chief executive of Bioqual, was responsible for providing lab monkeys to pharmaceutical companies like Moderna and Johnson & Johnson, which needed the animals to develop their Covid-19 vaccines. But as the coronavirus swept across the United States last year, there were few of the specially bred monkeys to be found anywhere in the world.”
What we’re reading (2/23)
“December Home Prices Rose 10.4%, The Biggest Gain In 7 Years, Case-Shiller Says” (CNBC). “That is the strongest annual growth rate in over six years, and a significantly stronger gain than in November, when prices were up 9.5%. It also ranks as one of the largest annual gains in the more than 30-year history of the index.”
“World’s Top 10 Hedge Fund Managers Earn $20.1 Billion In 2020” (Reuters). “Hedge funds made gains of 11.7% on average in 2020 amid a huge sell-off in March and large economic shutdowns following the emergence of the novel coronavirus, according to data from Hedge Fund Research.”
“Private Equity Ownership Is Killing People At Nursing Homes” (Vox). “When private equity firms acquire nursing homes, patients start to die more often, according to a new working paper published by the National Bureau of Economic Research…[r]esearchers from Penn, NYU, and the University of Chicago studied Medicare data that covers more than 18,000 nursing home facilities, about 1,700 of which were bought by private equity from 2000 to 2017…[t]hey found that going to a private equity-owned nursing home increased mortality for patients by 10 percent against the overall average.”
“A complete Guide To Cathie Wood's Mind-Blowing Success, Her Firm's Investing Strategies, And The Stock Picks She's Betting On For The Future” (Business Insider). “While her career dates back to 1981, 2020 was the year when her performance and fund inflows earned her a cult-like following in the industry. The $27 billion ARK Innovation ETF, her flagship exchange-traded fund, rose 150% last year, thanks partly to Tesla's 730% gain. Her other funds that cover the fintech, genomic, and internet industries all landed on the list of the 10 best-performing ETFs of 2020.”
“Kohl’s Tried Striking A Deal With Amazon. It Wasn’t Enough” (CNN Business). “An activist group, which includes Macellum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital LLC, said Monday that it has taken a 9.5% stake in Kohl's and has nominated nine new members to its board of directors. The news, first reported by the Wall Street Journal, sent Kohl's (KSS) shares up 8% in Monday trading.”
What we’re reading (2/22)
“Historic Gains In Small Stocks Highlight Investor Exuberance” (Wall Street Journal). “Shares of small companies are outpacing their larger counterparts by the widest margin in more than two decades…[t]he Russell 2000 Index of small companies has climbed 15% and set 10 closing records so far this year, well above the S&P 500’s 4% rise. That is the largest such gap between the two indexes through Feb. 19 since 2000, according to Dow Jones Market Data.”
“United Airlines Engine Explosion Over Denver Prompts Company To Ground Boeing 777s” (CBS News). “Federal aviation regulators are ordering United Airlines to step up inspections of all Boeing 777s equipped with the type of engine that suffered a catastrophic failure over Denver on Saturday. United said it is temporarily removing those aircraft from service.”
“White House Says Stock-Trading Tax Is Worth Studying After GameStop Frenzy” (CNN Business). “The White House supports studying the merits of a financial transaction tax — a move favored by progressives and despised by Wall Street — in the wake of the GameStop trading frenzy…such a tax would face fierce opposition from Wall Street and it's unclear whether moderate Democrats would support it. Opponents warn it would backfire on retail investors by raising costs and making financial markets less liquid.”
“France Hired McKinsey To Help In The Pandemic. Then Came The Questions.” (New York Times). “As France raced to complete a complex blueprint in December for vaccinating its population against the coronavirus, the government quietly issued millions of euros in contracts to the consulting giant McKinsey & Company…within weeks, France’s vaccination campaign was being derided for being far too slow. In early January, France had vaccinated only ‘several thousand people,’ according to the health minister, compared with 230,000 in Germany and more than 110,000 in Italy.”
“Everyone Is Getting Hilariously Rich” (Dealbreaker). “[I]t’s not just the [bit]coins themselves that are minting millionaires. Coinbase, the largest digital currency exchange, has hit a $100 billion valuation in the secondary markets ahead of its planned public listing. Founded in 2012, Coinbase is the largest crypto exchange in the U.S. as measured by trading volume. In the first nine months of 2020, Coinbase notched $141 million in net income off $691 million revenue from trading fees and commissions.”
What we’re reading (2/21)
“Blue-Collar Jobs Boom as Covid-19 Boosts Housing, E-Commerce Demand” (Wall Street Journal). “Nationally, employment in residential construction, package delivery and warehousing now exceeds pre-pandemic levels. Manufacturers have steadily added back jobs after slashing payrolls last spring, though employment remains down about 5% from February 2020, according to Labor Department data. Job openings in many blue-collar occupations broke above pre-virus levels last summer and remain significantly elevated, figures from the online job site Indeed show.”
“Feds Investigating Why Boeing Plane Rained Debris On Denver Suburb” (Washington Post). “The aircraft, a Boeing 777-200, appeared to scatter dozens of pieces of debris across a residential area roughly a half-mile wide, badly damaging at least one home and one vehicle, local authorities said. No injuries have been reported on the ground or among the flight’s 231 passengers and 10 crew members.”
“Wall Street Is Beginning To Say Stimulus Probably Won’t Spark Dangerous Inflation” (Business Insider). “For weeks, economists at major banks had sat on the sidelines, vaguely saying another package would achieve its intended goal of accelerating growth. Now that Democrats are charging forward with Biden's large-scale plan and likely to pass the bill by mid-March, Wall Street's take probably won't make Republicans too happy.”
“Big Tech Is Swallowing The Rest Of Silicon Valley” (MarketWatch). “The Top 15 tech firms in the region had sales of $1.35 trillion in 2020, which would give them the 15th-highest GDP in the world collectively, while comprising nearly 40% of Silicon Valley tech jobs[.]”
“The Man Who Turned Credit Card Points Into An Empire” (New York Times). Today’s episode of “The Daily” looks at Brian Kelly, the so-called “Points Guy,” who has famously spent the past decade arbitraging credit card points and evangelizing his tactics.
What we’re reading (2/20)
“Midwest Labor Markets Shake Off Covid-19 Downturn” (Wall Street Journal). “Indianapolis, Minneapolis and Cincinnati joined Columbus as having among the lowest unemployment rates of 51 major metro areas at the end of last year, on the unadjusted basis the Labor Department uses to rank cities. That placed the heartland cities well ahead of tech and financial powerhouses such as San Francisco and Boston.”
“The SPAC Bubble Is About To Burst” (Harvard Business Review). “It seems almost everyone who is anyone is ‘sponsoring’ or setting up a SPAC, from ex-Trump adviser Gary Cohn to basketball star Shaquille O’Neal to Hong Kong tycoon Richard Li. But, as my recent paper shows, signs beyond the headline figures suggest that SPACs are a bubble about to burst.”
“What Unchecked Short-Selling Means For The Stock Market” (Morningstar). “Short squeezes like what we saw this year with GameStop aren't new. But the evolution of the communication between investors and the trading platforms used to mobilize around the stock are--at least to the investing world.”
“Ark Invest’s Cathie Wood On Bitcoin ETF Prospects And Tesla’s Billion-Dollar Investment” (CNBC). “Bitcoin’s long-term outlook is brightening, according to Ark Invest’s Cathie Wood. The CEO and chief investment officer of the explosively popular active management firm told CNBC this week that the cryptocurrency’s catalysts are adding up as it soars to unprecedented new highs.”
“In Defense of Concerns Over The $1.9 Trillion Relief Plan” (Petersen Institute). From former-IMF chief economist Olivier Blanchard: “Those economists (like myself) who agree with Treasury Secretary Janet Yellen about the need to ‘go big’ on a protection and stimulus package, but who have misgivings about the size of the Biden administration’s $1.9 trillion coronavirus relief plan, are getting criticized as overly concerned about overheating and inflation. A healthy debate has erupted. This blog post addresses three main issues in that debate and explains why I am concerned: first, the size of the output gap—i.e., the gap between actual and potential output in the economy; second, the size of the multipliers—i.e., the likely effects from the stimulus; and third, how much inflation an overheating economy may generate.”
What we’re reading (2/19)
“The Man Who Abandoned Value” (Institutional Investor). “When Arne Alsin wrote about investing in disruptive companies two years ago, one commentator called it ‘one of the dumbest articles ever written.’ After a 274 percent year, Alsin isn’t the one who looks dumb.”
“Hedge Fund Bridgewater Reshuffles Leadership Ranks After Bruising Year” (Wall Street Journal). “Bridgewater Associates is shuffling its management ranks after one of the most challenging years in the hedge-fund giant’s history…the changes are the latest leadership moves meant to help transition the world’s largest hedge fund away from Mr. Dalio’s day-to-day leadership.”
“Disney Took A Hit During The Pandemic. You Wouldn’t Know It From Its Stock Price.” (Washington Post). “Since late October, Disney has been forced to temporarily close its Paris theme park, moved Pixar’s high-profile Christmas release ‘Soul’ out of battered theaters to less lucrative streaming platforms and watched as profit over the holidays dwindled from $2.1 billion the previous year to just $29 million in 2020. The company also opened Disneyland as a vaccination site. In the same period, Disney’s share price has jumped 58 percent, hitting an all-time high of $191 last week.”
“U.S. Factory Activity Cools; Cost Pressures Mounting” (Reuters). “U.S. factory activity slowed in early February likely as a global semiconductor chip shortage hurt production at automobile plants, while prices of inputs and manufactured goods soared, which could heighten fears of strong inflation growth this year.”
“Wealth Americans Have Gotten So Rich They Pay One-Sixth The Rate Of Taxes As Their 1953 Counterparts, Study Says” (Business Insider). “According to the paper from the Institute for Policy Studies, from 1953 to 2018 the rate of taxation on the richest Americans — as a percentage of wealth — fell by 83%. From 1979 to 2018, tax payments from the group, as a percentage of its wealth, decreased by more than 75%.”
What we’re reading (2/18)
“Cashless Is Here To Stay: Why Contactless Payments Will Be The Status Quo For Consumers & Businesses” (Worth). “According to the National Retail Federation, in the U.S. alone, no-touch payments have increased 69 percent since January 2020. Of those currently using contactless, 57 percent of participants said they’ll continue to do so beyond the pandemic. Cash and credit cards, as we know it, may vanish from much of consumers’ routine purchases, and with this mind, investments and business opportunities within contactless technologies are likely to continue their growth beyond the pandemic.”
“How Robinhood Ended Up In Washington’s Crosshairs” (CNN Business). “This was supposed to be the year Robinhood turned the page on its troubles and launched a massive IPO. And then GameStop mania happened…[a]t Thursday's virtual hearing, held by House Financial Services Committee, Robinhood will be forced to defend its controversial trading restrictions and the startup's relationship with the empire of billionaire Ken Griffin, who is also scheduled to testify.”
“Online-Trading Platform Will Let Investors Bet On Yes-Or-No Questions” (Wall Street Journal). “An online-trading startup that aims to let people wager on questions about future events ranging from economics to the weather to public health has raised $30 million from an array of prominent investors including venture firm Sequoia Capital and discount-brokerage pioneer Charles R. ‘Chuck’ Schwab. Kalshi Inc. expects to launch in March. It plans to let users bet on “yes” or “no” answers to questions about future events. For instance, had the platform existed last year, it might have asked users whether a Covid-19 vaccine would be approved by the end of 2020.”
“‘Someone Who Does Not Care About The Journalism’: Gloomy Tribune Newsrooms Brace For The Hedge Fund Squeeze” (Vanity Fair). “Among journalists at Tribune Publishing, whose newspapers are now set to be fully within the jaws of notorious hedge fund Alden Global Capital, the mood on Wednesday was as dark as you’d expect. ‘There are a lot of disappointed people in the newsroom right now,’ said Todd Lighty, an investigative reporter at the company’s flagship, the Chicago Tribune, where a virtual staff meeting was scheduled for 3 p.m. central time on Thursday. ‘It’s really disheartening to be owned by someone who does not care about the journalism one iota.’”
“Citibank Just Got A $500 Million Lesson In The Importance Of UI Design” (Ars Technica). “A federal judge has ruled that Citibank isn't entitled to the return of $500 million it sent to various creditors last August. Kludgey software and a poorly designed user interface contributed to the massive screwup. Citibank was acting as an agent for Revlon, which owed hundreds of millions of dollars to various creditors. On August 11, Citibank was supposed to send out interest payments totaling $7.8 million to these creditors.”
What we’re reading (2/17)
“U.S. Retail Sales Rose Strongly On Stimulus In January” (Wall Street Journal). “Retail sales, a measure of purchases at stores, at restaurants and online, rose by a seasonally adjusted 5.3% in January from a month earlier, the Commerce Department said Wednesday. The increase followed three months of decline during the holiday season. It was the strongest gain since last June, when the economy was in the process of reopening from pandemic-related closures.”
“Household Debt Rises To $14.6 Trillion Due To Record-Breaking Rise In Mortgage Loans” (CNBC). “Total consumer debt rose to nearly $14.6 trillion as 2020 came to a close, pushed by a record-breaking rise for mortgages in the red-hot housing market, according to a Federal Reserve report Wednesday.”
“Investors Are Bullish On Milan” (Dealbreaker). “The man who helped save the Euro has bond investors in a frenzy. Just a few days after Mario Draghi was sworn in as Italy’s new prime minister, the country’s 10-year bond offering drew a record €110 billion of orders on Tuesday.”
“Verizon Climbs 4% After Warren Buffett Reveals Nearly $9 billion Investment” (Business Insider). “Verizon gained as much as 3.8% on Wednesday after Warren Buffett's Berkshire Hathaway unveiled a multibillion-dollar stake in the telecom giant. The conglomerate revealed it added 147 million of Verizon's shares to its holdings in the quarter that ended December 31, according to a 13-F filing published Tuesday. The purchase amounted to roughly $8.6 billion in stock.”
“If Work Is Going Remote, Why Is Big Tech Still Building?” (Wired). “A surprising element of the pandemic is the endurance of tech’s real estate ambitions. Outside of San Jose, Google said in October that it would expand its existing office leases on the San Francisco waterfront by nearly a third, and would continue major new developments in Mountain View and Sunnyvale. The plans were conceived before the pandemic, but together they anticipate decades of growth.”
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.”
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.”
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.”
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.”
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.”
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.”