What we’re reading (5/16)
“Companies Are Flush With Cash—And Ready To Pad Shareholder Pockets” (Wall Street Journal). “After a year of hoarding cash, American corporations are ready to reward investors again. Companies across industries have been buying back stock and raising dividends at a brisk pace this year. That is a sharp reversal from 2020, when they suspended or cut such programs, warning of the urgent need to preserve liquidity in the early stages of the Covid-19 pandemic.”
“The Headhunters Leading Wall Street's Systematic-Trading And Data-Science Hiring Frenzy” (Business Insider). “The market for quant and data-science specialists has perhaps never been hotter. And the technologists, researchers, scientists, and traders developing cutting-edge investment strategies and platforms aren't just coveted by hedge funds. They're the lifeblood of high-frequency-trading (HFT) firms and proprietary market makers, as well as investment banks building out their systems for electronic trading and execution.”
“Here's What's Getting More Expensive” (CNN Business). “Used cars, homes, lumber, gas and chicken: What do they all have in common? They're all getting more expensive. The stimulus-fueled economy is rebounding and Americans are again spending on shopping, traveling and eating out. But the pandemic is far from over, and supply-chain woes mean supply isn't meeting demand -- sending prices even higher.”
“How A Stock-Market Selloff Made Junk Bonds An Unlikely Safe Haven” (MarketWatch). “Inflation scares haven’t created havoc everywhere. U.S. stocks booked a weekly loss after hot inflation data for April spooked investors bracing for a roaring, but potentially messy economic recovery. Their counterparts in the debt world barely budged. High-yield, or “junk bonds,” issued by riskier U.S. companies tend to mimic equities when rough patches hit. Lately that correlation has been breaking down.”
“When MTV Debuted 40 Years Ago, Everyone Thought It Would Fail. Here’s Why It Didn’t” (Vanity Fair). “Some products, in hindsight, seem like they were immediately destined for success. Take dishwashers, automobiles, or light bulbs—each created a demand for a product that hadn’t existed before, except in inferior incarnations. Once people knew about these significant upgrades in convenience, speed, or reliability, success and profit was assured…[b]ut MTV’s creation isn’t a Social Network tale of Ivy League boffins on track for greatness; it’s more like The Bad News Bears, a tale of scrappy underdogs.”
What we’re reading (5/15)
“Fed’s Waller Says Inflation Jump Likely Temporary, Urges Patience” (Wall Street Journal). “The U.S. economy is “going gangbusters,” but the Federal Reserve needs to see several more months of data on jobs and inflation before determining when to begin scaling back its easy-money policies, a central banker said.”
“Nobel Winner Daniel Kahneman’s New Book On Bad Decisions Has A Lot To Say About Market Overconfidence And Money Mistakes” (CNBC). “[H]erd instinct is good when you are in a primitive society. If everyone is running from a lion, you should too…[W]hile it helped us survive throughout all of prehistory, the herd instinct is bad when you are making modern financial decisions. When everyone is getting into cryptocurrency, we are hard-wired to believe that we should join them. On a deep psychological level, it feels like a threat to our survival to not jump in. So we have to keep second guessing and combatting our natural instincts. Always second guess yourself, avoid overconfidence, and stay open-minded.”
“How Two Brothers Went From Nearly Jobless To Multi-Millionaires With A Bizarre Crypto Bet” (CNN Business). “Tommy, 38, and James, 42, who have asked CNN not to publish their last names to protect their anonymity, had put a few hundred bucks into an odd digital asset called shiba inu coin — a spinoff of dogecoin, so basically a parody of a parody. One coin was worth a fraction of a cent, but a friend, who happened to be a crypto expert, told them he believed it could be a big moneymaker.”
“Colonial Shutdown Shows How Americans Pay The Price Of Efficiency” (Washington Post). “The market-driven energy sector has spent a decade or more cutting costs, streamlining and digitizing. Four big oil refineries have shut down in Pennsylvania and New Jersey since 2010 because it’s cheaper to bring in gasoline by pipeline from the Gulf Coast, 1,500 miles away — as long as that pipeline stays in operation. Texas and California have driven the price of electricity down by throwing out the old regulatory structure — the structure that made sure utilities earned enough to invest in backup resources.”
“The Economics Of Non-Alcoholic Spirits, Explained” (InsideHook). “At first glance, non-alcoholic spirits seem like they should be relatively low-cost since they’re comprised of water instead of alcohol. Water-based distillates have a tax advantage, too: alcohol is subjected to state and federal excise taxes that distillers of non-alcoholic spirits don’t have to pay. And liquor is almost always sold through the three-tier system in which distributors take a substantial cut, whereas non-alcoholic spirit producers have the option of selling direct to consumers online. Nonetheless, non-alcoholic spirits often cost in excess of thirty dollars a bottle.”
What we’re reading (5/14)
“The IRS Is Coming For Crypto Investors Who Haven’t Paid Their Taxes” (Wall Street Journal). “Cryptocurrencies are exploding—and so is the Internal Revenue Service’s pursuit of Americans who aren’t paying taxes on them. With Tax Day approaching, it’s a good time to clean up your act if you’ve been lax about taxes on crypto. Not doing so could compound future tax problems, especially if you have traded a lot or have more than a small stake.”
“Goldman Sachs Executive Quit After Making A Killing On Dogecoin: Report” (New York Post). “A Goldman Sachs managing director reportedly raked in millions of dollars from cryptocurrency dogecoin — and then quit the Wall Street titan. The London-based executive, Aziz McMahon, was with the bank for more than 14 years, his LinkedIn profile shows, according to eFinancialCareers. McMahon might be starting a hedge fund, according to the site, which cited sources at Goldman.”
“What Disney, Airbnb And DoorDash Results Reveal About The Post-Pandemic Economy” (CNN Business). “Companies are gearing up for an era in which Covid-19 isn't the primary driver of how people spend their money. The big question: As the coronavirus situation improves in countries like the United States, which trends from the past 14 months will have staying power, and which will be resigned to the pandemic past? Airbnb, DoorDash and Disney (DIS), which reported results after US markets closed on Thursday, provide some idea.”
“Are You Invested in America’s ‘Two-Hour Boom’?” (RiskHedge). “The lobby of 7 W. 34th Street looks like every other swanky downtown Manhattan office. But walk past the glowing white marble floors, take the elevator to the fifth floor, and you’re in an Amazon warehouse. These warehouses are how Amazon can now deliver nearly anything you can think of in two hours or less…[r]emember, Amazon became a big deal by pioneering two-day delivery. Now that’s standard. Today, over half of online sellers offer same-day delivery.”
“JPMorgan Chase, Wells Fargo, And U.S. Bank To Share Customer Deposit Records For Credit Card Approvals” (Business Insider). “Underwriting will involve reviewing account balances over time and overdrafts. JPMorgan is slated to grant the first approvals under the pilot program as early as this fall. The program will be geared toward applicants without credit scores—an estimated market of 53 million, according to FICO credit score provider Fair Isaac.”
What we’re reading (5/13): inflation edition
“Jump In Consumer Prices Raises Stakes In Inflation Debate” (New York Times). “Consumer prices jumped at the fastest pace in more than a decade in April, surprising economists and intensifying a debate on Wall Street and in Washington over whether inflation might reach levels that would squeeze households and ultimately undermine the recovery.”
“Another Inflation Gauge Comes In Hot With Producer Prices Jumping 6.2% In April From A Year Ago” (CNBC). “Companies paid much higher prices to producers in April for everything from steel to meat in another sign of inflation in an economy rapidly recovering from the pandemic. The new data comes a day after a sharp gain in consumer prices sent the stock market reeling.”
“Powell Gets His Inflation Wish” (Wall Street Journal). “The benign explanation for the April price surge is that it’s “transitory,” as Mr. Powell likes to say. The April surge compares to a price decline last spring at the height of the pandemic lockdowns, and the comparisons will look less ugly in coming months…[y]et inflation is always and everywhere a monetary phenomenon, as Milton Friedman put it. For more than a year the Fed has been pursuing an expansionary policy for the ages. It has been keeping rates near zero and expanding its balance sheet to record levels with bond purchases in an economy that has been growing fast for more than nine months.”
“The Inflation Trilemma” (Marginal Revolution). “You all know by now that the measured rate of price inflation came in at 4.2%, much higher than expected. Many people wish to maintain this is not a major problem, and maybe they are right. But here are three views you cannot hold simultaneously: 1. The distribution of income really matters. 2. Workers don’t have nearly enough bargaining power, and are at a disadvantage in negotiations and renegotiations. 3. Higher rates of price inflation are not a problem. Higher rates of price inflation, of course, lower real wages unless workers can bargain back up the nominal wage to reattain their previous real wage.”
“McDonald's Raises Minimum Pay At Corporate-Owned Stores Across The US, As The Battle For Workers Heats Up” (Business Insider). “McDonald's is raising its minimum wage in corporate-owned stores, as fast-food chains struggle to hire employees. On Thursday, the fast-food giant announced it is rolling out pay increases at corporate-owned locations, which will shift entry level pay for crew to at least $11 to $17 per hour. The starting range for shift manager will be at least $15 to $20 per hour, based on restaurant location.”
What we’re reading (5/12)
“Consumer Prices Jumped As Economic Recovery Picked Up” (Wall Street Journal). “The Labor Department reported its consumer-price index jumped 4.2% in April from a year earlier, up from 2.6% for the year ended in March. That is the highest 12-month level since the summer of 2008. Consumer prices increased a seasonally adjusted 0.8% in April from March. The index measures what consumers pay for goods and services, including clothes, groceries, restaurant meals, recreational activities and vehicles.”
“Used Cars, Travel And Furniture Are Just Some Of Things That Are Getting More Expensive” (CNN Business). “Just about everything is getting more expensive in the United States as the stimulus-fueled economy rebounds and Americans are again spending on shopping, traveling and eating out. But the pandemic is far from over, and supply-chain woes mean supply isn't meeting demand -- sending prices even higher. Nearly all major components of the government's inflation measure increased in April, the Bureau of Labor Statistics reported Wednesday.”
“Gas Shortages Intensify In Southeast, With 71 Percent Of Charlotte Stations Now Dry” (Washington Post). “More than 70 percent of the gas stations in Charlotte have run dry as panic-buying exacerbated fuel shortages throughout the Southeast in the aftermath of a hack that shuttered the Colonial Pipeline. Roughly 60 percent of the stations in metropolitan Atlanta were also out of fuel Wednesday morning, according to Patrick De Haan, an oil analyst at GasBuddy. At the state level, nearly 25 percent of the stations were without fuel in North Carolina, 15 percent in Virginia and Georgia, and 13 percent in South Carolina, De Haan said on Twitter”
“Through the Roof” (City Journal). “Policymakers need to recognize that the roots of the housing shortage lie not in financial speculation but in government regulation. Localities have made it practically illegal to build enough housing to meet demand, leading to inflated home prices. America is building homes at its slowest rate in 60 years, worsening a supply problem that has been decades in the making. Investors are snapping up homes because of supply restrictions, not in spite of them. The only answer to a housing shortage is to build more housing.”
“SoftBank Broke Profit Records. Can It Keep Up the Pace?” (DealBook). “A year ago, SoftBank disclosed its biggest-ever operating loss, and its voluble founder, Masa Son, spoke ruefully of the ‘valley of coronavirus’ that ensnared its investments. Now, thanks to huge I.P.O.s, the tech giant is setting a different — and much happier — record.”
What we’re reading (5/11)
“Stanley Druckenmiller Says The Fed Is Endangering The Dollar’s Global Reserve Status” (CNBC). “Federal Reserve policies aimed at keeping markets and the economy afloat during the pandemic could end up threatening the long-term health of the U.S. dollar, investing magnate Stanley Druckenmiller told CNBC on Tuesday. The chairman and CEO of Duquesne Family Office said the Fed’s insistence on holding interest rates down and buying trillions in bonds even though markets are thriving and the economy is booming is a long-term risk.”
“Americans Up And Moved During The Pandemic. Here’s Where They Went.” (Wall Street Journal). “The year the Covid-19 pandemic forced many Americans to stay home, more than seven million households moved to a different county—nearly half a million more households than in 2019. Spurred by the promise of flexible, remote work, many left large metropolitan areas and migrated toward less-dense, more-affordable places that offered more space.”
“Dow Briefly Tumbles More Than 600 Points As Surging Prices Rattle The Market” (CNN Business). “US stocks sold off Tuesday and the Dow briefly tumbled more than 600 points around mid-morning, as investors grow increasingly concerned about raw material price spikes, shortages and inflation. Prices are rising all over the place as commodities, shipping costs and more related categories become more expensive.”
“Cboe Files With The SEC To List Fidelity's Bitcoin ETF As The Number Of Firms Seeking Approval Grows” (Business Insider). “The Chicago Board Options Exchange has applied with the US Securities and Exchange Commission Monday to list Fidelity's Wise Origin Bitcoin exchange-traded fund, according to a Form 19b-4. Fidelity in March applied to launch an ETF to track the performance of bitcoin. The fund will hold bitcoin and value its shares based on prices from major cryptocurrency exchanges such as Coinbase and Bitstamp, according to a regulatory filing.”
“Hedge Fund Manager Who Said ‘I’m Going To Jail’ Is In Fact Going To Jail” (Dealbreaker). “Dan Kamensky knew what he had coming to him. Shortly after attempting to browbeat his investment bank into not outbidding him for something he’d fought for and wanted for his hedge fund, Marble Ridge Capital, he turned to pleading. ‘If you’re going to continue to tell them what you just told me, I’m going to jail, okay?’ he said. ‘I’m asking you not to put me in jail.’ Well, Kamensky’s begging proved no more successful than his bullying, and the Jefferies banker on the other end did continue to tell them what he had just told Kamensky, which was probably something along the lines of, ‘you appear to have breached your fiduciary duty to your fellow Neiman Marcus creditors, whom you represent as a member of the creditors committee, but trying to keep them from getting that extra 10 cents a share you’d prefer Marble Ridge not have to pay.’”
What we’re reading (5/10)
“Prices Are Rising Everywhere You Look” (CNN Business). Just as Larry Summers predicted. “This doesn't just matter for Americans guarding their pocketbooks. Price increases are also being closely scrutinized by investors and economists, who are desperate to know: Is this a passing phenomenon as the country emerges from a once-in-a-lifetime economic shock, or a more sustained trend that evokes the 1970s?”
“SpaceX Accepts Dogecoin As Payment To Launch ‘DOGE-1 Mission To The Moon’ Next Year” (CNBC). “Elon Musk’s SpaceX will launch the “DOGE-1 Mission to the Moon” in the first quarter of 2022, with the company accepting the meme-inspired cryptocurrency as full payment for the lunar payload.”
“The Breakout Cities on the Forefront of America’s Economic Recovery” (Wall Street Journal). “The pandemic is accelerating growth in midsize cities, positioning them to lead the charge in the nation’s economic rebound. Even before Covid-19, these rising stars—such as Greenville, Des Moines, Iowa, and Provo, Utah—had been quietly building out vibrant economies in the shadow of bigger metropolises. During the pandemic, they have drawn workers and businesses with large and affordable homes, ample access to outdoor space and less congestion.”
“Do Restrictions On H-1B Visas Create American Jobs?” (DealBook). “The chances of getting an H-1B visa have never been lower. In a randomized lottery each year, U.S. Citizenship and Immigration Services chooses 85,000 applicants to receive the visa, a cap that has remained unchanged since 2004. This year, the lottery pool contained about 308,000 applicants, meaning only one in four applicants was selected.”
“How A Homeless Man Lost Federal Aid By Trying To Move Into A New Apartment And Start Contributing Rent” (Business Insider). “On February 3, Derrick Henderson, 49, was going through his mail when he saw a rent bill addressed to him, saying he owed $2,368. On April 1, the bill increased to $5,788.26. Henderson was surprised, not because he didn't know his rent was due, but because he thought somebody else was helping him pay for it: the government. He was counting on a federal housing voucher to keep him from being homeless again, and he told Insider he was worried he'll soon be homeless in the future.”
What we’re reading (5/8)
“What Happens To Stocks And Cryptocurrencies When The Fed Stops Raining Money?” (Wall Street Journal). “Easy monetary policy has regularly fueled financial booms, and it is exceptionally easy now. The Fed has kept interest rates near zero for the past year and signaled rates won’t change for at least two more years. It is buying hundreds of billions of dollars of bonds. As a result, the 10-year Treasury bond yield is well below inflation—that is, real yields are deeply negative —for only the second time in 40 years.”
“U.S. Pipeline Operator That Transports 45% Of East Coast Fuel Shuts Entire Network After Cyberattack” (CNBC). “Top U.S. fuel pipeline operator Colonial Pipeline has shut its entire network after a cyber attack, the company said in a statement on Friday. Colonial’s network supplies fuel from U.S refiners on the Gulf Coast to the populous eastern and southern United States. The company transports 2.5 million barrels per day of gasoline, diesel, jet fuel and other refined products through 5,500 miles (8,850 km) of pipelines.”
“Logjam!” (Slate). “[T]he culprit [for the lumber shortage] is the decade of instability and low prices that followed the Great Recession, when America stopped building homes, leaving the lumber trade out to dry. The stunted recovery stripped the industry’s crucial middlemen—the mills themselves—to the bone. Building a new deck is expensive now because mills can’t ramp up to meet the demand surge—or won’t, nervous they’ll get caught with millions in underused machinery when prices crash back to earth.”
“The ‘Hybrid Office’ Could Be Great. It Could Also Be Hell.” (New York Times). “[R]esearchers at the University of Chicago estimate the share of work done remotely will level off at about 20 percent after the pandemic restrictions end. That’s about half as much remote work as is happening right now, but still four times the prepandemic share.”
“Analysis: Fund Managers See Value, Cyclical Stocks Running Further Despite Slow U.S. Jobs Recovery” (Reuters). “[F]und managers say that they are continuing to rotate into value and cyclical stocks - whose fortunes are closely tied to economic conditions - in anticipation that the economic recovery will be longer and more gradual than originally anticipated.”
What we’re reading (5/7)
“Warren Buffett ‘Broke’ Nasdaq: System Is Unable To Record High Berkshire Hathaway Share Price” (Entrepreneur). “Berkshire Hathaway shares, an investment group led by Warren Buffett , have reached such a high price that Nasdaq computers are unable to record their price. The entity stopped transmitting the quote from Tuesday and today there is no information about them on its official website.”
“From Dutch Tulips To Internet Stocks, How to Spot A Financial Bubble” (Wall Street Journal). “History shows that investment crazes are often associated with financial innovation, new instruments created by Wall Street middlemen, surrounded by mystery and fueled by expectations of big future profits. Sometimes they go very badly.”
“Fed Concerned About The Risks That Accompany Soaring Markets” (Washington Post). “A soaring stock market and fanfare around “meme-stocks” are drawing the attention of the Federal Reserve, as the economic recovery casts some shadows on a party that could eventually wind to an end. Rising asset prices, plus riskier investor appetites, were noted in the Fed’s latest Financial Stability Report, with fears that a significant drop-off in asset prices could ripple through the broader financial system.”
“Nobel Prize-Winning Economist Paul Krugman Details The Indicators He's Watching For The First Signs Of An Inflation Shock” (Business Insider). “Krugman said he's watching a handful of indicators to determine whether inflation poses a significant risk to the recovery. Core inflation isn't enough, since various bottlenecks could elude the benchmark, he said. Instead, the inflation-metric dashboard maintained by the Federal Reserve Bank of Atlanta gives a more holistic view of nationwide price growth. Sticky inflation indices, which track a subset of goods and services that change price somewhat rarely, are also worth monitoring, he said.”
“Nearly 1 In 3 New Stores Opening In The US Is A Dollar General” (CNN Business). “These openings are a continuation of dollar stores' rapid growth even before the pandemic. Economists and retail analysts say dollar stores are expanding in part because of growing wealth inequality in the United States and the hollowing out of the middle class. The share of American adults who live in middle-income households decreased from 61% in 1971 to 51% in 2019, according to Pew Research Center.”
What we’re reading (5/6)
“The Vaccine Liberation Movement Gets A New Ally” (DealBook). “The Biden administration reversed course yesterday and came out in favor of suspending patent protections for Covid-19 vaccines. The move pits policymakers against drug companies, as infections in India, South America and elsewhere spiral, highlighting the urgency of more widespread vaccination.”
“Patents Are Not The Problem!” (Marginal Revolution). “Patents are not the problem. All of the vaccine manufacturers are trying to increase supply as quickly as possible. Billions of doses are being produced–more than ever before in the history of the world. Licenses are widely available…[p]lastic bags are a bigger bottleneck than patents…[t]he US trade representative’s announcement is virtue signaling to the anti-market left and will do little to nothing to increase supply. What can we do to increase supply? Sorry, there is no quick and cheap solution. We must spend.”
“Millions Are Unemployed. Why Can’t Companies Find Workers?” (Wall Street Journal). “Hiring has been robust recently, despite the labor shortfall. U.S. employers added 916,000 jobs in March, according to the Labor Department, and economists project that the April jobs report, due out Friday, will show employers added 1 million more. Still, the shortage threatens to restrain what is otherwise shaping up to be a robust post-pandemic economic recovery.”
“U.S. Productivity Rebounds In First Quarter” (Reuters). “U.S. worker productivity rebounded in the first quarter, depressing labor costs growth, but the data has been severely distorted by the COVID-19 pandemic to provide a clear trend. The Labor Department said on Thursday that nonfarm productivity, which measures hourly output per worker, increased at a 5.4% annualized rate last quarter. Data for the fourth quarter was revised higher to show productivity falling at a 3.8% rate instead of the previously reported 4.2% pace.”
“Twitter Makes All Of Its Money From Ads. It’s Trying To Change That.” (Vox). “Twitter has been a free service for its users ever since it launched in 2006. Now it’s getting more serious about getting you to pay up, via an optional subscription service it’s building.”
What we’re reading (5/5)
“Yellen Says Rates Might Need To Rise As Economy Recovers” (New York Times). “The comments, broadcast online on Tuesday at The Atlantic’s Future Economy Summit, come amid heightened concern from some economists and businesses that the United States is in for a period of higher inflation as stimulus money flows through the economy and consumers begin spending again.”
“Weekly Mortgage Demand Stalls As Rates Rise And Fierce Competition Hurts Home Sales” (CNBC). “It was a mixed bag for mortgage demand last week, as higher rates did nothing for refinances and homebuyers faced more steep competition for a pitiful few homes for sale. Total mortgage application volume fell 0.9% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.”
“Michigan Wants To Close Oil Pipeline Under The Great Lakes. Canada Says No.” (Wall Street Journal). “Canada is fighting to stop U.S. officials from closing a vital cross-border oil and gas pipeline as a deadline to shut it looms. The dispute erupted in November, when Michigan Gov. Gretchen Whitmer announced she was revoking a permit that allows Enbridge Inc.’s Line 5 pipeline to run along the bottom of the Straits of Mackinac, between Lake Michigan and Lake Huron. She gave the company until May 12 to shut the pipeline.”
“Krispy Kreme files IPO Paperwork” (CNN Business). “The doughnut company said on Tuesday that it has confidentially filed paperwork related to a public offering of its stock with the Securities and Exchange Commission. The number of shares that will be offered and their price range has not been determined, the company said, adding that the IPO is expected to happen after the SEC completes its review.”
“Corporations Aren't ‘Woke,’ They Just Know Their Customers. Watch And Learn, Republicans.” (USA Today). “[D]on’t be tricked into thinking that America’s corporate giants are becoming something fundamentally different from what they’ve always been. But what you can see them as, in addition to profit pursuers, are bellwethers — highly useful signalers of where the culture is headed and how reality-based organizations are positioning themselves for success.”
What we’re reading (5/4)
“Fate Of Metal Magnate’s Empire Looms Over Blue-Collar Towns” (Wall Street Journal). “James Sanderson one day hopes to name a horse in the Kentucky Derby after British metals magnate Sanjeev Gupta, who he believes will save the steel industry in Georgetown, S.C. For now, Mr. Gupta is fighting to save his empire. The entrepreneur’s GFG Alliance group of companies says it is seeking to refinance billions of dollars worth of debt after Greensill Capital, its main lender, filed for insolvency in March.”
“Emails Between Steve Jobs And Other Apple Execs Reveal Conflict With Facebook Has Spanned More Than A Decade” (CNBC). “Last August, Facebook said Apple’s App Store rules were hampering it from releasing its Facebook Gaming app for iPhones in the way it wanted to…[n]ow, emails between three former Apple executives, including Steve Jobs, from 2011 show that a similar conflict between Apple and Facebook was likely part of the reason for a delay for the release of a Facebook app for iPads over a decade ago.”
“Goldman Sachs Plans To Get US Staff Back In The Office By Mid-June, According To A Report” (Business Insider). “Goldman Sachs is planning to get US employees back to the office by mid-June, Bloomberg reported Tuesday, citing people with knowledge of the matter. The bank has not yet informed staff of the plan, according to the report. Goldman Sachs declined Insider's request for comment.”
“How The Pandemic Led To A Rental Car Crisis Just As Americans Are Ready To Bust Loose” (Washington Post). “Major rental car operators last year sold off more than 770,000 cars as the pandemic crushed demand and kept Americans home…[f]or customers, smaller fleets mean higher prices and longer waits. But for the rental companies, shedding car leases and cutting billions of dollars in planned purchases was the key to survival. Now that the economy is growing faster than anticipated and people want to travel, the companies are struggling to find enough cars.”
“Verizon Offloads Yahoo And AOL In $5 Billion Deal” (CNN Business). “Verizon is exiting the media business, announcing Monday that it's selling the unit for $5 billion to private equity firm Apollo Global Management. The sale includes AOL and Yahoo, which Verizon bought for a combined $9 billion in recent years. Verizon will retain a 10% stake in the spin off and the Verizon Media Group name will be changed to just Yahoo.”
What we’re reading (5/3)
“Berkshire Chooses Greg Abel As Warren Buffett’s Successor In CEO Role” (Wall Street Journal). “Berkshire Hathaway Inc.’s famous Chief Executive Warren Buffett, the billionaire who has led the conglomerate for more than 50 years, is to be succeeded as CEO by vice chairman Greg Abel, putting to rest one of the biggest succession questions in corporate America.”
“Expensive Lumber Costs Have Added $36,000 To The Average Price Of A New Home, Report Finds” (Business Insider). “The housing market took off last summer, as the pandemic enabled many to work from home indefinitely, and with mortgage rates so low, many people rushed to buy new homes. But the pandemic shut down lumber production, and it hasn't kept pace with building since.”
“Fed’s Barkin Sees Higher Inflation This Year, But Then A Reversal In 2022” (CNBC). “‘I think we will see price pressure this year. You’ve got a very strong demand situation, and you’ve got constraints in supply,’ the central bank official said during a ‘Closing Bell’ interview. ‘When those things happen, you’re definitely going to see price pressure.’ However, Barkin added that he expects those pressures to subside as economic dynamics change through the year and the economy returns to a more normal state.”
“Nasdaq Wants New Diversity Rules, But Diversifying Boards Does Not Mean Better Performance” (USA Today). “Nasdaq cannot cite any high-quality study showing that board diversity boosts returns, because there appears to be none. In fact, there are many serious academic papers reporting the opposite result: diversifying boards can harm financial performance. Troublingly, Nasdaq disregards this evidence.”
“Sticking With Remote Work? Businesses Are Betting On It” (Reuters). “U.S. businesses have been spending more on technology than on bricks and mortar for more than a decade now, but the trend has accelerated during the pandemic, one more sign that working from home is here to stay.”
April 2021 performance update
Hi folks, here with a performance update for April. First, the key monthly numbers:
Prime: +2.34%
Select: +1.30%
SPY: +4.74%
Bogleheads (80% VTI, 20% BND): +3.62%
As the numbers make clear, Prime and Select were both up, which is always good, but they also underperformed both the market and the alternative, lower-risk “Bogleheads” benchmark (a sub-optimal monthly result, but also a rare one based on the longer history of our performance results so far). The numbers do obscure a bit the fact that things were looking pretty good until the last trading day of the month. In fact, Select was beating all three of the other portfolios above for almost the entire month and continuing its trend of catching back up to the market until Twitter reported quarterly earnings on Thursday, missing the mark on user growth. TWTR plummeted on the news, and ended up down ~15 percent for the monthly, which you can see in the gray line on the chart below.
In any case, with April now in the books, it’s worth noting that we’ve officially completed one full year of issuing picks and tracking performance here at Stoney Point. Needless to say, stocks had an exceptional run in the last 12 months. While I don’t expect Prime to deliver a 60%+ return in the next 12 months (and certainly don’t expect the market to deliver 50%, given the long-term historical yearly average of around 7 percent), our first year’s performance is a great track record to carry ahead. In the next year, I’m hopeful for a similar level of monthly alpha generation in the Prime portfolio, and for Select to converge to or even surpass SPY on a cumulative basis. All the while, I expect significant behind-the-scenes developments at Stoney Point as an enterprise.
Most of all, thanks for your readership and support!
Stoney Point Total Performance History
What we’re reading (5/1)
“How Apple Does M&A: Small And Quiet, With No Bankers” (CNBC). “While big tech rivals routinely strike multi-billion dollar deals, Apple has followed a different strategy. It’s refined the ‘acquihire,’ or strategic purchase of a small company primarily for its staff.”
“E.U. Accuses Apple Of Antitrust Violations Over App Store Rules After Spotify Complaint” (Washington Post). “Apple is facing antitrust charges in Europe for allegedly abusing its ‘dominant position’ to choke competition from music streaming rivals in its App Store, regulators announced Friday.”
“The Global Chip Shortage Is Going From Bad To Worse. Here's Why You Should Care” (CNN Business). “In the market for a new car, smartphone or washing machine this year? A global shortage of computer chips could mean you have to wait a while and pay more. A growing number of manufacturers around the world are having trouble securing supplies of semiconductors, delaying the production and delivery of goods and threatening to push up the prices paid by consumers.”
“Buffett Fights With Investors, With His Reputation At Risk” (DealBook). “Investors are pressing Berkshire to disclose more about climate change and work-force diversity. Shareholders, including the Calpers public pension fund, argue that Buffett’s conglomerate isn’t doing enough to disclose its portfolio companies’ progress in addressing those issues. Buffett opposed these initiatives ahead of the meeting, arguing that they cut against Berkshire’s philosophy of letting its subsidiaries operate largely independently. ‘I don’t believe in imposing my political opinions on the activities of our businesses,” he said at Berkshire’s 2018 annual meeting.’”
“America's Wealthiest Added $195 Billion To Their Fortunes In Biden's First 100 days” (Business Insider). “Over the last 13 months, as the pandemic has taken its economic toll, American billionaires have added $1.62 trillion to their collective net worths, according to a report from the left-leaning Institute for Policy Studies (IPS) and Americans for Tax Fairness (ATF). That report also found that the number of American billionaires has grown from 66 in 1990 to 719 today.”
May Prime + Select picks available now
The new Prime and Select picks for May are available starting now, based on a model run put through today (April 30). As a note, we’ll be measuring the performance on these picks from the first trading day of the month, Monday, May 3, 2021 (at the mid-spread open price) through the last trading day of the month, Friday, May 28, 2021 (at the mid-spread closing price).
You can check out the latest picks here, and stay tuned for performance result for April.
*Edited 5/27: the last trading day of the month was corrected from Monday, May 31, 2021 to be Friday, May 28, 2021. Monday, May 31 is Memorial Day and U.S. stock markets are not open.
What we’re reading (4/29)
“U.S. Economy Grew At 6.4 Percent Annual Rate In First Quarter As Consumer Spending Drives Robust Recovery” (NBC News). “The reopening economy surged in President Joe Biden's first 100 days, with U.S. gross domestic product hitting 6.4 percent, the best quarterly reading since 2003. U.S gross domestic product, or GDP, a measure of the total amount of goods and services produced, hit 6.4 percent in the first quarter of 2021, according to advance estimates released Thursday from the Commerce Department.”
“Stocks Are Off to Best Start to a Presidential Term Since Great Depression” (Wall Street Journal). “The S&P 500 has risen 10% since Mr. Biden’s Jan. 20 inauguration. The index is on course for its strongest performance since the start of Mr. Roosevelt’s first term in 1933, when it surged 80% after a spectacular crash in the Great Depression, according to a Dow Jones Market Data analysis. By comparison, the S&P 500 rose 5.3% in the first 100 days of President Donald Trump’s term in early 2017 and on average has gained 3.2% over that period in presidential terms since Herbert Hoover’s in 1929.”
“Jobless Claims Hit New Pandemic Low For Third Straight Week As Labor Market Picks Up” (Washington Post). “Weekly jobless claims fell to a pandemic low for the third consecutive week, the Labor Department reported Thursday, with 553,000 Americans filing for initial unemployment benefits in the week that ended April 24. This marks a 13,000 decrease compared to last week, putting the insured unemployment rate around 2.6 percent, the Labor Department said.”
“Apple Just Had A Massive Quarter Thanks To The 5G iPhone” (CNN Business). “Apple's steady stream of hardware upgrades and new services launched throughout the pandemic has held the company in good stead going into 2021. The company on Wednesday reported revenues of $89.6 billion and a profit of $23.6 billion for the three months ending March 27, blowing past analyst forecasts. The company also authorized a $90 billion share buyback, it said. Apple shares surged more than 3% after-hours following the report.”
“Millennials Are Getting Screwed Again By Their 2nd Housing Crisis In 12 years” (Business Insider). “A recent bank note from Jefferies said the US was short 2.5 million homes, while Freddie Mac put that estimate higher at a shortage of 3.8 million. There are 40% fewer homes on the market than last year, a Black Knight report found. It's bad news for many aspiring homebuyers — but especially for millennials. It's just the latest chapter in a long line of bad economic luck.”
What we’re reading (4/28)
“Venture Firms Bask In a Surge of Blockbuster Profits” (Wall Street Journal). “The venture sector has long been defined by big wins on disruptive tech companies, balanced by far more numerous losing bets. But in recent months, an unusually large number of venture investments have logged multibillion-dollar profits, setting many firms up for their greatest returns since the dot-com boom of the late 1990s.”
“Samsung Family Announces Plans To Pay Off More Than $10 Billion Of Inheritance Tax” (CNBC). “The family of Samsung Electronics’ late chairman announced Wednesday they will be paying off a massive inheritance tax bill of more 12 trillion Korean won (about $10.78 billion). The inheritance tax payment is one of the largest in the history of South Korea and globally — ‘equivalent to three to four times the Korean government’s total estate tax revenue last year,’ Lee Kun-hee’s family said in a statement.”
“Small Business Demand Lifts UPS Q1 Profit, Revenue Up 27%” (ABC News). “UPS is one of the few companies that benefited from the pandemic as demand for delivery rose as more people stayed home and shopped online. But even with more people getting vaccinated and heading out, the company said it expects delivery demand to continue this year as more businesses open up and need to ship goods. Plus, consumers have more money in their pocket to spend from government stimulus checks. UPS said daily volume jumped more than 14% in the first three months of the year from the same period a year ago.”
“Hedge Fund Manager Spent Legitimate Earnings On Race Cars, Allegedly Needed To Commit Fraud To Buy A Place To Keep Them” (Dealbreaker). “[B]efore his indictment for allegedly lying to investors about how he was investing their money and how those investments were doing, among other things, Franzone told The Wall Street Journal just how he used his disposal income: the 1965 Daytona 500-winning ride, Toyota’s first-ever NASCAR-winning entrant, etc.”
“Record-Breaking Digital Artist Beeple Says The NFT Craze Is Just Like The Dotcom Bubble Of The Late 1990s” (Business Insider). “Record-breaking digital artist Beeple, who sold a piece of digital art for a record-breaking $69 million, thinks the non-fungible token (NFT) market will evolve in the same way the internet did during the dotcom bubble of the late 1990s.”
What we’re reading (4/27)
“Tesla Makes Money (Including From Selling Cars)” (DealBook). “The electric carmaker posted record quarterly earnings yesterday, beating Wall Street forecasts. But a closer look shows that its core business — you know, making vehicles — wasn’t the only story, and that might be why the company’s stock fell in aftermarket trading.”
“Joe Biden To Issue Executive Order Implementing $15-An-Hour Minimum Wage For Federal Contractors” (Business Insider). “The order would increase the hourly minimum wage for workers on federal contracts no later than March 30, 2022, almost a year from now. Officials in the Biden administration estimate the measure will benefit hundreds of thousands of government contractors and argue it will not raise the financial burden on taxpayers.”
“Toyota Snaps Up Lyft's Self-Driving Cars Unit For $550 Million” (CNN Business). “Toyota is hitting the gas to achieve its self-driving goals by buying Lyft's autonomous vehicle business for over half a billion dollars. The two players announced the $550 million acquisition on Tuesday, saying that it would allow them to create a ‘dream team’ of about 1,200 researchers and engineers around the world.”
“Crocs Shares Soar As Shoe Maker Raises 2021 Sales Outlook, Sees Growth Of 40% To 50%” (CNBC). “Crocs shares shot up more than 8% Tuesday after the shoe maker increased its revenue outlook for the full year and reported record first-quarter sales. CEO Andrew Rees said demand for the Crocs brand is “stronger than ever” across the world. Some have called Crocs the “it” shoe of the pandemic, as the clog became a closet staple for consumers seeking comfort at home.”
“Lakeside Idaho City Is America’s Hottest Housing Market In New WSJ/Realtor.com Index” (Wall Street Journal). “Buyers from other Western states are moving to northern Idaho in droves, seeking a more rural and less expensive place to live, said Kristen Johnson, a real-estate agent at Century 21 Beutler & Associates in Coeur d’Alene. Workers able to work remotely are also choosing to relocate, she said.”
May picks available soon
We’ll be publishing our Prime and Select picks for the month of May on or before 4/30. As always, we’ll be measuring SPC’s performance for the month of April, as well as SPC’s cumulative performance, assuming the sale of the April picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Fri., April 30). Likewise, performance tracking for the month of May will assume the May 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 (Mon., May 3)