What we’re reading (5/21)
“As Pandemic Spread Pain and Panic, Congressman Chased Profit” (Associated Press). “The issue of congressional stock trading took on a new urgency last year when at least three senators were the subject of inquiries about whether they made financial decisions based on insider information…Malinowski’s trades received little attention at the time. Yet his subsequent failure to report his trading activity to Congress as required by law, which was first reported by Business Insider, have made him the latest to face scrutiny, with two complaints filed against him with the Office of Congressional Ethics.”
“U.S. Proposes Global Minimum Corporate Tax Rate Of 15%, With An Eye On Something Even Higher” (CNBC). “Corporations around the world should pay at least a 15% tax on their earnings, the Treasury Department said Thursday as part of its push for a global minimum for businesses. The final rate could go even higher than that, according to a Treasury release that said the 15% minimum is a ‘floor and that discussions should continue to be ambitious and push that rate higher.’”
“Apple’s Tim Cook Expected To Take Witness Stand In Antitrust Fight” (Wall Street Journal). “With the bench trial in Oakland, Calif., nearing its expected end on Monday, Mr. Cook would follow other Apple executives this week who tried to counter arguments by Epic that Apple improperly prohibits competing app stores on the iPhone and forces in-app purchases for digital payments through its own system that takes as much as a 30% cut.”
“WeWork Lost $2 Billion In A Quarter And 200,0000 Members In A Pandemic-Hit Year, It Said Ahead Of Its Stock Market Debut” (Business Insider). “WeWork's quarterly revenues fell almost 50% compared to the first quarter of 2020, from $1.1 billion to $598 million, according to its results for the quarter ending March 31. WeWork said restructuring costs were $494 million, an increase from $56 million in the first quarter of 2020. This was driven by Japanese tech giant SoftBank's stock purchases, and a settlement with former CEO Adam Neumann, who stepped down in 2019.”
“Population Predicts Regulation” (Economist Writing Everyday). “It turns out that a state’s population size, rather than political ideology or any thing else, is the best predictor of its regulations…[w]hat is less clear is why this relationship is so strong. Mulligan and Shleifer attribute it to a fixed cost of regulating; larger polities can spread this cost over more people, making the average cost of regulating cheaper, so they do it more. We note two other explanations: larger polities might have more externalities worth regulating, or if regulation produces concentrated benefits and dispersed costs, a larger population could make it harder for those harmed by regulation to organize collectively to oppose it.”
What we’re reading (5/20)
“High Inflation? A Generation Of Investors Has Never Felt It” (ABC News). “The central question gripping Wall Street is whether the burst of inflation hitting the economy as it recovers from the pandemic is just temporary or the start of a real problem. The answer threatens to crack the stock market’s incredible, record-setting run that began in March 2020. Adding to the fog of the debate — and the uncertainty that has markets churning — is that more than a generation has passed on Wall Street since investors had any experience at all with high, long-lasting inflation.”
“How Apple Screwed Facebook” (Wired). “Since the update [Apple’s iOS 14.5 update] went live last month iPhone owners have been opting out of data tracking in their droves. According to Flurry Analytics, 85 per cent of worldwide users clicked ‘ask app not to track’ when prompted, with the proportion rising to 94 per cent in the US. Apple did not respond to requests to comment. For an organisation like Facebook, whose entire business model is based around collecting, analysing, selling on and profiting from data about its users’ likes and dislikes, such numbers could be devastating.”
“Real-Estate Frenzy Overwhelms Small-Town America: ‘I Came Home Crying’” (Wall Street Journal). “Home prices in the U.S. have shot up in the past year, driven by limited supply, record-low interest rates and buyer demand. Bidding wars have spread from such high-profile locations as Palm Beach, Fla., and the suburbs outside New York City to smaller cities and towns, including long-neglected locales where properties typically sat on the market for months.”
“Treasury Targets Tax Cheats, Cryptocurrency In Proposal It Hopes Will Bring In $700 billion” (Washington Post). “The Treasury Department on Thursday announced a plan to raise an additional $700 billion through new tax compliance measures, a potentially key source of revenue for the Biden administration’s multitrillion-dollar spending proposals. In a 22-page report, Treasury officials identified a number of policies to increase enforcement aimed at closing the ‘tax gap’ between what taxpayers owe to the federal government and what they actually pay. These include increased reporting requirements, new tools for auditors, massively increasing the Internal Revenue Service’s budget, and new rules on cryptocurrency, among other measures.”
“6 Personal Assistants Dish On The Wildest Requests They've Ever Gotten From Execs, Like Shipping A Sandwich From Beverly Hills To Dubai” (Business Insider). “Personal assistants, or PAs, to top executives command on average $80,000 a year, according to Salary.com. But they often work hard for their money and need to go to great lengths to deliver quickly and constantly on demands from their bosses. Sometimes, these requests are downright quirky to any outsider — but for many PAs, it's all in a day's work. Insider spoke with six PAs and executive assistants who work for the remote-assistant platform Double and boast résumés that include positions at Deloitte, Visa, Target, and Danone (whose brands include Evian and Dannon). They shared a few of the wildest situations they've been tasked with handling in their careers.”
What we’re reading (5/19)
“Wall Street Falls For Third Day On Inflation Jitters Ahead Of Fed Minutes” (Reuters). “Wall Street's main indexes fell for the third straight session on Wednesday, as investors dumped riskier assets on fears that rising inflation could force the U.S. Federal Reserve to pare back its support soon.”
“Homebuyers Are Applying For Ever Bigger Mortgages As Home Prices Soar” (CNBC). “Sky-high home prices mean demand for ever bigger mortgages, but those prices may also be causing a pullback in homebuying overall. Mortgage applications to purchase a home fell 4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was just 2% higher than the same week one year ago, when the housing market was just starting to come back after the pandemic shut it down.”
“Hedge Funds Increase Bets On Private Companies” (Wall Street Journal). “Hedge-fund firms are stepping up their presence in what has emerged as Wall Street’s hottest area: investing in private companies. Viking Global Investors LP, Maverick Capital Ltd., Lone Pine Capital LLC and others have taken steps recently to increase their investments in private companies. Viking, a large investor in private healthcare and biotechnology companies, is aiming to raise $1 billion from investors for its first dedicated private-equity fund, said potential clients. The new fund is expected to close on Oct. 1.”
“‘Big Short’ Investor Michael Burry Makes Bearish Bet On Tesla” (MarketWatch). “The investment firm behind Michael Burry, who shot to fame for predicting the mortgage crisis well before anyone else, has made a bearish bet against electric-car behemoth Tesla. According to a Securities and Exchange Commission filing on Monday, Michael Burry’s Scion Asset Management was the owner of puts against 800,100 Tesla shares as of March 31, with a value of $534 million. A put is a bearish option that gives the holder the right to sell the security at a set price over a specified period.”
“Half Of Single-Use Plastic Waste Produced By Just 20 Companies” (CNN Business). “Production of single-use plastics is set to grow 30% in the next five years, fueling their contribution to global warming and ocean pollution, researchers said Tuesday as they published a list of companies that manufacture and fund throwaway plastic. The first ‘Plastic Waste Makers Index,’ published by the Australia-based philanthropic Minderoo Foundation, calculated that 20 companies -- mainly energy and chemicals giants -- are the source of half of the world's single-use plastic waste.”
What we’re reading (5/17)
“Inflation Is Good News for Stocks With High Dividends” (Barron’s). “Inflation may be hurting the broader market, but it also indicates that stocks paying high dividends can perform well…[t]hey have outperformed low dividend payers by just under 9 percentage points year to date, according to Evercore data. Citizens Financial Group (ticker: CFG), a component of Evercore’s Sustainable Dividend Growth portfolio, has risen 40% this year. It has a dividend yield of more than 3%, far more than the 1.63% on 10-year Treasury debt.”
“Natural Gas, America’s No. 1 Power Source, Already Has A New Challenger: Batteries” (Wall Street Journal). “A decade ago, natural gas displaced coal as America’s top electric-power source, as fracking unlocked cheap quantities of the fuel. Now, in quick succession, natural gas finds itself threatened with the same kind of disruption, only this time from cost-effective batteries charged with wind and solar energy.”
“AT&T-Discovery Deal Would Create A Media Juggernaut” (New York Times). “AT&T is in advanced talks to create a new company that would merge its media business, including CNN, with Discovery Inc., two people briefed on the deal said on Sunday. The plan would incorporate all of AT&T’s WarnerMedia assets, which include HBO and Warner Bros., one of the people said. The parties could announce a deal as soon as Monday, this person said, saying that the talks were not yet complete and final details were being worked out.”
“China’s Industrial Output Growth Slows In April, Retail Sales Miss Forecasts” (Reuters). “China's factory output growth slowed in April from the jump seen in the previous month while retail sales missed analyst expectations, indicating more pressure on the recovery in consumption.”
“Some Amazon Managers Say They Hire People They Intend To Fire Later Just To Meet Their Turnover Goal” (Business Insider). “Amazon has a goal to get rid of a certain percentage of employees every year — and three managers told Insider they felt so much pressure to meet the goal that they hired people just to fire them: ‘We might hire people that we know we're going to fire, just to protect the rest of the team,’ one manager said.”
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.