May 2021 performance update
Hi friends,
Here with a performance update for May. As usual, the key numbers for the month:
Prime: +1.21%
Select: -3.22%
S&P 500 (SPY ETF): -0.09%
Bogleheads Portfolio (80% VTI, 20% BND): -0.39%
After a couple of flattish months, I’m quite pleased to see Prime outperforming the market by about 130 basis points. The interesting big winner among the Prime set in the month was EXPD (+12.32%). EXPD—not Expedia; rather, Expeditors International of Washington—is a global logistics provider (e.g., air freight, ocean freight, etc.). That feels like a covid recovery story, so it’s interesting to see our algo picking it up. Another big winner this month was Maximum Integrated Products (MXIM, +6.39%), which makes circuits. If you’ve been following the global chip shortage in our “what we’re reading” blog posts, you may not be surprised to see the appreciation in that stock in the last month. But, again, interesting to see our algo picking it up. Recall, I push a button every month to select our picks (based on a formula that is qualitatively agnostic as to the daily news flow, but nevertheless aims to pick up on quantitatively meaningful news to the extent that news maps to value-relevant financial indicia).
Along these lines, worth calling out that our model’s #1 and #2 picks in the whole S&P 500 for June are direct diagnostics competitors Lab Corp and Quest. A pet theory on that without studying it closely: much of the world is still embroiled in the covid catastrophe, meaning these global diagnostics providers’ services remain much in need. Our model could essentially be communicating a view that markets are not correctly extrapolating an elevated growth outlook for these behemoths (counterpoint: the market could know something our model doesn’t capture, or simply have a different view as to the path of attenuation of the covid catastrophe globally).
Speaking of catastrophes, Select’s performance last month left something to be desired. That was largely driven by two picks getting hammered: Paycom (PAYC, -13.25%) and Cognizant Technology Solutions (CTSH, -12.04%). It’s a little foggy to me as to why. Both provide cloud services, so it could be part of the rotation out of high-technology stocks that market practitioners have been talking a lot about on CNBC and Bloomberg in the midst of the sector’s already-great 2020. Quantitatively, one story could be that these are long-“duration” stocks, meaning their values are particularly sensitive to changes in expectations about the level of Treasury rates. Given the evolution of the inflation outlook in the last month, one sort of has to imagine the market is anticipating future Fed rate increases to stymie the rising prices, which could have a particularly adverse effect on stocks like these.
As to macro factors more generally, it’s worth noting there are a lot of moving pieces in the macro outlook right now—from the drivers of continued low labor market participation, to the causes of rising price levels, to the merits of the current administration’s latest budget proposal, to the wisdom of the Fed’s continued monetary support, to the global covid outlook. I try to feature some of these topics in Stoney Point’s “what we’re reading” posts, but I do view these factors as mostly affecting asset allocation decisions (i.e., “Should I be in stocks or in gold or real estate or bonds?) rather than security selection decisions (i.e., given I’m going to be in stocks over a 3- to 5-year horizon, which stocks should I choose?”). My here’s here at Stoney Point are a little more focused on latter.
Stoney Point Total Performance History
June Prime + Select picks available now
The new Prime and Select picks for June are available starting now, based on a model run put through today (May 29). As a note, we’ll be measuring the performance on these picks from the first trading day of the month, Tuesday, June 1, 2021 (at the mid-spread open price) through the last trading day of the month, Wednesday, June 30, 2021 (at the mid-spread closing price).
You can check out the latest picks here, and stay tuned for performance result for May.
What we’re reading (5/29)
“Memorial Day Travel Surge To Test Airports, Airlines” (Wall Street Journal). “While domestic air-travel numbers last Christmas were only half those in 2019, recent Transportation Security Administration counts have them now hovering around 90% of pre-pandemic levels. The TSA screened 1.9 million passengers last Sunday, a 14-month high.”
“Why You Should Wait Out The Wild Housing Market” (The Atlantic). “How wild is the U.S. housing market right now? So wild, half of the houses listed nationwide in April went pending in less than a week. So wild, one poll found that most buyers admitted to bidding on homes they’d never seen in person. So wild, a Bethesda, Maryland, resident recently included in her written offer “a pledge to name her first-born child after the seller,” according to the CEO of the realty site Redfin. So wild, she did not get the house.”
“Bosses Are Acting Like The Pandemic Never Happened” (Vox). “CEOs should be thinking ‘if I try to push my organization back to 2019 and that all-cubicle model,’ [Harvard Business School professor Prithwiraj] Choudhury said, ‘the risk is I’m going to lose my best employees.’”
“Even In The Face Of Surging Grocery Prices, Retail Beef And Pork Prices Cause Sticker Shock” (Washington Post). “Overall food prices rose 0.4 percent from March, and are up 1 percent from a year ago, according to data released by the Bureau of Economic Analysis on Friday. The price of pork soared 2.6 percent in the month of April and 4.8 percent from a year ago, adjusting for seasonality. And while beef and veal prices stayed fairly flat for the month, they are up 3.3 percent from a year ago. In a season that routinely sees increased demand for beef and pork, this goes far beyond people excited to get back outside to barbecue.”
“A Massive Cannabis Farm Raided By UK Police Turned Out To Be A Bitcoin Mine” (Business Insider). “When police in West Midlands, UK were getting ready to raid what they suspected was a cannabis farm on May 18, they instead discovered a cryptocurrency mine that was stealing thousands of pounds worth of electricity from the main supply. ‘It's certainly not what we were expecting,’ Sandwell Police Sergeant Jennifer Griffin, said in a statement.”
What we’re reading (5/28)
“Commercial Real Estate Is Stuck In A Slow Motion Train Wreck” (Business Insider). “[R]ight now there is a two-ton grey rhino staring down the US economy: More precisely, $6.5 trillion of assets in the US commercial real estate (CRE) industry. This coming CRE threat, in the three major non-residential sectors of the industry, is snorting loudly and padding its foreleg, while we all stand and stare.”
“A Key U.S. Inflation Gauge Rose 3.1% Year Over Year, Higher Than Expected” (CNBC). “A key inflation indicator rose a faster-than-expected 3.1% in April as price pressures built in the rapidly expanding U.S. economy, the Commerce Department reported Friday. The core personal consumption expenditures index was forecast to increase 2.9% after rising 1.9% in March. Federal Reserve officials consider the measure to be the best gauge for inflation, though they watch a number of metrics.”
“The Economy Is Spinning Its Wheels, And About to Take Off” (Paul Krugman, New York Times). “[C]hill out. There is some bad news out there, but most of it is a temporary byproduct of extraordinary good news: The virus is losing, and the economy is winning.”
“Americans’ Boost To Spending Is Adding Fuel To Economic Growth” (Wall Street Journal). “Americans extended a spending binge in April as they continue to catch up on activities they held off on during the pandemic, propelling a broad economic recovery. After months of buying goods, many households are now shelling out more for services, dining out, traveling, and even visiting the spa. Consumer spending rose by 0.5% in April the Commerce Department said Friday—a solid increase, though slower than the 4.7% gain the prior month, which was fueled in part by federal stimulus checks.”
“The Tech Startup That Taught A Computer To Taste Wine” (CNN Business). “A California startup that taught a computer to ‘taste’ wine is using the technology to help winemakers improve their products and attract new customers. Founder Katerina Axelsson says Tastry uses artificial intelligence (AI) to analyze ‘tens of thousands of wines a year,’ generating vast reams of data to help winemakers and retailers target their products more effectively.”
June picks available soon
We’ll be publishing our Prime and Select picks for the month of June before Tuesday, June 1 (the first trading day of the month). As always, we’ll be measuring SPC’s performance for the month of May, as well as SPC’s cumulative performance, assuming the sale of the May 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., May 28 — note: Monday is Memorial Day and U.S. markets are closed). Performance tracking for the month of June will assume the June picks are bought at the open price (at the mid-point of the opening bid and ask prices) on the first trading day of the month (Tues., June 1).
What we’re reading (5/27)
“Wall Street Rebels Against Exxon” (DealBook). “Exxon Mobil suffered a stunning loss at its annual shareholder meeting yesterday, as a small new activist investor focused on climate change, Engine No. 1, won at least two seats on its 12-member board. To corporate America, the upset was a clear sign that company boards and leaders need to pay attention to environmental, social and governance issues (known as E.S.G.) — or suffer rebukes.”
“Larry Summers Sends Stark Inflation Warning To Joe Biden” (CNN Business). “Larry Summers is urging Washington to tap the brakes on stimulus — or risk unleashing a serious burst of inflation.‘I think policy is rather overdoing it,’ Summers said in recorded comments at a CoinDesk conference that were released Wednesday. ‘The sense of serenity and complacency being projected by the economic policymakers, that this is all something that can easily be managed, is misplaced.’”
“‘God Told Me to Put Money Into Hertz’: How Small Investors Are Upending Wall Street” (Wall Street Journal). “Many small investors are beating Wall Street pros at their own game. A basket of stocks favored by individuals has outperformed the broader market since March of last year, according to Vanda Research. This group, which includes behemoths like Apple Inc. and Tesla Inc. alongside electric-vehicle maker NIO Inc. and digital-payments company Square Inc., has gained 68% since the beginning of March 2020, far outpacing the S&P 500’s roughly 36% climb.”
“An Economic Theory Called ‘Reallocation Friction’ May Explain Why Employers Are Having A Hard Time Finding Workers — And Why A Full Recovery Could Be Years Away” (Business Insider). “In a normal economy, it's not a problem when workers change careers; other jobseekers can come in to take their place. But an exodus, like the one we may be seeing now in hotels and restaurants, is different. It can take time for workers to find a job in an unfamiliar industry in which they have few connections. Their new positions could require them to move to another city or state. And inexperienced workers require training to build up the necessary skills. Until all that happens, jobs go unfilled — keeping unemployment elevated, even though the demand for those jobs is there. Economists call it reallocation friction.”
“Best Buy Sales Jump 36% As Consumers Splurge On Electronics, Retailer Raises Forecast” (CNBC). “Best Buy said Thursday that sales grew 36% in the fiscal first quarter as shoppers’ stimulus-fueled spending spree included consumer electronics. Shares of the company 3.3% in premarket trading after the home electronics and appliance retailer raised its forecast.”
What we’re reading (5/26)
“Dow Jones Industrial Average Celebrates 125 Years As Wall Street’s Bellwether” (Wall Street Journal). “One hundred twenty-five years ago, the Dow Jones Industrial Average made its debut. The index of 12 smokestack companies closed that first trading day, May 26, 1896, at 40.94. It included General Electric Co. as well as long-forgotten names like American Cotton Oil and Distilling & Cattle Feeding. Since then, the Dow has evolved with the U.S. economy, giving investors from Wall Street to Main Street a measure of financial markets through the Great Depression, two world wars and all the events that shaped the 20th and early 21st centuries. It has risen an average of 7.69% each year and notched 1,464 record closes, according to Dow Jones Market Data.”
“The Bankers, Brokers, And Big Money Transforming Litigation Finance From A Lawyer's Hustle To A Multibillion-Dollar Asset Class” (Business Insider). “Paying for someone else's lawsuit used to be illegal. Now it's a multibillion-dollar opportunity. Commercial litigation funders make money by advancing money to businesses that lack the resources or the patience for a lawsuit. In return, they get a multiple of what they invested (often double or triple) or a return anchored to an interest rate. Litigation funders now have $11.3 billion invested or ready to invest in US commercial litigation, according to a recent estimate by Westfleet Advisors.”
“Amazon To Buy MGM Studios For $8.45 Billion” (CNBC). “Amazon said it hopes to leverage MGM’s storied filmmaking history and wide-ranging catalog of 4,000 films and 17,000 TV shows to help bolster Amazon Studios, its film and TV division.”
“Credit Suisse Just Told Its New York Bankers To Come Back To The Office From June 14 As More On Wall Street Prepare For A Summer Return” (Times News Express). “Credit Suisse follows Goldman Sachs, which also asked its US employees to come back to the office by June 14, Insider reported earlier this month. Goldman’s CEO David Solomon, in particular, has not been shy at voicing his discontent with remote work, calling it an ‘aberration.’”
“Ford Plans $30 Billion Electric Vehicle Investment By 2025” (CNN Business). “Ford is doubling down on electric vehicle development, announcing Wednesday it will invest $30 billion in electrification efforts by 2025. The automaker also pledged that 40% of its vehicles sold by 2030 will be electric. Ford had previously announced plans to spend $22 billion on electrification efforts and had recently revealed plans to build two new battery factories in a joint venture with Korean battery maker SK innovation.”
What we’re reading (5/25)
“The Great Commodities Boom Hits A Chinese Wall” (CNN Business). “In recent weeks, investors have poured money into bets on raw materials like steel and iron ore, confident that limits to supply and massive post-pandemic demand would trigger one of the biggest price spikes in decades. Now, thanks to action from China, the frenzy may be on hold. What's happening: Five top Chinese regulators announced Monday that they had jointly summoned key companies in the iron ore, steel, copper and aluminum sectors over the weekend…to step up regulation and closely monitor commodities markets, warning that there would be ‘zero tolerance’ for speculation or market manipulation.”
“Bitcoin Traders Using Up To 100-To-1 Leverage Are Driving The Wild Swings In Cryptocurrencies” (CNBC). “Bitcoin’s aggressive moves are being driven by much more than the next China crackdown or Elon Musk headline. Traders taking excessive risk in the unregulated cryptocurrency market being forced to sell when prices go down were in large part responsible for last week’s 30% drop in prices and outages for major exchanges, according to analysts. A burgeoning bitcoin lending market is also adding to the volatility.”
“900 People A Day Are Moving To Florida, Many Fleeing ‘Tax Hell’ In New York And New Jersey, The State's CFO Said” (Business Insider). “About 900 people a day are moving to Florida, the state's CFO, Jimmy Patronis, told Fox Business on Monday, attributing it mainly to higher taxes in states such as New York and New Jersey. Migration to Florida had steadily risen over the past decade before booming during the coronavirus pandemic as remote working and the warm climate drew people to the Sunshine State. Florida also has no personal income tax. In comparison, New York unveiled proposals in April to bump up its income-tax rates for its wealthiest residents. Patronis told Fox that states like New York and New Jersey were ‘financial train wrecks.’”
“If You Thought Working From Home Was Messy, Here Comes Hybrid Work” (Wall Street Journal). “It took months for bosses and employees to adjust to working remotely in the pandemic. The next era of work might be even more messy. Companies are laying down new rules and setting expectations for hybrid work as some workers come back in and others remain out of office…after months of discussions, big employers from Humana Inc. in Louisville, Ky., to Nike Inc. near Portland, Ore., say they are cementing plans to return to corporate complexes after Labor Day[.]”
“Global Uncertainty Is On The Wane” (The Economist). “The covid-19 pandemic created a wave of economic uncertainty around the world in 2020. But at the start of this year, even as infections mounted globally, a sense of confidence appeared to be returning. Such is the signal recorded by the World Uncertainty Index, a quarterly measure of global economic and political turmoil. It hit a record high in the first quarter of 2020, but fell sharply in the three months to the end of March this year, touching a 14-year low.”
What we’re reading (5/23)
“Bosses Still Aren’t Sure Remote Workers Have ‘Hustle’” (Wall Street Journal). “More than a year into America’s great work-from-home experiment, many companies have hailed it largely as a success. So why do some bosses think remote workers aren’t as committed as office dwellers? Recent remarks of numerous chief executives suggest the culture of workplace face time remains alive and well. At The Wall Street Journal’s CEO Council Summit this month, JP Morgan Chase & Co.’s Jamie Dimon said remote work doesn’t work well ‘for those who want to hustle.’ Goldman Sachs CEO David Solomon has called it ‘an aberration that we are going to correct as soon as possible.’”
“A Biden-Friendly Economist Is Creating A Big Headache For President's Spending Plans” (Politico). “The White House and congressional Democrats have argued for weeks that the lack of child care services poses a major obstacle to the economic recovery, pressing for a massive and immediate investment to get parents back to work. But a new economic analysis led by a prominent White House ally concludes that school and daycare closures are not driving low employment levels — blunting a key Biden administration argument in favor of its American Families Plan and undercutting the view of some Democrats that investing in child care is crucial for the country to climb out of the coronavirus recession.”
“The Declining American Birth Rate Could Actually Be Good For The Economy” (Business Insider). “Earlier this month, the Centers for Disease Control and Prevention (CDC) dropped a new report that revealed the US birth rate fell by 4%, the sharpest single-year decline in nearly 50 years and the lowest number of births since 1979…[b]ut here's the thing: A declining birth rate isn't necessarily bad news. It's both the continuation of a decades-long trend and a symbol of progress in gender equity. And while it signals some economic distress, it may also represent the start of a solution to America's affordability problem.”
“More Investors Than Ever Are Borrowing To Buy Stocks. Here’s What This Really Means For The Market” (MarketWatch). “Margin debt’s new all-time high is neither bullish nor bearish. I’m referring to the total amount that investors have borrowed to purchase stocks. Because the effect of margin is to leverage stocks’ gains, its marketwide level is a measure of investor confidence. To the bulls, rising margin debt means investor sentiment should be strong enough to propel the market higher. To the bears, in contrast, it is a contrarian indicator, with high levels indicating dangerous levels of speculative excess.”
“Bookies Of Mormon! Church Of Latter Day Saint Sees Its GameStop Shares Rocket 10-Fold To $8.7 Million - As Its Big-Tech Investments Help Swell $100bn Portfolio By $2.4 billion” (Daily Mail). “The Church of Jesus Christ of Latter-day Saints has seen its investment in shares of GameStop pay off handsomely thanks to the meme-fueled rally, after its initial $867,000 investment soared to $8.7 million in just a few months. Ensign Peak Advisors, the church's investment arm based in Salt Lake City, first purchased 46,000 shares of the struggling video game retailer in late 2020, when the stock traded between $10 and $20, according to regulatory filings.”
What we’re reading (5/22)
“Home Prices Just Smashed Another Record” (CNN Business). “Home prices in the US continued to climb in April, reaching new highs and rising at the fastest pace on record. The median sale price was a record $341,600 in April, according to a report from the National Association of Realtors. It was the highest median price since NAR began tracking this data in 1999. The median price, which includes existing single-family homes, townhomes, condominiums and co-ops, was up a record 19% from a year ago.”
“Why It’s Hard To Hire Right Now” (DealBook). “Businesses of all types report that they are having trouble hiring despite high unemployment. But are expanded unemployment benefits really to blame? We asked experts in economics, recruiting and other fields what’s making it hard for many U.S. businesses to hire right now — and what they can do to fix it.”
“At Its Heart, The Legal Battle Between Apple And ‘Fortnite’ Maker Epic Games Is About Whether Or Not The iPhone Is A Computer” (Business Insider). “[The] argument is critical because of how the App Store operates, with Apple acting as the sole arbiter of what can and cannot be published on the iPhone. If the iPhone is a computer, then the App Store is a monopoly, Epic's lawyers argued. If it isn't, and it's a distinct category of device, then Apple says it is protecting its users by keeping alternative digital storefronts off the iPhone.”
“Green Finance Goes Mainstream, Lining Up Trillions Behind Global Energy Transition” (Wall Street Journal). “Some of the world’s biggest companies and deepest-pocketed investors are lining up trillions of dollars to finance a shift away from fossil fuels. Assets in investment funds focused partly on the environment reached almost $2 trillion globally in the first quarter, more than tripling in three years. Investors are putting $3 billion a day into these funds. More than $5 billion worth of bonds and loans designed to fund green initiatives are now issued every day. The two biggest U.S. banks pledged $4 trillion in climate-oriented financing over the next decade.”
“Inside The Rise And Fall (And Rise And Fall) Of Shit Coins” (Vanity Fair). “If this all seems a little ridiculous, it’s designed to be. The entire premise of shit coins is to play on people’s anxieties by inflating every aspect of the coin in question. Think of it like theater, in which the entire internet is the stage, and every social platform, messaging app, and meme is at the disposal of the actors who are trying to pump up the value of a specific coin so they can make money, and then run off with the proceeds before everyone else realizes they’ve been conned by a group of rogue investors.”
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.’”