June picks available now
The new Prime and Select picks for June are available starting now, based on a model run put through Today (May 31). As a note, I will be measuring the performance on these picks from the first trading day of the month, Monday, June 3, 2024 (at the mid-spread open price) through the last trading day of the month, Friday, June 28, 2024 (at the mid-spread closing price).
What we’re reading (5/30)
“This Record Stock Market Is Riding On Questionable AI Assumptions” (Wall Street Journal). “Nvidia’s profits are rising about as fast as its share price, so if there is a bubble, it’s a bubble in demand for chips, not a pure stock bubble. To the extent there is a mispricing, it’s more like the banks in 2007—when profits were unsustainably high—than it is to the profitless dot-coms of the 2000 bubble. The threat to Nvidia’s share price is therefore about threats to its earnings. There are four risks: 1) Demand falls because AI is overhyped […] 2) Competition reduces prices […] 3) Nvidia’s biggest supplier, Taiwan Semiconductor Manufacturing, might want a bigger slice […] 4) What if scale doesn’t matter?”
“Lazy Work, Good Work” (Collab Fund). “John D. Rockefeller was the most successful businessman of all time. He was also a recluse, spending most of his time by himself. He rarely spoke, deliberately making himself inaccessible and staying quiet when you caught his attention.”
“Yes, Walmart Store Managers Really Can Make $500,000 A Year” (Bloomberg). “The world’s largest retailer is rethinking one of its most important roles after falling behind the competition. A couple of years ago, Walmart’s attrition rate for store managers spiked to almost double that of other big-box retailers such as Home Depot Inc. and Target Corp., according to data from human resources analytics company Revelio Labs Inc. Departures first ticked up when Walmart cut management ranks in the late 2010s, saddling those who remained with more work and longer hours, according to two former managers who declined to be named. At the time, the company was more focused on improving conditions for its hourly workers, investing billions in upgrading their wages.”
“You Can Thank Private Equity For That Enormous Doctor’s Bill” (Wall Street Journal). “Years of dealmaking has led to sprawling hospital systems, vertically integrated health insurance companies, and highly concentrated private equity-owned practices resulting in diminished competition and even the closure of vital health facilities. As this three-part Heard on the Street series will show, the rich rewards and lax oversight ultimately create pain for both patients and the doctors who treat them.”
“Home Insurance Was Once A ‘Must.’ Now More Homeowners Are Going Without.” (Washington Post). “Most uninsured homeowners are those who have paid off their mortgage and are no longer required to have insurance. Among those who own their home outright, the CFA estimates roughly 14 percent are uninsured, with low-income and minority homeowners especially at risk. Among mortgage holders, only 2 percent opt to go without coverage. Experts say this trend is driven by the escalating threat of climate change — which has forced insurers to make larger and larger payouts — and skyrocketing housing prices. Both trends are pushing the cost of policies up. On average, home insurance policies rose 11.3 percent in 2023, according to S&P Global.”
June picks available soon
I’ll be publishing the Prime and Select picks for the month of June before Monday, June 3 (the first trading day of the month). As always, SPC’s performance measurement for the month of May, as well as SPC’s cumulative performance, will assume 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 (Friday, May 31). 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 (Monday, June 3).
What we’re reading (5/26)
“How An Ex-Teacher Turned A Tiny Pension Into A Giant-Killer” (Wall Street Journal). “Plymouth County is known for Pilgrims, cranberries—and a top-performing pension fund run by a 65-year-old former schoolteacher. After a decade of mostly ho-hum performance, the $1.4 billion Plymouth County Retirement Association ranked in the top 10% of U.S. pensions over the past three years. Key to that success was an early—and prescient—bet that interest rates would rise. That buoyed the fund through big chunks of the past two years, when climbing rates hammered both stocks and bonds.”
“Tesla Shareholders Advised To Reject Musk’s $56 Billion Pay” (CNBC). “Proxy advisory firm Glass Lewis said on Saturday it has urged Tesla shareholders to reject a $56 billion pay package for Chief Executive Officer Elon Musk, which if passed would be the largest pay package for a CEO in corporate America.”
“What Do Students At Elite Colleges Really Want?” (New York Times). “Over the last five years or so, ‘the idea of thinking about your professional path has moved much earlier in the undergraduate experience,’ Ms. Ciesil said. She said the banks first began talking to students earlier, and it was the entrance of Big Tech onto the scene, asking for junior summer applications by the end of sophomore year, that accelerated recruitment timelines. ‘At first, we tried to fight back by saying, ‘No, no, no, no, no, sophomores aren’t ready, and what does a sophomore know about financial modeling?’’ said Mr. Woolsey at Union College. But, he added, schools ‘don’t want to push back too much, because then you’re going to lose revenue,’ since firms often pay to recruit on campus.”
“How To Build 300,000 Airplanes In Five Years” (Construction Physics). “One of the most important elements in the ‘Arsenal of Democracy’ [during WWII] was aircraft. Over the course of the war the U.S. produced around 325,000 airplanes valued at roughly $46 billion ($800 billion in 2024 dollars). Not only is this more aircraft than what Germany, Japan, and Italy combined produced during the war — it’s also more aircraft than have been built for commercial transport in the entire history of aviation.”
“The Chuck E. Cheese Band Delays Retirement With An Encore At 3 More Stores” (Washington Post). “More of Chuck E. Cheese’s animatronics bands are here to stay at five locations as the pizza-and-arcade chain tries to lean into fans’ nostalgia while endearing Chuck to today’s children. The brand announced last year that it would retire its Munch’s Make-Believe Bands except one ‘permanent residency’ in Northridge, Calif., which the company says has become a destination for wistful parents. In addition to the full-stage band in Northridge — and a previously announced solo-Chuck set at a ‘100% retro store’ in Nanuet, N.Y. — bands will remain in Springfield, Ill., Hicksville, N.Y., and Charlotte, N.C. Everywhere else, though, will shed the once-ubiquitous American icons in a matter of months.”
What we’re reading (5/25)
“Q1 2024 Household Debt And Credit: Rising Delinquency Rates Raising Concerns” (Regions). “The overall delinquency rate on household debt rose to 3.25 percent in Q1 from 3.13 percent in Q4 2023, with a particularly large increase in severely derogatory accounts, i.e., those accounts in some stage of delinquency on which there has been either a report of repossession, a charge-off to bad debt, or a foreclosure action. Though having moved higher over recent quarters, early-stage and overall delinquency rates remain below pre-pandemic norms.”
“Inside The Rockefeller Clan’s Intensifying Feud With Exxon” (Wall Street Journal). “The Rockefeller Family Fund, the charity she [Rockefeller heir Miranda Kaiser] is president of, is funding litigation and other support for more than 30 lawsuits around the U.S. against the fossil fuel industry. Exxon is a defendant in all of them. Fund staffers also consult with state attorneys general, nine of whom have brought cases against Exxon. The cases aim to collect billions of dollars from Exxon and its peers for their contributions to climate change and the damages caused by it.”
“How A Global Seafood Giant Broke Red Lobster” (CNN Business). “Thai Union’s damaging decisions drove the pioneering chain’s fall, according to 13 former Red Lobster executives and senior leaders in various areas of the business as well as analysts. All but two of the former Red Lobster employees spoke to CNN under the condition of anonymity because of either non-disclosure agreements with Thai Union; fear that speaking out would harm their careers; or because they don’t want to jeopardize deferred compensation from Red Lobster.”
“Instagram’s Desperate Move” (Business Insider). “Ultimately, the Instagram badges aren't the end of the world. At best, they're a nothingburger. At worst, they seem a bit lame and add to the vibe that Instagram is becoming a platform for olds.”
“Meta Walked Away From News. Now The Company’s Using It For AI Content.” (Washington Post). “After years of Meta steadily walking away from news on its platforms, the company’s new AI tool is now using the work of those outlets for content.”
What we’re reading (5/24)
“What Our Brains Know About Stocks—But Won’t Tell Us” (Wall Street Journal). “In the past few years, researchers have been investigating “neuroforecasting.” That’s the apparent ability of activity in the brain to forecast outcomes—even when people are unaware of it. Neuroscientists have asked participants to predict which requests for microlending will raise the most money online, which ventures will receive the most crowdfunding, how popular video clips or songs will be, or whether a stock would go up or down. Consistently, people’s conscious choices when confronted with these sorts of questions aren’t significantly better than chance. But the intensity of activation in their nucleus accumbens, an area of the brain that subconsciously processes anticipation of reward, turns out to be a good predictor of what people will collectively decide they like.”
“A Lender To Consumer Start-Ups Falters, Rattling Its Clients” (New York Times). “A popular lender backed by venture capital firms is struggling financially, sending shock waves through the small clothing and home furnishing companies that count on its financing. The lender, Ampla, spent years courting small direct-to-consumer brands with low rates and a pitch that it understood their needs. In recent weeks, its top executives have been searching for a buyer, two people familiar with the firm’s finances said. Last week, Ampla, which is based in New York, said it would lay off half its 62 workers.”
“America Is Still Having A ‘Vibecession’” (Paul Krugman, New York Times). “The gold standard for assessing economic perceptions is the Federal Reserve’s annual survey of economic well-being of American households. The results of the latest survey, taken in October, have just been released, and while there’s a lot of information in the report — notably, families with children appear to have been hit hard by the end of pandemic-era financial aid — the key finding hasn’t changed much. Most Americans continue to say that they’re doing OK financially, but they think the national economy is doing badly — while they’re being considerably more positive about their local economy. Wasn’t it always thus? No. As the report notes, ‘the gap between people’s perceptions of their own financial well-being and their perception of the national economy has nearly doubled since 2019.’”
“The Rise And Fall Of Simon Sadler's Segantii, One Of Asia's Most Successful Hedge Funds” (Bloomberg). “The legal heat became too much for Simon Sadler. The founder of Segantii Capital Management has told investors that it’s winding down and returning their money, marking the end of a 16-year run for one of the largest and most successful hedge funds[.]”
“Welcome To The WFH Friday Economy: It’s A Time For Hair Masks, Spas, Day Drinking, And No-Camera Meetings” (Business Insider). “Friday was the most popular day for spa and salon appointments booked on ClassPass in 2023, according to data the company provided to BI. The top time for fitness classes on Fridays in 2023 was 12 p.m. — perhaps indicating a rush of lunchtime exercisers. The top time to hit the salon or spa was 5 p.m. on the dot. Upticks in foot traffic at Starbucks, Sweetgreen, and Panera Bread shown by Placer.ai could suggest people are more frequently treating themselves to lunch or coffee out, working at coffee shops, or signing off earlier from work on Fridays. Indeed, an ActivTrak analysis of 75,000 workers found that whether or not they were going into the office on Friday, they were signing off at about 4 p.m. that day, compared with 5 p.m. on Mondays through Thursdays.”
What we’re reading (5/23)
“Stocks Slide, Dow Suffers Worst Day In A Year As Nvidia Fails To Spur Market Rally” (Yahoo! Finance). “Stocks slid from record levels on Thursday as interest rate worries dominated investor sentiment after Nvidia's (NVDA) blockbuster earnings failed to spur a broader market rally.”
“FTC Chair: AI Models Could Violate Antitrust Laws” (The Hill). “‘The FTC Act prohibits unfair methods of competition and unfair or deceptive acts or practices,’ Khan said at the event. ‘So, you can imagine, if somebody’s content or information is being scraped that they have produced, and then is being used in ways to compete with them and to dislodge them from the market and divert businesses, in some cases, that could be an unfair method of competition.’”
“Top PE Funds See Mediocre Returns As Exits Slow” (Institutional Investor). “For funds between seven and nine years old, ‘half of the stated asset value consists of unsold deals that are ‘marked to market’ by the private equity managers,’ according to a study by Jeffrey Hooke, a senior finance lecturer at Johns Hopkins Carey Business School who focuses on the alternative asset class.”
“Redefining The Scientific Method: As The Use Of Sophisticated Scientific Methods That Extend Our Mind” (PNAS Nexus). “Scientific, medical, and technological knowledge has transformed our world, but we still poorly understand the nature of scientific methodology. Science textbooks, science dictionaries, and science institutions often state that scientists follow, and should follow, the universal scientific method of testing hypotheses using observation and experimentation. Yet, scientific methodology has not been systematically analyzed using large-scale data and scientific methods themselves as it is viewed as not easily amenable to scientific study. Using data on all major discoveries across science including all Nobel Prize and major non-Nobel Prize discoveries, we can address the question of the extent to which ‘the scientific method’ is actually applied in making science's groundbreaking research and whether we need to expand this central concept of science. This study reveals that 25% of all discoveries since 1900 did not apply the common scientific method (all three features)[.]”
“Should Governments Crack Down On Fake Job Postings?” (Dealbreaker). “While the details vary, ghost jobs fall into one of two categories. The first are advertised job openings although employers have no intention of actually hiring anyone. Companies do this to project an image that they are growing, to placate overworked employees, gauge salary demands in order to determine whether to give existing employees raises, or to have a list of people who may be available in the future. The second type of ghost jobs are those that have requirements that are so strict and specific that only a few people will be eligible. Usually this is the case where the company has already selected who they want to hire internally but is required to make the job opening public due to legal requirements (although this requirement only seems to apply for federal contracting jobs) or contractual requirements such as a collective bargaining agreement. These job postings are also suspected to automatically reject unemployed candidates and instead target people who are already employed and want to leave their current job.”
What we’re reading (5/22)
“Fed Officials Saw Longer Wait For Rate Cuts After Inflation Setbacks” (Wall Street Journal). “Federal Reserve officials concluded at their most recent meeting they would need to hold interest rates at their current level for longer than they previously anticipated after a third straight disappointing inflation reading last month.”
“The Second Great Bailout” (The Grumpy Economist). “After 2008, politicians and regulators promised the Dodd-Frank Act would stop bailouts. They failed. We document the massive bailouts of 2020-2023. But this time nobody is even promising to do anything about it. Too big to fail has spread everywhere. The basic architecture of allowing highly leveraged finance but promise that regulators will stop risks has failed. We have now tried everything else, it’s time for equity-financed banking and narrow deposit taking.”
“Tracing OpenAI CEO Sam Altman’s Love for Scarlett Johansson’s AI Romance Her” (Vanity Fair). “In September 2003, OpenAI cofounder and CEO Sam Altman was asked to name his favorite movie about artificial intelligence. It was two months before Altman would be pushed out of his company because, according to his board of directors, Altman was ‘not consistently candid in his communications’ with the board….onstage at Dreamforce 2023 in San Francisco, with a fake waterfall backdrop frozen behind him, Altman said that Spike Jonze’s 2013 film Her resonated with him more than other sci-fi films about AI.”
“This Man Did Not Invent Bitcoin” (New York Times). “The mystery of Satoshi’s identity has long obsessed crypto experts, who analyze every record of his communications with the reverence of Talmudic scholars. Various candidates have been proposed as possible Satoshis, only for them to deny any role in Bitcoin’s creation. Dr. Wright, by contrast, has gone to extraordinary lengths to prove that he is Satoshi. He has presented himself as Bitcoin’s inventor in interviews and social media posts, laying out evidence for virtually anyone who would listen. In lawsuits tried in three countries, he has testified that he wrote the original white paper. After a small-time crypto personality challenged his claims in 2019, Dr. Wright sued for defamation in England. He followed that up with an aggressive suit against software developers working to improve Bitcoin’s code, accusing them of violating his intellectual property rights.”
“100-Hour Weeks And Heart Palpitations: Inside Wall Street’s Brutal Work Culture” (New York Post). “The tragic death of former Green Beret and Bank of America employee Leo Lukenas III has become a flashpoint of anger over allegedly unrealistic work expectations on Wall Street — partly because some bankers say Lukenas’ experience is so similar to their own. While there is no evidence that job-related stress caused the blood clot that killed 35-year-old Lukenas on May 2, a recent Reuters report that he was talking with a recruiter to find a job with better hours has put a glaring spotlight on the 100-hour work weeks he was said to be juggling before his death.”
What we’re reading (5/21)
“Red Lobster Superfans Desperately Want A Piece Of The Bankrupt Chain” (Business Insider). “At the time the auctions closed, TAGeX's website showed that the entire contents of each location sold for between $10,000 and $35,000. That included everything from upright refrigerators and microwaves to fish tanks, furniture, and, in some cases, decor.”
“The High-Class Problem That Comes With Home Equity” (New York Times). “[R]everse mortgages or something like them seem inevitable in a nation where individuals are entirely responsible for their own retirement savings.”
“The Growing Importance Of Desalination” (Contrary). “[M]odern desalination plants are capable of converting roughly 80% of the saline water piped into potable water. The remainder is so heavily concentrated with salt that filtering it even further would be economically inefficient. This remainder is called brine and needs to be disposed of appropriately. An additional consideration for modern plants is that the filtration membranes need to be maintained and cleaned periodically as molecular compounds and minerals can get stuck in the membrane, decreasing its efficiency.”
“East Coast Has A Giant Offshore Freshwater Aquifer—How Did It Get There?” (ars technica). “For decades, scientists have known about an aquifer off the US East Coast. It stretches from Martha’s Vineyard to New Jersey and holds almost as much water as two Lake Ontarios. Research presented at the American Geophysical Union conference in December attempted to explain where the water came from—a key step in finding out where other undersea aquifers lie hidden around the world.”
“Private Equity Is No Place For Your Nest Egg” (Bloomberg). “Retirement is expensive. If you’re lucky, yours will last a few decades, and you’ll be earning no or very little income. So if you want to have enough money when you retire, you basically have three options: Save more, take more risk with your investments, or work longer. Many people find the first and third options undesirable or impossible. That leaves the second option. And despite what people such as Marc Rowan might lead you to believe, there’s really no way to get a higher return without taking more risk.”
What we’re reading (5/20)
“What Does The Dow Hitting 40,000 Tell Us?” (Paul Krugman, New York Times). “Unlike many right-wing commentators, I don’t consider the stock market the best indicator of the economy’s health, or even a good indicator. But it is an indicator. And given the state of American politics, with hyperpartisanship and conspiracy theorizing running rampant, I’d argue that this market milestone deserves more attention than it has been getting.”
“ChatGPT Can Talk, But OpenAI Employees Sure Can’t” (Vox). “what has really stirred speculation was the radio silence from former employees. [Ilya] Sutskever posted a pretty typical resignation message, saying ‘I’m confident that OpenAI will build AGI that is both safe and beneficial…I am excited for what comes next.’ [Jan] Leike ... didn’t. His resignation message was simply: ‘I resigned.’ After several days of fervent speculation, he expanded on this on Friday morning, explaining that he was worried OpenAI had shifted away from a safety-focused culture.”
“Press Pause On The Silicon Valley Hype Machine” (New York Times). “It’s a little hard to believe that just over a year ago, a group of leading researchers asked for a six-month pause in the development of larger systems of artificial intelligence, fearing that the systems would become too powerful. ‘Should we risk loss of control of our civilization?’ they asked. There was no pause. But now, a year later, the question isn’t really whether A.I. is too smart and will take over the world. It’s whether A.I. is too stupid and unreliable to be useful.”
“Oracle’s Deadly Gamble” (Business Insider). “Cerner was a total mess. While Ellison was fixated on the wildly exciting possibilities of marrying Cerner's medical records with Oracle's technology, Cerner was failing at even the most elementary tasks of data management. The company's rollout at the VA, which serves 9 million vets, had been a slow-moving catastrophe. One feature of its electronic records system had caused more than 11,000 orders for medical care to disappear into an ‘unknown queue.’ As a result, thousands of patients didn't receive the treatment their doctors had ordered. VA staffers were left in what one hospital leader called ‘a constant state of hypervigilance and distress’ as they scrambled to retrieve and reenter the missing orders, which wound up harming 149 patients. Even worse, errors in the system's underlying design were contributing factors in three deaths.”
“Ivan Boesky, Convicted In 1980s Insider-Trading Scandals, Dies At 87” (Wall Street Journal). “Ivan Boesky, who went to prison and paid a record $100 million fine for a sprawling insider-trading scandal, becoming a symbol of extravagance and corruption on Wall Street, has died at the age of 87…Boesky’s 1986 guilty plea and his cooperation with federal authorities led to the collapse of Michael Milken’s junk-bond empire and the end of the frenzied debt-fueled takeovers of the era that upended many industries. Boesky’s dramatic rise and fall marked a decade that became synonymous with unbridled ambition and even greed.”
What we’re reading (5/20)
“Sports Grow From Private Equity Afterthought To Booming Market” (Sportico). “Most every major league—and that soon will likely include the NFL—allows private equity (PE) funds to own stakes in their teams, to the point institutional investors are almost ubiquitous: At least a dozen teams in the NBA, NHL, MLB and MLS have private equity among its ownership groups. The top European soccer leagues and Formula One, as well as growing leagues from women’s soccer to lacrosse to mixed martial arts, have heavy institutional ownership.”
“Microsoft Set To Unveil Its Vision For AI PCs At Build Developer Conference” (CNBC). “One area where Microsoft has a distinct advantage over others in the AI race is in its ownership of Windows, which gives the company a massive PC userbase. Microsoft CEO Satya Nadella said in January that 2024 will mark the year when AI will become the ‘first-class part of every PC.’ The company already offers its Copilot chatbot assistant in the Bing search engine and, for a fee, in Office productivity software. Now, PC users will get to hear more about how AI will be embedded in Windows and what they can do with it on new AI PCs.”
“Our Man In East Setauket” (Institutional Investor). “The first half hour of the drive confirmed [Jim] Simons’ now famous chain-smoking habit, but otherwise it was a bit awkward. I made the mistake of telling him the names of former scientists who I knew worked at the firm. He flipped out a bit about revealing the identities of his staff in the article, and I thought he might have his driver turn the car around. Eventually, I agreed to use some but not all names.”
“Americans Are Down On The Economy (Again), With Inflation Topping Election Concerns” (The Washington Post). “Consumer sentiment, a gauge of Americans’ economic perceptions, is at a six-month low, according to a closely watched index by the University of Michigan. The measure notched its biggest drop since 2021, reflecting the persistent tug of inflation on household budgets and fueling fears that rising prices, unemployment and interest rates could all worsen in the coming months.”
“Mystery Of Mona Lisa’s Background May Have Been Solved” (The Art Newspaper). “A US geologist says she has cracked one of art history’s biggest mysteries—the location in which Leonardo da Vinci’s Mona Lisa is set. Ann Pizzorusso, who says online that she has worked in ‘oil drilling and gem hunting’, believes that the hazy landscape behind the celebrated enigmatic sitter draws on the northern Italian city of Lecco.”
What we’re reading (5/18)
“Market Froth Is Getting Extreme. Just Look At Meme Stocks.” (Wall Street Journal). “The rise of meme stocks in early 2021 came amid stock-market froth, with bubbles in SPACs, cannabis stocks, lossmaking tech, and solar and wind-related companies. They shared a common driver: Too much money in the economy had to go somewhere, and it went into stocks. Easy money was the driver of many past bubbles, too, and might again be propping up the stock market.”
“The Winners And Losers Of Meme Stock Mania Redux” (Institutional Investor). “A single post on X by Roaring Kitty sent GameStop shares soaring this week, and before the mania began to subside, short sellers were down more than $2 billion in the name — a move that fueled short squeezes in meme stocks and likely boosted a handful of hedge funds that were long both GameStop and AMC Entertainment.”
“The Fitness Fad Graveyard” (Business Insider). “he connected-fitness company is struggling. Its CEO, who joined the company in February 2022, is already stepping down. It recently announced plans to lay off 400 people, which is about 15% of its workforce. Private-equity sharks are reportedly circling. The stock is near record lows. Peloton isn't going under imminently, but let's be real here: No fitness fad lasts forever. At least culturally, the Peloton graveyard is probably on the horizon, right next to the Tae Bo cemetery and ThighMaster crematorium.”
“Watchdog Readies Crackdown On Predatory Lending After Supreme Court Win” (Washington Post). “The Consumer Financial Protection Bureau plans to restart its aggressive crackdown against payday lenders and other companies that offer high-cost, short-term loans to poor borrowers, after a Supreme Court ruling this week resolved a challenge to the federal agency’s authority to act.”
“A Would-Be Assassin Stirs Europe’s Violent Ghosts” (New York Times). “Europe is increasingly divided, and dangerously so. As in Slovakia, that divide pits nationalists opposed to immigration against liberals who see in the far right a threat to the rule of law, a free press and democracy itself. In this political world, there are no longer opponents, there are only enemies. All means are good to attack them, up to and, recent events indicate, including violence.”
What we’re reading (5/17)
“Dow Closes At Record High Above 40,000 To Cinch A Five-Week Winning Streak” (CNBC). “Stocks finished the week strong, with the Dow up 1.2% to notch its fifth straight weekly gain. The S&P 500 and Nasdaq climbed 1.5% and 2.1% week to date, cinching their longest winning streak since February.”
“The Executive Who Revived Barbie Has A New Long-Shot Mission: Save Gap” (Wall Street Journal). “The 56-year-old Dickson is the latest in a long line of Gap leaders attempting to find an answer. He is trying to reconnect with people who remember the flagship Gap brand from its heyday in the 1990s as well as younger shoppers who have no recollection that a white Gap T-shirt and pair of khakis once defined a generation.”
“The Blue-Collar Job Boom” (Business Insider). “Alyssa DeOliveira followed a well-worn path: go to college, get a degree, find a white-collar job…she tried nursing and accounting before settling on criminal justice, landing a job at a law firm. For a little over a year she arrived every morning at about 8. She listened to voicemails and checked emails. If she was lucky, she left at 5…Today, should you find yourself in Boston riding the T's green line, DeOliveira might be your conductor….She loves her job. And benefits-wise, her job loves her. ‘I'm making almost double what I was making at the office job,’ she said. ‘My office job didn't give me a 401(k), but with the T, I have the pension, I have healthcare.’”
“Current And Former Dodgers Owners, World's Wealthiest Law Firm Working On Bid To Buy TikTok” (DealBreaker). “ByteDance certainly doesn’t *want* to sell the wildly popular app TikTok. However, the United States actually got over its partisan dysfunction to pass a “divest or ban” law, so they might not have much of a choice. That is, if the legal challenges fail. Frank McCourt (the billionaire former Los Angles Dodgers owner, not the Angela’s Ashes author) is working on a bid to buy Gen Z’s social media of choice. In an announcement, McCourt revealed that he’s working in consultation with Guggenheim Securities (whose parent company's CEO currently owns the Dodgers) and Kirkland & Ellis to put together “a people’s bid’ for TikTok.”
“A Supreme Court Victory Won’t End A War On Regulators” (DealBook). “The Supreme Court lifted the existential threat hanging over the Consumer Financial Protection Bureau, rejecting a challenge to the agency’s funding. The decision could have huge consequences for a raft of conservative-led lawsuits involving administrative authority — but business groups and Republicans are vowing to fight on. A recap: Payday lenders had sued the C.F.P.B. over a rule that would limit the number of times they could withdraw money from a customer’s account for repayment. The companies and conservative groups argued that the practice wasn’t harmful, and said the way the regulator is funded — via annual allocations from the Fed’s profits rather than from Congress — was unconstitutional.”
What we’re reading (5/11)
Catching up after a little hiatus. Big news in the quant world re: Jim Simons. RIP.
“Jim Simons, Billionaire Hedge Fund Founder, Dies At 86” (CNN Business). “Simons, the founder of the hedge fund Renaissance Technologies, helped to pioneer quantitative investing, a market strategy that relies on mathematical and statistical models to identify investing opportunities. Later in life, Simons became a political donor and philanthropist. Simons had a love for math and numbers from an early age, according to his foundation’s website. Born in Newton, Massachusetts, in 1938, Simons earned a mathematics degree at the Massachusetts Institute of Technology and a doctorate in math from the University of California, Berkeley.”
“Stubbornly High Rents Prevent Fed From Finishing Inflation Fight” (Wall Street Journal). “Stalled inflation this year hasn’t derailed the Federal Reserve’s plans to eventually cut interest rates. That’s because it expects a slowdown in housing costs to eventually drag inflation close to its 2% target. The problem: It has been waiting for that slowdown for 1½ years now, and it still hasn’t arrived. The slowdown might simply be delayed. But some analysts worry it’s not going to happen because of changing dynamics in the housing market. If so, that would significantly weaken the case for lower rates.”
“Whole Foods CEO Announces Major Changes To Store That’ll Help Customers Save Money And ‘Minimize Impact Of Inflation’” (The U.S. Sun). “Speaking with Yahoo Finance, [Whole Foods CEO Jason] Buechal revealed Whole Foods would be expanding its generic brands to offer more affordable options and ‘minimize’ the impact of inflation.”
“Everything Investors Know About Hedge Funds Is Based On Flawed Data” (Institutional Investor). “If the best performing small-cap companies hadn’t publicly reported their returns for decades, investors would question everything from how much they allocated to these stocks to the validity of academic research showing that small caps outperform large-caps. Well, that’s essentially what has been happening with hedge funds for years.”
“Warren Buffett Is Battling A Bargain Drought — And Pared His Apple Bet Because It’s A 'One-Trick Pony,’ Expert Says” (Insider). “The computing behemoth is a ‘big cash generator,’ but it’s essentially a ‘one-trick pony,’ [Oxbow Advisors partner Ted] Oakley said. ‘They depend on one product when you get down to it.’”
April performance update
Here with a performance update for April. Here are the key numbers:
Prime: -4.53%
Select: -3.08%
SPY ETF: -4.17%
Bogleheads (80% VTI, 20% BND): -4.01%
A bit of mixed month for our strategies, with Prime underperforming the SPY index somewhat, but Select significantly outperforming. Despite Prime underperforming SPY in monthly returns, the magnitudes were such that, mechanically, there was actually a bit of convergence in the cumulative returns since I started this (shown in the chart below), since a -4.17% is a bigger hit in dollar terms to SPY than -4.53% is to Prime given historical performance to date. Speculating a little, but, without looking closer at the data, my prior is that the relative performance of our strategies versus the market index feels correlated with sentiment toward the rate environment, which would not be altogether surprising. Lately, sentiment has trended toward a view that rate cuts are farther out in time than previously expected. It’s unclear how that will play out in the remainder of the year but we will see. If that theory is true, we should see quicker convergence when financial conditions loosen up a bit.
Stoney Point Total Performance History
May picks available now
The new Prime and Select picks for May are available starting now, based on a model run put through Today (April 29). As a note, I will be measuring the performance on these picks from the first trading day of the month, Wednesday, May 1, 2024 (at the mid-spread open price) through the last trading day of the month, Friday, May 31, 2024 (at the mid-spread closing price).
What we’re reading (4/26)
“Private Equity’s Latest Trade: The Financial Futures Of Millions Of Retirees” (Semafor). “Over the past three years, about $135 billion of corporate pension liabilities have moved from America’s biggest companies to insurers. They are converted from corporate promises, vestiges of an era of generous paternalism, into an annuity, a type of insurance contract that has become the hottest product on Wall Street. In the process, they lose the backing of the Pension Benefit Guaranty Corp., a government entity that guarantees workers’ retirement benefits if their pension plans fail. Instead, any insolvency would be resolved by state insurance funds, which operate similarly to the FDIC’s fund for bank depositors and try to make as many people whole as possible from what’s left.”
“Thinking Doesn’t Have To Feel So Hard” (Wall Street Journal). “In a study published in the journal Science in 2020, Westbrook and colleagues found one way to do just that: Pay attention to the benefits of completing the task, instead of the effort required. The researchers gave participants the choice of solving an easy memory puzzle for a small amount of money or a much harder puzzle for more money. The options were displayed on a screen, and participants’ eye movements were tracked as they decided which puzzle to attempt. When people spent more time looking at the reward for the challenging puzzle, they were more likely to choose it. ‘The results suggest that if our mind’s eye, or our attentional focus, is on the benefits of an option, then sure enough, over time we’re more likely to choose to do hard things,’ Westbrook says.”
“‘Nation Of Makers’: Britain Industrialised Over A Century Earlier Than History Books Claim” (University of Cambridge). “Britain was well on its way to an industrialised economy under the reign of the Stuarts in the 17th century – over 100 years before textbooks mark the start of the Industrial Revolution – according to the most detailed occupational history of a nation ever created…According to Shaw-Taylor’s estimates, the share of the British labour force in an occupation involving manufacturing rather than agriculture was three times that of France by 1700.”
“With Inflation This High, Nobody Knows What A Dollar Is Worth” (New York Times). “Using nominal returns in an inflationary era can lead you to the erroneous conclusion that market is generating phenomenal returns.”
“Police Rumble Gang Stealing Antique Books Across Europe” (euronews). “Works by Russian literary greats such as Alexander Pushkin and Nikolai Gogol were substituted with valueless counterfeits from European libraries. European authorities say they have rounded up a criminal gang who stole rare antique books worth €2.5 million from libraries across Europe. In a press release, Europol announced they had arrested nine Georgian nationals in Georgia and Lithuania who are thought to have collaborated in the plot, in which at least 170 books were stolen.”
May picks available soon
I’ll be publishing the Prime and Select picks for the month of May before Wednesday, May 1 (the first trading day of the month). As always, SPC’s performance measurement for the month of April, as well as SPC’s cumulative performance, will assume the sale of the April picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Tuesday, April 30). Performance tracking for the month of May will assume the May picks are bought at the open price (at the mid-point of the opening bid and ask prices) on the first trading day of the month (Wednesday, May 1).
What we’re reading (4/24)
“Groups Sue To Block FTC’s New Rule Barring Noncompete Agreements” (Washington Post). “The lawsuit, filed in federal court in the Eastern District of Texas, comes a day after the FTC voted 3-2 to issue a rule that bans noncompete agreements, which restrict workers from switching employers within their industry. The agency estimates that 30 million workers are bound by the agreements, and proponents of the ban say it will raise wages, bolster innovation, foster new businesses and reduce health-care costs.”
“Mortgage Rates Reach New High For 2024” (Axios). “Mortgage rates touched 7.5% in April, the highest they've been since last fall, per Mortgage News Daily data…Experts were optimistic late last year that mortgage rates would drop in early 2024 and lure sellers and buyers off of the sidelines in time for spring.”
“TSMC’s Debacle In The American Desert” (Rest of World). “TSMC’s work culture is notoriously rigorous, even by Taiwanese standards. Former executives have hailed the Confucian culture, which promotes diligence and respect for authority, as well as Taiwan’s strict work ethic as key to the company’s success. [TSMC founder Morris] Chang, speaking last year about Taiwan’s competitiveness compared to the U.S., said that ‘if [a machine] breaks down at one in the morning, in the U.S. it will be fixed in the next morning. But in Taiwan, it will be fixed at 2 a.m.’”
“Why Panama Dollarized” (Caribbean Progress Studies Institute). “It is usually assumed that the United States government forced the Republic of Panama to make the United States dollar legal tender. The populace, academics, and literati in Panama also generally believe this. But that’s not what happened. The initial request to make dollars legal tender in Panama actually came from the Panamanians.”
“Crypto Mixer Samourai Wallet’s Co-founders Arrested For Money Laundering” (Wall Street Journal). “U.S. prosecutors on Wednesday targeted another so-called cryptocurrency mixer, accusing the two co-founders of Samourai Wallet of money laundering and of operating an unlicensed money-transmitting business. Keonne Rodriguez, Samourai’s chief executive, and William Lonergan Hill, its chief technology officer, were arrested and charged for developing and operating Samourai.”
What we’re reading (4/23)
“Investors Are Fearful. They Shouldn’t Be” (CNN Business). “Philipp Carlsson-Szlezak, Boston Consulting Group’s global chief economist, thinks there’s too much doomsaying on Wall Street. The economy has been extraordinarily resilient for the past few years — consistently proving the naysayers wrong, he says. For all of the market gloom last week, stocks are still near all-time highs, and this earnings season has been strong.”
“FTC Votes To Ban Noncompete Clauses That Bar Employees From Working For Competitors” (CNBC). “If officially implemented, the rule will not only prohibit new noncompete clauses, but will also force companies to scrap their existing noncompetes for all employees except senior executives who earn more than $151,164 annually and who are in policy-making roles.”
“Former CEO Of Buzzy Tech Startup Hit With Prison Time For Fraud” (Business Insider). “The founder of a buzzy Silicon Valley startup was sentenced to prison over a multimillion-dollar fraud scheme — and prosecutors want it to be a lesson to other ‘fake it til you make it’ entrepreneurs. Manish Lachwani, the former CEO of app testing company HeadSpin, was sentenced on Friday to 18 months in prison, plus three years supervised release, for wire fraud and securities fraud, the Department of Justice announced.”
“Cathie Wood’s Popular ARK Funds Are Sinking Fast” (Wall Street Journal). “Cathie Wood’s investors are jumping ship. They rushed into her funds and won big during the pandemic, when the star fund manager became a social-media sensation by making bold bets on disruptive technology stocks such as Tesla, Zoom Video Communications and Roku. They largely stuck with her when the funds’ fortunes reversed after the Federal Reserve raised interest rates. Now, after years of bruising losses, many of them have had enough.”
“How Can Elon Musk Reassure Tesla Investors?” (DealBook). “Markets aren’t sure the carmaker is on the right track. The cost cuts are only the latest announced in recent months, as Tesla tries to reverse a sales slump while rivals are taking market share. Analysts are especially worried about softening demand in China, a wider E.V. slowdown in the U.S., and that the price reductions are hurting global profit without juicing sales.”