Sen. Collins Slams Biden For ‘Politicizing Entire Nomination Process’ With Race, Gender-Based Supreme Court Pledge
You know it’s bad when Biden’s lost the RINOs…
On Sunday, Sen. Susan Collins (R-ME) slammed President Biden for his “clumsy” approach to a race-based nomination for the next supreme court justice in the wake of Stephen Breyer’s retirement.
Biden, fulfilling a campaign pledge, said that he would only nominate a black female to the role.
“I welcome the appointment of black females to the court and believe that diversity benefits the Supreme Court, but the way that the President has handled this nomination has been clumsy at best,” she said, adding: “It adds to the further perception that the court is a political institution like Congress when it’s not supposed to be.”
Sen. Susan Collins tells @GStephanopoulos that she would welcome the appointment of a Black female justice.
When “This Week” moderator George Stephanopoulos asked how Biden handled the nomination differently than his predecessors – namely Ronald Reagan and Donald Trump, who said while in office that they intended to nominate a woman to the bench, Collins said “This isn’t exactly the same,” as Biden made the promise while on the campaign trail.
Susan Collins says she’s more concerned about Biden announcing he’ll pick a Black woman than Trump announcing he’d pick a woman because Biden made his announcement when he was a candidate & therefore politicized the process. (Remember Trump’s ACB superspreader event at the WH?) pic.twitter.com/dcCGolAbhx
That said, Collins also noted that she’s open to whoever the nominee is, and appreciates that Senate Judiciary Committee Chairman Dick Durbin will grant her an interview with them.
Democrats will be able to confirm Biden’s nominee if all 50 Democratic Senators vote for them, or if enough Republicans cross the aisle in the event that some Democrats aren’t on board.
One potential nominee which Collins voted for last year is Circuit Court Judge Ketanji Brown Jackson, 51, who Durbin declined to characterize as the front-runner on NBC‘s“Meet the Press,” but noted that youth will play into the nomination in order to find a judge who will be able to serve a lengthy term, according to the Boston Globe.
Meanwhile, Sen. Lindsey Graham (R-SC) signaled support for J. Michelle Childs, a black US District Court judge from his state, who he called “highly qualified” and “an awesome person.”
Graham doesn’t think a racial quota for the Supreme court is a problem.
“Put me in the camp of making sure the court and other institutions look like America,” Graham told “Face the Nation” on Sunday, adding “I don’t see Michelle Childs as an act of affirmative action. I do see putting a black woman on the court making the court more like America.”
Far be it for me to be sensationalist, but it looks like Spotify has become the official venue where the big tech censorship civil war is about to take place.
Or, perhaps where it has already started.
Spotify has been in the news over the past few weeks because it has been home to “controversial” podcast host Joe Rogan. And let me tell you, “controversial” isn’t what it used to be.
Nowadays, Rogan is considered “controversial” because he’s someone that – <gasp> – allows individuals to speak their opinions and listens to both sides of the story while presenting a spectrum of takes on political and social issues that runs the gamut and may not conform to the mainstream narrative or “the science”.
This week, the decrepit clutches of cancel culture continued their “war” against Rogan (read: open minded discussion) in the form of 76 year old aging rock star Neil Young, who threatened to pull his catalog of music – which he doesn’t even fully own the rights to – from Spotify as a result of what he calls “misinformation” being presented on Rogan’s show.
Now that we’ve redefined “controversial” as “open minded discussion”, it’s also crucial we redefine “misinformation”. Nowadays, “misinformation” means any utterance of thoughts that weren’t handed down directly from Dr. Anthony Fauci, the CDC, the mainstream media or global elites and central planners.
In response to Young’s temper tantrum this week, Spotify did precisely nothing and, at Young’s request, deftly pulled the artist’s music from their platform.
Perhaps feeling defeated by Spotify’s common sense decision, or perhaps motivated by the perverse amount of press Young received for his “declaration against misinformation”, a second septuagenarian former rocker, 78 year old Joni Mitchell, also joined the fray and threatened to pull her music from Spotify, as well.
As her reasoning for the ultimatum, Mitchell claimed that “irresponsible people are spreading lies”. At first, I thought maybe she had looked back on the “official” declarations that cloth masks would work against the virus, vaccinations would end Covid altogether and that ivermectin was nothing more than veterinary horse paste. Instead, it turns out she, too, was referring to Rogan’s podcast.
I don’t think it’s a coincidence that people threatening to pull their music from Spotify are extremely wealthy. Mitchell has an estimated net worth of $100 million and Young has an estimated net worth of $200 million.
I’m not sure these once rebellious, freedom seeking musicians have taken the time to consider those who are now in the shoes they were once in, reliant upon platforms like Spotify for their pittance of royalties as they embark on the beginning stages of their careers. For Young and Mitchell, it clearly isn’t about who else may be affected by a downturn in Spotify’s business. For them, anything is justified in upholding their opinions, ideologies and political beliefs as it comes to what is and isn’t acceptable free speech.
People like Young and Mitchell have become unfortunate shells of what they used to represent while they were writing and performing music decades ago. Worse than that, they’ve become hypocrites, trampling over the very same first amendment they banked on to give them the voice they used to make themselves extravagantly wealthy as counter-culture songwriters in the first place.
Young and Mitchell were immense successes because they tapped into the same vein of American culture that Rogan now resides in: the incessant need to hear “the other side of the story” from what “the man” was preaching. Whether the dialogue is about protesting the Vietnam war or Covid lockdowns is moot: these are the issues of our respective generations.
Today’s blog post has been published without a paywall because I believe the content to be far too important to deny to anyone. However, if you have the means and would like to support my work by subscribing, I’d be happy to offer you 22% off for 2022: Get 22% off forever
The irony is uncanny, if you can zoom out and look at the bigger picture. Joe Rogan is now what these artists used to be: an iconoclast.
My guess is that more aging rockers may also follow suit and that, even if they don’t, the fever pitch to censor Joe Rogan is going to be dialed up even further for Spotify.
Many people may be thinking we have seen what Spotify is made of in its decision to tell Neil Young to go pound sand; but how will the platform react if a barrage of artists starts to make similar threats?
As a believer in capitalism, I wouldn’t be surprised if Spotify is taking a risk/reward approach to this battle in the boardroom. After all, they have shareholders, and there likely is, in fact, some dollar amount that may cause them to cave on Rogan’s deal.
Don’t say it isn’t possible: remember, in a similar analogue, NBC parted ways with Megyn Kelly after just two years, leaving her with the spoils of a $69 million contract just because the network faced feverish outcry from the woke mob.
I just hope that Spotify takes the time to realize that it is in an extremely unique position. If the company continues to have a backbone and is the first to consistently and publicly dissent against the methods of its big tech peers – names like Google, Twitter and Amazon – who don’t seem to have any issues censoring at the first sign of one pimple faced teenager complaining behind a laptop screen and a Reddit forum – they truly have a unique have an opportunity to be on the right side of history going forward.
And that can win them favor that money could never compete with.
As much as businesses may see this as a war based on economics, it is also a war that I believe will grow deep enough to be based on ideologies.
The fact is you are either for politicians, elites, and large technology companies dictating what you can and can not have the right to consider when making decisions, or you support the idea of being able to consider opinions from all ends of the spectrum in order to make your personal decisions.
You are either an advocate for stifling one entire half of an argument – which admittedly may contain the boogeyman disguised as some actual misinformation – or you are pro freedom of speech and an individual’s right to decide for themselves.
And most importantly, you either have the wherewithalto understand that the official narrative has, and will, continue to get things wrong (vaccines would wipe out Covid, for example) and that opinions labeled as “misinformation” and “conspiracy theories” can sometimes turn out to be the objective truth (like the lab leak ‘theory’), or you don’t.
If your intentions are only to seek out objective truths, why would you turn away anyone’s opinion before sifting away at all available information before trying to arrive at the facts?
These are questions and concepts that Spotify needs to be asking itself very carefully.
While, from a monetary standpoint, canceling Joe Rogan may, at some point, look like it makes sense on paper, the music giant needs to ask itself at the end of the day: are they the battleground for something even more important than money?
We have yet to see a mainstream big tech company take a serious stand against censorship. Spotify: are you prepared to be the first?
Aerosol researcher and co-author Chang-Yu Wu explained that local humidity and temperature play vital roles in the size of the virus’s particles, which can influence its life span in the air. Drier atmospheres in colder regions will induce water evaporation from the particles, shrinking their size and allowing them to float in the air for longer periods. People also tend to seek shelter inside in colder environments and expose themselves to recirculated air that potentially contains the virus.
The air in humid, hotter environments contains more water, which can condense onto the virus particles, make them bigger and theoretically fall to the ground faster. Wu compares the particles to a rock in this case — the more mass, the faster it falls.
Liberman notes that the Wu paper “needless to say, has nothing like the WaPo’s ‘the more mass, the faster it falls’ explanation.” (Of course, objects’ characteristics can affect the speed at which they fall, for instance because of air resistance, and the behavior of aerosols can be quite complex; but those effects are generally quite slight for “a rock,” as our friend from Pisa demonstrated.) Liberman adds:
As often in the interpretation of reported interviews in news articles, the WaPo article leaves us with a problem in abductive reasoning. Did the interviewee really say that? or did the writer (or one of their editors) misunderstand, misremember, or invent it?
Over 80% Of Americans Think They’ll Be “Stuck With [COVID] Forever”
“It’ll become endemic and we’ll be stuck with it forever,” says 38-year-old Floridian Ryan Wilson.
“It’s frustrating, but what can you do about it?”
Many Americans agree that they’re going to “be stuck with it forever” – or, at the least, for a long time. A poll from The Associated Press-NORC Center for Public Affairs Research shows that few – just 15% – say they’ll consider the pandemic over only when COVID-19 is largely eliminated. By contrast, 83% say they’ll feel the pandemic is over when it’s largely a mild illness.
Overall, 45% approve of how Biden is handling the coronavirus pandemic and 54% disapprove.
Of course the partisan division is enormous, but most worryingly for Democrats is the lack of trust among so-called ‘Independents’…
Shockingly, only 31% trust the president as a source of information about the vaccines, 24% have a moderate amount of trust and 46% have little or no trust.
The public is slightly more likely to believe information that comes from the Centers for Disease Control and Prevention (CDC). Forty-four percent have a lot of trust, 24% are moderately trustful, and 33% have little or no trust in the CDC as a source of information on COVID-19 vaccines.
“I’ve switched to wearing N95 masks because I’m no longer confident in the regular cloth masks, and I hardly go out at all anymore,” says 36-year-old Minnesotan Colin Planalp.
“We’ve canceled travel plans. My son has been out of school for more than a week now and hopefully he’ll get to go back in a week. But who really knows?”
Planalp is not alone as the poll shows more Americans are taking precautionary measures against the virus than before the omicron surge.
Overall, 64% now say they are always or often avoiding large groups and 65% are wearing face masks around others, both up from 57% in December. Sixty percent say they are regularly avoiding nonessential travel, up from 53% one month ago. That level of precaution is the highest since last spring, before millions of Americans were fully vaccinated.
In summary – two years of constant fearmongering, coercive threats, and division have left the American public less trusting of anything coming out of “experts” mouths, while at the same time elevated the dissonance between their perception of COVID’s deadliness (especially for kids) and the reality of the virus risks to ’11’… will we ever get back to normal?
Aerosol researcher and co-author Chang-Yu Wu explained that local humidity and temperature play vital roles in the size of the virus’s particles, which can influence its life span in the air. Drier atmospheres in colder regions will induce water evaporation from the particles, shrinking their size and allowing them to float in the air for longer periods. People also tend to seek shelter inside in colder environments and expose themselves to recirculated air that potentially contains the virus.
The air in humid, hotter environments contains more water, which can condense onto the virus particles, make them bigger and theoretically fall to the ground faster. Wu compares the particles to a rock in this case — the more mass, the faster it falls.
Liberman notes that the Wu paper “needless to say, has nothing like the WaPo’s ‘the more mass, the faster it falls’ explanation.” (Of course, objects’ characteristics can affect the speed at which they fall, for instance because of air resistance, and the behavior of aerosols can be quite complex; but those effects are generally quite slight for “a rock,” as our friend from Pisa demonstrated.) Liberman adds:
As often in the interpretation of reported interviews in news articles, the WaPo article leaves us with a problem in abductive reasoning. Did the interviewee really say that? or did the writer (or one of their editors) misunderstand, misremember, or invent it?
On Friday morning, we switched to being tactically bullish. Does that mean we think the “valuation matters trade” is over? No. The issues discussed in last weekend’s T-Report remain relevant. On some of the issues, we have more clarity now that we had the Fed meeting, all of which support the thesis that valuations will be re-priced.
Failure To Launch – Equities
On Friday, the Nasdaq 100 futures swung by more than 4% from their lows around 8am, until they ripped higher into the close. Not only did we see short covering, but we continue to see little sign of “capitulation”. TQQQ once again had big inflows and has the most shares outstanding again. I focus on this particular bet, because it is essentially a leveraged bet on 10 companies. The ETF is triple leveraged, and just over 50% of the Nasdaq 100 is linked to 10 companies. Trading TQQQ is not for the faint of heart, and for me, for now, it represents the “greed” side of the market that keeps rearing its head. Interestingly, on Friday, we had a “barbell” in terms of flows, with SPY and ARKK having outflows, vs QQQ and TQQQ. There is clearly some serious buying the dip in sector, and while I was happy to participate in it, I will soon be reverting to a bearish stance.
Why will equities fail to launch?
Because Fed speaker after Fed speaker will hammer home how serious they are about rate hikes and balance sheet reduction. If fact, I expect much of the Fedspeak to clarify balance sheet reduction. That balance sheet reduction will start this summer and be of an order of magnitude that is eye-popping (thinking close t $2 trillion by end of 2024).
Basically, the Fed is going to try and jawbone inflation expectations lower, and that will have the side effect of weighing on risky assets.
From the credit side of things, we saw a nice rebound on Friday, though it was modest in comparison to what equities did. Until recently, equities have managed to have a pretty decent sell-off, without the help of a bunch of credit fear mongering, but if we resume trading poorly, credit weakness is a new issue for the equity market to absorb.
On the bright side of things, as earnings come out, we can see discretionary buybacks occur, which could support a lot of these companies.
Failure To Launch – The Fed
I expect that sometime in the next two months, there will be a lot of people wishing they hadn’t jumped on the 5 rate hike bandwagon.
Last week’s data wasn’t a “good news” for the economy story. Personal income and spending were down. Real personal spending was down in December and November. Fed manufacturing indices dropped. Retail and wholesale inventories rose.
My big fear remains that:
Consumers pulled forward demand to battle the supply chain issues.
Consumers treated the stimulus as “free money” which it was, which inflated the perception of how strong the consumer is.
Companies responded to this demand perception and supply chain issues, by aggressively producing goods, that may not be needed as quickly as thought.
Inventory hangover.
Prepare for more bumps ahead for the market. I didn’t even mention Russia and the Ukraine or any of the other geopolitical issues that could have ramifications for the market (see Around the World and Russia on the Warpath Sitrep).
While TQQQ (and I will keep harping on this thing) is down 36% since the middle of November, it is still up 25% from the start of 2021 and a stunning 150% since the start of 2020 (pre-pandemic). I don’t think the pre-pandemic levels are a target, but I think its healthy to think about them in the context of saying how cheap something is or isn’t after the recent selling.
If we get another leg down, I have two concerns that “are different” than the past few weeks:
Nervousness in the credit markets is real. That is new. I think it is overdone, but the persistence of this weakness is cause for concern if it resumes again, and that will feed into broader risk issues.
We are seeing the “waterfall” play out, at least a little bit. That is where the selling moves from an area that has been hit hard, to one that seems “expensive” by comparison. The sell what you can, not what you want/should.
There is no depth to liquidity and every rally feels like there are no sellers and every sell-off feels like there are no buyers – adding to the stress of every decision.
I hope I haven’t already overstayed my welcome on my bullish call , but I don’t think we have seen the lows in stocks. We will see new lows in stocks and wider levels in credit spreads in the coming weeks.
That leaves me comfortable with trading longer dated treasuries and rate products from the long side of the ledger. I think despite (or in fact, because of) the fed rhetoric, the snuffing out growth fear will be real and will materialize in more “risk off” trades.
On those gloomy thoughts, I’m not sure how to end this T-Report on a positive note, other than saying the Nor’easter we had this weekend wasn’t that bad, and apparently some people enjoy the “feels like” temperature of zero! (I told you I was having difficulty finding a cheery sign-off). Once the market starts figuring out that the Fed will fail to launch, we can have a longer, sustained rally, I just think we have some more trouble before that happens.
Good luck, and maybe, at least the insane pace of trading and violent swings will be reduced this week, as I think many of us could use a bit of a breather where we can relax and reassess without being driven by the crazy price action!
When the pandemic started, many hoped it might rally Americans to confront a grandiose global challenge, a kind unseen since the end of WWII. Instead, it just made them even lazier.
New data from the CDC showed that a quarter of American adults aren’t even active enough to protect their health. For all the Pelotons sold in the last two years, millions of Americans are apparently still living a sedentary lifestyle that’s believed to be even more harmful to a person’s health than smoking.
The greatest concentrations of lazy adults are found in the Southern US and Puerto Rico (areas that are also the poorest per capita in the US).
Two years into a pandemic that has normalized work-from-home and moved many social gatherings online, new data from the Centers for Disease Control show that many Americans were couch potatoes long before Covid-19.
A quarter of U.S. adults aren’t active enough to protect their health, according to a CDC study conducted from 2017-2020. The agency released a map on Thursday showing that Puerto Rico and states in the South had the highest prevalence of inactivity, followed by the Midwest, Northeast and the West. Colorado, Utah, Washington and Vermont were the most-active states.
“Getting enough physical activity could prevent 1 in 10 premature deaths,” said Ruth Petersen, director of the CDC’s Division of Nutrition, Physical Activity, and Obesity, in a statement. The health benefits include better sleep, lower blood pressure and anxiety, and reduced risk for heart disease and several cancers.
Using the CDC data, BBG created a map showing the percentage of the population classified as “sedentary”.
The CDC gathered its data via a (still ongoing) telephone survey called the Behavioral Risk Factor Surveillance System. New data are reported on a routine basis. The interviewers have been trained to classify any activity – even walking to work or on the golf course – as qualified physical activity.
As for what might be causing the regional disparities in the above map, the CDC guessed that “disparities…exacerbated by a lack of “safe and convenient” places for physical activity in some neighborhoods….research has shown that income, education and race are correlated with access to green space in US metro areas.”
No trader can escape drawdowns. They’re a reality of the business. But you can implement techniques to reduce their intensity and length. One of the best ways to do this is to scale back position size as you go on a losing streak. Backing off when things aren’t going your way is the key to having a long trading career.
A tiny drawdown, left untreated, can quickly turn into a blowup of account capital and mental capital. If you lose either of those two, you’re out of the game for good.
A drawdown is a sign that either:
Your method is temporarily misaligned with market conditions
Your edge is eroding and you need to adapt
You’re making trades outside of your expertise or normal process
It makes sense to reduce position sizing because in the moment, you never know exactly why an account is drawing down. Lowering size slows the process and gives you time to think about what’s happening.
In the case of scenario a, the smaller size makes it mentally easier to weather the storm.
For scenarios b and c, smaller position sizes will protect your capital and buy you more time to make adjustments and get back on track.
Success in this business is about long-term consistency and compounding. Starving a trading strategy that begins to underperform is extremely helpful in achieving this goal.
Position Reduction Strategy
The following is a methodical way to determine when and how aggressively you should reduce size.
First, dig into your trading history and see if your losses “cluster.” Are the losing trades sprinkled around winners? Or are there clear areas where a few losses lead to many more losses in a row? If you see a pattern of losses clustering, then your strategy will benefit from size reduction.
Check how many losses in a row typically cause the drawdown. Just one loser likely doesn’t signal anything. It’s usually a series of losing trades. That number could be 3 or more. It’s different for everyone depending on their process. Evaluate your trading history and try to determine your optimal threshold.
For example, you might find that after three losing trades in a row, things start to get dicey for a few months. So the next time you run into three losers, start to cut back size.
Keep cutting back until the drawdown stabilizes. Once the drawdown begins to recover, start adding the size back.
You can go beyond this rudimentary method by actually charting your account equity curve and developing trend-following rules for it. If your account value based on closing trades is above a 20-trade moving average, then use full size. If your account value falls below the 20-trade moving average, then back off size. This is a more defined “quant” way to go about it.
Varying position size will bring your returns to the next level. Markets deliver profits in cycles. If you tune into these cycles, you can exploit them and achieve better returns with fewer drawdowns.
“They’re Trying To Put Me In Jail” – Trump Calls For “Biggest Protests We’ve Ever Had” If “Racist” Prosecutors “Do Anything Illegal”
While the mainstream media mostly ignored the event for fear of being accused of racism for simply having the temerity to cover it, crowds of President Trump’s loyal supporters gathered Saturday night in Conroe, Texas for the first Trump rally of the 2022 mid-term election cycle. Because even if he isn’t on the ballot, Trump is still indisputably the most important figure in Republican politics – even if Democratic prosectors are trying to “put me in jail”, as he (correctly) proclaimed at one point during the event, much to the astonishment of the Twitterati.
The “Save America” rally was the first Trump rally in Texas since he lost the White House, and will be followed by other stops across the South and Midwest.
With every GOP politician in the country eager to seek his endorsement, Trump took the stage late Saturday night and shared some thoughts about his priorities for when he “runs and wins” in 2024.
Trump says if he’s re-elected, he may pardon people prosecuted for their actions on January 6th pic.twitter.com/VLlkGyUr32
At one point, Trump said that if he is elected to be America’s 47th president in November 2024, he would strongly consider pardons for the roughly 700 people who have been charged criminally over their role in J6.
“If I run and if I win, we will treat those people from January 6th fairly,” Trump said Saturday night. “And if it requires pardons, we will give them pardons because they are being treated so unfairly.”
Trump also strongly criticized Democratic lawmakers and prosecutors for their response to the riot, and also for the numerous investigations into him which, as the AP reported in roundup of the various probes, have taken on a criminal overtone in recent months.
The probes, which are unfolding in multiple jurisdictions and consider everything from potential fraud and election interference to the role he played in the Jan. 6 insurrection, represent the most serious legal threat Trump has faced in decades of an often litigious public life. They’re intensifying as a new poll from The Associated Press-NORC Center for Public Affairs Research found Trump’s iron grip on the GOP may be starting to loosen.
The former president alluded to the multiple investigations Saturday night, claiming “they want to put me in jail” before calling on supporters to create “the biggest protests we’ve ever had” in Washington DC and other cities if the prosecutors investigating him do “anything illegal”.
“If these radical, vicious, racist prosecutors do anything wrong or illegal, I hope we are going to have in this country the biggest protest we have ever had in Washington DC, in New York, in Atlanta and elsewhere because our country and our elections are corrupt,”
Trump continued, saying that “in reality, they’re not after me, they’re after you. And I just happen to be the person in the way,” he said.
After ranting about the prosecutors investigating him, Trump calls the prosecutors racist and says if they do anything illegal, he hopes there are massive protests in DC, New York, and Atlanta pic.twitter.com/RnY6F5OJNv
Prosecutors have been “going after my company for years…using every trick in the book.”
“For years, they’ve been going after my company, many years, using every trick in the book in an attempt to literally, if they can, put me in jail. They want to put me in jail,” Trump said at the rally on Saturday.
He also accused prosecutors of being “sick”, “horrible” and “racist”.
“It really is prosecutorial misconduct at the highest level. These prosecutors are vicious, horrible people. They’re racists, and they’re very sick. They’re mentally sick. They’re going after me, without any protection of my rights by the Supreme Court or most other courts. In reality. They’re not after me, they’re after you, and I just happen to be the person that’s in the way. That’s what they’re after. It’s been going on for years.”
With an eye toward this weekend’s events, Trump praised the Canadian truckers leading a “Freedom convoy” in protest of Ottawa’s overly restrictive COVID measures. Trump claimed that the truckers were doing more to “defend our freedom” than most Americans.
“The Canadian truckers, you’ve been reading about it, who are resisting bravely these lawless mandates are doing more to defend American freedom than our own leaders by far,”
He added that “we want those great Canadian truckers to know that we are with them all the way.”
Trump: “The Canadian truckers, you’ve been reading about it. Who are resisting bravely these lawless mandates are doing more to defend American freedom than our own leaders by far, and we want those great Canadian truckers to know that we are with them all the way.” pic.twitter.com/DPAfraVHjd
Trump touched on a range of other topics, from bashing overly restrictive COVID restrictions to promising he would investigate President Biden and his family should Trump triumph in 2024. For his opener, Trump had Texas Gov. Greg Abbott speak. As for the crowd size, footage appeared to show a vast crowd of tens, if not hundreds, of thousands of people.
We have a two-fer for Story Time this week. The first is a reminder to never buy a new 52-week low, a lesson we first learned watching a highly skilled investor try to bottom-tick Enron. The second is a review of a new academic paper that tracks the use of “rational” versus “emotional” words in English language books and periodicals from 1850 to the present day. “Peak rationality” was in 1980 according to this work, and “emotion” has been making a strong comeback ever since. Markets reflect societal trends, so any wonder “meme stocks” happened?
#1: Never buy a stock or investment theme making new 52-week lows. We often mention this piece of market wisdom, but today I (Nick) will discuss it in a little more detail. It has taken me decades of experience to understand all the nuances of this old trader’s aphorism, so here is my highlight reel on the topic.
The first time I realized the power of this rule was watching a close friend and institutional money manager buy Enron in 2001 as the stock was collapsing. You probably recall how this once high-flier imploded during a wave of accounting scandals that eventually led to its bankruptcy. My friend, a CPA with an MBA, thought he had a handle on the company’s fair value after doing a lot of work on the name. He didn’t. He bought every new 52-week low until his firm’s risk manager forced him to sell what had become a huge loss. He left the business shortly thereafter, never to return.
Now, that’s an extreme example, but it does highlight many of the problems inherent in buying any financial asset that is making new lows:
Who knows more about a stock – the fresh-faced investor buying the new low or the existing owner who is selling the new low? I think it is more often the seller, especially if it is an institution. They’ve likely met with management and done other due diligence. If they are willing to take the loss at a new low, one must believe that is very likely a well-considered decision.
Price momentum is one of the few time-proven factors in investing. Yes, it is deeply rewarding to catch major inflection points. But it is easier to follow the herd once a trend has started. We tend to prefer easy to hard when it comes to making money in markets.
Say you break with this wisdom and do buy a new 52-week low, and then the stock makes a series of fresh new lows. You double – and then triple – down, buying on further declines. No matter how mentally disciplined you are, this position will take up more and more of your mental bandwidth. And that’s time you won’t have to find new ideas or manage the rest of the portfolio.
At the risk of stating the obvious, there are many 52-week lows swimming around global equity markets these days. These include the Russell 2000, the ARK Innovation ETF and other products from the same firm (ARKW, ARKF, ARKG, ARKQ), MSCI China, MSCI South Korea, Japan’s Nikkei 225, clean energy ETFs (ICLN, QCLN, FAN, TAN), and US IPO ETFs (IPO). Obviously, we recommend staying on the sidelines with respect to any of the assets until their prices stabilize for at least a few weeks.
Takeaway: don’t make investing or trading harder than it has to be. That’s not our saying; we heard Steve Cohen tell traders that many times during our time at the old SAC Capital. One way to follow that sage advice is to respect the tape.
* * *
#2: Since we make our living with the written word, we were intrigued by a recently published academic paper titled, “The rise and fall of rationality in language”. Published on the Proceedings of the National Academic of Sciences (PNAS) website, the authors examined the frequency with which words associated with “rationality” appear in written work relative to those associated with “emotion”. There is a link to the full paper at the end of this section.
Using data from Google Ngram’s collection of millions of English language books and periodicals and scanning for 5,000 words that express either rationality or emotion, the researchers found that:
From 1850 to 1980 the use of “rational” words (such as “determine” or “conclusion”) rose. The authors theorize that the rising status of science and technology and their socioeconomic benefits “gradually permeated culture, society, and its institutions ranging from education to politics”.
After 1980, and especially after 2007, words signifying “emotion” (such as “feel” and “believe”) staged a rapid rise in popularity in written English. The authors put forth several theories, summarized by this statement: “Perhaps a feeling that the world is run in an unfair way started to emerge in the 1970s when the results of neoliberal policies became clear and became amplified with the rise of the Internet and social media.”
These charts from the paper show the frequency of use trend lines for each category from 1850 to the present day:
Takeaway: one need only look at the meme stock craze of the last year to see the powerful role emotions can play in markets over the short term, and this paper puts some useful historical and societal context around that phenomenon. Capital markets do not exist in a vacuum, but rather reflect back an image of the individuals and institutions that set prices within them. The DataTrek approach is to be as fact (“Data”) based as possible. The “Trek” is hard enough already without having to carry any emotional baggage. Don’t make things harder than they have to be…
