Some Governors Receive Opprobrium, Others Avoid It

Today I saw some Emotional Baloney Devoid of Facts that pissed me off. Ireland, the country from which this Morally Indignant Sage of Science-y Wisdom is writing to criticize our president and select* governors, has had 224 deaths per million people; the US has had 171 deaths per million as of this writing. I don't read this writer, so I can't tell if he is slagging is own government as much as that of the United States, but perhaps he should. 

Up-to-date numbers can be found here: https://www.realclearpolitics.com/coronavirus/
And here: https://docs.google.com/spreadsheets/d/13O1rprFdkU9xpbnrlfEZeWu9T972NBKbppRVLWHhmYM/edit#gid=538573678

Outside of New York, where the 22,274 deaths (1,145/million) are definitely Trump's responsibility but not Governor Cuomo's or Mayor de Blasio's, the U.S. death rate is thankfully far lower. But Trump is mean I guess? New Jersey (680/million) is also run by a Democrat, so it avoids criticism. Imagine if Chris Christie was still governor!

The author mentions Florida, which has a much older and more vulnerable population. In FL, the governor is responsible for his state's 1,074 deaths because (50/million) he's a Trump mini-me and also mean and HATES SCIENCE.

In Georgia, the "homicidally stupid" governor has presided over 916 deaths, a death rate of 86/million. But he's opening beaches because he HATES SCIENCE and IS REALLY MEAN.

Another Ignorant state, Alabama, gets called out because "it was not until April 3rd that governor Kay Ivey finally issued a stay-at-home order..." 

Alabama has had 44 deaths per million people- 219 total! For reference, AL had 953 total traffic deaths in 2018, (link below) (Kay Ivey is a republican, of course, so it goes without saying that she is stupid and HATES SCIENCE also) https://www.iihs.org/.../fatality.../detail/state-by-state

What a crock of nonsense. Personally I think bad luck and randomness has more to do with the death and infection rates, but if you're going to politicize Coronavirus, look at which states have the most deaths per capita. More intellectual dishonesty from "journalists" who are less trustworthy than expired gas station sushi.

Bearish Thoughts

This weekend I read  this well-argued bearish take. I tend to agree with the author that the last few weeks’ gains have been a gift: an opportunity to exit a market that hasn’t yet seen the bottom of a W-shaped recovery (you are still in the first “V”)

I find myself repeatedly thinking about the permanent lifestyle changes Covid-19 will induce, and how to guess who will be the winners and losers.  Some portion of the population- 10%? 20%?- will never again go to a movie theater, for example. I read today that buffets as we know them will cease to exist.

Is one company’s loss another’s gain? Do MSFT and ZM benefit proportionally from the airlines’ loss when video chat meetings replace business travel for some portion (5%? 15%?) of Corporate America?

The big question, is the US economy a machine that we can turn back on as quickly as we shut it down? The world economy?

https://seekingalpha.com/article/4338344-hated-rally-ever-is-gift-for-investors-to-now-sell

Outsourcing your Physical Safety

I have long felt that motorcycles are foolish. Reason being: the safest, most careful motorcycle driver in the world is at the mercy of people driving heavier vehicles; namely: everyone else.

Last week, a man who was parked at a stoplight on his motorcycle who was killed when a car ran into him. I met another man who was standing on a sidewalk when an elderly woman lost control of her car and hit him and a family member. He broke over a dozen bones and lost the ability to work for more than two years. His story reminded me of Stephen King's near-death experience in 1999 when he was struck by a driver whose dog was loose in his van.

I used to live and work on a university campus, and was amazed at the number of otherwise intelligent young people (it was a top-25 school that required high GPA and college boards for admission) who would cross (or even walk up the middle of) a street with earbuds in, looking at their phone, without the slightest notion there might be a driver doing the same thing. I'm seriously amazed there have not been any pedestrian deaths on that campus.

Particularly today, when most phone-addled drivers are distracted in a way that would make Mr. Bean ashamed, it's only prudent to drive a relatively heavy car, to remain constantly aware of your surroundings whether driving, walking, or biking, and to realize that the world is full of stupid, clueless people who can kill you without trying.

So while I'm sure driving a motorcycle is an awesome feeling, like autoerotic asphyxiation, I've never tried either, and for the same reason: the downside risk is too great.

Keys to Olympic Success

One would think the way to succeed at the Olympics is simple: to get a medal in one's event.

Au contraire!

The ways to win fame, endorsements, and television airtime, and the best practitioners of these methods are:

1. Be attractive (Lindsey Vonn).
Carrying on in the great tradition of Lolo Jones, Anna Kournikova and, Lindsey Vonn at previous Olympics, Lindsey is dazzling the viewing public with her glamorous looks, perfect teeth, and sixth-place finishes. She may not be on the podium, but she will surely be in People Magazine's 50 Most Beautiful People.

2. Be gay (Adam Rippon).
Rippon spent the Olympics winning hearts and bashing Vice President Pence- who Public Opinion definitely ranked as way less cooler than the North Korean dictator's sister.  He finished tenth individually, but what an inspiration! As a contrast, Johnny Weir is also gay but works year-round as an analyst with Tara Lipinski because he's really good at what he does.

3. Wear traditional Tongan gear and no shirt during the Opening Ceremony (Lofa Tatupu).
That guy actually was pretty cool, and he didn't finish last in his event. Like!

So, apologies to the more accomplished but less attractive heterosexual Olympic athletes who didn't get prime time interviews with Savannah Guthrie.

Also, snowboarding isn't really an Olympic sport. It's just there so Americans will watch and so Americans can win medals. We really ought to field a football team in the Winter Games- that would be sure to increase ratings. As long as they didn't kneel during their Gold medal ceremony.t

The Dead Cat Bounce Part 1

Last week my friend Jordan alerted me to a news story that blew my mind. From early 2016 until last week, certain investors were making a killing speculating that stock-market volatility would remain low. "Until last week" are the key words here: in about two weeks, XIV, an exchange-traded fund that is the inverse of the volatility index (symbol: VIX, clever, aren't they?), went from its peak of $144.75/share to $5/share, a 96.5% decrease. This after climbing over 800% from $15-20 share two years ago.

"I'm a genius, I'm rich, I'm a genius, I'm rich, I'm a genius, I'm....oh crap!"

Volatility refers to how much the indices veer from the mean on average over time. If stocks are up and down all the time, volatility is high. If they go consistently up, or down (or remain flat), volatility is low. As Jordan explained to me, XIV would have worked well as part of someone's investment strategy: as discussed here, a small bet using 5% or less of your money, as a hedge against low volatility. Presumably on the other side would be a bet that would pay off in the event of high volatility (as we've seen the past two weeks). But a lot of people saw the great rates of return, doubling your money every couple months, and somehow thought the escalator would keep going up forever. So they made it their primary investment! Incredible, right?

Try as I might, I'm not clever enough to understand derivatives like XIV and VIX. For years I've been struggling to even understand the difference between puts and calls, much less how I could use options to my advantage. My lack of understanding has kept me from investing in derivatives, and probably saved me a lot of financial loss and stress.

Investing is full of bromides. We've heard them all:

• Everyone's a genius in a rising market.
• You can't call the top-- or the bottom.
• Be greedy when others are fearful, and vice versa.
• Buy low, sell high.
• Don't catch a falling knife. 
• Even a dead cat bounces.

Wait-- what? Even a dead cat bounces?

With regard to stocks, here's my interpretation of that maxim: buy a stock after it goes way down, because it will probably increase in value the following day.

More broadly, we're talking about reversion to the mean, or regression to the mean. The idea that data points (e.g. stock prices) will follow a trend line. If they veer far away at one measurement (a particular date), the next measurement will be closer to the mean, more likely than not. Maybe even on the other side of the trend line. Everything reverts to the mean.

Lately I've been testing the dead cat bounce theory. Below are a couple of success stories from last year. Full disclosure, these are usually small investments using Roth IRA money. In other words I won't pay tax on gains and I won't need the money for another 25 years. I'm just trying to grow my nest egg. I watch the stock market every day, particularly stocks of the companies I know and use. So when Advance Auto Parts lost nearly 1/4 of its value in a single day, it caught my attention.

August 14: Advance Auto Parts closes at $109.18 a share.
August 15: AAP has a disappointing earnings report and plunges 23% intraday. I buy some at $83.67/share. It closes at $86.97.
August 16: the dead cat bounces. I sell at $92.43/share. AAP closes at $91.40. My profit: 10.5%.

Advance is a Roanoke, VA company. Their employees are knowledgeable and helpful. They'll read your check engine code and change your wipers. The last time I went, 2-3 Advance Auto Parts employees were helping a lady get a snake out of her car! That's above and beyond right there.

My point in telling you the above? Advance is a good company. If I buy it, and the stock doesn't bounce back the next day, week, month, or year, I'm stuck with stock in a good company; eventually it will come back.

The implied task here is don't make short-term investments that you aren't ready to hold as long-term investments in case your intuition turns out to be wrong, or the broader market takes a crap, or there's a major terrorist attack, or.... (you see my point):

1. Invest money you won't need back in less than a year.
2. Invest in companies you believe are good to have long-term. 

In the bigger economic picture, Advance Auto was getting caught up in the broader retail narrative that Amazon is going to kill every brick and mortar store in America (if not the world). In the case of shopping mall department stores that pay indifferent people minimum wage to tell you "I don't know," I'm on board with that thesis. Nobody at Sears is going to help you get a snake out of your car. But painting the forest with a broad brush blinds one to the potential for happy little trees.

"When America sneezes, the world catches a cold." When Amazon sneezes, the market thinks every company is dying of pneumonia. The best example of the insane overreactions Amazon engenders?

THE WHOLE FOODS ANNOUNCEMENT, JUNE 15, 2017. DOOM! GLOOM!

THE TRADITIONAL GROCERY STORE IS DEAD!!!!

The day after this announcement, cable news stock huckster Jim Cramer was on cable news saying "Amazon is going to dominate food in two years."

Reality check! In 2016, Whole Foods had a market share of 1.2% ranking it #10. Kroger ranks second at 7.2%, behind only Walmart (14.5%). Kroger is #18 in the Fortune 500 (Walmart is #1, Whole Foods is #176).

My point? Amazon gets a toehold in the grocery business and every other grocer is going to shut its doors? It was a classic overreaction, and it played out thusly:


June 14: the day before the announcement, KR stock closes at $30.28.
June 16: the day after the announcement, KR plunges, closing at 22.29: a 26.4% drop in two days

It took me a few weeks to recognize the illogical injustice at play here, but I knew Kroger. It's our primary grocery store and gas station. I knew Kroger wasn't going to close down its stores just because Amazon bought a store where Prius-driving DINK yuppies buy organic hummus (going for max stereotyping there). So I decided to put my money where my feelings were:

Aug. 8: I bought KR for $21.38. Reality returned, Kroger had a couple good quarters, and...
Jan. 25: I sold KR for $30.00. That's a 40.3% gain in under 5 months. I figured at $30, it was fairly valued and exactly where it was priced before the "Amazon-Whole Foods" merger.

Don't mistake me here: I like Amazon. I shop there a lot. I own the stock. The Whole Foods deal was the right move for Amazon for a host of reasons. Hell, the increase in AMZN's market capitalization the day of the announcement roughly equaled the value of the $13.7B deal. So it paid for itself!

In conclusion, the beautiful thing about a blog is I don't need a conclusion. Hopefully you learned something or found it interesting. Have you had similar wins investing in stocks you know, or buying when the market overreacted to bad news? Write about it in the comments, or email me at jmarkdavison@gmail.com.

I will follow this up with a tale of how I made some good returns last month on dead cat bounces with one particular stock. Meanwhile, remember that anyone who tells you they have the way is full of it. Anyone who has a way, well, they might have a way.

Until they don't, like the XIV guys.

Using Miles and Points to Europe

I finally booked the trip I've been saving up for. This is the culmination of everything I've learned doing this silly hobby. I followed four simple steps and boom!

1. Earned 110,000 United miles in the last 12-18 months through flights, dining, and shopping. (I got the MileagePlus Explorer Card in 2016 but used the signup bonus last summer).
2. Mrs. Fox got a Chase Sapphire Preferred and transferred the 50,000-point signup bonus to me.
3. Built up 80,000 points through spending on my Chase Sapphire Reserve, added the 50,000 transfer from Mrs. Fox, then exchanged the 130k points 1:1 for United miles (online and instantaneously).
3. Spent hours researching routes and dates, and finally had to call due to glitches. I was worried the Excursionist Perk wouldn't work if I called, but it worked.
4. A nice woman named Trina at United reservations squared me away in about 30 minutes (I always avoid talking to humans and I don't know why; it's pretty dumb and self-defeating).

Rothenburg ob der Tauber

So we are flying as such (x4):

1. 30,000 miles saver fare plus $5.60 taxes: 
Washington DC to Frankfurt, Germany, a nonstop overnight redeye.

We'll rent a car and spend a few days revisiting the sights and restaurants (and restaurants) in Germany, where we lived from 2002-06 (and had our first kid, and made our second kid). I learned that one-way rentals within the same country cost about the same, which is different from the U.S. So that will help keep us from retracing our steps, eliminating the need to lay bread crumbs across Germany so we can find our way back to Frankfurt. We'll eat the bread and fly out of Munich.

2. Zero (!) miles plus $45 taxes using Excursionist Perk*:
Munich to Bilbao, Spain.

No, it's Bil-bao!

Bilbao is about 4 hours from Bordeaux in France where we'll spend a week with my parents who are celebrating their 50th anniversary this year, as well as my siblings and their families. We'll rent a car, about $140 for the week, using Chase or Amex points if it makes sense; otherwise we'll use real money.

3. 30,000 miles saver fare plus $113 taxes:
(1) Bilbao to Munich, 1 hr layover
(2) Munich to London, overnight layover
(3) London to Washington, DC.

In London, I'll use hotel points or pay a cheap weekend fare. There won't be time to see the city but my kids can hear the King's English and say they've been to Great Britain. I loved visiting England and Ireland from Germany because it was so nice to hear people around me speaking a language I could understand.

There aren't many layovers, but while we're waiting for flights, we'll be in the lounge eating free food. 

The Damage/ Analysis of Value

For travel worth a minimum of $5,000:
(4 roundtrip tickets at $1000 each plus 4 intra-Europe one-ways worth $250 each)

240,000 miles plus $604 in taxes

$4396.00 / 240,000 miles = 1.83 cents per mile

The Points Guy does a monthly valuation for points and miles. They value United miles at 1.4 cents each. So I got a good deal by that metric, thanks to the Excursionist Perk. That helps the main in me feel clever, but even if I'd gotten less than 1.4 cents a mile, we're taking an awesome trip for $604!

What is this Excursionist Perk of which you speak, dude? In short, for award travel from one continent to another, United allows you one free* flight within that region. It is pretty complicated and explained in detail here.

*you always gotta pay the taxes; taxes are, after all, the only slightly more popular of life's two certainties

Things I learned

(I know United best but most of these lessons are applicable to other airlines)

1. Book as early as you can. The airlines dedicate a limited number of seats to award travel. Having a United credit card and having status opened more seats to me, but it was still challenging, as my return itinerary demonstrates. Virtually every return trip involved ridiculous itineraries and multiple stopovers to get the saver fare (30k vs the usual 70k miles for economy). It's a weekend in peak season. If I'd have booked 6+ months in advance or even returned mid-week, there would have been better options.
2. They say the toughest way to earn miles is flying. The Mileage Plus Shopping Portal, the Mileage Plus dining program, and even the Mileage Plus X app helped me accrue miles. Oh, and I flew a little, too.
3. Be flexible. I'd have preferred to fly into and out of Bordeaux. To do so would have required an overnight layover in Istanbul airport- where an terrorist attack killed 45 people in 2016! Yeah, those fares are cheap for some reason. It's worth a 4-hour drive along the Atlantic Coast to be less of a target.
4. If you wanna lose weight, try this 1 weird trick.

Conclusion

I was joking about it being simple: it takes some work, and there are challenges.
1. It takes a few months to earn miles and meet minimum spending requirements.
2. It takes years and the right combination of genetics to create and rear four children, three of which will all require braces within a year of one another, enabling you to easily meet those minimum spending requirements.
3. It's tough to find a wife who is willing to use any credit card you hand her. I'm joking about that, too, of course- everybody knows women be shoppin'. Thanks, Mrs. Fox! I'll bring you back some wine and at least two of those three children!

Women be shoppin'! You can't stop a woman from shoppin'!

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