New Covid cases prompt market sell-off

David MoonBlog

This past Monday, the Dow Jones Industrial average declined 725 points, or a little more than two percent. If we are to believe the news reports, the selloff was prompted by an increase in Covid cases. I don’t know if I am more disappointed by the investors who sold or the so-called media experts who fed the frenzy. Headlines explained “Virus fears ripple through markets,” “Delta variant will likely create sloppy stock market,” “Covid angst spooks investors” and “Sell-off intensifies amid pandemic fears.” A Wall Street Journal headline screamed, “Stocks tumble as Delta variant sends investors to bonds.” Are zero-point-nothing … Read More

Does 2021 feel like the late 1990s?

David MoonBlog

At a recent family funeral, I was visiting for the first time with a distant niece and her boyfriend. Despite his quasi-mohawk, strange piercings and dinner plate sized thing embedded in his earlobe, the boyfriend was a reasonably tolerable fellow – at least he was until he learned I was the Tennessee uncle in the investment business. That’s when he began to explain to me how the online brokerage firm Robinhood was about to enable a massive wealth shift from people like me to people like him. He went into detail explaining that traditional metrics such as earnings were irrelevant – … Read More

July 2021 investor letter

David MoonUncategorized

July 2021 Dear clients and fellow shareholders: When the overall stock market increases 15% in a 6-month period (a 30%+ annualized return), it means 1 of 3 things is happening. Investors are accelerating future gains into the current period, they are correcting for prior periods when stock returns trailed increases in corporate earnings, or a combination of the two. This year’s exceptional returns-to-date fall into the third category.  That is, investors are broadly building almost perfect expectations into the pricing of the large S&P 500 stocks, while correcting some previous price/value disequilibrium in some specific sectors.  We won’t complain too … Read More

Knoxville mansion caught in war on terror

David MoonBlog

Other than when one former owner decorated for Halloween and another owner ran afoul of securities regulations, I haven’t thought much about Knoxville’s largest and most talked about house, Villa Collina. The house even has its own Facebook page.) My disinterest changed last year when an Afghan military contractor purchased the house from his former business partner, then immediately listed the home for sale at a price $750,000 less than his purchase price. Something didn’t add up. How did an Afghan military contractor end up owning the largest residence in Tennessee? And why would he buy a house for $10.5 … Read More

Supreme Court weakens NCAA cartel

David MoonBlog

The U.S. Supreme Court ruled on June 21 that the NCAA can’t prevent schools from providing education-related benefits and payments to student-athletes. The decision has nothing to do with paying players or allowing them to profit from their name, image and likeness. The Court merely ruled that schools can pay for things like computers, study abroad programs and post graduate scholarships. The NCAA responded defiantly. NCAA president Mark Emmert said that the ruling did nothing to prevent the organization from defining what is and isn’t an educational benefit, adding “we look forward to working with Congress to chart a clear path forward.” … Read More

Reddit stocks and Kennedy’s shoeshine

David MoonBlog

In 1929, multimillionaire investor Joe Kennedy, Sr. was having his shoes shined, with the added benefit of receiving generous and unsolicited investment advice from the shoeshine boy. For the future patriarch of the Kennedy political dynasty, the combination of the young boy’s confidence and ignorance was the final sign that investor sentiment had become irrationally exuberant. Kennedy promptly returned to his office, sold his entire stock portfolio and used the proceeds to short the market – that is, bet that stock prices would decline. Shortly thereafter, an epic market crash ensued, leading to ruins for many, but vast riches for … Read More

U.S. accumulates gazillions in debt

David MoonBlog

President Biden’s newly released a budget proposal calls for $6 trillion in expenditures next year, up from actual 2019 (pre-Covid) federal expenditures of $4.4 trillion. The 2019 deficit was $984 billion. The President proposes doubling that figure next year, to $1.8 trillion. The President’s projection of $39 trillion in national debt (accumulated deficits) in 10 years falls (at best) under the “wishful thinking” category, as the figure will cross the $30 trillion mark this year. The U.S. government debt reached $1 billion in 1863 as the government raised money to finance the Civil War. It took another 118 years to … Read More

Officials downplay inflation risks

David MoonBlog

U.S. Treasury Secretary Janet Yellen recently said that President Biden should push forward with his $4 trillion stimulus package even if the increased spending triggers inflation. In a May 28 call among G-7 finance ministers, Yellen argued that any inflation spikes this year are likely to be temporary. However, even if higher prices are lasting, she has confidence in world policy makers to handle it. “I know that world; they’re very good,” Yellen is reported to have told the group. “I don’t believe they’re going to screw it up.” Most analysts agree. Most, but not all. The day following Yellen’s … Read More

NFL player fumbles on Bitcoin

David MoonBlog

After signing a new $920,000 contract with the Kansas City Chiefs, NFL tight end Sean Culkin made news when he announced that he intended to convert his entire salary to Bitcoin. In an April 26 Tweet, the 27-year-old Culkin said he would be converting his entire 2021 NFL salary into Bitcoin. Culkin, a finance graduate from the University of Missouri and current MBA student at Indiana, explained that he has always been interested in finance and economics.  “What makes Bitcoin so intractable is its scarcity.” If scarcity and value were the same thing, you could sell your old Betamax tape … Read More

Congress mulls 401(k) annuity requirement

David MoonBlog

When Congress passed the SECURE Act in 2019, it included a little noticed provision encouraging employers to include annuity options among company 401(k) investment options. New legislation currently being drafted by the House Ways and Means Committee takes the ridiculous annuity favoritism to a level I could have never imagined. If passed, employers would be required to include annuities as an investment option in self-directed 401(k) plans. That’s right; required. It is bad enough that scoundrels are repeatedly allowed to mis-sell products with deserved reputations as expensive and overly complex, Congress now wants to mandate that they be included in … Read More