Joined Dec 1, 2015
135 Blog Posts

WrestleMania Mania! WWE Shares Higher Ahead of Call

WWE Shares are higher after a WrestleMania that featured a ton of guys my age or older doing genuinely insane things with their bodies.

Witness 46 year old Shane McMahon throwing himself from atop a steel cage:



If history is a judge the real risk involving WWE is buying the stock here. As per post-WrestleMania custom WWE is holding a State of the Business conference call this afternoon. As seen in the below chart, for the last two years the average drop for shares of WWE during these calls is 20%.

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A good portion of that is because WWE Chairman Vince McMahon usually gets on these calls and starts spouting absolutely insane things. Vince doesn’t just play a bad guy in WWE programming. The McMahon family genuinely controls more than 50% of the voting rights to the company.

Shortly after WWE (then WWF) went public Vince announced the company was expanding into football. When an analyst questioned company focus Vince’s response was “kiss my ass”.

He wasn’t kidding.


The WWE conference call starts at 3pm. The reason you care is the WWE Network is the prototype for all the Over-the-Top products to come from companies like HBO and ESPN. The WWE Network just over 2 years old and has about 1.4 million subscribers. That’s about 75% more subs than HBONow. Unlike HBO, WWE is banking everything on its own network. The company has completely abandoned the pay-per-view business model for monthly events. It’s all or nothing for WWE; either the network grows or the company has to shrink.

Adding to the fun is that it’s impossible to ever tell if the McMahon’s are being serious or doing a gimmick. Even and especially on conference calls. The McMahon family is never, ever not doing a gimmick. The company is hilariously ill-suited to being public but impossible to kill. WWE is also a great tell for America’s appetite for incremental networks.

As I type WWE shares are modestly higher. There’s nothing modest about this company. In a pre-release this moving WWE announced more than $17m in gate for WrestleMania 32, a 50% improvement over last year but hardly the metric analysts are focusing on.

It’s all about subs for WWE and, by extension, Big Media. The madness starts at 3pm. Call in early and keep your eye on the stock.

Read: Vince McMahon Is America

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Ack! Pershing Sq Ltd Now Down Since Inception



Ackman’s Pershing Sq Holdings lost more than 25% in the first quarter. Since inception at the start of 2013 the fund is now down more than 9%. Total. Total returns were nearly 70% as recently as last July.

Pershing Sq Holdings is one of several of funds run by Ackman, who claims a 14% 12yr return on assets run with PSH’s unique style.

Based on the Pershing Sq website the firm has collected roughly $450 million in management and incentive fees. Total investor losses now total more than $1 billion. In 2014 Pershing Sq was up 40% net of fees. More than a 1/3 of those gains came from a position in Allergan; shares Ackman bought ahead of leading a takeover bid for the Botox maker.

That stake (still possibly under investigation) eventually morphed into the Valeant holding that threatens Pershing Sq today.



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Triple Crown of Crap Q1 Recap: $TWTR $FIT $GPRO



Avoid losers and the winners will take care of themselves.

The point of the Triple Crown of Crap Index was pick the 3 worst public companies I could think of and make them into an index. The defining trait of a game of skill is whether or not it can be lost on purpose. Twitter, GoPro and FitBit were specifically chosen for to lose.

They didn’t disappoint. TWTR, GPRO and FIT have lost an average of 40% since the start of the year. All three stocks have been mercilessly beaten almost without interruption, and for very good reasons.

Some companies just shouldn’t be public and these are three of them. GoPro has dropped $6.6b in market cap over the last 52-weeks. That’s enough to buy 150 of at the party yachts CEO Nick Woodman bought for himself last Christmas.

FitBit is staggering to the wire and looks set to “win” Q1 with a 55% decline. Twitter and GoPro are both down about 30% with only one full day of trading left in the quarter. Whichever stock finishes closest to flat will be replaced in the Index starting April 1st.

You may make your case for the new entrant in Q2’s Triple Crown of Crap Index in the comment section below.

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American Virility Trumps Fed Stock Picking Model



I dont do Fed anymore.

For one thing, it’s always the same conversation. For another, it doesn’t make you money.

That’s not an idle complaint. Interest rates don’t predict stock movements. Neither do 10 year yields, dividends, or the Shiller CAPE PE.  Here, via Vanguard is a whole list of conventional indicators that mean almost nothing in terms of forecaster future stocks moves:




Nothing Yellen can possibly say will help you pick stocks. It’s not actionable information.


So instead of parsing Yellen I revisited the Batman indicator. Like a NY Times reporter I tweaked my data set until I found a nice fat correlation to support my idiotic assertion. As you can see in the attached graphic, my work has uncovered a concerning indicator for stocks.

Please do nothing with your portolfios based on this information (statistically accurate though it is).

(Thanks to the Economist for their inspiring, if limited, base graphics)



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Valeant Collapse Claims Another Boss

The Sequoia Fund has announced the retirement of co-Manager Bob Goldfarb. The fund has been destroyed by the Valeant debacle. At its peak Valeant made up nearly 1/3 of the long-outperforming fund. Suffice it to say, Sequoia’s performance was adversely impacted by rolling the dice on a Canadian pharma roll-up with suspiciously low R&D and mountains of debt.

Careers of people associated with Valeant are piling up like the Layla scene in Goodfellas. It’s impossible to get out of this flaming hedge fund hotel fast enough. Don’t expect this to be the last victim.

Valeant went from a can’t-miss price rigging model (and possibly some shady accounting) to untouchable leper. Any pol not looking for a way to profit from this meltdown in some way has no ambition whatsoever. Valeant has no friends. It remains quite possibly the Shadiest Company on Earth:

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At the center of it all, playing the role of Jimmy, is Mr. William Ackman. No one gets to Ackman, who insists he has a plan to fix all this.

Jimmy goes free. In the movies and real life.



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Stocks Rolling Over: Sell Puppies, Buy Dogs $SPX $SPY

It’s National Puppy Day!

Pause to coo…


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Every good-hearted person loves puppies. They don’t have a choice. According to real scientific evidence people and dogs evolved together. Dogs and people domesticated one another starting about 27,000 years ago. As part of the process, humans are hard-wired to see puppies the same way we see baby people. Healthy humans love babies and puppies on a chemical level. It’s not your conscious choice to make.

The magic of science has thus settled centuries of debate. The world isn’t divided into Dog People and Cat People. There are Dog People and psychopaths. If you don’t love puppies you’re a monster. That’s just fact. Whether or not you like cats is incidental.

As befits puppy day, stocks are staging a baby (dog) roll-over. With a hour to go the S&P500 is lingering around the 2045 level that marks unchanged for 2016. For those of you keeping score at home the S&P closed at 2059 on December 31, 2014. That means if you re-invested all your dividends your index fund is just about balls-on flat for 5 quarters.

You can deride market timing all you want but the hard math is this: Dollar-cost averaging into an index fund with a compound annual growth rate of 0% will leave you with a nest egg of exactly what you invested, less fees. That’s more of a suicide pact than a retirement plan.

Sell Puppies, Buy Dogs

Rather than wait to Sell in May I’m declaring victory now, today, on National Puppy Day.

I don’t trust a market that runs 14% in 6 weeks. I want to add longs when the mood is scared. Right now investors are a mix of dumb-money bulls chasing the market higher and angry bears whining about how stocks “should” be lower because of terror attacks (a notion debunked before the open yesterday morning: Brussels Attacked: Don’t Expect Market Panic).

National Dog Day is August 26. I believe the S&P500 will be relatively unchanged or lower at that point. I peeled off extra (read: levered) longs last week and am content to wait for another trip to SPX 1950 or August 26th, whichever comes first, before I leg into broad stock exposure.

The All-time highs for the S&P 500 are 4% higher. That’s my stop.


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(Note: In terms of my real-life portfolio I remain long the same retailers we’ve been discussing all year hedged with Twitter just to remind myself I’m fallible. “Sell Puppies, Buy Dogs” is largely a symbolic attempt to urge investors to be cautious while others are donning giddy pants. Entry points matter for long-term investors. That’s why I was obnoxiously Bullish a month ago and why I’m incrementally more cautious now.

Dunkin': Genetically modified to be my BFF
Dunkin’: Genetically modified to be my BFF

Also… seriously, don’t buy a puppy. Buy a dog if you have space where you live and aren’t an inhuman monster.)


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Traders Making Peanuts: Sell-Off Set-Up

Stocks turning higher (ahem) as traders digest the horrors in Brussels.

The POTUS’ extended observations on the US’ relationship with the tin-pot dictatorship off the coast of Florida have given me an opportunity to do some sophisticated technical analysis (with a hat tip to Josh Brown and MKM’s Jon Krinsky).

Stocks could be in for some grief over the next few weeks.



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Brussels Attacked: Don’t Expect Market Panic

Stocks are little changed after another deadly attack in Europe. The strikes come days after the arrest of a key suspect in the shootings and suicide bombings that killed 130 people in Paris last November 13th.

You’re going to be hearing about these attacks all day. Travel stocks will be hit. Consumer discretionary stocks with little international exposure could get an incremental boost. The ugly, most basic possible level of debates will be had regarding international relations and domestic security. Drones vs Boots. Choose your policy.

All of this is lamentable, agonizing, really, but not a trade. The world is little worse today than yesterday. It’s always this bad.

The S&P500 is up 13.3% in a month and a half and slightly higher for the year, thanks to the Great Irish Recovery of last week.  The market doesn’t need a reason to go lower. It frankly sort of should go lower just to keep everyone from going all crazy.

I assume these attacks are connected to Paris. On that assumption, I retraced the market last November. Paris happened at the end of a terrible week for stocks. The following Monday, with investors “braced” for selling, the S&P rallied 1.5%. Because screw ISIS.

The close on Monday, November 16: 2053. The close yesterday: 2051.

So we beat on, boats against the current, borne ceaselessly into the past…



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Tiffany Earnings Reaction: “Diamonds Are A Scam”

Retailer for tourists Tiffany reported this morning. I was considering digging into the report. Good brand. There’s real estate value buried in their somewhere. Stock has been hammered so you’ve got some buzzard activists over-head.

There could be a trade in Tiffany. If there is I’ll miss it.

I read the entire earnings release but I was mentally checked out before I got past the sub-headlines. Everything beyond that just confirmed the information bias I’d already formed when I read the header. That’s how brains work. They take in information and try to make sense of it as quickly as possible. It’s a mental trap but it’s also much more efficient, especially once you become proficient at analyzing companies.

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Retailers: Report quarterly earnings and give me the outlook. We aren’t having coffee. This isn’t a chat. Stop hiding.

It’s much less work to pass on a stock than force an opinion. Almost everything is a pass.

There’s a system of rules for communicating with investors. When a company changes the rules it’s a red flag. Sometimes that’s an opportunity. Usually it’s a reason to walk. Every once in a while it’s personal.

3 Reporting Commandments:

1. Follow the Format: Headline, numbers, discussion.

It’s amazing how many companies screw this part up. It’s an earnings release. You think it would be pretty straight-forward.

The format is well established: A headline (“XXXXX Reports 4th Quarter and Current Outlook”) and a series of bullet points fulfilling the promise made at the top. That’s the expectation of everyone involved. Anything else should immediately considered suspect.

Tiffany went with “Sales and earnings negatively affected by the strong U.S. dollar” as a first bullet. You’ll note the lack of numbers. Bite me, Tiffany.

2. Don’t make me do math.

I like math more than 99% of the world but I don’t want to solve little quizzes first thing in the morning. Every metric Tiffany gave was proceeded by a non-GAAP distraction from some economic world other than reality. They reported a bunch of ex-currency garbage and full year results. That means I have to subtract the first three quarters of the year, which doesn’t sound like much but is a subtle sign of disrespect.

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Tiffany’s manner of reporting numbers is akin to a man offering a handshake with his palm facing the floor. It’s a bid to control the conversation unnaturally. Tiffany is both selling me and making me do the work.

Some companies are so good they can get away with reporting however they want. Tiffany is not one of those companies.


3. Don’t use empty financial-sounding jargon

Tiffany’s final bullet point at the top of its earnings release for Q4 and all of 2015 is this: “Company had strong cash flow”.

Dammit, Tiffany. I know the meaning off all 5 words in that sentence but the way you strung them together erased all their utility. As a statement “strong cash flow” has the weight of “Our products are glittery”. Tiffany is calling me dumb by putting such drivel at the top of the page.

Since Tiffany doesn’t want to give me real data let’s go ahead and discuss the company in the context of its appalling industry.

Tiffany gets the best mark-ups in jewelry. It commands a premium almost entirely because of the blue box and a 50 year old movie featuring Audrey Hepburn at the height of her considerable powers.

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Yes. Just… Yes.


Audrey Hepburn as Holly Golightly is perfect. That’s a rare and wonderful thing and it’s cost American men billions over the last 50 years.

There’s some irony in Breakfast at Tiffany’s as marketing vehicle. For one thing, Audrey Hepburn doesn’t even buy a diamond. She can barely afford to go in the store.

Hepburn plays a gorgeous impostor with a shattered soul. The movie is a tragedy that’s been passing as a rom-com for half a century.

Pretty Woman has been uncomfortable to watch because of the gender roles for at least a decade but Tiffany the company continues to dine of the aura of Audrey Hepburn. Sold to you.

While we’re chatting, there’s also this. Diamonds, just as a concept, are morally indefensible. That’s not just me saying it. Here’s “Have You Ever Tried to Sell a Diamond“, the seminal 1982 piece from the Atlantic that exposed the origins of the giant scam that somehow made diamonds synonymous with love.

The diamond industry exists solely because women love them and men are weak. That’s not an excuse not to buy one, guys. You have to get her a ring. Try to figure out the smallest rock she’ll love and pay as little as possible. Diamonds are like taxes; no one really pays full retail. Avoid the mall merchants, especially their financing. Love doesn’t mean paying double-digit interest rates forever.

Which is more than you need to know. I’ve got basketball games to handicap and a weekend to get to plan. If you’re looking for a retailer dependent on foreign currency swings and hocus pocus to mask a core business that really can’t be handicapped keep digging on Tiffany. Otherwise this chart should be sufficient:


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Go Irish! Stocks Poised To Blackout 2016 Losses

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Happy St. Patrick’s Day, one and all.

The Irish are one of the few peoples left on earth who don’t really care about being stereotyped. After centuries of serving as England’s ashtray I suppose being portrayed as pugnacious drunks doesn’t seem like that big a deal.

Half of the Jeff Macke family tree runs straight through Dublin. Some 100-plus years ago my Great Grandfather O’Farrell presumably said something snarky, boarded a boat and wept all the way to America. The snark and the weeping and fighting are all part of being Irish. I’m half Irish, half German. My German side is smarter but the O’Farrell side could take it in a brawl.

Great grandpa probably didn’t get a warm welcome when he landed in the States. As recently as 1923 the NY Times was still publishing help wanted ads explicitly telling the Irish they need not apply.

"We're here for your beer and women"
“We’ve come for your beer and women”

Shortly after that last Times ad Joe Kennedy put an end to the stereotypes by building a bootlegging empire, siring countless children and buying a Presidency for his second favorite son, Jack.

Yet the Irish are still second-class citizens everywhere except Boston, which obviously doesn’t count. Well not anymore. Today, March 17 2016, a combination of March Madness, beer and joyous fist-fighting will drive the S&P 500 back to positive for the year. Today Bears will be sealed in a full keg of Guinness, chugged and thrown-up on the Streets of Wrigleyville. By tomorrow the correction of 2016 will be nothing more than a fuzzy memory.

(Half) my people have spent centuries derided as animals, shot on the orders of Winston Churchill himself and made into Catholic school mascots. Today, at last the Irish will be celebrated for serving as the rheumy-eyed connective tissue of this nation.

You’re welcome, America. Now give us a kiss…

Facts and levels of note:

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