An experiment

[ChpBstrd]

See if you can spot the outlier in the experiment.

Benchmark (VTI)   54.00%                              
Experiment   116.00%   (   DIN   105.00%   /   M   168.00%   /   DXPE   75.00%   )

The experiment is currently +62% ahead of it's benchmark, thanks to the middle stock in that group.  I'll probably sell some more call options today, since Macy's is fully recovered (+10% in 12 months)

Here's the explanation for Macy's outperformance. It's an extension of the GME short squeeze.

Short Interest:
DIN: 6.21% https://shortsqueeze.com/?symbol=din&submit=Short+Quote™
M: 35.28% https://shortsqueeze.com/?symbol=m&submit=Short+Quote
DXPE: 5.12% https://shortsqueeze.com/?symbol=dxpe&submit=Short+Quote™

[BicycleB]

See if you can spot the outlier in the experiment.

Benchmark (VTI)   54.00%                              
Experiment   116.00%   (   DIN   105.00%   /   M   168.00%   /   DXPE   75.00%   )

The experiment is currently +62% ahead of it's benchmark, thanks to the middle stock in that group.  I'll probably sell some more call options today, since Macy's is fully recovered (+10% in 12 months)

Here's the explanation for Macy's outperformance. It's an extension of the GME short squeeze.

Short Interest:
DIN: 6.21% https://shortsqueeze.com/?symbol=din&submit=Short+Quote™
M: 35.28% https://shortsqueeze.com/?symbol=m&submit=Short+Quote
DXPE: 5.12% https://shortsqueeze.com/?symbol=dxpe&submit=Short+Quote™

Thanks for the explanation. Macy's higher than last January seemed really weird.

[MustacheAndaHalf]

I thought Macy's spiked on rumors of digital sales being higher than expected... but it's another month until they report earnings.  Maybe their 40% short interest is the target.  If that's the case, as options pay out for GME, will that attack continue or will some of it spill over to Macy's?

I have some "stink bids" at big jumps from the current prices, but maybe I lack enough imagination... I only go up to +100% of the current call options prices.

Benchmark (VTI)   55.00%                                 
Experiment   114.00%   (   DIN   97.00%   /   M   167.00%   /   DXPE   77.00%   )

The experiment is +59% ahead of it's benchmark currently.

[BicycleB]

The ground you staked out has been reached by the tide of the recovery/bubble, it seems. Lifting up the experiment - and maybe your options. Good luck in the continuing adventure.

[MustacheAndaHalf]

Yahoo's outdated information shows 32% short interest.  Not sure where I got 40%, but it was probably out of date as well.  I'm sure Wednesday's spike of +50% scared some of the short sellers away.

As to the tides, it appears Macy's is approaching low tide, causing the experiment to give up 1/3rd of it's edge and wind up back at +42% ahead of the overall market.

Benchmark (VTI)   51.00%                                 
Experiment   93.00%   (   DIN   86.00%   /   M   126.00%   /   DXPE   68.00%   )

I sold off 40% of my Macy's position this week, with a very tiny slice of that at the Wednesday peak.  It was dramatic watching bid and ask prices race upwards, and then step in the middle briefly, getting a +680% profit on the peak trade.  I bought call options months ago when Macy's was still near $6.50/sh - I wouldn't try that again at Friday's close of $15/sh.

[MustacheAndaHalf]

The market is catching up, rising +5% to the experiment's +3% since the last update.  But the experiment has a large lead of +40% ahead of the market.

Benchmark (VTI)   56.00%                              
Experiment   96.00%   (   DIN   94.00%   /   M   111.00%   /   DXPE   84.00%   )

I assume Macy's was pushed up by the same forces that bought GME until it reached new heights.  As that buying pressure leaves, so does the boost to "M" stock.  Looks like the experiment depends on how vaccines roll out, now that there are so many companies producing them (Moderna, Pfizer, AstraZenica, Johnson & Johnson).  The vaccine Russia rushed out (stage 1 testing only) has gone through stage 3 testing now, and proven highly effective.  They use a trick where the two doses are different, on the theory the body reacts more strongly to the variety of similar attacks.

I just checked on y-charts, and Macy's, Dine Brands and DXP Enterprises all have about the same number of shares now as they did 1 year ago.  That means the peak from before Covid is likely their actual peak, and it still makes sense to hold them until recovery.

[MustacheAndaHalf]

Nice jumps for Macy's and Dine Brands since Tuesday, with the experiment +51% ahead of it's benchmark.

Benchmark (VTI)   57.00%                              
Experiment   108.00%   (   DIN   105.00%   /   M   127.00%   /   DXPE   91.00%   )

The Russian vaccine is really good news, because it also adds evidence that two different vaccine shots could provide higher effectiveness than the same type twice.  It's not certain yet, but it's evidence in that direction.

[MustacheAndaHalf]

Back on Jan 22 in this thread, I said growth rates of new Covid cases were in free fall, and that the market was wrong.  Soon after, I quoted Dr Fauci agreeing that cases seemed to be plateauing.  To update that with more commonly used statistics, the 7-day average:  200k/day in mid-Jan, 150k/day Feb 1, and 125k/day as of Feb 6.  Hospitalizations have even dropped significantly.
https://covidtracking.com/data/charts/us-currently-hospitalized

Benchmark (VTI)   59.00%                              
Experiment   109.00%   (   DIN   106.00%   /   M   126.00%   /   DXPE   93.00%   )

The experiment remains +50% ahead of the total U.S. stock market.

[MustacheAndaHalf]

https://ycharts.com/companies/CCL/shares_outstanding

@ChpBstrd - I'm confused by share dilution and market prices.  DIN is -14% with no share dilution, while RRGB is -17% when ignoring dilution, and fully recovered (+9%) considering the additional shares.  I'm assuming the market cap of the company recovers, so if there's more shares, the recovery involves a lower stock price.  I wonder if I missed something.

The market hasn't had normal revenue data for a year now, so maybe they can't compare to normal stock values yet.  If I'm right, when RRGB has a quarter of normal earnings, the stock price will take a dive.

Based on Y-charts data, I've been selling some of my highest risk portfolio.  Spirit Airlines is 88% recovered, and I'm worried about industry bankruptcy risk, so I've begun selling.  With RRGB's 109% recovery, I've started selling since the goal isn't to capture upside so much as the recovery.  If I drift away from the recovery as my goal, I no longer have any definition of when to sell, which makes the timing even more difficult.


the recovery is a market timing decision, with stocks possibly never recovering fully (like mall REITs that lost value every year for the past several years).

[ChpBstrd]

https://ycharts.com/companies/CCL/shares_outstanding

@ChpBstrd - I'm confused by share dilution and market prices.  DIN is -14% with no share dilution, while RRGB is -17% when ignoring dilution, and fully recovered (+9%) considering the additional shares.  I'm assuming the market cap of the company recovers, so if there's more shares, the recovery involves a lower stock price.  I wonder if I missed something.

The market hasn't had normal revenue data for a year now, so maybe they can't compare to normal stock values yet.  If I'm right, when RRGB has a quarter of normal earnings, the stock price will take a dive.

Based on Y-charts data, I've been selling some of my highest risk portfolio.  Spirit Airlines is 88% recovered, and I'm worried about industry bankruptcy risk, so I've begun selling.  With RRGB's 109% recovery, I've started selling since the goal isn't to capture upside so much as the recovery.  If I drift away from the recovery as my goal, I no longer have any definition of when to sell, which makes the timing even more difficult.


the recovery is a market timing decision, with stocks possibly never recovering fully (like mall REITs that lost value every year for the past several years).

I'm satisfied with the explanation that the market is unreasonable. Maybe blame momentum investors?

Fun quote of the day:

airline bankruptcies historically can occur years after a financial crisis. Delta and Northwest didn't file until 2005, years after 9/11. American didn't file until 2011, well after the Great Recession.

https://www.cnn.com/2021/02/07/business/airlines-cash/index.html

[MustacheAndaHalf]

For RRGB, a 17% share dilution happened sometime between June 8 - July 12.  In May the stock ranged from $10.56 to $19.69 (mid $15.13), versus August $10.82 to $15.08 (mid $12.95).  It's reassuring the stock traded about 17% lower after a 17% share dilution.

I might as well revisit my decision to switch from DIN stock to RRGB call options, using the past 6 months as a measuring stick.  DIN is up +42% in 6 months, while RRGB is up +187%.  Taking some calls I didn't own, $10 RRGB calls expiring Jan 2022, those cost $4.39 six months back, and recently sold for $18.66, a 4.25x multiple, or +325% return.  Looks like that decision is no contest.

Speaking of DIN...

Benchmark (VTI)   60.00%                              
Experiment   110.00%   (DIN   99.00%   /   M   135.00%   /   DXPE   97.00%)

Someday soon, every stock in the experiment might reach +100% return since the experiment began ~10-11 months ago.  In the meantime, together they are beating the market by +50%.

[MustacheAndaHalf]

Covid cases are dropping, and an estimated 1/4th of Americans have immunity through prior illness or vaccination.  Not sure why the experiment is still losing ground against it's benchmark, but it's now just +45% ahead.

Benchmark (VTI)   61.00%                              
Experiment   106.00%   (DIN   98.00%   /   M   123.00%   /   DXPE   97.00%)

[MustacheAndaHalf]

Before either DIN or DXPE drop, I wanted to capture the moment when all 3 stocks had doubled:

Benchmark (VTI)   62.00%                              
Experiment   109.00%   (DIN   100.00%   /   M   127.00%   /   DXPE   100.00%)

The experiment is ahead of the market by +47%.

[ChpBstrd]

Covid cases are dropping, and an estimated 1/4th of Americans have immunity through prior illness or vaccination.  Not sure why the experiment is still losing ground against it's benchmark, but it's now just +45% ahead.

Benchmark (VTI)   61.00%                              
Experiment   106.00%   (DIN   98.00%   /   M   123.00%   /   DXPE   97.00%)

Well, they're not trading on fundamentals. Must be momentum investors.

[MustacheAndaHalf]

Benchmark (VTI)   61.00%                              
Experiment   106.00%   (DIN   98.00%   /   M   123.00%   /   DXPE   97.00%)

Well, they're not trading on fundamentals. Must be momentum investors.

Macy's caught momentum from the WSB crowd, but that's gone now.  Macy's float is within 1% of it's 2019 level, where prices ranged from $24.76 (Apr) to $15.83 (Dec).  So there's an argument to be made for Macy's getting near $25/sh.

I'm experimenting with GameStop - maybe I can track that while waiting for DXPE/M/DIN to recover.  At some point GME stock should revert to it's former prices, and lose 70 to 90% of it's value.  I've sold GME calls expiring in Mar - Apr with an $800 strike, and calls expiring in 2022 & 2023 with a $950 strike price.

Mar 12: sold $60, now $6, profit 90%
Mar 19: sold $78, now $47, profit 40%
Apr 16: sold $130, now $108, profit 17%
2002: sold $6800, now $244, profit 96%

Yesterday I added the following
GME, 2023, $950 strike: sold $467, now $482, loss 3%

I'm monitoring margin requirements, which are terrible for that Mar 12 call.  It has $6 of profit left, but lowers my margin available by $520.  I've entered margin required for each short position, and that's first to be closed out (buy to close) if I need to increase liquidity.

[MustacheAndaHalf]

Based on 2019 prices and tripling of the outstanding shares, AMC should be between $2.50 and $5/sh.  Yesterday, I also sold AMC calls expiring in 2023.

AMC $22 strike (4x now), sold $200, now 203, 2% loss
AMC $27 strike (5x now), sold $182, now $180, 1% profit
AMC $40 strike (7x now), sold $130, now $150, -21% loss

The $22 to $40 strikes range from 4x to 7x the current price of AMC, at $5.65.  Had I known the popularity of the $40 strikes, I would not have bothered with the others.  I'm considering closing some of my $22 and $27 strikes in order to sell more $40 strikes.

AMC and GME are both competitions: the hedge funds are defending the efficient market.  If something is overpriced, it can be sold for a profit, correcting the inefficiency.  WSB and some secret hedge fund are pushing up the price, in an effort to break the market makers in AMC call options.  In selling call options myself, I'm seeing the odds stacked heavily against WSB and fans.

[MustacheAndaHalf]

In my account, IBKR is still showing an estimated value of $6 for my (short) Mar 12 GME call, but all other sources show $28.  That's also the range offered in the options market, so I'll be treating IBKR's estimate as incorrect and ignoring it.

Meanwhile, the AMC calls I sold have turned profitable, but are illiquid.  I tried selling at a price above the last trade, and nothing happened.  There's a wide bid-ask spread for the $22 and $27 calls which makes those positions difficult to close.
AMC $22 call now 15% profit (sold $200 -> can buy at $170)
AMC $27 call now -1% loss (sold $181 -> can buy at $183)
AMC $40 call now 8% profit (sold $129 -> can buy at $119)

For each of these, I sold the highest strike price ($800 in 2021, $950 in 2022-2023)
GME calls Mar 12, now 54% profit (sold $60 -> can buy to close at $28)
GME calls Mar 19, now 49% profit (sold $78 -> can buy at $40)
GME calls Apr 16, now 38% profit (sold $130 -> can buy at $81)
GME calls 2022 Jan, now 96% profit (sold $6800 -> can buy at $247) *oldest*
GME calls 2023 Jan, now 10% profit (sold $467 -> can buy at $420) *newest*

My risk level is not appropriate for most people.  The option with the highest profit represents me predicting the GameStop buying attack had failed - on the Monday after it made the news, Feb 1.  Between the Feb 1 close and Feb 2 open, GameStop stock dropped 37%.  During Feb 4 trading, GME dropped another 41%.  That's why the price of the Feb 1 call is so much higher than all the others - it was sold facing down GME stock at $250/sh.

So, that's what I'm doing to keep me distracted from the original experiment I started in 2020.  Now severe weather is pushing stocks lower, so the experiment lost some ground to the market, but remains +45% ahead.

Benchmark (VTI)   61.00%                              
Experiment   106.00%   (DIN   97.00%   /   M   121.00%   /   DXPE   102.00%)

[MustacheAndaHalf]

For my call selling experiment, I've picked 4 calls to track.

The Fad Fund	price	orig price	gain / loss
AMC $22 call 2023	$175.00	-$199.56	12.31%
GME $800 Mar 12	$25.00	-$60.41	58.62%
GME $800 July 16	$188.00	-$190.00	1.05%
GME $950.00 2022	$223.00	-$6,799.12	96.72%

[MustacheAndaHalf]

Slightly more compact format this time, summarizing on one line with details below.  The stock market is up +59%, and experiment up +121%, or +62% ahead of the market.

Benchmark (VTI)   59.00%      vs      Experiment   121.00%   
DIN   118.00%   /   M   100.00%   /   DXPE   115.00%

The U.S. is vaccinating at a rate of 1.6 million/day, and prioritizing those most at risk.  Hopefully within months, that makes the pandemic less deadly.  And eventually, vaccinations allow normalacy.

Last year news media polled people about vaccines that hadn't been announced yet, and a staggering number of people were unsure about taking vaccines.  I predicted it would come down dramatically, and it has.  I mentioned that health care workers would be a priority, which means people's doctors would get vaccinated.  I think that has a big impact: a person who you trusted with your health before the pandemic tells you they had a vaccine shot, and that you should get one as well.

[MustacheAndaHalf]

The Fad Fund	price	orig price	gain / loss
AMC $22 call 2023	$200.00	-$199.56	-0.22%
GME $800 call Mar 12	$17.00	-$60.41	71.86%
GME $800 call July 16	$235.00	-$197.50	-18.99%
GME $950.00 call 2022	$261.00	-$6,799.12	96.16%

I read that WallStreetBets might go after GME again at some point, which might explain why the July calls spiked upwards (while GME stock dropped, which is odd).  I was -23% on those calls, but I sold some more to bring it down to -19% loss at this point (to buy the calls back, I'd have to pay 119% of the premium I received).

AMC spiked higher on good news of NYC reopening movie theaters in the first week of March.  I suspect it's a mix of people thinking AMC is halfway to recovery ($7 now vs almost $16 in Apr 2019), and WSB investing.

Those investors are in for a shock: AMC has tripled their outstanding shares.  If AMC recovered to their 2019 market cap, the stock would trade at $2.50 to $5/sh!  So people buying AMC at $7/sh on good news will realize their mistake some point when earnings go back to normal.  (That ignores new streaming subscribers, who might prefer a month of movies instead of the price of one movie ticker).

Overall I prefer selling GME calls rather than AMC.  With GME at $43/sh, it's an 18x jump from my strike price of $800/sh.  With AMC, it's now 3x away from my $22 strike.  It's dangerous to not admit mistakes in investing, so if the losses pile up far enough I'll close my AMC positions at a significant percentage loss (but small for my portfolio and it's gains, which is why I can take the risk).

[MustacheAndaHalf]

Since this thread is meant as a record, I don't edit prior entries, but Macy's percentage was rounded off to the nearest 100% instead of the nearest 1% in this entry:

Benchmark (VTI)   59.00%      vs      Experiment   121.00%   
DIN   118.00%   /   M   100.00%   /   DXPE   115.00%

The other entries are -3 and -6 below the experiment, so I infer Macy's was +9 above, or at 130%.  (130 + 118 + 115)/3 = 121.  The other numbers are all correctly rounded off to the nearest 1%.


The 3 fund experiment is +69% ahead of the total stock market today.

Benchmark (VTI)   60.00%      vs      Experiment   129.00%   
DIN   119.00%   /   M   142.00%   /   DXPE   127.00%

[MustacheAndaHalf]

I closed those earlier GME positions at big losses, which I discussed in the "How to profit off GME" thread.  Here's where they ended up:

The Fad Fund	price	orig price	gain / loss
AMC $22 call 2023	$458.00	-$199.56	-129.50%
GME $800 call Mar 12	$1,926.00	-$144.63	-1231.67%
GME $800 call July 16	$5,000.00	-$229.90	-2074.86%
GME $950.00 call 2022	$4,713.00	-$6,799.12	30.68%

The profitable trade was based on data and risk assessment.  The others assumed risk assessment was a checkbox that had already been checked, instead of re-evaluating the additional  investments/speculations/bets.  When conditions changed, I should have closed my position instead of adding to it.


Back to the earlier experiment:

Benchmark (VTI)   57.00%      vs      Experiment   128.00%   
DIN   123.00%   /   M   138.00%   /   DXPE   123.00%

Now beating the market by +71%, I'm expecting the $1.9 trillion bill in Congress will depend what happens next.  If there's problems, the stocks could take a hit while pricing in new uncertainty.  If it passes through budget reconciliation, the experiment should get another boost.

Outside the experiment, I have calls that expire this month, and plan on selling those if/when the stimulus bill passes.

[FrugalFukuoka]

What are you thoughts on the COVID trend?
Vaccination-wise it seems there is room for optimism with a vaccination available for every American by June (?) or so. On the other hand there is some news we could see a 4th wave due to the new variants..

[MustacheAndaHalf]

What are you thoughts on the COVID trend?
Vaccination-wise it seems there is room for optimism with a vaccination available for every American by June (?) or so. On the other hand there is some news we could see a 4th wave due to the new variants..

When I started the experiment I was actively studying and learning about it.  But I no longer spend a lot of time following up on research and making new predictions.

My understanding is that vaccines can be rated with 3 different percentages: chance of catching Covid-19 at all, chance of being hospitalized, and chance of dying from Covid-19.  The vaccines are very effective in those last two categories, despite mentions of the vaccines being less effective at preventing Covid-19 completely.  Also, the early vaccines were tested before variants emerged, which makes it harder to compare.

I know that vaccine makers have a much shorter cycle to update their vaccines, so they could respond faster to variants if current vaccines aren't enough.  I don't know if the U.S. variants have been studied enough.  I know existing vaccines are highly effective at preventing hospitalization and death even with the UK and South African variant.

Since Sars-Cov-2 hasn't mutated enough to defeat existing vaccines, I tend to believe that's what will play out over the next few months.  And since the most vulnerable people are being vaccinated first, the rates of hospitalization (and death) should fall even before then.

So I hope after a few months, things are closer to recovery.  As to the experiment, I'm not sure what that means for Macy's, for example.  Compared to Dec 2019, Macy's is almost recovered.  Compared to Apr 2019, it has +63% further to go.  And that ignores customers who switched from Macy's to Amazon, and might not return to Macy's.

[MustacheAndaHalf]

Wow, I guess the experiment had an up day then a down day... the market has had two down days, so things haven't changed much.  The experiment will turn 1 year old later this month, and is +123% for the year while the market is +53%.

Benchmark (VTI)   53.00%      vs      Experiment   123.00%      
DIN   114.00%   /   M   122.00%   /   DXPE   134.00%

[BicycleB]

How close are you to your criteria for completing the experiment?

[MustacheAndaHalf]

How close are you to your criteria for completing the experiment?

I need to fill in my spreadsheets for DIN and DXPE - their share prices and number of shares for the past couple years.  Then I'll know how close each stock is to it's former market cap.  There's also a large variation: if Macy's recovers to Apr 2019, it's +65% away... but recovering to Dec 2019, it's just +5% away.  So right now, I'm not sure.

This past week, the overall market took deeper losses than the experiment.  While VTI fell 4% from Feb 25, the experiment is at the same level.  So now the experiment is +73% ahead of the stock market:

Benchmark (VTI)   56.00%      vs      Experiment   129.00%      
DIN   127.00%   /   M   127.00%   /   DXPE   134.00%

Democrats in the Senate have agreed on changes to the 1.9T stimulus bill, so this week could see that pass the Senate and then the House.  I don't know how much of an impact interest rates will have - it's expected the stimulus will push those higher.  There's also treasury auctions this week with possibly too few buyers, which could push yields higher... and impact interest rates.  Probably a bad week for long-term bonds ahead.

I expect the recovery stocks to do well, despite the interest rate changes, but I'm not sure.  Also, I don't know what event in the months ahead would signal a complete recovery.  If vaccinations occur gradually, when has the recovery completed?

[BicycleB]

How close are you to your criteria for completing the experiment?

I need to fill in my spreadsheets for DIN and DXPE - their share prices and number of shares for the past couple years.  Then I'll know how close each stock is to it's former market cap.  There's also a large variation: if Macy's recovers to Apr 2019, it's +65% away... but recovering to Dec 2019, it's just +5% away.  So right now, I'm not sure.

...

I expect the recovery stocks to do well, despite the interest rate changes, but I'm not sure.  Also, I don't know what event in the months ahead would signal a complete recovery.  If vaccinations occur gradually, when has the recovery completed?

^Good question! Idk.

I have a question myself. Why would Apr 2019 be the reference point?

Maybe I've forgotten, but I thought the experiment's logic was based on recovery to pre-COVID valuation levels. Wouldn't sometime in Feb 2020 be the appropriate reference? (not intending to argue, honestly baffled.)

[MustacheAndaHalf]

I have a question myself. Why would Apr 2019 be the reference point?

Maybe I've forgotten, but I thought the experiment's logic was based on recovery to pre-COVID valuation levels. Wouldn't sometime in Feb 2020 be the appropriate reference? (not intending to argue, honestly baffled.)

It's so I can capture seasonal variations without too much typing.  I wanted to know the stock price from the prior year at several points, and to save typing, I picked Apr/Aug/Dec.  For every stock, I average the lowest and highest price of the month, which tends to get me close to the average price overall.  And then I lookup shares outstanding over time, and enter that.  For one stock, it's calculating the average 7 times, and then entering 7 numbers.

I used to track a recovery against Feb 2020 prices.  Then I learned how many stocks diluted their shares, so the multiple data points is also to establish a baseline for market cap (# shares x share price).  But I might add Feb back to that data... I also want to roughly capture when I think a recovery will happen this year, so I can compare against 2 years prior.  So I might add more data for that.

I currently have a theory that most people, like me in late 2020, still view the recovery as a stock price recovery.  But it's not: it's a recovery to the company's former market cap.  For companies that were at $20/sh, if they printed shares until there were 2x as many, their recovery price is actually $10/sh... same market cap.  So I might want to look at Feb 2020 (and 2019) to see if the market cap calculation changes dramatically.

It's nothing factual - I wanted to limit my typing.  So rather than enter various months of 2019 and 2020, I picked 3 months (Apr/Aug/Dec).  Hopefully that's a balance between seasonal variations and typing.

I formerly used Feb 2020 as a reference point for recovery. 

[MustacheAndaHalf]

Wow, now beating the market +84%.

Benchmark (VTI)   57.00%      vs      Experiment   141.00%      
DIN   136.00%   /   M   147.00%   /   DXPE   139.00%

@BicycleB - I've entered DXPE and DIN into my recovery spreadsheet, and DIN looks ready to sell.  It's somewhere between 10% from recovery, and 10% past recovery.  Macy's is 4% past it's Dec 2019 level, and DXPE is 4% past it's Aug 2019 level.  But comparing to Apr 2019, they have 25% and 50% to go, respectively.

I expect the 1.9T relief/stimulus bill to pass the House this week, despite attempts to stall.  So that should give a boost to recovery stocks, and make people question where inflation is headed.

[MustacheAndaHalf]

In the Matrix, Neo opens his coat to reveal dozens of weapons.  To quote the security guard in that scene, "Holy s**t!"

The experiment has reached +92% above the U.S. stock market:

Benchmark (VTI)   61.00%      vs      Experiment   153.00%      
DIN   129.00%   /   M   181.00%   /   DXPE   147.00%

I'm currently comparing their recovery to April 2019, so all 3 could have more room to recover.  But it's getting close.

After the Covid relief bill payments go out, I don't know what event signals the recovery.  The U.S. has fully vaccinated 13% of Americans, so watching that percentage go up is one indicator.

Personally, I think it's foolish to stop wearing masks.  But looking at Texas' Covid cases, they are currently far better off than California, so maybe they can afford to experiment.  Texas being one of the most populous states, I'll want to see how they do after lifting all government restrictions on masks and indoor gatherings.

[alcon835]

I'm in Texas. Check the numbers in 3 weeks and see how you feel about lifting the mask mandate.

[MustacheAndaHalf]

Texas governor Abbot was dead wrong last year.

https://www.kxan.com/state-of-texas/state-of-texas-new-questions-as-gov-greg-abbott-ends-mask-mandate/
"Abbott put the third phase of reopening Texas into effect immediately on June 3, 2020. Businesses were allowed to expand to 50% capacity. Restaurants could expand to 75% capacity and have parties of up to 10 people starting June 12, 2020.
...
After the third phase, the mayors in Austin, Houston, San Antonio, Dallas, Fort Worth, El Paso, Arlington, Plano and Grand Prairie signed a letter to request the power to order mask mandates for their cities.
...
On July 2, 2020, Abbott ordered a statewide mask mandate in counties with 20 or more active cases of COVID."

Last year he lifted the mandate, and a month later capitulated and re-instated it.  The week before he capitulated, the median number of cases per day was 5787.  Looking at the past 7 days right now, the median number of new cases per day is 5518.  The data suggests a repeat the last time Abbot made this mistake.

The difference is vaccinations, where Texas (9%) lags the national average (13%).  I'm not aware of any expert recommending a full reopening once 9% of the population is vaccinated.  Neither data nor experts point to a good outcome.

[Financial.Velociraptor]

Here in Houston, every business I've been to is still requiring masks as local policy.

[alcon835]

That is what I am saying. While the vaccinations going out changes the equation from last year, we still need another 60ish days to get enough vaccines into Texans to start removing the restrictions. Everywhere I've gone still has signs requiring masks, which I appreciate, but this is clearly happening because Abbott is trying to build goodwill with the base following the fallout from the winter storms last months.

[MustacheAndaHalf]

That's good to know - I wasn't aware how many businesses are ignoring the government's lifting of the mandate.  It sounds like the burden is being shifted from the government onto the private sector (or public sector, in the case of schools?).

Unlike the experiment in this thread, my largest single stock holding is Occidental Petroleum (OXY), which is headquartered in Houston.  They've done really well so far, and I hope their recovery can continue.

[ChpBstrd]

Here in Houston, every business I've been to is still requiring masks as local policy.

Remember the good ole days when distrust of government involved wanting to do the wrong thing because the government was telling us to do the right thing? I'm showing my age here.

[MustacheAndaHalf]

It's been almost a year since I started tracking these 3 stocks:

... I'll reset the clock, and I still expect them to beat the market:

DIN at 37.05 / 37.05  up +0%
M at 6.66 / 6.66 up +0% (it's an evil experiment, I'll grant you that)
DXPE at 13.78 / 13.78 up +0%
VTI at 128.60 / 128.60 up +0% (benchmark)

And today's values:

Dine Brands Global (DIN) $88.30
Macy's Inc (M) $21.03
DXP Enterprises (DXPE) $32.94

Which leaves the experiment beating the stock market by +103%!  While Vanguard Total Stock Market returned +61% near it's low (Mar 25), the equal weighted stocks of the experiment are up +164% since Mar 25, 2020.

Benchmark (VTI)   61.00%      vs      Experiment   164.00%   
DIN   138.00%   /   M   216.00%   /   DXPE   139.00%


Considering when I should end the experiment, I'm thinking either:
(1) By time, end it after 52 weeks, on March 25 2021 (10 days away)
(2) When I sell my last DXPE shares and Macy's call options

[BicycleB]

I'd enjoy seeing the result at both times fwiw. Overall, thanks for the thread.

[alcon835]

I agree with the above, I'd like to see both if you're up for it.

[MetalCap]

Agreed w BicycleB, thanks for the thread!  Great discussion, simple to follow, and entertaining through the whole mad year.

[MustacheAndaHalf]

Sure, why not.  I'll note the performance at the 52 week point, and end it when my Macy's and DXPE holdings hit zero.  I sold another chunk of my Macy's call options on Monday, so I've got about 1/4th of the original calls remaining.

Benchmark (VTI)   62.00%      vs      Experiment   155.00%   
DIN   133.00%   /   M   202.00%   /   DXPE   131.00%

Since the last update, Macy's stock dropped from $21.03 to it's current $20.13, or a 4.3% drop.  But the experiment is being measured from the initial investment of $6.66/share, so losing $0.90 hits the experiment's performance by -13.5% (relative to the original purchase).  That's how Macy's dropped from +216% to +202% so quickly - it's relative to the investment a year ago.

I've seen something similar but more extreme with OXY call options.  Some days, I'll lose an amount equal to my starting investment!  But it's because the stock drop has a leveraged impact on call options, and my calls were bought at a fraction of current prices.  So the overall performance since purchase has very wide swings.

I'm not exactly sure what's going on with the stock market yesterday - it looks like a market expecting lockdowns.  Looking at Covid-19 data for the U.S., I'm not seeing it yet, despite Dr Fauci's warning.  I know Italy has gone back into lockdown, and there's a risk that happens elsewhere.

The Fed will discuss their outlook on Wednesday, which is highly anticipated.  It sounds like markets are ready to misinterpret what Fed Chair Powell says, and surge higher or drop lower.  I expect cautious optimism, pointing out unemployment is still high, and that inflation needs to run above 2% for a time.

[MustacheAndaHalf]

Investors seem nervous about rising interest rates.  Days ago, the Fed announced their estimates: 2.0% inflation by year's end, and 6.5% GDP growth (!).  Both the market and experiment lost ground, but the experiment's stocks fell further:

Benchmark (VTI)   59.00%      vs      Experiment   150.00%   
DIN   134.00%   /   M   181.00%   /   DXPE   134.00%

The market is trailing the experiment by 91%.  By definition, the market has a beta of 1.0, and on Yahoo Finance the experiment averages 2.29 Beta.  Even if you multiply the market's gains by 2.29 (+115%), it trails the market.  By that measure, the experiment is ahead of the market on a risk-adjusted basis.

[BicycleB]

That's exactly what I was wondering about! Without knowing how to ask. Good deal.

[MustacheAndaHalf]

Here's the experiment's performance as of this weekend:

Benchmark (VTI)   60.00%      vs      Experiment   152.00%   
DIN   142.00%   /   M   181.00%   /   DXPE   132.00%

Ahead +92% with this Thursday being the 1 year mark.  By the way, be careful looking at 52 week performance right now - it ignores the drops in March 2020, but keeps the recovery gains.  I've stopped viewing 1 year performance, and have been looking at 2 year performance to avoid that bias.

I've downloaded the latest Covid-19 data from John Hopkins University, and it looks like California and Texas cases are dropping lower (by percentage, comparing Thurs to prior Thurs).  New York seems to be at a plateau, so I'm not sure what happens next.  A few states are getting worse, but overall I don't see a lot of hot spots.

A poll from earlier this month found 30% refusing vaccines, 45% willing to get vaccinated, and 22% already vaccinated.  That could be another signal to sell off recovery stocks - if almost everyone willing to be vaccinated has gotten vaccinated.  So if that 30% doesn't drop, maybe when we're 60% vaccinated it's time to sell.  If that drops to 10%, maybe at 80% vaccinated it's time to sell.
https://www.npr.org/sections/coronavirus-live-updates/2021/03/12/976172586/little-difference-in-vaccine-hesitancy-among-white-and-black-americans-poll-find

[MustacheAndaHalf]

My favorite perspective of the day, from a member of Africa's CDC: Covid-19 has killed 2.6 million people.  The vaccines have killed nobody.  Get a vaccine.  :)

Europe's vaccination effort is going slowly, and many countries have stalled AstroZenica vaccinations over blood clot fears.  Italy and most of France are back under lockdowns, which could be spreading to Germany soon.  That could be impacting U.S. markets, or worse, could be foreshadowing - the U.S. is typically a few weeks behind Europe.  In this case, vaccination speed makes a big difference, with 2/3rds of Americans over 65 already vaccinated.  Looking at my Covid-19 cases growth data, I see a plateau with a slow downtrend (not the number of cases, but the growth rate).  I think it will turn out better than expected.

Benchmark (VTI)   60.00%      vs      Experiment   139.00%   
DIN   140.00%   /   M   162.00%   /   DXPE   117.00%

[MustacheAndaHalf]

If I started the experiment last March 25th, maybe I should measure one year through March 24, 2021?  At any rate, partway through the trading day, the experiment leads the market by +75%.

Benchmark (VTI)   57.00%      vs      Experiment   132.00%
DIN   134.00%   /   M   144.00%   /   DXPE   117.00%

[MustacheAndaHalf]

I believe this experiment started a year ago, March 25 2020.  So here's how it's gone over the past 12 months:

Benchmark (VTI)   58.00%      vs      Experiment   135.00%   
DIN   139.00%   /   M   147.00%   /   DXPE   119.00%

After 1 year, the experiment is ahead by +77%:  +135% versus +58% from the March 25th low.

I actually added to my Macy's position this week as part of my prediction that the U.S. was not going to see a Covid-19 surge like in Europe.  The data shows exponential growth plateaued, and declining slightly.  The U.S. is far ahead of Europe on vaccinations, which are being given to the most vulnerable people first.

I still hold Macy's call options and DXPE shares, so I'll keep the experiment going until I unload both of those positions.

[MustacheAndaHalf]

The U.S. stock market seems to reflect a number of different pressures recently, not just Covid-19.  Unlike last year, it seems like recovery, oil and inflation can all operate separately now.  So retail might drop while banks and oil companies rise, which is something I saw earlier this week.

The experiment is +72% ahead of it's U.S. total market benchmark.

Benchmark (VTI)   63.00%      vs      Experiment   135.00%   
DIN   147.00%   /   M   136.00%   /   DXPE   121.00%


Using 2019 prices to predict a recovery, my median estimate for Macy's is 17% away from full recovery.  For DXPE, 27% away... and DINE is 109% recovered from it's Dec 2019 price (I sampled April/Aug/Dec 2019 only, because it's a manual process of entering the share float).

[SparkyPeanut]

Interesting post, thanks.

Will you do another experiment for April 2021 to April 2022?