Three things to do right now; Pretty Much No One Is Using Trump's New Social Media App (Not Even Trump); Hilton has outperformed Zoom since the start of the pandemic; Sacklers and Purdue Pharma Reach New Deal With States Over Opioids
1) With markets in turmoil – yesterday, the S&P 500 Index had its worst day since October 2020, the Dow just entered correction territory (down more than 10% from its recent high), the Nasdaq is now officially in a bear market (down 20%), and the CBOE Volatility Index ("VIX") hit a 17-month high – every investor is trying to figure out when we'll reach a bottom.
I wish I could tell you. While I have strong opinions about a lot of things, this isn't one of them...
In fact, there are so many variables and possible outcomes that I think anyone who claims to know for sure what's going to happen in Ukraine and in the markets is blowing smoke.
So what should you do?
It's what you should always do during times of turmoil...
First, carefully analyze your portfolio with an eye toward identifying and fixing two common mistakes:
- Can your portfolio withstand a big shock? If stocks fall another, say, 25%, and stay depressed for a few years, will you be OK? Or are you on margin and/or do you own options that will blow you up?
- Do you own any stocks that you shouldn't? Are there any stocks that you know, deep in your gut, that you never should have bought, but aren't selling because you're hoping that they rebound to the price you bought them at so you can exit with your dignity intact? (This is the most common portfolio management mistake.)
Then, following Warren Buffett's famous maxim, "Be fearful when others are greedy and greedy when others are fearful," look to add to your favorite positions, assuming you have some cash that you won't need for at least three years – for example, in your retirement account.
Finally, stop checking your portfolio every two seconds. I can't remember who said this, but "a watched stock never rises."
Imagine you're on a ship being tossed around in a storm. If you focus on each wave, you'll get seasick in no time... so instead, fix your eyes on the horizon.
2) Speaking of stocks to sell, two weeks ago, I wrote:
My No. 1 stock to avoid in 2022, Digital World Acquisition (DWAC), is spiking this morning after former President Trump's new social media venture, Truth Social, became the top free app on Apple's (AAPL) App Store shortly after it launched late on Sunday (and still is, according to this tracking site).
I was certainly early in predicting the collapse of this stock... but my view hasn't changed that this will be the ultimate outcome, for various reasons I've outlined in prior e-mails (archive here).
This is a classic "buy the rumor, sell the news" situation, so this morning's spike to $99 per share smells like a blow-off top to me...
Since then, the news regarding Truth Social has been almost impossibly bad, as this Slate article highlights: Pretty Much No One Is Using Trump's New Social Media App (Not Even Trump). Excerpt:
There was lots of hype and anticipation, but former President Donald Trump's Twitter clone doesn't appear to be taking off just yet. Truth Social was released to much hype shortly before Presidents Day, but many people were put on waitlists amid huge demand. Now, as more people are getting in, they're finding a veritable ghost town, as no one really appears to be using the social network, not even the former president. Trump is followed by only 140,000 people, a fraction of the almost 90 million who followed him on Twitter before he was kicked out of there after the Jan. 6, 2021, Capitol riot. According to reports, Trump only has one message, or "Truth," up on the network: "Get Ready! Your favorite President will see you soon!" He wrote that before the app's launch and it has 7,750 "ReTruths," the app's version of retweets.
Some big-name Republican lawmakers, including the likes of Marjorie Taylor Greene and Matt Gaetz, have accounts on the app, but they don't seem to be posting anything different from what they post on other social media platforms. "Put simply, there isn't much happening on the site," writes Politico's Ruby Cramer, who was able to join the site recently after being placed on a waitlist.
It seems Trump knows his long-awaited app is a bomb and he's none too happy about it. The Daily Beast talks to two sources who say the former president has been complaining about the app's lack of success and the negative media coverage it has received. In public, though, Trump is urging followers to be patient, assuring that those who use it are "loving the product." But the numbers suggest otherwise. Although there was a surge of interest when it first launched, now there aren't a lot of people logging on, and those who do don't seem to stay very long. "From the inside," writes Cramer, "Truth Social feels empty."
DWAC finally broke yesterday, falling nearly 15%. I think this is the beginning of the end, so if you own it, get out now!
3) You may recall that in my January 13 e-mail, I shared a chart showing that the stock of Buffett's Berkshire Hathaway (BRK-B) had outperformed go-go-growth darling Cathie Wood's ARK Innovation Fund (ARKK) since the pre-pandemic peak of the S&P 500 on February 19, 2020.
Since then, the gap has only widened, as you can see in this chart:
Up next is a similar chart that's even more extreme for another pair of stocks that captures what's happened in the market in the past year...
When the pandemic hit, few stocks were hit as hard as hotel operator Hilton (HLT), which collapsed by 60% in less than a month. Conversely, few took off like video-conferencing leader Zoom (ZM), which soared more than 400% over the next eight months.
But believe it or not, less than a year and a half later, Hilton's stock has now outperformed Zoom's since the pre-pandemic market peak, as you can see in this chart (a hat tip to NYU marketing professor Scott Galloway for flagging this):
4) In my December 17 e-mail, I wrote:
I was delighted to see this news yesterday: Judge Overturns Purdue Pharma's Opioid Settlement. Let's hope higher courts reject the Sacklers' appeal of this ruling and they are then bankrupted.
Unfortunately, however, late last week the holdout states took another $1 billion and agreed to a deal that lets the Sacklers keep most of their blood money and likely walk away scot-free (though they could still be subject to criminal prosecution): Sacklers and Purdue Pharma Reach New Deal With States Over Opioids. Excerpt:
Members of the billionaire Sackler family and their company, Purdue Pharma, have reached a deal with a group of states that had long resisted the company's bankruptcy plan – a crucial step toward funneling billions of dollars from the family's fortune to addiction treatment programs nationwide, according to a court filing on Thursday.
If Judge Robert Drain, who has presided over Purdue's bankruptcy proceedings in White Plains, N.Y., approves the agreement, the Sacklers would pay as much as $6 billion to help communities address the damage from the opioid crisis. In return, Sackler family members would get the prize they insisted upon for nearly three years: an end to all current and future civil claims against them over the company's prescription opioid business.
The Sacklers' liability protection would not extend to criminal prosecutions.
What a sad ending to this sordid tale. Once again, I'm reminded of Shakespeare's famous words uttered by King Lear: "Plate sin with gold, and the strong lance of justice hurtless breaks."
For more on this, see New York Times columnist Kara Swisher's interview with the journalist Patrick Radden Keefe, author of Empire of Pain: The Secret History of the Sackler Dynasty, in her Sway podcast, How the Sacklers Got Away With It, on Apple, Spotify, or Google.
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.