Kenosha Chaos And The NPC Economy

Michael Mauboussin: Hereโ€™s what active managers can do

michael mauboussin, Credit Suisse, valuation and portfolio positioning, capital markets theory, competitive strategy analysis, decision making, skill versus luck, value investing, Legg Mason, The Success Equation, Think Twice: Harnessing the Power of Counterintuition, analysts, behavioral finance, More Than You Know: Finding Financial Wisdom in Unconventional Places, academics , valuewalkThe debate over active versus passive management continues as trends show the ongoing shift from active into passive funds. Q2 2020 hedge fund letters, conferences and more At the Morningstar Investment Conference, Michael Mauboussin of Counterpoint Global argued that the rise of index funds has made it more difficult to be an active manager. Drawing Read More


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Q2 2020 hedge fund letters, conferences and more

Another Riot, Another Record

After another clear cut example of police brutality against an African American on Sunday,

"peaceful marches... gave way to fires and destruction," in Kenosha, Wisconsin, as the New York Times put it.

More Small Businesses Destroyed

Among the local businesses destroyed in Kenosha were a car dealership, a furniture store, and this gaming lounge highlighted by journalist Michael Tracey.

That store getting destroyed brought to mind the video game term "NPC" (non player character). To the stock market, all the small businesses torched and looted are NPCs. Same with the local outposts of large retail chains.

Markets Hit New Highs

The destruction of the NPC economy means little to a market driven by the likes of Apple, Amazon, and Google.

The market's reaction is consistent what the pseudonymous Twitter correspondent Second City Bureaucrat describes as "Occupy Main Street":

After The First Death

Tuesday brought the first death in the Kenosha chaos, as armed civilians shot at each other.

Elijah Schaffer argued that the shooter responsible for the first death in Kenosha was a BLM-supporting libertarian.

Investing During Occupy Main Street

COVID lockdowns, riots, and looting are wrecking business districts while Americans shoot each other in the streets. How should you incorporate that into your investing framework? Portfolio Armor doesn't incorporate it at all, at least not directly. Instead, we look for names that have been going up, and that options market sentiment suggests have more room to run over the next six months.

We use our analysis of total returns and options market sentiment to select our top ten names each trading day. A month ago, these were our top ten names, as we shared in a post at the time (An Inauspicious Signal).

Kenosha

Our top names as of Monday, July 27th.

Here's how those top names have performed as of Tuesday, August 25th's close versus SPY.

Kenosha

As you can see, they were up 10.27% on average, versus 6.47% for SPY. Our security selection process seems to be handling the chaos well so far. We should have an update today's top names for subscribers on our site and our iPhone app by 9pm tonight.