April 2022 by Luckbox Magazine

life. money. probability.

APRIL 2022

Free digital subscription: getluckbox.com

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Go Beyond Trading Just Stock Options Unlock new trading strategies and learn how index options can be a new tool in your trading arsenal Learn more at cboe.com/minis

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person should review the Characteristics and Risks of Standardized Options (ODD), which is required to be provided to all such persons. Copies of the ODD are available from your broker or from The Options Clearing Corporation at 125 S. Franklin Street, Suite 1200, Chicago, IL 60606 or at www.theocc.com. Cboe is a registered trademark of Cboe Exchange, Inc. © 2022 Cboe Exchange, Inc. All Rights Reserved.

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April 2022

12 16 18 24

PHOTOGRAPHS: REUTERS

THE MARCH OF HYPE

From the first newspaper ad to the metaverse of the near future, the Great American Hype Machine has been offering up hyperbole for three centuries.

THE ROCK IS ON A ROLL

The multi-talented wrestlerturned-entertainer and entrepreneur flexes his star power and charisma to muscle his business ventures forward.

I NSIDERS AREN’T BUYING ARK’S HYPE

Cathie Wood, one of the most influential money managers of the last decade, has been inspiring more doubt than confidence lately. Can she regain her touch for picking stocks?

THE JEEN-YUHS OF HYPE

Ye, the artist formerly known as Kanye West, convinces fans to pay hundreds of dollars for a pair of sneakers or a ticket to see him listen to his recordings.

HE METAVERSE: T REALITIES OF VIRTUAL REALITIES

Will people gather in the metaverse instead of in person in a few years? No one knows for sure because the virtual world isn’t really a thing yet.

April 2022 | Luckbox

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L U X U R Y P E R F O R M A N C E P A S S I O N

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888 340 4361

Crafted without compromise

kalamazoogourmet.com

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A hot air balloon sports the Luckbox logo at the 2022 Arizona Balloon Classic. editor in chief ed mckinley managing editor yesenia duran associate editors mike reddy kendall polidori editor at large garrett baldwin technical editor james blakeway contributing editors vonetta logan, tom preston mike rechenthin creative directors katherine bryja tim hussey contributing photographer garrett roodbergen editorial director jeff joseph

trends life, luxury & the pursuit of happiness DIVERSIONS

31 Inflation, Hot Air & Wind RECORD HIGH

34 Millennial Rock Redux 37 Music’s Memorable Moments

trades&tactics

SENTIMENT

42 America’s Role in Global Leadership CALENDAR

PHOTOGRAPH: ALEXANDRIA ROWLEN

43 Deep Dish April

contributor’s guidelines, press releases & editorial inquiries editor@luckboxmagazine.com

actionable trading ideas NORMAL DEVIATE

45 Pro Traders & Poker Pros POKER

47 Rounders are Grounders THE UNLUCKY INVESTOR

48 Don’t Let Stocks Ruin Your Day

BOOK VALUE

40 The Luckbox Bookshelf

comments, tips & story ideas feedback@luckboxmagazine.com

INSERT

CHEAT SHEET

Stay Logical

TECHNICIAN

58 Hype Cycle Case Study: 3D Printing TRADER

62 Meet Kimberly Jane FAKE FINANCIAL NEWS

8 The Cult of Peloton THE LAST PICTURE

64 Save the Children

advertising inquiries advertise@luckboxmagazine.com subscriptions & service support@luckboxmagazine.com media & business inquiries publisher: jeff joseph jj@luckboxmagazine.com Luckbox magazine, a tastytrade publication, is published at 19 N. Sangamon, Chicago, IL 60607 Editorial offices: 312.761.4218 ISSN: 2689-5692

INSIDERS

Printed at Lane Press in Vermont

50 Insiders Call a Bottom

luckboxmagazine.com

DO DILIGENCE

52 Big Hype, Bad BUZZ

Luckbox magazine

MACRO VIEW

54 Fed Hike Hype @luckboxmag

INTERMEDIATE

56 Returning to Average ADVANCED

57 Hype and Skew

On the cover: Illustration by Mark Todd

2019 & 2020 Best New Magazine Folio Award for Custom Content

Luckbox magazine content is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities and futures can involve high risk and the loss of any funds invested. luckbox magazine, a brand of tastytrade, Inc., does not provide investment or financial advice or make investment recommendations through its content, financial programming or otherwise. The information provided in luckbox magazine may not be appropriate for all individuals, and is provided without respect to any individual’s financial sophistication, financial situation, investing time horizon or risk tolerance. luckbox magazine and tastytrade are not in the business of executing securities or futures transactions, nor do they direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. luckbox magazine and tastytrade are not licensed financial advisers, registered investment advisers, or registered broker-dealers. Options, futures and futures options are not suitable for all investors. Transaction costs (commissions and other fees) are important factors and should be considered when evaluating any securities or futures transaction or trade. For simplicity, the examples and illustrations in these articles may not include transaction costs. Nothing contained in this magazine constitutes a solicitation, recommendation, endorsement, promotion or offer by tastytrade, or any of its subsidiaries, affiliates or assigns. While luckbox magazine and tastytrade believe that the information contained in luckbox magazine is reliable and make efforts to assure its accuracy, the publisher disclaims responsibility for opinions and representation of facts contained herein. Active investing is not easy, so be careful out there!

April 2022 | Luckbox

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HYPE, SIGNAL & NOISE I am a God So hurry up with my damn massage In a French-ass restaurant Hurry up with my damn croissants I am a God I am a God I am a God —I am a God, Kanye West (2013)

uckbox examines data, trends, probabilities and human behavior to find better ways of handling our money and living our lives. It’s a process that requires the ability to distinguish between signals and noise. Signals are defined as useful, actionable messages based on verifiable facts. Anything inaccurate, incomplete or deceptive qualifies as noise. But lately, we’ve discerned an unsettling uptick in noise. We’re overwhelmed by the relentless self-promotion of influencers, marketers, hucksters, so-called investment gurus and tech industry “analysts”—all of them peddling some supposedly disruptive new technology or pitching an uninspiring new way of looking at something old. That’s why the time seems right for a hypethemed issue of Luckbox. It’s an opportunity to assign some magniloquent messaging to the noise bin. So where do we start? Well, hype predates stone tools, but there’s lingering disagreement over what the word really means. For some, it suggests deception, manipulation and con games. Others regard it as neutral—anything that succeeds in grab-

I miss the old Kanye, straight from the ‘Go Kanye Chop up the soul Kanye, set on his goals Kanye I hate the new Kanye, the bad mood Kanye The always rude Kanye, spaz in the news Kanye I miss the sweet Kanye, chop up the beats Kanye I gotta to say at that time I’d like to meet Kanye —I Love Kanye, Kanye West (2016)

bing and holding the public’s attention. We’re subscribing to the idea that hype’s neutral. It’s the broader viewpoint that covers about twice as much territory as the narrower interpretation. Our reflections on hype begin in this issue with an exploration of the fanaticism surrounding Peloton stationary bikes. The brand has ridden a wave of hype to achieve extraordinary results in terms of sales and valuation, but reality may be rearing its ugly head. Next comes a historical account of hype in America. The nation’s three centuries of bombast began with the first newspaper ad and continue to this day with disagreements about the role of the internet. We follow that survey of the sweep of history by creating word portraits of three masters of hype. First, there’s the tale of The Rock. He parlayed the fame he won as a wrestler into a second career as an actor and a third as a spirits and beverage entrepreneur. Now, rumors are flying about a possible presidential run. Who could provide a better example of reshaping and repurposing hype than the man also known as Dwayne Johnson? Next, Luckbox analyzes the past successes

Thinking Inside the Luckbox

Luckbox is dedicated to helping active investors achieve skill-derived, outlier results. 1 Probability is the key to improving outcomes in the markets and in life.

2 Greater market volatility brings greater opportunity for traders and investors.

3 Options are the best vehicle to manage risk and exploit market volatility.

4 Don’t rely on chance. Know your options because luck smiles upon the prepared.

and uncertain future of Cathie Wood, who’s been described as one of the most influential money managers of the last decade. Is Wood the latest hyped investment guru or truly a hot hand? Third, we visit Ye—the rapper, business magnate, fashion maven, music industry disruptor, former political candidate and self-proclaimed God who was formerly known as Kanye West. And Ye’s far from finished—he earned the biggest single-day Spotify streaming total for any artist in 2021. His accomplishments and controversies make him the embodiment of hype. But hype isn’t confined to individuals. In fact, hype can be as all-encompassing as the metaverse, the new unreality that’s touted as a companion to the good old universe we’ve grappled with our entire lives. That’s another subtopic for this issue. So, consider this edition of Luckbox a test: See if you can separate the signal from the noise in this abundance of hype. Here’s something to get you started: Booyah! Ed McKinley Editor in Chief

Jeff Joseph Editorial Director

Two ways to send comments, criticism and suggestions to Luckbox Email feedback@luckboxmagazine.com Visit luckboxmagazine.com/survey A new survey every issue.

Luckbox | April 2022

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OPEN OUTCRY HOW FAMILIAR ARE YOU WITH THE CONCEPT OF THE METAVERSE? Very familiar

Somewhat familiar

Harris Poll

12%

27%

Luckbox Readers

22%

54%

Your thoughts on this issue? Take the reader survey at luckboxmagazine.com/survey

WHEN YOU THINK OF “HYPE” OR “OVERHYPED,” WHO OR WHAT SPRINGS TO MIND?

Cathie Wood. She’s Wall Street’s greatest hype person. —Eric Amberson, MA Elon Musk. His affect and impulsive financial moves make me distrust him. He seems filled with grandiosity. —Miriam Sexton, Dunedin, FL Peloton. At the end of the day, it is just an exercise bike with some subscription programming attached. It was perfect timing when it hit the market and was too much hype in too short a time frame. —Tyson Miller, Hilton Head, SC Meta. The entire idea of the metaverse seems like the death knell for society. NFTs are a very close second. —Kerry Downing, Hillsboro, MO Tesla. People hail it as the future, but it does nothing that other more-established car companies can’t do better. —Dani Habtom, Cupertino, CA Cryptocurrency. I think Jamie Dimon, the chairman and CEO of JPMorgan Chase, said it best in a recent issue of Luckbox: “I personally think that bitcoin is worthless.” —Louis Zawislak, Metairie, LA

WHAT, IF ANY, MEME STOCKS DID YOU BUY FOLLOWING 2021’S GAMESTOP STOCK RALLY? I didn’t buy any meme stocks ��65% GameStop �� 12% AMC Entertainment �� 9%

IF YOU DID BUY MEME STOCKS, WHAT DROVE YOU TO BUY SHARES? I wanted to make a quick buck ��62% I believed in the companies I bought �� 12% I got caught up in the hype �� 9%

WHAT ADVERTISING CAMPAIGN, SLOGAN OR JINGLE HAVE YOU BEEN UNABLE TO FORGET?

Where’s the beef? I’m lovin’ it! Nationwide is on your side 1-877 Kars4Kids What’s in your wallet? TELL US WHAT YOU LIKED OR DISLIKED ABOUT THE ART & DESIGN ISSUE OR LUCKBOX.

The magazine covers a wide range of topics of interest to traders. I appreciated the detailed analysis of Fibonacci and a sober, well-thought article on the future of crypto. —Mike DeWalt, Camano Island, WA Love the whole issue. Always very wellwritten. I’m still trying to find the cherry on the cover! —Annie Goodman, Edwards, CO

SCAN THIS

There’s more to Luckbox than meets the page. Look for this QR code icon for videos, websites, extended stories and other additional digital content. QR codes work with most cell phones and tablets with cameras.

1 Open your camera

2 Hover over the QR code

3 Click on the link that pops up

4 Enjoy the additional content

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SHORT INTEREST

HYPE! I don’t think our Founding Fathers ever envisioned a six-four, bald, tattooed, half-Black, half-Samoan, tequila-drinking, pickup truck-driving, fanny pack-wearing guy joining their club— but if it ever happens, it’d be my honor to serve you, the people.

SEE PAGE 16

—Dwayne “The Rock” Johnson, via Instagram, on the rumor that he might run for president

Make lots of predictions … when one of yours pans out, trumpet your success on a wide scale … say “I told you so.” SEE

PAGE 12

Instead of using jargon that other people have come up with, create your own. Use it whenever possible. Doing this will convey instant expertise. ―Ideas for manufacturing hype from Michael F. Schein, The Hype Handbook: 12 Indispensable Success Secrets

$500b

SEE PAGE 26

—Facebook’s loss of market cap since rebranding to Meta, as of Feb. 25, 2022 SEE PAGE 18

Cathie Wood’s ARK bet $400 million on six stocks this month, and it’s a disaster. —Fortune

“I AM UNQUESTIONABLY, UNDOUBTEDLY, THE GREATEST HUMAN ARTIST OF ALL TIME. IT’S NOT EVEN A QUESTION AT THIS POINT. IT’S JUST A FACT.”

SEE PAGE 24

—Ye, formally known as Kanye West, Beats 1 Radio

Luckbox | April 2022

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Favorite one-hit wonders Eye of the Tiger (Survivor) — 41.4% Somebody That I Used to Know (Gotye) — 19.8% Macarena (Los Del Rio) — 12.1% —Luckbox Readers Survey

SEE PAGE 8

5.9 MILLION

Members on the Peloton platform —Backlinko

42%

10.6%

Weighted underlying holdings of the Social Sentiment ETF (BUZZ) that have experienced insider buying within the past six months. —Nasdaq

SEE PAGE 50 & 52

68,986 feet

60+ bands

—World record for highest hot air balloon flight

—When We Were Young music festival details

SEE PAGE 31

SEE PAGE 34

(or ~13 miles)

3 stages 12+ hours

—Global leader approval rating for Joe Biden (Morning Consult)

SEE PAGE 42

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April 2022 | Luckbox

3/4/22 10:42 AM

FAKE FINANCIAL NEWS

The Cult of Peloton Devotees made a stationary bike company rich—for a while By Vonetta Logan

fanaticism, I had concerns. Can a $2,500 Peloton bike live up to the hype? Have my friends and family joined a Peloton cult? And where can I buy padded shorts? Those and other questions aside, let’s delve into the fitness craze that is Peloton.

hings about me: I’ve never read Harry Potter books, I haven’t watched one second of Succession and I’ve never had a milkshake with half of a chocolate cake sticking out of it. I’m not big on hype. Not to be a contrarian, but I hate being told what to do. I like to find things organically or preferably have The Rock

whisper them into my ear: “Buy my Teremana tequila, Vonetta.” So, I’d never hopped onto a Peloton indoor exercise bike. First, I live in an apartment that doesn’t have a well-lit solarium like the ones in Peloton ads. Also, I hate exercise. When I found out my mission for this month’s article was to join in on the fitness

The flywheels fall off Soon, however, Peloton began to struggle under the weight of its own growth. Delivery times went from days to weeks to months. Then, in March 2021, a pediatric fatality occurred on its Tread+ treadmill. At first, CEO John Foley refused to address the issue, but the company eventually relented and issued a recall. By last summer, vaccine adoption and gym reopenings prompted Peloton to slash prices. That hurt its bottom line, and Peloton’s stock closed out 2021 more than 75% lower than its December 2020 high.

Is the Peloton craze a spandex-covered cult?

PHOTOGRAPH: COURTESY OF VONETTA LOGAN

Kickstart my heart Peloton, the most successful Kickstarter venture of all time, listed its original bike for $1,500 on the crowdfunding site in 2013 and managed to raise $307,332. Most companies buckle under the weight of the hype on Kickstarter (looking at you, Coolest Cooler), but Peloton cranked up its resistance wheel and got stronger. It reached “unicorn” status in 2017 and went public in 2019. When gyms had to close because of COVID-19, Peloton offered a way to get fit at home. The company’s market cap reached nearly $50 billion in February 2021, up from its $7 billion in October 2019. From Q2 2020 to Q2 2021, the company gained over one million new subscribers.

Luckbox | April 2022

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In 2022, the company added hundreds of dollars in fees for its products as it grappled with waning demand. Then, in January 2022, news leaked that Peloton was temporarily halting production amid a companywide hiring freeze. CEO Foley was again adamant that it wasn’t true, but weeks later under pressure from activist investors, Peloton fired Foley and eliminated 2,800 jobs, or 20% of its workforce. The new CEO, Barry McCarthy, is the former CFO of both Netflix and Spotify, two low-priced subscription companies. Some think the only way forward is to sell the company. Peloton’s market cap as of this writing is $9.47 billion. You’re just my hype Here’s an update of an old joke: “How do you know someone owns a Peloton? Wait five minutes and they’ll tell you.” According to the site The Business of Apps, 66% of Peloton users are between the ages of 25-44, and 21% make over $200,000 a year. Reasons for owning a Peloton differ, according to my friends and family members. “I’m a sucker for the latest and greatest exercise equipment,” Robyn M. told me. “I had a NordicTrack back in the day.” She’s motivated by Peloton’s live classes and toils to earn badges for taking classes and achieving goals. Robyn isn’t alone. Beth F. told me this: “Love the product but love the personalities behind it even more. It really does feel like they share everything with you. You feel a connection to the product.” Among the owners I interviewed, most admitted to following at least one of Peloton’s 51 class instructors on social media outside of the Peloton platform. Users love the flexibility of creating their own workouts, finding a trainer they vibe with and being able to choose music that suits their personality. They also enjoy the ability to do non-cycling activities like strength training, boxing and yoga with the app—all for a $39 monthly subscription. Drinking the Kook-Aid Finally, the time had come to try the greatest fitness phenomenon since Suzanne Sommers wanted us to have thighs that could crack

walnuts. Using a with the unlikely name of called pelotonbuddy.com (wish I was making that up), I found hotels in Chicago that had Pelotons in their fitness centers. I checked into one of them with a gallon of water, some padded booty shorts and a ring light. My first class was a 30-minute hip-hop ride with popular instructor Kendall Toole. This class was a “replay” of her live class, but 20 people attended, even though it was late on a Thursday night. Kendall is blond, jacked and basically a spandex-covered gym treat. She’s her own perpetual motion machine and alternates between pithy motivational sayings, “You can rock this!” to the more banal “I’m excited for your journey!” Um, journey? I’m in a hotel gym during a blizzard. It was easy to adjust the bike for my height and how close I wanted to be to the bars. The large HD screen was great for seeing all the action, and it displays your metrics. The bike’s seat, however, haunts me to this day. Go to Home Depot, find a 2x4, lay it across some sawhorses and then straddle it. That’s how the seat of a Peloton bike feels. Even though I had padded shorts, my butt hurt for days after my ride. Like a lot of people, I haven’t been working out as much as I did before the pandemic. The class was challenging (why are we standing up now?), and my Apple Watch thought I was having a cardiac event,

$50 billion Peloton’s peak market cap

$8.1 billion The company’s evaluation at press time

Peloton, the most successful Kickstarter venture of all time, raised $307,332 in 2013. but I completed it. I was waiting for some revelatory experience, but I just took my wobbly legs back to my room to shower and sleep. I’d try more classes tomorrow. The next day, I decided to try some of Peloton’s off-bike offerings. I did a 10-minute chest and arms class with Callie and a 10-minute shut up and squat (not sure if that’s the real name) with the chocolate Adonis known as Adrian Williams. I liked the off-bike classes better than the bike, but additional mats, weights and a screen that pivots all require extra cash. Worth it? True believers don’t like being told their deeply held convictions are their “opium,” but I don’t quite see what all the Peloton hype is about. Questions about the company’s future remain unanswered: Will they allow Netflix? Will Nike buy them out? Will the seat ever be comfortable? But the company has built a dedicated base of fans who love the product and don’t use it for a clothes rack. The new CEO has hinted at a lower cost of entry or additional products that would democratize fitness. But is Peloton a spandex-covered cult? I’m not going to go that far because the fan base is ripped and I’m an out-of-shape comedian. Just bring padded shorts and an open mind. Vonetta Logan, a writer and comedian, appears daily on the tastytrade network and hosts the Connect the Dots podcast. @vonettalogan

April 2022 | Luckbox

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PE!

16 18 24 26

THE MARCH OF

YPE

As technology advances, each generation gets its own version of hyperbolic advertising, promotion and manipulation. That’s both good and bad.

by ED MCKINLEY

hype resides in the eye of the beholder. while some consider it exaggeration or even deception, others define it as anything that attracts the public’s attention. Viewed as the latter, hype can promote a product, personality or idea. But at the extremes, it can work as a powerful force for good or for evil. Hype can seem like something new, but it’s been at work since time immemorial. Even in the Stone Age, news could spread by word of mouth faster than a person could walk. Each step along the technology trail has increased the speed and power of hype. Early on, drums carried coded messages more quickly and accurately than the chain of gossip could deliver the news. By the ninth century, woodblock printing was feeding the hype machine in China. Koreans were using movable type to print books in the 13th century. In Germany, Johannes Gutenberg cranked out his first Bible in 1436 on a screw-type wine press that applied pressure evenly on inked metal type. In three years, he produced 200 copies of the Bible. Compared with hand copying, the speed and accuracy of the printing press was unprecedented. But no one really knew what to do with so many Bibles, so most sat unused and Gutenberg died penniless. But not before he helped end the Middle Ages, played a vital role in ushering in the modern era and

T H E G R E AT A M E R I C A N H Y P E M ACH I N E FOR MORE THAN 300 YEARS, THE ADVANCE OF TECHNOLOGY HAS BEEN PROVIDING AMERICAN HYPE ARTISTS WITH EVER-INCREASING POWER IN THEIR QUEST TO GAIN AND HOLD THE ATTENTION OF THE CITIZENRY. LET’S CHECK OUT SOME HIGHLIGHTS: The first billboard advertises a circus

1704

1836

Real estate touted in the first newspaper ad 12

60% of American homes have radios

1878 J. Walter Thompson ad agency is created

1934

12 million televisions are in American homes

1935 Leo Burnett starts an ad agency

1951

ARPANET established

1955

1969

Half of American homes have televisions

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ILLUSTRATION: REUTERS

prepared the world for an unprecedented rush of hype. Less than a century later, Martin Luther became the world’s first best-selling author. Some 5,000 copies of his translation of the New Testament into German sold between 1518 and 1525. From there, technology created a whirlwind of hype. The telegraph, developed in the 1830s and 1840s by Samuel F.B. Morse and other inventors, transmitted dots and dashes over electrical wires. Guglielmo Marconi invented the radio when he sent a wireless Morse Code message through thin air in 1895. By the 1920s, Lee de Forest was turning radio into a purveyor of entertainment and hype, and Hollywood attached sound to movies. A still image transmitted over wires in 1862 marked an important milestone on the long road to television, the medium that would eventually do so much to advance the cause of hype. World War II slowed the TV’s progress, but it exploded in popularity in the postwar world from the late ’40s to the mid-’50s. For a few years, it may have seemed to many that television had brought hype to its pinnacle. But in 1983, an even more powerful engine of hype was born: the internet. And the internet gave rise to the Golden Age of Social Media, a period often thought to have ended in about 2012, which brings the discussion more or less to the present day—an era marked by social media’s slide into commercialism and a longing for the as yet unrealized metaverse, an alternative digitally unreality.

PUSHING PRODUCTS

The public has always been willing to accept— if not necessarily embrace—a certain amount of promotional hype. In one example, polling during the Golden Age of Radio in the 1930s and 1940s indicated a majority of Americans agreed that listening to ads in exchange for news and

The first smartphones become available

1976 The Apple-1 home computer is released

1994

the Tiger to the Jolly Green Giant, or fictional but dedicated public servants like Smokey the Bear. In the 21st century, the task of moving consumers to buy their way to happiness is beginning to shift to social media influencers. They’re the people who have established themselves as experts on a particular topic and go online to post their thoughts to large audiences of followers. Mega influencers with more than a million followers on a single social medium have begun to employ agents who negotiate deals that can net them a fee of a million dollars for a single post. Rankings of the most popular or most effective influencers list names that often come from the ranks of fashion mavens and entertainers. Some have amassed tens of millions of followers. Micro influencers, whose followers number only in the thousands, promote brands for free if they fit the theme. Nano influencers have only a small number of followers, but their product endorsements can prove powerful because of the devotion of their fan bases. Mega, nano or something in between, today’s influencers have plenty of places to ply their trade. A list of the top social media would have to include Facebook, YouTube, Instagram, TikTok, Snapchat, Pinterest, Reddit, Twitter and Quora. Legions of consumers are responding. In fact, the number of people using social media has reached 3.4 billion, or nearly half the inhabitants of the planet. But “influencer marketing” on social media takes its place among five strategies that MIT professor Sinan Aral has identified in his book The Hype Machine: How Social Media Disrupts Our Elections, Our Economy, and Our Health—And How We Must Adapt. The machine in the title is what he also calls the “social media industrial complex.” (For more on the book, see p. 40.)

Johannes Gutenberg, inventor of the movable-type printing press.

WARREN BUFFETT AND CHARLES MANSON BOTH CITE THE IMPORTANCE OF THE SAME TENET FROM HOW TO WIN FRIENDS AND INFLUENCE PEOPLE. entertainment constituted a “fair deal.” But advertisers don’t just provide information on products. In print, on the airwaves and through the internet they manipulate audiences by portraying their wares as the ticket to self-esteem, social acceptance and the good life. Ads create a “need.” That process gave rise to so many 20th century icons. Think of the hucksters for processed foods that have ranged from Tony

The launch of FaceMash, which becomes Facebook

2000 Half of American homes have computers

2003

Instagram is founded

2006 Twitter is founded

2010

Commercialization of the metaverse

2021

2020s

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THE HYPE MACHINE

Aral’s five strategies for marketing the “hypersocialized” world in and around social media are: Network Targeting—It works well to aim social media messages at an individual, but it’s even more accurate to include information from the subject’s associates because people seek friends with similar interests. Referral Marketing—Network connections don’t just predict preferences. They also influence preferences, so companies like Uber, Tesla and Airbnb have used personalized word-of-mouth referral programs and incentives to grow their businesses. Social Advertising—Seeing a friend’s preferences influences one’s own preferences. Facebook exploited that tendency in a get-out-the-vote campaign by showing the faces of friends who had voted. Viral Design—The first three strategies apply to products or ideas that already exist. Viral design creates something new that’s calculated to make people share it with friends. Influencer Marketing—Influencers can convince their social media followers to follow a trend or buy a product. They can use their leadership to pursue commercial ends or to push the public toward good or evil pursuits.

PERSONAL HYPE

While Aral writes about social media as a machine for creating hype, another author, Michael F. Schein, addresses hype on a more personal level in The Hype Handbook. Schein was working as a freelance copywriter and found he had to learn to promote himself to get assignments. Eventually, he became so good at hype that he abandoned the writing life to become a hype consultant to business executives. In his book, Schein provides 12 “secrets” to successful hype, but he notes that three of them carry the most weight: Make War, Not Love—People like to oppose something. Thus, they’ll pay attention to a hype seeker who attacks an idea or competitor. Piggy Backing—Successful hypesters make whatever they’re doing seem like a grassroots movement. And they nurture strong circles of wellplaced connections. Protect Your Packaging—To get the public to buy a product, follow a person or consider an idea, would-be hype masters should block out the noise by cleansing their presentation of everything extraneous.

Schein offers an example of how murky the intersection between good and evil can become when hype comes into play. He said Warren Buffett and the late Charles Manson have both cited the importance of the same tenet from Dale Carnegie’s How to Win Friends and Influence People. The famed investor and the cult leader accomplished their goals by employing Carnegie’s 16th principle of knowing how to “let the other person feel that the idea is his or hers.” Meanwhile, Aral takes the macro view. He told Luckbox he views hype and its newest medium, social media, as offering society two paths: “promise and peril.” “Social media could deliver an incredible wave of productivity, innovation, social welfare, democratization, equality, health, positivity, unity, and progress,” he said in his book. But it’s up to society to realize that potential. “If left unchecked, it will deliver death blows to our democracies, our economies, and our public health,” he maintained. “Today we are at a crossroads of these realities.” (See p. 41 for more from Aral.)

THE WORD “HYPE” COMES FROM “HYPERBOLE.”

FOR GOOD OR ILL

However one approaches hype, the result can work for the benefit or detriment of society and the individual.

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20TH CENTURY HYPEMASTER David Ogilvy (1911-1999) helped start Ogilvy & Mather in 1948 and eventually became known as the “Father of Advertising.” Here’s one of his most memorable catch phrases:

“For more information on lung cancer, keep smoking.” This piece of advice comes from Ogilvy’s oft-quoted Seven Commandments of Advertising:

“The consumer isn’t a moron; she’s your wife.” Facebook daily users

VICTIM OF HIS OWN HYPE? Mark Zuckerberg may be committing the ultimate marketing sin of believing his own hype. At least that’s the theory of someone who should know—Michael F. Schein, the author of The Hype Handbook. “He may be thinking of himself as a godlike creator of worlds,” Schein says of Zuckerberg. “He thinks he’s creating a science fiction utopia.” Zuckerberg’s faith in that utopia runs so deep that he’s renamed his company Meta, short for the metaverse, an alternative unreality that techies are creating on the internet. “Wall Street isn’t buying it,” Schein says of Meta’s devotion to the metaverse. That’s partly because no one’s exactly sure what the metaverse will be or when it will arrive. To make matters worse, Facebook meanwhile lost 500,000 daily users in the last three months of 2021, and the company projected earnings of $27 billion to $29 billion in the first quarter of this year, short of the $30 billion analysts had expected. Add up the shortcomings, and Meta Platforms (FB) has lost $251 billion in value, the biggest stock market downturn in history. It was trading at $207.60 at press time, down 85% from its highest-ever closing price of $382.18 on Sept. 7, 2021. A big part of the problem lies in Zuckerberg’s risky headlong plunge into the metaverse, Schein maintains. That transformational approach differs greatly from the wildly successful incremental history of Zuckerberg’s Facebook. Facebook began in 2003 as Face Mash, and access was limited to students at Harvard. It became TheFacebook in 2004 as it was spreading to other Ivy League schools. It wasn’t until 2006 that it grew into something resembling today’s Facebook and became available to the general public.

1.8 BILLION worldwide

193.9 MILLION in the U.S. —Statista

BLOCKBUSTERS OF HYPE The following top 10 Google news searches for 2021 indicate the current frontrunners in the race to the top of the heap in hype.

1) Mega Millions 2) AMC stock 3) Stimulus check 4) Georgia Senate race 5) GameStop 6) Dogecoin 7) Hurricane Ida 8) Kyle Rittenhouse verdict 9) Afghanistan 10) Ethereum price

(For more of Schein’s thoughts on hype, see p. 40.)

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ROCK ROLL

THE IS ON A

Dwayne Johnson is a one-man hype machine. Even his body embodies hype!

by KENDALL POLIDORI

an Under Armour partnership, Seven Bucks Productions, and most recently, two beverage-based companies: Teremana Tequila and ZOA Energy drinks. The Rock launched his small-batch Teremana brand of tequila in March 2020, about the time the pandemic became entrenched. Esquire magazine called it a “solid and additive-free” tequila and ranked it sixth of 63 celebrity spirits brands and second among celebrity tequilas. Teremana has set an industry record by selling more than 600,000 cases during its first year. In a social media post, The Rock noted that actor George Clooney sold his Casamigos tequila to Diageo for $1 billion after selling only 170,000 cases a year. Besides tequila, The Rock has invested in a brand of bottled water and launched his second collaboration in the ice cream business. He created ZOA Energy last year to produce a “clean and healthy” energy drink with no sugar and only 100 calories per can. It comes in five flavors and contains Vitamin C, Vitamin D, Vitamin B, essential aminos, camu camu, turmeric, antioxidants, acerola, choline and a healthy dose of 160 milligrams of natural caffeine from green tea extracts and green coffee beans.

PHOTOGRAPHS: (OPPOSITE LEFT) GARRETT ROODBERGEN; (OPPOSITE RIGHT) REUTERS

Rock” Johnson has reached the pinnacle of media influence. After an abortive attempt at a career in Canadian professional football, he remade himself as a celebrity pro wrestler in America. Then he left the ring, taking his star power to Hollywood and landing roles in The Fast and the Furious, Jumanji and Disney’s Moana. Meanwhile, Johnson’s successful business ventures have earned him a well-deserved reputation as a level-headed entrepreneur. He’s demonstrated his understanding of his audience and their habits in the way he has run enterprises that have included The Rock Clock app, Athleticon, Acorns, his own YouTube channel,

PHOTOGRAPHY: ?????????????????

A MULTI-FACETED ENTERTAINER, Dwayne “The

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Rock Star

In his first non-wrestling acting gig, Johnson played “Rocky Johnson” in That ‘70s Show Johnson comes from a long line of wrestlers. His grandfather, Peter Maivia, was a Samoan pro wrestler, and his father, Rocky Johnson, made pro wrestling history as part of the first all-black championship tag team billed as “The Soul Patrol” He played defensive tackle for the University of Miami and studied criminology and physiology

$320 million

–The Rock’s estimated net worth

15.8 million

–Twitter followers @therock

With Molson Coors Beverage as a distribution partner and minor investor, ZOA hopes to generate $20 million in sales this year. As of November 2021, ZOA reached sales of as much as $16 million year-to-date in measured retail channels. Social media campaigns have helped ZOA Energy attract attention. As of November, The Rock’s Instagram account was the fifth most popular in the network with 278 million followers. Now, it exceeds 300 million. But The Rock’s far from finished. He announced last year that he’s interested in running for president in 2024, and a poll published in April 2021 indicated that 46% of Americans would support his bid.

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INSIDERS AREN’T BUYING ARK’S

PHOTOGRAPH: REUTERS

HYPE

Fund manager Cathie Wood says her portfolio will produce a 40% compound annual growth rate over the next five years. Market history and executive insiders suggest otherwise.

after 12 years as chief investment officer of global thematic strategies at investment giant AllianceBernstein, Wood founded ARK (Active Research Knowledge) Funds in 2014. Its thematic investment funds target disruptive and innovative high-growth companies, the technological forces altering economies and consumer behavior. The flagship ARK Innovation ETF (exchangetraded fund) invests in next-generation technolby GARRETT BALDWIN ogy like videoconferencing, telemedicine, energy storage, digital streaming and the metaverse. Wood’s team has capitalized on investors’ fear of missing out (FOMO) on big trends and Hot until you’re not bigger gains. Bill Miller, the once-legendary fund manager of Legg Mason Value Trust, received In 2020, five of ARK’s seven investment industry accolades similar to Cathie Wood. That ended in 2006. ETFs achieved an average return of 141%. 55 175 Legg Mason Value Trust (LMTVX) A gushing media cheered 50 Ark Innovation ETF (ARKK) 155 Wood’s success. Financhill, 45 a company that offers a suite 135 of financial tools, called her 40 115 “the most underrated inves35 tor in the game.” Barron’s 95 said she “disrupted” invest30 ment management. In a New 75 25 York Times profile titled God, 55 Money, YOLO: How Cathie 20 Wood Found Her Flock, the 35 15 authors highlighted the bold 15 10 Tesla price prediction Wood Jan-03 Jul-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 made while debating (or bestFeb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 Feb-20 Jul-20 Jan-21 Jul-21 Jan-22 ing) Kevin O’Leary, Shark Tank’s Mr. Wonderful. But times have changed. With recent market conditions working against tech stocks, the flagship fund and other ARK ETFs face new pressures. For months, investors have dumped growth stocks on speculation that the

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Federal Reserve would accelerate its timeline on interest rate hikes to tame inflation and concerns about high valuations. Longtime critics have argued that ARK Funds, like the tech-heavy Nasdaq-100, benefited from the Federal Reserve’s decade of low interest rates and the cheap money policies that have prevailed since the fund’s inception. Add on massive amounts of Congressional stimulus in 2020 and 2021—plus a new wave of specula“OUR STRATEGY IS tors—and the market capitalization OUR STRATEGY. THE of stocks trading at a price-to-sales OPPORTUNITY IN OUR above 20 surpassed the nosebleed STRATEGY IS HUGE valuations during the dot-com RIGHT NOW. WE EXPECT bubble. (See The Cost of Growth.) A COMPOUND ANNUAL With new headwinds and capital RATE OF RETURN rotating from growth stocks to value stocks, Wood hasn’t wavered despite OF ROUGHLY OVER rampant selling in 2022. (The flag40% OVER THE NEXT ship ETF fell 33.5% YTD by Feb. 18). FIVE YEARS.” “Our strategy is our strategy,” — C AT H I E W O O D , D E C E M B E R 2 0 2 1 Wood told Bloomberg in December before issuing an eye-popping outlook. “The opportunity in our strategy is huge right now. We expect a compound annual growth rate (CAGR) of roughly over 40% over the next five years.” Critics are scrutinizing this incredible projection and Wood’s recent argument that ARK now qualifies as a “deep value” fund. It was noted in thetycoonist. com blog, for example, that just one in 15 stocks on

an annualized return of 40% over five years is one in 38,000. When the portfolio had 43 stocks in December, thetycoonist.com said that for the fund “to quintuple in five years, every single stock would need to increase by a factor of more than twelve.” Such returns are technically possible but highly unlikely. So, what does Wood see that so many others don’t? If her preferred stocks trade at deep value and could deliver such incredible returns, why would a group of investors with an exceptional track record of exploiting share price value fail to share her conviction?

A WARNING TO GROWTH INVESTORS

Wood offered a statement in February that redefined ARK’s thematic innovation fund. “Give us five years,” she said, “we’re running a deep value portfolio.” Let’s unpack both parts of that sentence. First: “Give us five years.” According to ARK’s website, its thematic analysts ask four key questions about investment opportunities: • Where’s the next big disruptive innovation? • What’s the size of the total market? • Which industries will be disrupted? • What companies will emerge as the winners? After answering those questions, ARK’s thematic analysts speculate and invest in much the same way someone might bet on sports futures markets for the Kentucky Derby. But ARK Funds is also betting Underwhelming on the weather, track conditions, The ARK Innovation fund grossly underperformed both the S&P 500 and Nasdaq-100 in 2021 after its jockeys, trainers—and even the meteoric rise of 2020. Over the past year, the ETF was also far more volatile than either major index. The breeding of horses that occurred Sharpe Ratio shows ARK performance relative to risk for the past year, considering volatility. The Sortino years ahead of multiple Kentucky Ratio isolates the metric to include only the downside risk. Seasoned investors prefer Sharpe and Sortino Derby events. Then ARK Funds ratios greater than 0.50%. Generally speaking, negative Sharpe or Sortino ratios are red flags. changes its bets dozens of times along the way at different odds. Look at the fund’s Top 10 holdETF ARK Innovation S&P 500 Nasdaq-100 ings in mid-February: Tesla (TSLA), Teladoc (TDOC), Coinbase (COIN), EXACT Sciences Symbol ARKK SPY QQQ (EXAS), UiPath (PATH), Roku 2020 return 148.7% 16% 48% (ROKU), Zoom Video Commu2021 return -24.0% 27% 27% nications (ZM), Block (SQ), Unity Software (U) and Intellia 2022 return (so far) -32.8% -10% -15% Therapeutics (NTLA). Standard deviation 0.44 0.14 0.20 Based on the weight of ARK’s current investments, one might Downside deviation 0.28 0.10 0.15 ask whether those top 10 compaSharp ratio -1.63 0.66 0.25 nies represent the “best in breed” at their current value relative to Sortino ratio -2.55 0.95 0.35 their perceived future value. Can anyone reasonably hypoththe S&P 500 have generated annualized returns of esize future disruption for videoconferencing giant 40% over the last five years. This suggests that pickZoom Video Communications? The stock is now down from all-time highs of $568.34 in October ing just one stock with 40% annual returns has a 6.6% probability. 2020 to less than $127 per share in February 2022. Therefore, based on joint probability, the odds of What trends would push it back to all-time highs, as having a three-stock portfolio in which all stocks hit Wood suggests, in the next five years?

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Basic business analysis indicates low barriers to entry in the videoconferencing business. Plus, companies new to the sector have been gaining market share, thanks to the COVID-19 work-fromhome trend. On the micro level, one wonders if Zoom’s best years are ahead in a world that’s adopting digital whiteboards, employing artificial intelligence and embracing the metaverse. Or will Americans want to take part in what Vox describes as a “dystopian hellscape of working in the metaverse?” Imagine workers joining the avatars of colleagues while strapped inside a VR headset at home. Will another competitor take market share? Before allocating capital, ARK should ponder all of this and then ask its fourth question: “Which companies will emerge as the winners?” Another ARK Innovation favorite, Teladoc, could succeed in telemedicine, but nothing has stopped virtual medicine from thriving across competitive, independent health networks. Is the metaverse the future of virtual surgery support, and will that drive radical disruption and incredible profits for Teladoc investors? Or will it lose part of its 13% market share to competitors that include Sharecare (SHCR), Amwell (AMWL) and other telehealth competitors? Tesla has grown incredibly but in the years ahead may concede market share in the EV business to legacy automakers like Volkswagen, which will become the global leader in EV production next year. Tesla trades at 18.6 times sales, and shares are off about 31.8% from all-time highs. Its price-to-earnings sit at an incredible 178 times, signaling that the price justifies the return by the year 2190. (Note: Tesla has proven valuation ideologues wrong before). Tech may be disruptive, but projecting the future market leader can be a fool’s errand. Take the example of Motorola Solutions. It was once the world’s largest cell phone manufacturer and thus a leader in a disruptive technology that changed the global landscape. But Motorola fell out of favor when Apple and Samsung unleashed even more disruption. Motorola Solutions stock cratered after Apple unveiled the iPhone. Microeconomic questions prompted the Morningstar investment research firm to issue a “neutral” rating in 2021 for the ARK. (See Falling Star). Analyst Robby Greenwald worried last year that ARK’s nine analysts lacked deep industry experience and that the fund struggled to develop and retain talent. The fund also seemed to operate on Wood’s instinct instead of thematic analysis, he wrote. “ARK’s untested analysts, go-with-your-gut risk management approach and bloated asset base raise doubts about whether this fund’s outstanding historical results can continue,” Greenwald maintained. His report emerged one month after ARK Innovation hit its all-time high of $159.70. By Feb. 18, 2022, shares traded at $64.80.

FALLING STAR “Wood’s reliance on her instincts to construct the portfolio is a

liability. This is a high-risk, benchmark-agnostic portfolio that invests across technology platforms the team thinks will revolutionize how sectors across the globe operate. “The firm often favors companies that are unprofitable, highly volatile and could plummet in tandem. The fund lacks well-defined risk controls, which are now more important than ever. As its asset base has swelled, the fund has become less liquid and more vulnerable to severe losses. As an exchange-traded fund it can’t close to investors. “ARK’s untested analysts, go-with-your-gut risk management approach and bloated asset base raise doubts about whether this fund’s outstanding historical results can continue.” – Robby Greenwald, Morningstar, March 30, 2021

TURNOVER TROUBLE

ARK Innovation ETF is an active fund, meaning that Wood can jump in and out of stocks and other investors can follow based on daily reporting. However, the exchange-end fund enables Wood to force investors to remain locked in—a very liquid strategy. Traditionally, a five-year fund would set several positions, maintain low turnover and act with conviction on a specific portfolio. In finance, a portfolio turnover ratio is the percentage change of the stocks bought and sold over 12 months. ARK Innovation reports a turnover ratio of 70%. The fund with a five-year outlook has made many impulsive moves with investor capital, even if it maintains an “active” strategy. For example, ARK dumped shares of Twitter in January 2022. Logic suggests, given an active strategy, that Wood needed cash for more attractive buying opportunities. “I’ve never seen innovation on sale like it is today.” Wood said in January. On Jan. 7, Wood’s fund purchased a sizable stake of 261,211 shares of Roblox (RBLX) as shares traded above $84. Wood had previously generated large gains in November 2021 in its ARK Next Generation Internet ETF portfolio after a 42%

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Inside ARK

finance professors Soosung Hwang of Sungkyunkwan University in South Korea and Alexandre Rubesam of Cass Business School in the United Kingdom. ARKK portfolio Direct insider P/S ratio* Direct insider selling weight* buying Value is a common subject in academic studies of how certain invesTesla 8.65% 18.3 $0 $16,992,734,845.00 tors exploit it for gains and how it Teladoc 6.52% 5.7 $0 $167,155,602.00 relates to other anomalies. Corporate insider buying and selling Coinbase 5.73% 7.3 $0 $5,796,792,852.00 trends are the most important signals EXACT Sciences 5.01% 7.1 $0 $58,280,602.00 when building conviction for a trade or spotting value, according to a 2018 UiPath 4.27% 18.3 $0 $1,245,178,277.00 study called Do Insiders Exploit AnomRoku 6.40% 7.3 $0 $587,982,679.00 alies? by Deniz Anginer, Gerard Hoberg and H. Nejat Seyhun. Zoom 6.01% 10.2 $0 $1,211,577,497.00 Technologies That study finds that insider executive purchases exploit price anomalies and Block 4.19% 3.2 $0 $666,901,451.00 allow buyers to extract value between Unity Software 4.90% 26.9 $0 $980,678,790.00 their buy price and when knowledge of their trades becomes public. As legendIntellia 4.36% 10.7 $0 $216,663,891.00 Therapeutics ary money manager Peter Lynch once said, “Insiders might sell their shares 56.04% Avg. 11.5 $0 $27,923,946,486.00 for any number of reasons, but they buy *As of 2/17/2022 Source: SECForm4.com them for only one: They think the price will rise.” jump in shares after earnings. Insider buying can be a sign of confidence when But Roblox’s innovation got cheaper in February. a stock has fallen and executives believe it’s underOne month later, ARK Innovation bought another valued. Conversely, insider selling, especially among 729,695 Roblox shares on a day the stock closed at several executives in a process known as cluster sell$63.06. Then, after another small purchase the following, can signal a collective belief that the stock may be expensive. ing day of 42,982 shares, the fund found another sale— Analysis of this trend suggests a diligence failure in buying another 337,552 shares after share ARK Innovation ETF’s portfolio construction. prices collapsed after earnings. “GIVE US FIVE YEARS— Shares then lost another 8.3% on WE’RE RUNNING A DEEP Feb. 18. and traded under $50 per share. TRACKING AARK INSIDERS VALUE PORTFOLIO.” So, does ARK still believe in Roblox, The U.S. Securities and Exchange Commission (SEC) requires corporate insiders to submit a Form 4 when even with its -25.8% margins, the price— C AT H I E W O O D , F E B R U A R Y 2 0 2 2 to-sales ratio of 13.4, and other weak they buy or sell stock in their companies or execute fundamentals in the middle of a dramatic company stock options. sell-off? As tech stocks continue to drop, as the Fed Consider what that form indicates about ARK hikes rates and as growth stocks continue a brutal Innovation ETF. round of price discovery, Wood is asking for incredible The fund’s share price peaked at $159.70 in February patience despite her previous winning track record. 2021 and began declining. Over the 12 months from that peak, insiders at ARK’s top 10 company holdings WHAT INSIDERS SAY sold more than $27.92 billion in shares, according to Now to the second—and more important—part of secform4.com. Less Tesla and Elon Musk, the other Wood’s proclamation about ARK ETF: “We’re running nine represented about $11 billion in sales. a deep-value portfolio.” These sales represented an exit of existing shares and The phrase “deep value” is associated with Benjamin pushed the insider buying signal on all 10 stocks into negative territory. Graham, the famed value investor and author of the Wall Street tome The Intelligent Investor. Now, guess how much stock those insiders purchased Wood appears to be redefining value by linking directly over those same 12 months, according to the the ratio of a stock’s current price to a future that “we same source. The answer: Zero. Suppose ARK has assembled a superior collection of cannot even imagine right now.” Or as she recently described it, she’s tying investment to the disruptive holdings that will trade at Wood’s definition of deep value force of the metaverse. and thus possesses significant financial potential in the It’s a restructuring of valuation logic. It’s the soft years ahead. These are the companies that Wood believes rebranding of ARK Funds. And it’s a hard sell. will be the winners in the race toward disruption. At its core, “value” is a market anomaly, one that’s If that’s true, why aren’t executive insiders—a predic“prominent in short, specific periods,” according to tive class of investors—buying stock in her preferred

Here’s a breakdown of the stock, P/S ratio, insider direct buying and insider direct selling of the top 10 stocks in ARK Innovation ETF (ARKK) on Feb. 18, 2022 over the previous 12 months.

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disruptive companies? They’re not directly buying their own stocks hand-over-fist, even though Wood is staking her reputation on their companies. Executives do receive options and stock incentives, but SEC documents show that no insiders at the top 10 ARK holdings purchased shares directly over the previous 12 months. In many cases, corporate officers executed options and took stock. In one example, Tesla CEO Elon Musk executed billions in stock for “tax purposes” in September 2021, only to turn around and sell shares for cash. Analysis of the entire ARK portfolio of 37 stocks shows that as of Feb. 18, not many insiders have made direct purchases of their stocks in the previous 12 months. Insiders at eight companies triggered only 13 direct cash purchases since February 2021. At just 0.5% of the ETF’s weight, digital education firm 2U (TWOU) is the holding with the largest number of insider trades. Four executives bought stock between Feb. 14 and Feb. 16 in a range of $9.43 to $10.07 per share. At $9.43, that price sits at roughly 81% off from the company’s 52-week high. Direct insider buying isn’t a perfect indicator of future prices, but it is a sign that in terms of value very few executives at the companies Wood touts believe now is the time to buy shares.

WARNING SIGNS

Don’t think of this as a eulogy. Consider it a warning. Many managers have believed their strategies could weather any headwind but promptly failed. Esteemed manager Bill Miller, whose Legg Mason Value Trust beat the S&P 500 for 15 straight years, doubled down on “value” in Bear Stearns and other fading financial stars

during the 2008 crisis. The event was dramatized in the book and film The Big Short. In what Pershing Square Capital founder Bill Ackman called “one very big mistake,” he held onto Valeant Pharmaceuticals (VRX) as shares cratered during an activist effort. As a result, he endured a brutal two-year stretch of losses. Both managers bounced back and have delivered remarkable returns in recent years. But other names have disappeared from the headlines. Financial manager Garrett Van Wagoner had the “golden touch” on tech stocks when he launched a fund in January 1997. His Emerging Growth Fund had annual gains of 66% in the first three years, including 291% gains in 1999. Then, the dot-com bubble deflated. So when Van Wagoner closed his fund in 2008, it had an annualized loss of 7.8% from inception. Nobel Laureate economist Paul Krugman wrote a eulogy for Tiger Management in April 2000. In his classic New York Times op-ed, Reckonings: A Hedge Fund Pruned, Krugman noted that fund manager Julian Robertson placed failed bets against the Japanese economy. “Each time the market wonders what happened” when a famed manager loses touch, Krugman wrote. “And each time, one possible answer is that he never had that touch to begin with.” In many cases, the failed fund becomes more memorable than the forgotten manager: Think of Archegos Capital, Everest Capital, Greensill Capital and Woodford Investment Management.

THE FUTURE

No one should arbitrarily root against Wood—except investors in the Tuttle Capi-

THE COST OF GROWTH How costly is a stock that trades at a multiple of 10 times

revenue (or a P/S of 10)? In April 2002, former Sun Microsystems CEO Scott McNealy said the following to Business Week:

“At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends,” he said. “That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is hard with 39,000 employees.”

tal Short Innovation ETF (SARK), an actively managed fund that aims to generate -1x the return, for a single day, of the ARK Innovation ETF (ARKK). This fund, which uses swaps that Wood has called “ridiculous,” generated a 61.3% return from its Nov. 12, 2021 inception through Feb. 18, 2022. Meanwhile, Wood remains convinced that rotating capital from growth stocks to value has been a mistake. In a January 2022 report, ARK Funds’ managers wrote: “In our view, the real bubble could be building in such so-called “value” stocks with much higher valuations in the context of a five-year investment time horizon, as opposed to last year.” Let’s be fair. The acolytes of a famed value investor and author Benjamin Graham aren’t worried because banks and manufacturing stocks have increased in price-to-tangible book value from 0.8x to 1.0x in three months and remain near liquidation value. But maybe Wood will be right and everyone else will be wrong, even the corporate insiders. Or perhaps Wood will make a strategic shift that anchors the portfolio to S&P 500 benchmark stocks like Amazon and Apple while riding out the storm fueled by broad price discovery. Or maybe ARK Funds’ tech stocks will continue to fall and thus attract takeover bids that generate merger arbitrage opportunities. Or, in five years, traders may look back and raise a glass to St. Cathie after she walks away with an estimated net worth of $250 million. In this era of unforgiving investors and media blowhards, one should—at the very least—salute Wood for having the bravery, resilience and confidence to fight the history books and attempt to make valuations bend to her will.

Achieving those seemingly impossible returns would also require that the company paid no corporate or dividend taxes and spent nothing on research and development for a decade, McNealy said. “Now, having done that, would any of you like to buy my stock at [the 2000 high of] $64?” he asked rhetorically. “Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?” Yes, what were investors thinking in 2000? Apparently, they believed that 10-times-sales doesn’t matter. That a company may disrupt an industry’s legacy players. That the rest of the investment world—including the valuation snobs—were wrong. They were thinking like the architects of the ARK Innovation exchangetraded fund. Even after the dramatic tech selloff from November 2021, the average P/S ratio of its top 10 holdings is 11.5 times revenue.

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a stadium when tickets start at around $200 and all he’s going to do is show up two hours late and head bop to a recording of his music? Only one comes to mind: Ye, the artist formerly known as Kanye West. He has that special something that gets fans on board with whatever he’s promoting, whether it’s music, footwear, fashion, audio devices or a presidential campaign. Despite the controversy he engenders, no one can deny he’s the embodiment of hype. Ye, who was born in Atlanta and grew up in Chicago, first got in front of the public on Channel Zero, an underground hip-hop showcase on Chicago Public Access television. The program’s host, Coodie Simmons, went on to direct the Netflix docuseries Jeen-yuhs: A Kanye Trilogy about Ye’s life as an artist, record producer, businessman and fashion designer. The three-part series opens when Ye was working as a producer for Roc-A-Fella and trying to prove himself as a solo artist and rapper. It brings out his human side, portraying him as a relatable person who struggled to land a record deal. Viewers are privy to his close relationship with his mother and suffer with him as he grapples with bipolar disorder in an unsympathetic environment. But the documentary, released in January, is just one reason Ye’s name is in the headlines. Aside from writing and producing songs for the likes of Jay-Z, Janet Jackson, Ludacris and Alicia Keys, Ye’s own 10 studio albums have Ye’s followers put him at the forefront of hip-hop. on Twitter Last year alone, he won a Grammy for Best Contemporary Christian Music Album and was named songwriter of the year at the BMI Trailblazers of Gospel Music Awards. After Ye’s 32-track album Donda garnered mixed reviews and drew complaints about “incomplete” production last year, he released a follow-up titled Donda 2. But a few days

30.7 million

THE

JEEN-YUHS OF

HYPE

Kanye West made his name in rap 20 years ago. Since then, he’s become a mogul who influences fashion, politics and pop culture. by KENDALL POLIDORI PHOTOGRAPH: REUTERS

WHAT STAR CAN SELL OUT A

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MORE THAN BEATS In 2020, Ye’s fashion footwear brand, Yeezy, took in $1.3 billion. It consistently pumps out new shoe designs, including the Adidas Yeezy 450, which costs $250-$300 a pair. Besides his commitments to other fashion ventures, Ye has signed a 10-year deal with The Gap that’s expected to bring in $150 million in sales in its first full year. He founded the record label and production company GOOD Music in 2004 in conjunction with Sony BMG. And, of course, there’s his relationship with Kim Kardashian, not to mention his political campaigns. He didn’t need the Democrats or the Republicans when he ran for president in 2020 because he had his own party: the Birthday Party.

$1.8 billion

Ye’s net worth —according to Forbes

$10 billion

Ye’s net worth —according to Kanye before Donda 2’s release, Ye announced fans could listen to the album only through his own Stem Player, a device introduced last year in conjunction with Donda. The Stem Player costs $200 and is shipped as a Bluetooth speaker-like device, making the album unavailable on streaming platforms. Allegedly, Ye turned down a $100 million deal to produce a device with Apple. Ye informed his 14.6 million Instagram followers that “artists get just 12% of the money the industry makes. It’s time to free music from this oppressive system. It’s time to take control and build our own.” At press time, Ye had collected in excess of $2 million from the sale of more than 10,000 Stem Players, including one bought by Luckbox. That means Donda 2, which includes 16 tracks, will be heard legally by fewer than 125,000 fans who own Stem Players. At least Ye leaked a few Donda 2 songs during his Feb. 22 show in Miami, which was also streamed at IMAX theaters in 15 cities. Kendall Polidori is The Rockhound, Luckbox’s resident rock critic. Follow her reviews on Instagram @rockhound_luckbox and Twitter @rockhoundlb.

More Kanye Listen to Donda 2

THE ROCKHOUND REVIEW YE’S latest 16-track album, Donda 2, skipped the streaming services and was released exclusively through his Stem Player, which fans can purchase at stemplayer.com. The move is Ye’s response to what he considers an unjust system that gives too much money to the services and not enough to artists. The album has received mixed responses, partly out of sympathy for fans who can’t afford to shell out $200 for a Stem Player. But for those who can afford it, the album lives up to its hype. Music aside, the Stem Player provides users with an interactive listening experience. Besides adjusting the volume and bass, they can manipulate the tempo and the verses by sliding lighted tactile effects. That means they can make the album experience their own or leave it alone. The device is covered in soft, skin-like silicone and fits into the palm of the listener’s hand. The album itself is better than its predecessor, Donda. The production is crisper, with a less-muddled sound. The tracks recall “the old Kanye.” His lyrics reflect his solid relationship with his mom, the pain of his divorce and his struggles with his mental-health issues. Say what one will about Ye, he owns up to his faults and shares his regrets in a gut-wrenchingly honest way. The album features guests that include Migos, Travis Scott, Pusha T, Jack Harlow and Playboi Carti. Future, who was an executive producer of the album, also makes an appearance on the album. It’s a diverse mix of tempos and beats, with Ye throwing out more autotune melodies than usual. Ye’s genius shines through with his use of samples, including one of Kim Kardashian’s opening monologue on Saturday Night Live last year. Donda 2 highlights Ye’s ability to amp up the bass and deliver swift verses, while also acknowledging the need to strip down the beats and slow his pace. It’s no match for The College Dropout, but it brings to the forefront the elements that made Ye so influential in hip-hop in the first place: deeply personal lyrics about religion and life set to original beats that meld soul, hip-hop, R&B and gospel.

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Decentraland hosted a metaverse festival featuring electronic music producer Deadmau5.

THE METAVERSE REALITIES OF

could virtual beer sales threaten real beer sales? You might scoff, but that question was unironically asked— and answered—during a metaverse marketing webinar held in January by financial news website Insider. “I don’t think it’s a threat at all,” answered Spencer Gordon, Anheuser-Busch InBev’s digital strategy leader. “I look at it as a new way to engage consumers and to bring them into our brands.” Gordon shared his take on the metaverse alongside other top marketers. Marriott International’s senior vice president of brand, loyalty and portfolio marketing said the world’s largest hotel chain was closely watching the virtual real estate market. The chief marketing officer of Playboy Enterprises called collectors of her company’s NFTs the “VIP members [of] the 21st century Playboy Club.” The term “metaverse” didn’t enter the vernacular—let alone recurrent marketing webinars—before then-Facebook CEO Mark Zuckerberg announced plans to transform his social media company into “a metaverse company” last July. Web searches for the word were negligible until the Big Tech behemoth doubled down and rebranded as Meta in October, according to Google Trends. Now the metaverse is virtually inescapable—no dystopian pun intended—as brands, companies, corporations and all of their respective marketing teams work to make their mark on a new reality that some say will change the way humanity does everything. The only problem? The metaverse is more concept than concrete. Its meaning might change depending on who’s talking about it, and it often does. In October, Fast Company asked a variety of industry experts what the metaverse will look like and how it will be

Will the world look back upon the early days of the metaverse as a fit of delusion or the founding of an institution? by MIKE REDDY

More Metaverse Look inside Decentraland

PHOTOGRAPH: WIKIMEDIA COMMONS

VIRTUAL REALITIES

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used, and some responses directly contradicted others. Some spoke to potential benefits of the metaverse, like fostering creativity, promoting entrepreneurship and improving physical health, while others warned of potential dangers, such as security vulnerabilities and the monetization of users. Some suggested it will engage every human sense—even create new ones. Others said that level of immersion is unrealistic and unwanted. Rony Abovitz, the founder of augmented reality startup Magic Leap, wouldn’t even agree to use the word “metaverse,” opting instead for “Xverse.” As debate continues about the meaning of the metaverse, there’s no shortage of companies investing in their own visions and trademarks for it. But because it’s easy to shoehorn “the metaverse” into any marketing campaign, one can’t help but wonder if it truly is the next great technological disruptor or merely an idea hijacked by hype.

WHAT IS THE METAVERSE?

together under the umbrella term of “the cloud.” Similarly, he said, there will be lots of metaverses. “I don’t think any one corporation has the right idea,” he said. “I think they all have different ideas, and I think it’s wrong for one virtual world company to say, ‘We’re building the metaverse, ours is the one.’ Yeah, they might want to say that, and they want people to believe that, obviously, but that’s not the case.” Despite his history of building virtual worlds, Ventrella tends to ignore the buzz they attract. Hype shouldn’t be taken as truth, he said, and it can create a bubble-like focus that’s more disruptive than productive. Still, he noted, metaverses do have a place in soci-

“IN THE NEXT FIVE YEARS, WE WILL EFFECTIVELY TRANSITION FROM PEOPLE SEEING US PRIMARILY AS A SOCIAL MEDIA COMPANY TO BEING A METAVERSE COMPANY.” — MARK ZUCKERBERG,

META CEO

ROUNDHILL BALL METAVERSE ETF (METV) TOP 5 HOLDINGS

It seems that everyone’s trying to grab a piece of the metaverse, and the Roundhill Ball Metaverse exchange-traded fund claims to offer just that. These are the ETF’s top five holdings.

Data as of Feb. 24, 2022

The term “metaverse,” a mashup of “meta” and “universe,” first appeared in Neal Stephenson’s 1992 NAME T I C K E R W E I G H T science fiction novel Snow Crash. In Stephenson’s inNVIDIA NVDA 8.69% terpretation, users wore virtual reality goggles to access a virtual world as avatars, described in the book Microsoft MSFT 7.54% as “audiovisual bodies that people use to communiMeta Platforms FB 6.40% cate with each other in the Metaverse.” The Collins English Dictionary similarly defines Unity Software U 5.26% metaverse as “a proposed version of the internet that Snap SNAP 5.14% incorporates three-dimensional virtual environments.” But virtual worlds are nothing new. Linden Lab’s Second Life was launched in 2003 and attracted as Old idea, new hype many as 1.1 million active monthly Google Trends data shows that interest in the search term “metaverse” exploded when users back in 2007. Gaming-cenFacebook rebranded to Meta last October. Meanwhile, the price of the Roundhill Ball tric virtual world platforms, such as Metaverse exchange-traded fund (METV) also spiked. World of Warcraft and Roblox—both of which were released before 2007— have drawn in as many as 46 million –Google Trends interest: “Metaverse” and 202 million active monthly users –METV price at their respective peaks. Is the metaverse really as novel and all-encompassing as marketers and media hype seem to suggest? “Well, it’s mostly bullshit, right?” said Jeffrey Ventrella, who co-founded the There.com virtual world in 1998 and later worked as a senior developer for Second Life. “I mean, it’s not like we’re all going to be in the metaverse in five years. There will be more metaverse around us, and I think it will come in many different forms.” Ventrella likened the metaverse to cloud computing. Although there are many cloud computing companies Data as of Feb. 22, 2022 offering many cloud-based systems and services, they’re usually lumped

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ically be called a “live rave” in the virtual world platform Decentraland in January. And when Samsung held a launch event for its new Galaxy phones in Decentraland a month later, some users struggled just to gain access to the event space. Similar technical troubles befell would-be attendees of a VR Foo Fighters concert held in Meta’s Horizon Venues app following the Super Bowl. Some couldn’t access the event space at all while others experienced glitches and crashes. A review of the concert in TechRadar was headlined “Meta’s Foo Fighters Super Bowl VR concert failed in the most basic ways.” Then there are the more serious problems, such as sexual harassment in VR—something Meta responded to by introducing a 4-foot personal boundary feature to its Horizon Worlds and Horizon Venues apps in February. The metaverse’s most daunting hurdle, however, likely revolves around increasing its mainstream awareness and adoption.

$1 trillion

Estimated annual metaverse revenue in the coming years

“IN SOME YEARS, PEOPLE WILL CHOOSE TO SPEND MORE TIME WITH THEIR GOGGLES ON IN THE METAVERSE. AND WHO GETS TO SET THE RULES? THE WORLD WILL BECOME MORE DIGITAL THAN PHYSICAL. AND THAT’S NOT NECESSARILY THE BEST THING FOR HUMAN SOCIETY.” — E R I C S C H M I D T, FORMER GOOGLE CEO

A screenshot from the virtual world platform The Sandbox.

ety, especially if they’re owned by the commons rather than corporations. And the hype surrounding them— whether they’re fully understood or not—means they represent a very powerful idea.

METAVERSE NAYSAYERS Regardless of how powerful an idea it may be, the metaverse is not without critics. The former CEO of Evernote, Phil Liben, said he thinks the metaverse “is a gloss that uncreative people and companies put over fundamentally a lack of good ideas” during a January appearance on the Dead Cat podcast. Others are just as quick to point out early metaverse flaws. Critics salivated when a crowd of lifeless, near-stationary avatars attended what can only iron-

THE ROAD AHEAD Nearly two-thirds of U.S. adults said they weren’t familiar with the metaverse before taking a Harris Poll about it in January, and over half felt overwhelmed by the concept even after it was defined. Add to that the fact that fewer than 40% of respondents said they thought the metaverse would make their lives better, and the future of the future looks pretty bleak. But surveys don’t have the best track record for forecasting tech trends. “I remember vividly surveys of consumers back in the day asking them, ‘Would you put your credit card information into a dropdown box on a website and buy something over it,’” said Sinan Aral, professor of information technology and marketing at MIT.

PHOTOGRAPHY: (TOP) REUTERS; (BOTTOM) COURTESY OF THE SANDBOX; (OPPOSITE LEFT) SHUTTERSTOCK

—JPMORGAN CHASE

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“THE METAVERSE IS HERE, AND IT’S NOT ONLY TRANSFORMING HOW WE SEE THE WORLD BUT HOW WE PARTICIPATE IN IT—FROM THE FACTORY FLOOR TO THE MEETING ROOM.”

A map representing the virtual land owned and for sale within The Sandbox.

— S AT YA N A D E L L A , M I C R O S O F T C E O

“Vast majorities of them were like, ‘There’s no way I’d write my credit card number onto a computer and put it on the internet,’ and now we have Amazon.” Aral, who authored the 2020 book The Hype Machine, is now writing a metaverse-focused book. As a founding partner at Manifest Capital, a venture capital firm that has invested in metaverse companies, he’s been following the space closely. “I don’t think that the technologies that we have today are a good representation of what will be the captivating versions of the metaverse that [will make] people say, ‘OK, I wouldn’t have put those Oculus things on back 10 years ago, but I might be able to do this,’” he said. Meta’s Reality Labs’ As technology advances, so 2021 investment in the too will a common understandmetaverse and annual ing of the metaverse. Its ambiguity, Aral said, is the byproduct investment commitment of a social negotiation of meangoing forward ing and value that goes handin-hand with the hype cycle. At the core, people are still trying to advocate for a vision of the Meta’s Reality Labs’ net future that doesn’t yet exist. losses in 2021 on $2.27 Look no further than the billion in revenue internet bubble, which burst in 1995, to understand what’s

$10 billion

$10.19 billion

A woman wears a Meta Quest 2 VR headset.

UNREAL ESTATE If the metaverse is supposed to be a virtual world, it should naturally include virtual real estate. So virtual world companies have been selling plots of land, celebrities have been promoting them and the public has been buying them. A digital property can even come with a very real mortgage. Virtual world platforms, such as The Sandbox and Decentraland, use NFTs to simulate a real estate market with a finite number of plots. Big-name brands and businesses, including JPMorgan Chase, Adidas, Samsung, Miller Lite and Atari, have all bought in, and so have celebrities, including Snoop Dogg. One netizen made headlines by paying $450,000 for property close to Snoop Dogg’s “Snoopverse” in The Sandbox. And if that doesn’t raise an eyebrow, consider the fact that self-described “metaverse land developer” TerraZero completed a first-of-its-kind metaverse mortgage in January. “Mortgages and financing availability will expedite the development and adoption of the metaverse, and we are excited to be at the forefront of this new and exciting economy,” TerraZero CEO Dan Reitzik said in a press release. As of Feb. 23, the cheapest plot of land for sale in The Sandbox— measuring 96 meters by 96 meters—costs 3.495 ethereum, or roughly $9,600 on the NFT marketplace OpenSea. For Decentraland, the cheapest 16 meter by 16 meter parcel costs 4.75 ethereum, or about $13,000.

going on with the metaverse. In the meantime, Aral offered some advice for safely navigating the hype: Read widely and broadly, and be skeptical. “Those two tools in your toolbox are really helpful together, like reading a lot of differing opinions and then being skeptical yourself,” he said. “Anytime you read something, ask yourself, ‘How could I poke holes in that?’ or ‘What might their answer be to this?’ or ‘What have other people said about whether or not this is true?’”

THE LUCKBOX-VERSE? CORPORATIONS AND BRANDS HAVE WASTED NO TIME CARVING OUT PIECES OF THE METAVERSE. HERE ARE SOME NOTABLE TRADEMARK REQUESTS: • PANERA BREAD FILED FOR “PANERAVERSE,” WHICH IS SAID TO INVOLVE VIRTUAL RESTAURANTS AND REAL-LIFE FOOD DELIVERY. • THE BROOKLYN NETS REQUESTED “NETAVERSE” AND PLAN TO BECOME THE FIRST NBA TEAM TO MAKE A METAVERSE DEBUT.

• CHUCK E. CHEESE FILED FOR “CHUCK E. VERSE.” April 2022 | Luckbox

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BY 1893 INSPIRED

F E W H A S T H E S P I C E . H A N D - M A D E I N S M A L L B ATC H E S, U S I N G A M A S H-B I L L INSPIRED BY WHISKEY ’S PRE-PROHIBITION GOLDEN ERA. F E W COMBINES A HIGH RYE CONTENT & PEPPERY YE A ST TO MAKE A UNIQUELY SPIC Y BOURBON.

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6:16 AM

trends life, luxury & the pursuit of happiness

DIVERSIONS

Inflation, Hot Air & Wind Hype and ballooning both rely on hot air and some wind at your back. But in the case of ballooning, not too much wind.

PHOTOGRAPH: ALEXANDRIA ROWLEN

By Jeff Joseph

n each issue of Luckbox, the editors and contributors bring an array of perspectives to a single theme. This time, the focus on hype got us thinking about hot air, and that somehow led to the idea of hot air ballooning. With a national ballooning event approaching, it seemed like the right time to emblazon the Luckbox logo on something larger than a T-shirt. So, we set out for Phoenix to achieve a more elevated perspective on ballooning. Some might call it a “balloondoggle,” but we viewed it as “research.” That’s how Luckbox came to sponsor a balloon in the Hare & Hound race at the Arizona Balloon Classic this past January. A crowd of 20,000 turned out to see 25 balloons—or aerostats, as they’re sometimes called—compete in the 11th annual outing. Unfortunately, officials canceled the race a few minutes before liftoff because high winds threatened to hinder navigation and could make landing dangerous. Our dream of hot air turned out to be exactly that.

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trends

“ If you actually need to get somewhere, a hot air balloon is a fairly impractical vehicle. You can’t really steer it, and it only travels as fast as the wind blows. But if you simply want to enjoy the experience of flying, there’s nothing quite like it. Many people describe flying in a hot air balloon as one of the most serene, —How Stuff Works enjoyable activities they’ve ever experienced.”

DARK SIDE OF BALLOON

1783

Pilatre de Rozier, a French scientist, launches the first hot air balloon. The passengers—a sheep, a duck and a rooster—stay aloft for 15 minutes before crashing.

1783

Two French brothers, Joseph and Etienne Montgolfier, pilot the first flight of a hot air balloon with people aboard. They stay up for 20 minutes.

1785

Pilatre de Rozier foregoes the farm animals and attempts to cross the English Channel using a hydrogen-enhanced balloon. The balloon explodes an hour after takeoff, making him the sport’s first fatality.

1914

Throughout WW1, both sides use balloons for military reconnaissance.

1960

In a ballooning breakthrough, Ed Yost develops a balloon that carries its own lightweight burners and bottled propane. Longer flights and better maneuverability ensue, giving birth to the modern era of ballooning. Yost flies for a record-breaking 95 minutes.

Before social media gave birth to Twitter wars, duelists used swords or pistols to settle arguments over reputation, love and principle. Perhaps the most flamboyant of all duels was conducted aloft in 1808. Mademoiselle Tirevit, a celebrated dancer, was in a love triangle. Her suitors, apparently believing they had “elevated minds,” agreed to a winner-take-mademoiselle duel to the death in hot air balloons over Paris. They took turns shooting at each other with blunderbusses loaded by seconds who doubled as pilots. Here’s a contemporary report of the outcome: “When they had mounted to the height of about 900 yards, M. Le Pique fired his piece ineffectually; almost immediately after the fire was returned by M. Granpree, and penetrated his adversary’s balloon; the consequence of which was its rapid descent, and M. Lee Pique and his second were both dashed to pieces on a housetop, over which the balloon fell.” —Duel in Hot Air Balloon, Northampton Mercury, 1808

1987

Richard Branson and Per Lindstrand are the first to cross the Atlantic in a hot air balloon, flying 2,900 miles in 33 hours.

1991

Branson and Lindstrand are first to cross the Pacific, traveling 6,700 miles in 47 hours with a top speed of 245 mph.

2002

On his sixth attempt, Steve Fossett completes the first solo flight around the world, covering 22,100 miles in 13 days.

The Luckbox balloon’s flight crew tests the propane burners the evening before the Arizona Balloon Classic.

PHOTOGRAPH: (BRANSON) PA ARCHIVE/PA IMAGES; (ARIZONA) ALEXANDRIA ROWLEN

HOT AIR HISTORY

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28 grams the weight of one cubic foot of air (approx. one ounce)

21 grams the weight of one cubic foot of air heated to 100 ºF

ENVELOPE

SKIRT

PHOTOGRAPH: (BRANSON) PA ARCHIVE/PA IMAGES; (ARIZONA) ALEXANDRIA ROWLEN

Hot air balloons have three components: The propane burner that heats the air, the envelope that holds the air, and the basket that carries passengers and extra propane tanks.

BURNERS

Hot air balloons rise into the air because the density of the air (warmer air) inside the balloon is less dense than the air outside the balloon (cooler air). The balloon and the basket displaces a fluid that is heavier than the balloon and the basket, so it has a buoyant force acting on the system. Balloons tend to fly better in the morning, when the surrounding air is cool. —National Aeronautics and Space Administration (NASA)

WICKER BASKET PROPANE TANK (inside) Hot air is literally lighter than air. The physics behind hot air ballooning relies upon the Archimedes Principle which states that the buoyant force on a submerged object is equal to the weight of the fluid that the object displaces. So, each cubic foot of air in a hot air balloon can lift about 7 grams (or ¼ of an ounce). That’s why hot air balloons need to be so large—the envelope must contain a large enough volume of heated (lower-density) air in order to generate sufficient upward buoyant force to lift the weight of its passengers. April 2022 | Luckbox

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RECORD HIGH

An abrupt Instagram announcement of the When We Were Young music festival sparked a social media frenzy. Despite skepticism, it’s one of the most hyped events of the upcoming season. By Kendall Polidori

Clockwise from top: Oliver Sykes of Bring Me the Horizon, Haley Williams of Paramore and Gerard Way of My Chemical Romance.

PHOTOGRAPHY: (PARAMORE) REUTERS/MIKE SEGAR; (HORIZON) RITZAU SCANPIX/HELLE ARENSBAK VIA REUTERS; (CHEMICAL ROMANCE) PA ARCHIVE/PA IMAGES

Rock Redux for Millenials

moke fills the air from cigarettes clenched between fingers adorned with chipped black nail polish as punks throw each other around a mosh pit. They’re stepping on each other’s toes with feet clad in knee-high Converse, leather boots with rows of buckles or checkerboard slip-on Vans—just about anything, as long as it’s wild and black. Wrists are graced with rubber bracelets with band names. Arms are covered in sleeves of tattoos. Some of the black T-shirts look at least 10 years old. Then there are the denim vests encrusted with iron-on patches and buttons. Strands of multicolored hair bounce up and down and back and forth. An earlobe might no longer have a gauge earring, but the empty hole is still evident. Welcome to When We Were Young, the post-Warped Tour music festival that should have happened 10 or more years ago. Now the punks have become adults and have the cash to wrap themselves in nostalgia. And they’re expected to shell out some of it to see their heroes this fall in the desert.

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HYPE FEST

PHOTOGRAPHY: (STATE CHAMPS) ALEX MCDONELL

State Champs is one of more than 60+ bands scheduled to take the stage at the When We Were Young festival.

Neglecting pop-punk For years, the hyper-specific sub-genre of pop-punk music was often overlooked by anyone who wasn’t immersed in its culture. The kids who reigned from the days of Warped Tour were no longer regarded as “cool,” and they remained far outside the mainstream. Until recently. Now, artists like Machine Gun Kelly, Willow Smith and Avril Lavigne are revitalizing pop-punk/ rock—scoring radio hits and taking home music awards. That’s the backdrop for the social media frenzy around the announcement of the When We Were Young (WWWY) music festival. It’s sparking plenty of conversation—and memes—outside the formerly secluded emo community. “Pop-punk and the alternative scene is having a moment, but for a while it was only cool to the people who knew about it,” said Ryan Scott

$300

Cost of a one-day ticket for WWWY

Graham, bassist for State Champs. Bands like State Champs have championed the scene since the early 2010s, but their music has gone unnoticed by people who wouldn’t dare step inside the doors of a Hot Topic store. But as music evolves, the barriers between genres dissolve. Thus poppier artists like MGK are getting attention. Simply put, more people are aware of pop-punk now, and the hyped response to the festival’s announcement is justified. But so is the skepticism around the event, skepticism so deep that doubters are likening it to the disastrous Fyre Festival. (See sidebar, right.)

The Fyre Festival—hyped as an exotic extravaganza of music, glamor and luxury—turned out to be one of the most nightmarish frauds ever perpetrated. In 2017, founders Billy McFarland and rapper Ja Rule promised attendees a memorable event of a lifetime in the Exuma district of the Bahamas. But they proved themselves incapable of handling the logistics. Instead, people paid anywhere from $500 to $12,000 for tickets that brought them nothing but misery. They found themselves stranded with nowhere to sleep and almost nothing to eat or drink. The promoters began hyping the festival a year before it was to take place. They targeted ads to reach the followers of models and powerful social media influencers, including Hailey Baldwin and Bella Hadid. The hype touted a luxurious weekend getaway on a private island with a big-name music lineup, grand private villas, five-star dining and beach parties. But during the weeks leading up to the festival, almost nothing came together as planned. Bands dropped out, workers weren’t paid and the infrastructure necessary to accommodate the crowds failed to arise. But festival-goers still arrived, only to find the event aborted at the last minute. To make matters worse they were marooned for hours, served nothing but cold cheese sandwiches. Ticket holders took McFarland and his company to court. But that was the least of his problems. Convicted of criminal charges in connection with the festival, McFarland was sentenced to six years in prison and ordered to forfeit $26 million.

Stellar list of bands The WWWY lineup seems almost too good to be true. It supposedly includes Paramore, Bring Me The Horizon, My Chemical Romance and Alkaline Trio, just to name a few. For the “retired” emos of the early 2010s, it’s the roster of their dreams. The festival’s official Instagram page was created on Jan. 18 and quickly acquired nearly 800,000 likes. In less than 24 hours, the hashtag #whenwewereyoung received 18 million views. And despite viral tweets from fans, the

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trends

Logistics? The lineup is stacked with about 65 bands all playing on the same day. The event is scheduled to run Oct. 22, 23 and 29, with the same lineup each day. With three stages, that leaves about 30 minutes for most sets and a tad bit longer for the headliners, adding up to a 12-hour day. Still, as Graham puts it, the festival isn’t something some teenage guy thought up in his basement. It’s a professional event organized by the international entertainment company Live Nation. But experience doesn’t ensure success. Ten people died and hundreds were injured when the crowd got out of control at the Astroworld festival that Live Nation put on in November in Houston. Victims are suing the company for billions of dollars. But a spokesperson for WWWY told Newsweek in January that, “the safety of fans, artists and staff is thoroughly planned for among event organizers and in coordination with local authorities.”

As Airbnb hosts, the pop duo Los Del Rio taught their guests how to sing and dance the Macarena.

One-hit Wonders n Gotye Somebody That I Used To Know (Feat. Kimbra) (2011) n Survivor Eye of The Tiger (1982) n Passenger Let Her Go (2012) n Silentó Watch Me (Whip/Nae Nae) (2015) In 2015, 17-year-old Richard Lamar Hawk, aka Silentó, garnered over a billion views on YouTube for a song he released after losing his high school talent show. It became an instant hit among millennials, and the dance that accompanied it went viral. But his musical career was put on pause in 2021 after he was convicted of murder in the death of his cousin. n Far East Movement Like a G6 (Feat. The Cataracs, DEV) (2010) n Hinder Lips of An Angel (2006)

n Los Del Rio Macarena (1995) In 2021, the Spanish pop duo Los Del Rio celebrated the 25th anniversary of their hit by becoming Airbnb hosts at a villa in their hometown of Dos Hermanas, Spain. The two musicians hosted four guests for a two-night stay at the property and taught them to sing and dance the Macarena. Guests also learned to cook Andalusian dishes with a local chef and took lessons in Andalusian dances. Since then, the duo has released a single, so more hits may be in the works. n Plain White T’s Hey There Delilah (2006) n Tag Team Whoomp! (There It Is) (1993) n Chamillionaire Ridin’ (2006) Top-selling one-hit wonders, Business Insider

WWWY skepticism The hype—good and bad—around the WWWY festival has put participating bands in the spotlight. Graham feels uneasy about fans’ skepticism, but there’s time to coordinate safety initiatives and logistics. So, why does skepticism arise? Does the Fyre Festival get the blame, or is it something ingrained in pop-punk culture? The festival is real, and the three dates are already sold out. It may expand the music of punk middle

Skepticism about the event runs so deep that doubters are likening it to the disastrous Fyre Festival.

schoolers to the masses. It’s no longer a subculture, and Szalkowski noted that the festival is an opportunity for the scene and pop-punk to be “cool.” If the culture suddenly penetrates the mainstream, the public will become more open to its ideals and aesthetics, such as multi-colored hair and skinny jeans. Graham recalls when he was the only person to rep all that when he was in high school in a small Michigan town. Success or flop—WWWY will be talked about for years to come.

PHOTOGRAPHY: (AIRBNB) COURTESY OF AIRBNB

festival organizers didn’t even bother to create a Twitter profile. Besides high ticket prices ($300+ for one day), observers also worry that many of the bands in the lineup weren’t aware of who else was playing. But Graham and State Champs guitarist Tyler Szalkowski confirmed that was done on purpose to initiate more social media hype. “The festival heads knew that this was going to go into insane mode, and they didn’t tell anyone,” Szalkowski said. “So we confirmed our spot under the notion that Jimmy Eat World and Paramore were playing, and that was enough for us. Two hours before the lineup officially went public, we saw it and were immediately losing our shit.” Szalkowski notes that fans want to see every single band on the bill because of the specificity of their niches. That enthusiasm could make the festival difficult to stage.

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trends

RECORD HIGH

Hustle, Flow & Hype

MUSIC’S MEMORABLE MOMENTS A look at some musical escapades that left an indelible mark By Kendall Polidori

Beatles perform on 1964 The The Ed Sullivan Show

ven when musicians travel a long and winding road to fame, it can seem like recognition strikes suddenly. One moment they’re unknown, and the next they’re famous. Music’s most memorable moments have etched more than a few names into the collective psyche almost overnight. Let’s examine a few.

The Beatles had already scored a No. 1 U.S. hit with I Want to Hold Your Hand when they appeared on The Ed Sullivan Show on Feb. 9, 1964. But their performance on the popular American TV variety show helped make them truly international stars. More than 70 million people tuned in and saw frenzied teenage girls screaming and weeping over the band. The stodgy old Sullivan was met with ear-piercing shrieks from the audience as he introduced the Fab Four, all dressed in dapper suits and ties. They played eight minutes of songs, including All My Loving. The rest is history.

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trends

When the proto-punk band The Stooges, originally known as the Psychedelic Stooges, played their first house show in their hometown of Ann Arbor, Michigan, lead singer Iggy Pop showed up wearing a dress he picked up from a thrift store and a shower cap with strands of aluminum foil attached. Iggy reportedly made experimental noises with a vacuum cleaner and a blender. Behind him, his bandmates pounded on their instruments, putting together a loud and energetic show that the 20 people in attendance would never forget. The Psychedelic Stooges went on to play their first official live show in 1968

at the Grande Ballroom in Detroit, opening for Blood, Sweat & Tears. They shortened their name before becoming a leading force in rock, laying the groundwork for bands like The Sex Pistols and the Ramones. Iggy’s outrageous shirtless frontman performances made history. He famously crowd-surfed into a glass table, cutting himself and spitting blood onto the audience. He carved an X into his chest and proceeded to bleed on stage. Slathering his chest with peanut better, he then flicked the stuff off his body and into the audience. When he threw a whole watermelon into the crowd, be gave a fan a concussion. Accidentally snorting PCP, he was inspired to place his penis on top of an amplifier.

Cooper nude with 1972 Alice a boa constrictor In the 1970s, talent manager Shep Gordon found himself struggling to get Alice Cooper and his band’s harsh rock into the ears of the masses. The idea was to push boundaries, putting on a theatrical live show instead of just relying on the music. Gordon saw Cooper as an opportunity to position a certain aesthetic as the embodiment of the generation gap. Essentially, he wanted parents to hate the band so all the kids would love it. When Gordon booked the band a show at the 10,000-seat Wembley Arena in London and had sold only 500 seats a month out, he had to think of something out of the box—and quickly. A few days before the show, Gordon secretly arranged for Cooper to take a promotional photo with shock value: Cooper sprawled nude with a boa constrictor across his private area. Gordon then proceeded to get a billboard-sized version of the photo and plastered it onto the side of a truck. He drove it through the heavy traffic of Piccadilly Circus. The stunt resulted in chaos, with a line of cars following the truck and news helicopters flying over the scene and broadcasting it on television. Parliament discussed banning Cooper from the country, followed by headlines like Ban Alice the Horror Rocker. He’s Absolutely Sick. But the kids loved it. The band’s latest single sky-rocketed to the top of the U.K. charts and their Wembley show sold out. Alice Cooper went on to become one of the biggest American acts in the U.K.

PHOTOGRAPHY: (IGGY POP) NORTHFOTO/SHUTTERSTOCK; (COOPER) CRAIG STERKEN/SHUTTERSTOCK

Stooges’ 1967 The live shows

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Fab Morvan (left) and Rob Pilatus (right) pose with Grammy president C. Michael Greene at the 1990 Grammy Awards rehearsal.

Milli 1988 Vanilli’s lip-syncing

PHOTOGRAPHY: (MILLI VANILLI) ALAN LIGHT; (GAGA) 2011 FEATUREFLASH PHOTO AGENCY/SHUTTERSTOC

downfall

While at a disco in his hometown, German singer, songwriter and producer Frank Farian heard the song Girl You Know It’s True by Baltimore band Numarx. He liked it and knew that with a little more finesse it could become a much bigger hit. So, he brought in singers to contribute to the track and ended up mixing so many voices on the chorus that it’s difficult to tell who’s singing. He had the hit, and all he needed was a photogenic face to go along with the group. That’s when Farian found Fab Morvan and Rob Pilatus, who were living in a housing project in Munich. He paid them $4,000 each to become the German-French R&B duo Milli Vanilli, even though they didn’t sing a single word on the record. Girl You Know It’s True became lodged in the Billboard Hot 100 for 26 weeks straight, peaking at No. 2 in April 1989. To celebrate their success, the duo joined the inaugural Club MTV Tour with names like Paula Abdul and Tone Loc. Performing in front of 80,000 people at the theme park Lake Compounce in Bristol, Connecticut, they kicked off their set with their trademark energy and dance moves. But once the chorus hit, the lyrics began repeating, “Girl you know it’s, girl you know it’s, girl you know it’s …” over and over. The audience had to question their singing capability, yet the duo still went on to win three trophies at the American Music Awards in January 1990 and the Grammy for Best New Artist. They toured shortly after and found themselves tripping up over their song’s audio—either skipping or not playing at all. The nuisance of lip-syncing caused so much trouble for the group that they eventually were ready to call it quits. Farian beat them to the punch and released a statement, but the duo still held a press conference of their own, stating that they were “seduced, abused and felt very guilty.” It became one of the biggest lip-syncing scandals in pop culture history and ended with Arista dropping them and deleting their entire catalog. It was the first and only time a Grammy award was revoked.

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Gaga’s 2010 Lady meat dress In the early 2010’s, songs like Telephone and Bad Romance were keeping Lady Gaga at the top of pop charts. And her outlandish outfits were also keeping her name on the lips of listeners. They couldn’t stop talking about her appearance at the MTV Video Music Awards clad head-to-toe in cuts of raw meat. The meat dress was designed by Argentinian designer Franc Fernandez and styled by Nicola Formichetti. The dress, small wrist bag and beret were made from Argentinian beef bought from Fernandez’ butcher in Los Angeles. The idea was to make a statement at the awards show about her distaste for the U.S. military’s “Don’t Ask, Don’t Tell” policy. To that end, she also made a speech titled The Prime Rib of America. But it was the outfit that made headlines and created talk show buzz for weeks to follow. On The Ellen DeGeneres Show, Gaga said that “if we don’t stand up for what we believe in and if we don’t fight for our rights, pretty soon we’re going to have as much rights as the meat on our bones.” To keep the meat dress fresh on the night of the show, Gaga’s crew packed it in several coolers backstage. That night was the first and last time she wore it, but soon afterward the Rock & Roll Hall of Fame paid $6,000 to taxidermist Sergio Vigilato to preserve the dress for display. He essentially turned the meat into beef jerky, making it look much different from its original form.

Your Retirement, Your Call You Can Trade Stocks, Options, and Futures in your IRA

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trends

BOOK VALUE

The Luckbox Bookshelf New and not-so-new books that captured our attention this month

Cultish: The Language of Fanaticism By Amanda Montell

It might seem that Heaven’s Gate, a religious movement of the late ‘70s, doesn’t have much in common with Peloton leaderboards, but Amanda Montell sees the connection. Both arise from America’s all-out obsession with cults, she maintains. Backed by her original research, Montell analyzes the social science of cult influence and attributes much of its power to language. For her, the language of cults permeates the nation’s culture. It’s all around us, influencing us every day. At the same time, she explains that the fascination with documentaries exploring the lives of cult leaders like Charles Manson—or even serial killers like Jefferey Dahmer and Ted Bundy—comes from the search for an explanation of what causes people to join and remain in extremist groups. Then there’s the common misgiving that nearly anyone could submit to the lure of a cult. To some degree they’ve already succumbed, Montell writes. Whether it’s scrolling through a personalized Instagram reel feed or attending a SoulCycle class three times a week, Americans find themselves exposed to cultish language and influence in everyday life. It may not be brainwashing, but it’s a process of manufacturing ideology and attitudes, according to Montell. The Hype Handbook

In The Hype Handbook, Michael F. Schein— founder and president of Microfame Media—defines hype, explains how it works and makes a case for using its power for good instead of evil. Through real-life examples that include the adventures of the likes of Alice Cooper, Andy Warhol, Otto von Bismarck, Warren Buffet and Charles Manson, Schein provides a guide to building a successful career and enjoying a successful life. To that end, Schein teaches readers to create buzz around projects, businesses and causes. His 12 strategies for using hype point the way to achieving goals by generating outrage to draw attention, building a community of like-minded people

PHOTOGRAPHY: GARRETT ROODBERGEN

By Michael F. Schein

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for support and creating an atmosphere that breeds curiosity and intrigue. He offers tips on radiating energy, organizing a secret society, repeating a mantra and building anticipation by pushing people out of their comfort zones. For Schein, hype represents the holy grail of spreading the word about any idea, product or service. The Hype Machine: How Social Media Disrupts Our Elections, Our Economy, and Our Health—and How We Must Adapt By Sinan Aral

Social media networks have changed everything, connecting people and products all over the world in totally new ways. It’s a new order that offers both promise and peril, depending upon how humanity deals with it, according to Sinan Aral, author and MIT professor. Aral describes himself as a scientist, entrepreneur and investor—in that order. It’s a perspective reflected in the careful rigor and great breadth of his book. He urges readers to take a step back from the screen and look under the hood of the social-networking hype machine to see how it influences politics, the economy and public health. That’s the way to move technology in a purposeful direction and remove the noise, he writes. To help accomplish that, he peeks behind the curtain of powerful social networks to find how they shape people’s choices. His research shows how the engine that he calls the social networking industrial complex influences everything from elections and business decisions to dating and vaccinations. Along the way, Aral explains how social media affects the brain, assesses the power of social ratings and warns of the consequences of fake news. He offers strategies for becoming more thoughtful consumers of social media and reaching a better understanding of the effects of technology. Social media stimulates neurological impulses and persuades people to change how they shop, vote, exercise and love, he warns. But he also insists that understanding the social media hype machine can help humankind harness its power to promote equality, education and public safety.

The Revolution That Wasn’t: GameStop, Reddit, and the Fleecing of Small Investors By Spencer Jakab

Wall Street Journal columnist Spencer Jakab draws on his experience as a stock analyst to tell the story of how the GameStop meme stock squeeze unfolded in January 2021. In the process, he identifies the real winners of the rally and reveals the financial mechanisms that made the event such a bonanza. He even explains why investors refer to some equities as meme stocks. Besides detailing how Wall Street brought millions of new investors into the markets, he explains how the novices were hustled into thinking they had an edge in the game and exactly who enjoyed a huge payday. Jakab argues that ordinary investors can outsmart the pros simply by refusing to play their game.

The Unlucky Investor’s Guide to Options Trading By Julia Spina

There’s no denying the power of luck in investing, but those who succeed in the long run have learned not to rely on simple good fortune to determine their fate. Instead, they study books like The Unlucky Investor’s Guide, which focuses on options trading. Precisely customizable options can generate profits in any market—no luck required, writes author Julia Spina. She combines her academic background in mathematics, signal processing and data analytics with her mentoring by options trading legend Tom Sosnoff to produce an essential handbook for new traders who want to learn the basics of sustainable and profitable derivatives trading. The book reached No. 1 in the Investment Analysis & Strategy category in its first week on Amazon.

Far too often, book reviews drive away readers. But reviews present just one stranger’s view, and taking them to heart leaves great books undiscovered. The Luckbox Bookshelf offers profiles instead of reviews. Don’t look to these pages for opinions. Think of Bookshelf as a place to discover books that educate, entertain and challenge entrenched beliefs.

April 2022 | Luckbox

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trends

SENTIMENT

IS AMERICA RETREATING FROM GLOBAL LEADERSHIP? INTELLIGENCE SQUARED U.S. invites some of the world’s brightest thinkers to debate issues. The organization was founded in New York in 2006 to promote intellectual diversity by fostering respect for differing opinions. The debates are organized in the traditional Oxford style. The side that convinces more audience members to embrace its arguments wins. The excerpts below come from a debate in January about the United States’ role on the international stage.

58% 15% 27% FOR

AGAINST

UNDECIDED

–AUDIENCE OPINION BEFORE THE DEBATE

$80.7 MILLION

U.S. TRADE DEFICIT IN DECEMBER 2021

More Debate See who won the debate

—BEA.GOV

Can Small Investors Beat The Street? The Wall Street Journal’s “Heard on the Street” columnist Spencer Jakab, author of The Revolution That Wasn’t, and tastytrade co-founder and co-CEO Tom Sosnoff agree to disagree. The debate was scheduled for release in late March at intelligencesquared.com.

FOR

AGAINST

LONG: Whether or not we feel that we were well-positioned to handle the pandemic and well-positioned to handle Afghanistan, the rest of the world perceives us as having stumbled and, quite frankly, done astonishingly poorly. In foreign affairs, perception is reality. And you don’t have to take my word for it. Pew Research and Pew polling says frankly that 57% of the countries polled said the United States used to be a good partner. Used to be. Sixty-seven percent said the United States is somewhat a good partner. That’s a catastrophic decline from previous years. And in fact, after the debacle, what many would describe as the abrupt and haphazard departure from Afghanistan, Biden’s external polling across the world went down approximately 10%.

SCHAKE: We have not invested enough in our military strength. We have for too long hoped that China would choose to be a responsible stakeholder in the international order. And we have never found a way to persuade Vladimir Putin that Russia is safest and most prosperous if it is surrounded by safe and prosperous countries rather than by countries Russia can subjugate. All of those things are true. None of them means that the United States is retreating from leadership in the world. And we have been slow to focus on the threats that China poses, but the United States, first under President Bush, continuing under President Barack Obama, then under President Donald Trump, and now under President Joe Biden, is increasingly prioritizing American diplomacy and American national security policies to reverse that.

KRISTOL: So, we are retreating; we’ve been retreating. What’s the evidence? It’s pretty simple, honestly. Let’s look back 20 years. Was Putin, who was clearly an adversary of ours, stronger or weaker then? He had not yet invaded neighboring countries like Georgia or Ukraine. He hadn’t consolidated nearly as ruthlessly his power internally, and he hadn’t murdered people in other countries and capitals of other countries. Putin is now more of a threat than he was 20 years ago, and he’s a real threat. People can say, ‘Oh, Russia is still a small economy, and it’s not, you know, a threat the way it was under the Soviet Union,’ but they’ve done a lot of damage and can do a lot of damage.

SINGH: In economic terms, the United States is doing shockingly well considering two years ago we had the most calamitous economic crisis since the Great Depression. We’ve come out strong, we lead the recovery, unemployment is at 3.9%, our GDP is $21 trillion—significantly more than China’s still—and yes, China is rising. But don’t forget, China has 1.5 billion people. When China’s GDP is getting to be six times ours, well, then I’ll be starting to worry. If you take the next eight top countries by GDP, they’re all American allies and partners. That’s half the global economy. In terms of military strength, the same goes. The United States, our partners and allies are still the undisputed global leaders.

Mary Beth Long spent more than a decade as a CIA officer and was the first woman confirmed by the Senate as assistant secretary of defense for international security affairs. Bill Kristol is the founder and editor-at-large of The Weekly Standard.

Kori Schake is a senior fellow and the director of foreign and defense policy studies at the American Enterprise Institute. Vikram Singh serves as senior advisor to the Asia Program at the United States Institute of Peace.

Luckbox | April 2022

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trends

CALENDAR

APRIL 1 Red Hot Chili Peppers’ 13th album: Unlimited Love 1-2 CryptoWorldCon Miami 3 Grammy Awards Ceremony (rescheduled) Las Vegas 4 National Deep Dish Pizza Day 4-10 Masters Tournament Augusta, GA

PHOTOGRAAPHY: (PARTON) REUTERS/MARIO ANZUONI; (ADIDAS) COURTEST OF ADIDAS; (OTHERS) SHUTTERSTOCK

6-9 Bitcoin 2022 Miami 7 National Beer Day 8 Jack White’s 5th album: Fear of the Dawn 15 National Tax Day 15-17 Coachella Valley & 22-24 Music & Arts Festival Indio, CA 22 Earth Day 23 Record Store Day 27 Influencer Marketing Conference New York 27-29 Global Metaverse Conference Online 29 Shaky Knees Music Festival (with Green Day & Nine Inch Nails) Atlanta 29 Rock & Roll Hall of Fame (2022 Class) nomination voting ends TBA The release of Adidas Yeezy 450 “Sulfur” shoes

A knife and fork affair Deep dish pizza has been Chicago’s baby since the 1940s. That’s when two immigrant entrepreneurs, Ike Sewell and Ric Riccardo, created the city’s Italian-American version of pizza. In the late 1800s, Neapolitan immigrants arrived in the U.S. in search of jobs, and many of them made their homes in Chicago. But they craved pizzas that brought them closer to their culinary roots. They were used to thin pizza, so the savory layered cake-like crust of deep-dish pizza was new. In 1943, Sewell and Riccardo opened Pizzeria Uno in the Near North Side neighborhood and began serving the public their style of pizza with a deeper dish, crunchier and thicker crust, and sauce on top of the cheese. Their creation soon became a Chicago-born icon. Pizzeria Uno later became a chain now known as Uno Chicago Grill. Today, a handful of Chicago restaurants offer different takes on the pie, including Lou Malnati’s, Giordano’s, Pizano’s, Gino’s East and Pequod’s. There’s a place for everyone, but Chicagoans will always argue over which one is the best. (Luckbox’s pick is a tie between Giordano’s and Pequod’s.) A hole-in-one event Last year’s Masters champion, Hideki Matsuyama, may return to compete against a long list of players, including Fred Couples, Sergio Garcia, Dustin Johnson, Kevin Na and Sandy Lyle. Players can be invited if they’ve won a FedEx Cup points event on the PGA Tour this year or if they’re ranked among the top 50 golfers in the world a week before the Masters. Augusta National also has the right to offer special invitations. Each hole is named after a plant, and No. 3 is called “Flowering Crab Apple.” Reigning rockers Jolene fans, this is your chance to help give Dolly Parton the title she rightfully deserves: Rock & Roll Hall of Fame inductee. As part of the selection process, music devotees can vote for up to five nominees daily at vote.rockhall.com until April 29. Seven of this year’s 17 nominees are on the list for the first time: Beck, Eminem, Duran Duran, Parton, Lionel Richie, Carly Simon and A Tribe Called Quest. Only artists who released their first record at least 25 years ago qualify for nomination.

April 2022 | Luckbox

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trades& tactics

Cheat Sheet #21

Rem o and ve s this ave page !

Stay Logical

By Mike Hart

raders should always bear in mind that markets are random and that the future remains unknown. Predicting prices presents a challenge, but traders can improve their chances by creating and following an approach that’s systematic and logical. They can accomplish that by using facts to create a logical structure. At

the same time, they should avoid emotional trading by disregarding biased opinions and questioning baseless market hype. This Cheat Sheet offers five simple metrics that traders can use to control their emotions and start following the facts to make rational decisions. Statistical analysis provides a wealth

Market Expectations

There’s a 68% probability that an underlying will remain within the range of its expected move. That gives a rough estimation of potential future price action. The tastyworks platform calculates and displays that in a couple of ways. The trade page shows the expected move both visually and numerically.

of information, and calculating probabilities provides insight into market dynamics. Let’s consider how it might work in the five examples on this page. Mike Hart, a former floor trader at the Chicago Stock Exchange and proprietary futures trader, specializes in energy markets and interest rates. He’s a contributing member of the tastytrade research team. @mikehart79

Expiration Probability

Probability of expiring out-of-the-money (OTM) measures an option’s chance of expiring worthless. The metric is calculated by subtracting the option’s delta from 100. Delta

Calculation

POE

100 - 30

70%

100 - 16

84%

Probability of Profit

Probability of Profit (POP) is calculated to help evaluate risk and reward by using probabilities to quantify a trade’s potential outcome.

IV Rank

Ranging between 0 and 100, IV Rank (IVR) helps evaluate the current level of volatility. Using 30 as a cutoff between high and low, it’s especially useful for strategy selection. Above 30, look to sell premium with these strategies. Strangle

Jade Lizard

Iron Condor

Short Vertical

Butterflies

Straddle

Below 30, look to buy with these strategies. Calendar spreads

Debit spreads

Diagonals

PMCO

Higher POP

Lower POP

Lower Delta

Higher Delta

Undefined risk

Defined risk

Touch

The Probability of Touch (POT) is the likelihood that at some point before expiration the price of a stock will reach a strike. That gives context to the trade’s expectations. To calculate, multiply the delta of the option by two. Delta

Calculation

POT

30 x 2

60%

16 x 2

32%

April 2022 | Luckbox

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LOVE WHERE YOU TRADE * Starts 3/1/22 and ends 8/31/22. Offer only valid for new tastyworks customers or existing tastyworks customers who have never funded a tastyworks account

prior to 08/31/22. Must be legal residents of the 50 United States (or D.C.), 18 years+. Must have a $2,000 min. funded account for 3+ mos. to qualify. Qualified customers receive a minimum $200 in stock. Stocks randomly selected by tastyworks, and stock value may fluctuate up or down due to market volatility. Offer not valid for non-US residents, IRA or Trust accounts. For additional eligibility requirements and all details, see the Official Terms and Conditions at www.info.tastyworks.com/get200.

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PHOTOGRAPH: REUTERS/LAS VEGAS SUN/STEVE MARCUS

tastyworks.com/get200

trades&tactics actionable trading ideas

THE NORMAL DEVIATE

Pro Traders Know Probabilities Like Poker Pros Know Pot Odds Many seasoned traders were not taken in by the meme stock hype By Tom Preston t’s not opposable thumbs, extra cranial capacity or the ability to walk on two feet that separates humanity from animals. It’s hype. OK, maybe bees and ants let their friends know about the picnic. But humans have the unusual anti-competitive quality that spurs them to encourage others to buy something, or buy into something. Hype has given humankind everything from printed books, light bulbs and Teslas to Pelotons and MacBooks. Hype got those products widely adopted and changed the way people live. Without hype, working as a monk scribe would be the hot gig job of 2022. When it comes to trading and investing, though, hype is more of a mixed bag. Hype in the markets comes in different forms, with sometimes less than productive results. One kind is the standard Wall Street analyst or CEO hype that touts all the great things a company is doing that will boost earnings and explains why everyone should buy the stock. Whether or not investors respond to this hype in the way the company hopes is debatable, and making a trading decision based on it is basically a guess.

PHOTOGRAPH: REUTERS/LAS VEGAS SUN/STEVE MARCUS

April 2022 | Luckbox

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trades& tactics

Even at $325 a share, GameStop had a 50/50 chance of going higher, and it did that before crashing.

With a Reddit-driven stock, the pot odds can sometimes favor an up move or a down move. low relative to the pot, and the probability of a hand is high, then the pot odds for the hand are high. It’s worth taking the risk of continuing to play a hand. High pot odds are no guarantee of winning a poker game, but as with trading, playing a high number of games in which a player has high pot odds will likely result in that player winning a majority of the games. In trading, stock prices theoretically have more than 2.5 million potential outcomes, but the probability of moving higher or lower at any time is 50%. Yet with a Reddit-driven stock, where an online community is hyping a low-priced stock to buy or a high-priced stock to short, sometimes the pot odds can favor an up move or a down move. For a stock to keep moving higher, investors and traders need to step in and buy it at those levels. At some point, they’ll stop stepping in, and that may cause the stock to fall. Consider

The concept of pot odds in poker is a close probability analog to chat room stock hype. 46

GameStop (GME), hyped on the Reddit boards in early 2021. When GameStop was still $16 and was being hyped online as “too cheap,” there was a theoretical 50/50 chance it would go higher or lower. But its relatively low price and the magnitude of the potential upside if the hype “worked,” meant the “pot odds” favored the upside. GameStop went from about $16 to $500 in about five days. At $500, there was still a 50/50 chance it would go higher or lower. But with the online hypers getting paid and likely selling their positions, the pot odds favored the downside. The stock then fell and gave most of its rally back over the following five days. This is a case of “buy the rumor—sell the news,” and it doesn’t work for every low-priced stock or for every stock on the Reddit boards. But as with poker, making small low-risk, high-potential-reward trades in stocks that have had a big move up or down can put the odds in a trader’s favor. Tom Preston, Luckbox contributing editor, is the purveyor of all things probability-based and the poster boy for a standard normal deviate.

PHOTOGRAPH: TY LIM/SHUTTERSTOCK

Another more modern type of market hype is the online chat room. That’s where Redditors, for example, pile into a discussion and make a case for why a $10 stock should be $100, or a $200 stock should be $2. This type of hype seems effective if for no other reason than that traditional analysts and money managers hate it. But chat rooms produce a type of market hype that might yield interesting trades. The reason is that at least a few of these online stock hypers have positions in the stock. They’ve bought some shares, or even long calls. Unlike most Wall Street analysts, they have skin in the game. So, their hype—if it gets more people to buy the stock—could benefit them financially. Poker, and the concept of pot odds, is a close probability analog to chat room stock hype. Bluffing a poor poker hand is a type of hype intended to convince other players that a hand is stronger than it actually is. And because this article is all about probabilities, the strength of a poker hand is really its probability of being better than other possible hands. Because a 52-card deck has a defined, albeit large, number of possible five-card combinations, players can quantify the probability of various hands. The probability of combining one hole card with the cards on the table in a game of Texas Hold ‘Em to get one pair (a relatively low-value hand) is higher than combining both hole cards into a full house (a relatively high-value hand). A deck of 52 cards has about 2.5 million possible combinations of five-card hands. A little over 50% have no value in a poker game, unless the game ends in a contest where the player with the highest card wins. And while even 1.25 million hands would be hard to evaluate, a basic knowledge of how frequently two Kings or two Hearts are dealt as the hole cards (2 in 221, or .905%), as well as the probability of the hands that can be created with the community cards, gives a player an idea that a particular hand will beat the other players’ hands. In poker, the practical application of that probability is pot odds. Pot odds combine the probability of a hand winning with the size of the next bet (the call) and the total pot. If the pot is large, the call is

Luckbox | April 2022

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trades& tactics

THE POKER TRADE

Rounders are Grinders Don’t believe the hype! Casual players get the wrong impression that they need aggressive plays or gigantic folds. By Jonathan Little elevised poker tournaments show only the most interesting hands in a long final table or cash game session. Viewers rarely see the routine, mundane hands where someone steals the blinds or when someone raises, continuation bets on the flop and then wins a small pot. That leads casual players to think that the creative, aggressive plays—or conversely, the gigantic folds—are how players win at poker. It’s hype! Players actually win by finding a game they can beat, playing it a lot and keeping a proper bankroll. No fancy plays are required. Many players struggle when they face overly loose, aggressive opponents who are capable of showing up with any hand at any time. They vividly remember the times they raised with a hand like Q-Q, a lunatic re-raised, they called and then somehow lost to the lunatic’s 7-3 when the board runs out J-6-2-7-3, or when it comes A-K-2 and they fold to a continuation bet. Maniacal strategies may seem impressive and may work well against players who fold too often, which just so happens to be how many small- and medium-stakes players play. If opponents refuse to put all their money into the pot without a two pair or better hand, simply betting whenever they check will result in winning a lot of money because the opponent is folding too often by the river. While playing maniacally may seem like an easy but high-variance way to win at poker, the strategy falls apart once opponents realize that all they have to do is not fold. I have made substantial money playing in medium-stakes tournaments and cash games against maniacs by simply check/calling down with hands like a middle pair.

If an opponent’s range contains far too many bluffs, the proper adjustment is to call with all bluff catchers, perhaps as weak as ace-high. It may feel scary calling a large river bet with middle pair, but against a true maniac, it is the most profitable play by far—even though it can result in losing some large pots from time to time when an opponent actually makes a hand. Players who win the large pots 60% of the time and lose them 40% of the time eventually win all of the money. Other players witness insanely tight folds on televised poker and think that’s the way to win. In reality, if players choose the strategy of folding almost everything to substantial aggression, all opponents have to do to crush them is bet. The only time players should look to make gigantic folds is when they’re against an opponent whose range is heavily weighted toward premium hands. Suppose a tight, straightforward player raises to three big blinds from first position out of his 100 big blind effective stack and

value bets with marginal made hands like A-3 or J-10, you should fold. Many players make the blunder of calling down with their decent top pair without considering their opponent’s strategy. Just because you have a normally strong hand does not mean you should automatically call down every time. That said, if you had A-K instead, folding would almost certainly be too tight against anyone. If your opponent was instead a maniac, folding A-9 could be far too tight. As stated earlier, to succeed at poker, find a game you can beat, play it a lot and keep a proper bankroll. But almost no one—besides the best professional—does all three. Find a game you can beat by playing only in games with extremely unsophisticated players—or study enough to have an edge against almost every player you encounter. Pokercoaching.com will help with the latter. Once you have a game you can beat, play it a lot. With every hand dealt, a player wins or loses some tiny amount of equity, depending on the player’s edge over opponents. Many would be thrilled to win $1 per hand. The problem is that most players want to play only every once in a while. People who play 100 hands per week and win $100 have a large $1 per hand win rate. While that’s nice, it won’t make anyone rich, and most players probably can’t win anywhere near $1 per hand. Also, the routine swings of the game will feel gigantic to anyone who doesn’t spend a lot of time playing poker. Losing 10 tournaments in a row might take a recreational player three months. Maintaining the discipline to keep a proper bankroll can be tough because even players

Players win at poker by finding a game they can beat, playing it a lot and keeping a proper bankroll. you call from the big blind with A-9. The flop comes A-J-4. You check, your opponent bets four big blinds and you call. On pretty much any turn except for an Ace or 9, if you check and your opponent makes a substantial bet, you should fold. Consider that tight, straightforward opponent’s range to bet the flop and turn. That opponent will likely have almost no bluffs, and if there is one it will usually be with a strong draw. So, unless you know that player often

who have an edge will inevitably experience bad runs. Check out pokercoaching.com/ bankroll for guidelines for proper bankroll management. That’s how to win at poker, plain and simple. There’s no need to run consistently insane bluffs or make giant folds. That’s just hype. Jonathan Little, a professional poker player and WPT Player of the Year, has amassed more than $7 million in live tournament winnings, written 14 best-selling books and teaches at pokercoaching.com. @jonathanlittle

April 2022 | Luckbox

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trades& tactics

THE UNLUCKY INVESTOR

A M AT H EM AT IC IAN’S GU IDE TO SUSTAINAB LE T RADING —NO LUCK REQUI RED

Don’t let Stocks Ruin Your Day By Julia Spina

eta Platforms (FB), formerly known as Facebook, experienced a historic loss in stock price after a lackluster 2021 Q4 earnings report. The company’s stock depreciated by more than 26% by the end of the following day, reducing Meta’s market capitalization by $230 billion. That’s a very bad day. It’s nearly unprecedented for a stock that constitutes roughly 3.4% of the Nasdaq-100’s value to experience an extraordinary 12 standard deviation move. But this kerfuffle was hardly an isolated incident of extreme stock volatility since the sell-off of 2020. Events like the Tesla surge of 2020 and the GameStop squeeze have helped make idiosyncratic risk increasingly relevant to the financial landscape. Financial risk generally falls

SHORT OPTIONS TRADERS CAN LIMIT EXPOSURE TO TAIL EVENTS BY ADOPTING RISK MANAGEMENT TECHNIQUES ⊲ Keep stock options position sizes small. A single position should not occupy more than 5% to 7% of portfolio capital, and stock options should occupy at most 25% of the capital allocated to short premium. ⊲ Stick with defined risk strategies, such as wide iron condors, for stock underlyings. ⊲ Avoid earnings plays entirely or keep positions exceptionally small.

A (very) bad day into two categories: idiosyncratic or systemic. Idiosyncratic risk is specific to an individual company or sector, and traders can reduce it through diversification, the process of spreading capital across a variety of relatively uncorrelated assets. Systemic risk is inherent to the market as a whole. Because every market, sector and company has the capacity to fail, systemic risk cannot be diversified away. But diversified instruments, such as exchange-traded funds (ETFs) and mutual funds, tend to be more stable and less prone to outlier moves, compared with non-diversified instruments, such as stocks. Historical return volatility measures the dispersion of returns over a given time frame and is typically larger for riskier assets. Conditional value at risk (CVaR), also known as expected shortfall, quantifies the tail risk of an investment. This metric estimates the expected loss of an asset in an “extreme” event at a given level of likelihood. In other words, Apple (AAPL) can expect to return losses exceeding 8.3% on the worst 5% of days. Observe the historical volatilities among instruments, and it immediately becomes clear that the more diversified assets, SPY and XLK, are generally more stable in typical market conditions. Note that SPY stands for the SPDR S&P 500 ETF, an exchangetraded fund that tracks the Standard & Poor’s 500, and that XLK refers to the Technology Select Sector SPDR Fund.

The price of shares in Meta went over a cliff after a triple whammy: Critics doubted the wisdom of the company’s rebranding, earnings fell short of expectations and users were disappearing. Price

Meta Price Q4 2021 Earnings

$350

300

250

200

150

2017

2018

2019

2020

2021

2022

Tracking Meta

This histogram records daily returns for Meta Platforms from 2017-2022. The daily return following the Q4 2021 earnings announcement on Feb. 2 is labeled. Percentage of Occurrences (%)

Meta Price Q4 2021 Earnings Move

30%

-25

-20

-15

-10

-5

Returns (%)

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trades& tactics

Financial risk generally falls into two categories: idiosyncratic or systemic. Diversification also noticeably reduces the severity of extreme loss events. In one example, extreme losses were more than eight times larger for Apple than for the historical results for SPY. Diversified assets are less sensitive to exceptional events, such as the loss Meta experienced in early February. Focusing on diversified instruments and maintaining a well-diversified portfolio minimizes exposure to single-company risk factors and

leads to more dependable expectations for future performance. However, avoiding stocks entirely isn’t always the best choice for investors, particularly short-options traders. Although stocks tend to carry more risk than diversified instruments, they also offer high-IV opportunities more often than diversified underlyings, resulting in larger credits and more profit potential for premium sellers. Julia Spina, a member of the tastytrade research team and author of The Unlucky Investor’s Guide to Options Trading, holds degrees in engineering physics and applied mathematics and a master’s in physics. @financephoton

Comparing risk

Less diversification means greater risk, as illustrated here by comparisons of a collection of non-diversified tech stocks, a somewhat diversified tech sector exchange-traded fund (XLK) and a highly diversified market exchange-traded fund tracking the S&P 500 (SPY). Asset

Historical Returns Volatility (%)

CVaR at 5% Likelihood (%)

TSLA

3.86

-8.33

2.24

-5.35

AAPL

1.93

-4.43

AMZN

1.92

-4.35

GOOGL

1.73

-4.12

XLK

1.56

-3.75

SPY

1.2

-3.03

HOOKED ON THE MARKETS?

Visit DailyFX.com for continuous updates on global markets in currencies, commodities, and stock indices.

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trades& tactics

INSIDERS

Insiders Call a Bottom

When executives buy and sell their company’s stock, that’s a consistently reliable indicator of future prices. Recently, insider activity signaled a market bottom— at least before Vladimir Putin and the Fed arrived. By Garrett Baldwin

ake notice when C-level execs acquire or unload stock in their companies. They may be telling investors something about the direction prices will soon be heading. The history of the insider buyingto-selling ratio indicates a pattern of corporate executives calling a bottom on market downturns. When a stock bottoms, it has reached its low point and may be about to ascend. Don’t believe it? Let’s turn to GuruFocus, an online financial news and research platform. Insider buy/sell ratio, below provides a monthly breakdown of when the number of buyers outpaced the number of sellers (the ratio). When the number of buyers outpaces the number of sellers, the ratio is above 1. When the number of sellers outpaces the number of buyers, the ratio is less than 1. At the height of the 2008 financial crisis, insiders called a bottom

on their stocks over October 2008 through March 2009. When the Federal Reserve stepped in with Operation Twist, and Congress executed a significant stimulus package under the Obama administration, markets started their turnaround on March 6, 2009. But it doesn’t stop there. A surging insider buy-to-sell ratio accompanied short-term bottoms over the last decade. Insiders ramped up buying during the debt ceiling jitters and Black Monday of 2011. Buyers also stepped up in late 2015 after China sent a wave of panic across the markets (alongside falling oil prices and Greek debt woes). Something similar happened in 2018 after a significant selloff occurred because of factors that included the “Chinese tariff” tantrum, expectations of interest rate hikes and speculation about regulatory matters. The most significant insider

Following a dramatic January sell-off, the five-day moving average of insider buying to selling hit its highest level since March 2020.

buying spree since the Great Financial Crisis took place in March 2020 after COVID-19 fears nearly shut down the U.S. economy and the S&P 500 shed roughly 34% of its value in a matter of weeks. Insider buying also ramped up over two weeks as the Federal Reserve announced an unprecedented amount of monetary stimulus to combat the pandemic’s effects on the economy. Once again, insider buying signaled a bottom in the market, reminding investors that no one knows the balance sheets and the value of corporate assets better than chief executive officers, chief financial officers, board members and other executives who scoop up their own shares on the cheap. It also helps when the Fed plays ball. History repeats itself? Executives might sell their stock for any number of reasons.

Insider buy/sell ratio (monthly) SPY

Monthly insider buy/sell ration

500

2.5

400

300

1.5

200

100

0.5

0 Mar 2007

May 2008

Jul 2009

Sep 2020

Nov 2011

Jan 2013

Mar 2014

May 2015

Jul 2016

Sep 2017

Nov 2018

Jan 2020

Mar 2021

Source: GuruFocus

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3/4/22 9:54 AM

Insider net buy/sell ratio (in dollar amount) 5-day moving average 22-day moving average S&P 500

Jul 2017

Jan 2018

Jul 2018

Jan 2019

Jul 2019

Jan 2020

Jul 2020

Jan 2021

Jul2021

Jan 2022

Source: secform4.com

A CEO might sell a few million dollars in stock in the belief that it’s heading lower but might just want cash to buy a new vacation property or send a child to school. One sale doesn’t provide many clues about sentiment. But a large amount of selling by multiple executives—a process called “cluster selling”—could indicate corporate insiders think the stock is overvalued compared with where it might be in a few months. In mid-2021, interest rates remained at zero, alongside low expectations that the Fed would raise interest rates by March 2022. However, as sentiment for rate hikes slowly increased, insider selling increased significantly. In the first 11 months of 2021, CEOs and other insiders sold $69 billion in stock, according to InsiderScore/Verity. That figure was 79% above a 10-year average and clearly signaled that executives were happy to take money off the table. Since November, the sell-off across the markets has fueled speculation regarding when a bottom would form. In locating a bottom,

the most readily apparent predictor would be the amount of buying and selling. Following a dismal selloff during January expiration week, many traders kept a close eye on whether insiders would embark upon a big round of buying. Sure enough, a pattern of solid buying revealed itself during the final week of the month. Moving average The chart Insider net buy/sell ratio, above, from secform4.com tracks insider buying and selling, and shows its five-day moving average during the period. The blue line reveals that following that dramatic January selloff, the five-day moving average of insider buying to selling in terms of dollar amount hit its highest level since March 2020. The January wave of insider buying signaled a bottom alongside various other metrics like aggregate momentum of oversold exchangetraded funds. This might not predict a complete bottom of the market—as evidenced

“ Insiders exploit anomalies likely due to mispricing, and required disclosures improve price efficiency while offering sophisticated investors higher anomaly alphas.” —Conclusion of a study published by the University of Southern California’s Marshall School of Business in 2018

during the 2008 crisis and a number of months of strong buying. However, that buying pattern did provide some stabilization— at least until February when James Bullard, president of the St. Louis Federal Reserve, called for speeding up interest rate hikes and Russian President Vladimir Putin invaded Ukraine. Should those tensions and Fed jitters push the market lower, traders should continue to monitor the five-day moving average of this metric in times of high volatility and consider this question when the market sells off: Are we at the bottom yet? To find out, one must listen to the insiders.

April 2022 | Luckbox

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trades& tactics

DO DILIGENCE

QU I E T FOU N DAT I O N HELPS P ROACT IV E INV ESTO RS U NDERSTAND T HEI R PORTFOLI OS

The BUZZ Doesn’t Live Up to the Hype Even in the era of meme stocks, this pricey and unpopular sentiment fund is underperforming By James Blakeway

ven people who’ve never owned stock or never played Grand Theft Auto heard about the GameStop phenomenon and the “meme stock” hype that gripped Wall Street last year. GameStop (GME) shares ended 2020 at $18.84 per share, mounting an impressive rally from below $6 the previous summer. On Jan. 28, 2021, GameStop shares traded to an intraday high of $483 before closing the day at $193 per share. Financial and mainstream news outlets reported ad nauseam on the aggressive shortsqueeze of GameStop shares that played out on the Reddit community known as WallStreetBets. Naturally, the media furor fueled interest in finding the next stock primed for takeoff. Hungry potential investors flocked to Reddit forums and opened brokerage accounts, ready to capture the profits. While frenzied individual investors strained to find GameStop 2.0, the financial industry took note. Looking to capitalize on the excitement, VanEck Funds Launched its BUZZ exchange-traded fund (ETF). As a social sentiment fund, BUZZ invests in stocks that artificial intelligence (AI) ranks highly because of bullish sentiment online. In other words, people on the internet are “buzzing” about the stocks. Those with the most positive chatter are weighted higher in the BUZZ Index and therefore receive a larger investment allocation in the VanEck ETF. The index and ETF include 75 stocks at any given time. They avoid illiquid or penny stocks

BUZZ marketing

VanEck Funds launched its BUZZ exchange-traded fund to capitalize on the excitement surrounding GameStop and other “meme stocks.” Rank in BUZZ

Symbol

Company

Weigthing

GME

GameStop

3.33%

AAPL

Apple

3.33%

AMZN

Amazon

3.21%

NVDA

Nvidia

3.20%

DKNG

DraftKings

3.08%

SOFI

SoFi Technologies

3.07%

AMD

Advanced Micro Devices

2.99%

PFE

Pfizer

2.97%

AMC

AMC Entertainment Holdings

2.90%

PLTR

Palantir Technologies

2.87% BUZZ: Top 10 Holdings as of 2/15/2022

by requiring each company to be worth $5 billion or more. The stocks also must generate an average of $1 million in daily trading volume. The fund then rebalances at the end of each month to focus on the latest rankings of stocks generating excitement online. Check out the table Buzz marketing, above, to see the top 10 current holdings in BUZZ . In theory, this ETF sounds fantastic. Investors can participate in a well-balanced portfolio of stocks that are trending online without needing to monitor Twitter or message boards. Additionally, the fund vets the stocks to make sure they qualify as sensible investments.

Investors who bought shares in the VanEck BUZZ exchange-traded fund on its debut are not seeing a positive return. 52

But despite all that prep work, the VanEck BUZZ ETF gets lackluster results. BUZZ disappoints when it comes to fund fees, a metric in which it’s far from competitive. As shown in the table “Social costs,” p. 53, BUZZ charges a 0.75% expense ratio. That’s nearly four times as much as Invesco’s Nasdaq100 ETF, which provides investors exposure to the tech-dominant Nasdaq-100 Index. For a fairer comparison, consider VanEck’s semiconductor ETF (SMH), which still has a lower expense ratio at 0.35%. BUZZ also failed to inspire much enthusiasm among investors and traders and thus posts disappointing daily trading volume. After its launch in March of last year, BUZZ saw an average daily volume of 1.8 million shares in the first month. But in January 2022, BUZZ had daily volume of only 61,000 shares. The VanEck semiconductor ETF saw

Luckbox | April 2022

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Social costs

The BUZZ exchange-traded fund could cost investors significantly over time due to higher fees. Index

BUZZ Social Sentiment

S&P 500

Nasdaq-100

Russell 2000

MVIS US Semiconductor

ETF

BUZZ

SPY

QQQ

IWM

SMH

Expense ratio

0.75%

0.095%

0.20%

0.19%

0.35%

10-year cost of $10k invested

$750

$95

$200

$190

$350

Buzzed out

BUZZ outpaced the Russell 2000 at times last year but now lags behind all three major indexes. BUZZ ETF S&P 500 ETF Nasdaq 100 ETF Russell 2000 ETF

$13000

$12000

$11000

$10000

$9000

$8000 Mar 2021

May 2021

Jul 2021

Sep 2021

5.6 million and 8 million shares traded daily on average in those same timeframes. So, how has the expensive and unpopular BUZZ performed compared with the generic indexes? In short, not well. Investors who bought the VanEck BUZZ fund on its debut are not seeing a positive return. To be fair, the market has been turbulent in recent months with all three major stock indexes selling off. However, a purchase of the S&P 500 or Nasdaq-100 ETFs on the launch day of BUZZ was still up money in mid-February. (See Buzzed out, above.) At some points last year, BUZZ was outpacing the Russell 2000 but now lags behind all three major indexes. Investors looking for more aggressive ETFs than the overall indexes can potentially shift some capital to growth-focused ETFs that rely

2204_TRADES_do diligence.indd 53

Nov 2021

Jan 2022

Mar 2022

on basic fundamentals instead of Twitter traffic. The SPDR S&P 500 Growth ETF (SPYG) holds a portfolio of 239 growth-focused firms and has an expense ratio of 0.04%. The ETF industry is revolutionary for individual investors. The ability to invest in liquid, low-cost, diverse funds enables people to participate in the growth of the U.S. stock market and build personal wealth. But remain cognizant that ETFs are still products, and many rely on flashy marketing to draw investors. With less than a year under its belt, time will tell if BUZZ can work long-term and fulfill the dream of capturing social sentiment. James Blakeway serves as CEO of Quiet Foundation, a data science-driven subsidiary of tastytrade that provides fee-free investment analysis and trade ideas for self-directed investors @jamesblakeway

3/3/22 11:33 PM

trades& tactics

MACRO VIEW

O PPO RT U N I T I ES I N G LO BAL DIR ECT IO NAL T R ENDS

Fed Hike Hype Higher interest rates will keep the markets volatile By Christopher Vecchio

hen the Federal Reserve raises interest rates, financial markets can turn volatile. The hikes in the early 2000s bore this fruit and so did the initial efforts to end quantitative easing (QE) and raise rates in the mid-2010s. Now, the Fed has finished tapering its pandemic-era QE program and started its rate hike cycle, so the markets are by no means finished with their current bout of volatility. But what’s next? Well, traders can use the Gartner Hype Cycle to see how the Fed’s tightening may play out. (For another take on the cycle, see The Technician, p. 58.) The hype cycle maps out a pattern of events that typically occurs when a product, event or idea moves from niche awareness to mainstream adoption. It begins with a trigger event that generates enough hype to push the public to a peak of inflated expectation. When the public realizes nothing can live up to the hype, disillusion takes hold. At that point in the cycle, one of two things can happen: The trigger event fails because it’s rendered immaterial, which ends the cycle, or evidence materializes to substantiate some of the initial hype that surrounded the trigger event. If the latter plays out, hype builds anew into a slope of enlightenment. The final stage, the plateau of productivity, arrives as mainstream adoption is achieved. By then, the broader population is not only aware of the trigger event but also understands it and can rationalize it. The stages of the markets’ response to the Fed’s tightening efforts follow the ebbs and flows of the Gartner Hype Cycle—only inverted.

How hype works The Gartner Hype Cycle shows how ideas, products and even personalities can attract attention, overcome obstacles and join the cultural mainstream. Gartner Consulting came up with the cycle in 1995, basing it on research that shows people with low competence tend to overestimate their ability. It goes without saying that much of what’s hyped doesn’t complete the process and instead dies in obscurity.

2. Peak of inflated expectation

5. Plateau of productivity

4. Slope of enlightenment 3. Trough of disillusionment

1. Trigger event

In the markets, it might go this way:

2 ⊲ Exhaustion sets in at a peak of inflated expectations about tightening. 3 ⊲ As the Fed has not yet changed policy materially, interest in buying returns, leading to a rally in asset prices into a trough of disillusionment about tightening. 4 ⊲ As evidence accumulates that the Fed will be forced to tighten policy, a slope of enlightenment leads to increased pressures to sell. 5 ⊲ The rate hikes come to pass, and financial markets level off into the plateau of relative productivity.

1 ⊲ A trigger event occurs when a rate hike produces a sell-off in risk assets, and all of the weak hands are wiped out.

The stock market may have already passed through Stages 1-3 of the inverted Gartner Hype Cycle and may have started

When the public realizes nothing can live up to the hype, disillusion takes hold.

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TRADERS!

DON’T MISS SLOPETALK

The markets’ response to the Fed’s tightening is reflected in an upside-down version of the Gartner Hype Cycle. This example shows the E-mini S&P 500 futures contract, the VIX and VVIX in a four-hour time frame. S&P 500 Futures (/ES)

• It’s FREE • Live discussion (text, charts, and voice) just for traders!

slopet alk.com

The inverted hype cycle

Created by:

4850

Tim Knight

1. Trigger event: January FOMC minutes

Founder of Prophet

4750

3. Trough of Disillusionment: Ends after January NFP, January U.S. CPI reports

4650

& SlopeOfHope.com

4550

4450

4350 VIX VVIX

4250

2. Peak of inflation expectations: VIX > 35, VVIX > 150

170 160

150 140

130 120

110 15

100 Dec 6

Dec 16

Dec 26

Jan 5

Jan 15

Jan 25

Feb 4

Feb 14

Source: Bloomberg

moving into Stage 4. (That trend is reflected in The inverted hype cycle, above.) 1 ⊲ The trigger event occurred in January, when the minutes from the December Federal Open Market Committee suggested that not only would rate hikes arrive quickly but also that the Fed would embark on quantitative tightening (QT) this year. 2 ⊲ Over the next several trading sessions, the VIX, which measures the implied volatility of the S&P 500, spiked above 35. Meanwhile VVIX, which measures the implied volatility of the VIX, moved above 150, representing the peak of inflated expectations about tightening. 3 ⊲ Exhaustion set in, making for a short-term rebound in asset prices to a trough of disillusionment about tightening. 4 ⊲ The inverted hype cycle entered Stage 4 in February, when the better-than-expected January non-farm payrolls report showcased a resilient labor market, and the January consumer price index indicated inflationary price pressures had reached a 40-year high.

2204_TRADES_macro.indd 55

Those data points were the material evidence financial markets needed to embark on their Stage 4 slope of enlightenment, whereby acceptance began to increase that the Fed would be tightening policy rapidly over the coming months. So, what does the inverted Gartner Hype Cycle tell traders about the near-term path of the financial markets? If stocks are in the midst of Stage 4, then there’s still pressure to sell. In fact, given the historical precedence in the early stages of Fed tightening efforts, stock prices may remain volatile with a downside bias through the middle of 2022. Only when the Federal Reserve has actually begun to raise rates and has embarked upon the path of QT will stock markets reach their Stage 5 plateau of productivity, the time and place where buying opportunities may begin to emerge in earnest. Christopher Vecchio, a senior currency strategist for DailyFX, forecasts economic trends in a number of countries. @cvecchiofx

3/3/22 11:34 PM

trades& tactics

INTERMEDIATE

Mean Reversion By Michael Gough

hile hype can inflate markets like hot air in a balloon, prices tend to return to Earth at a moment that’s notoriously difficult to forecast. Conversely, underpriced stocks often regain the value they’ve lost. These are reasons traders can put a little faith in the statistically backed mean-reversion strategy. Still, the strategy works only for a handful of mean-reverting asset classes that oscillate around a historical average price. Many futures markets have recently begun moving beyond their average price, but even that trend presents an intriguing opportunity for mean-reversion traders. How so? Well, mean reversion is simply the idea that a price or measure will revert to its long-term mean at some point if it’s not already there. If prices are far beyond their average, either above or below, they may be likely to snap back. While mean reversion may not work on a longer timescale with all markets—equities that exhibit positive drift, for example—it can provide an effective strategy in interest rate, volatility and commodity markets. Take 10-year interest rates, which were about 3% in 2018, that swiftly fell to 0.50% during the pandemic and have since climbed back to 2%. That’s near their mean price for this look-back window. The mean 10-year interest rate for this period is 1.84%, relating to a Small 10-Year U.S. Treasury Yield futures price of 18.40. That mean provides a summary of the data, and traders can calculate it by dividing the sum of data points by their number. The opportunity to employ a meanreversion strategy may present itself when the current price moves far above or far below the mean. While rates may not be near the mean

Crude stats

From statistical theory, 68% of the data (price) during the last 10 years has been within the $48 to $92 per barrel price range.

100

Jan 2010

Janl 2012

Jan 2014

Jan 2016

at the moment, they may clearly exhibit a tendency to revert to the mean. Mean reversion can occur in various time frames. On Feb. 16, for example, crude oil was sitting far above its long-term mean, potentially indicating a reversion opportunity. In determining when to buy or sell based on mean reversion, one technique would be to use a statistical measure such as standard deviation. Standard deviation is the mean’s good friend and helper in measuring valuable, yet realistic, opportunities; it’s simply a measure of how much the data points deviate from the mean. The mean price of crude oil, for example, has been roughly $70 per barrel over the last 10 years. The standard deviation is +/- $22. From statistical theory, 68% of the data (price) during the last 10 years has been within this $48 to $92 price range.

Jan 2018

Janl 2020

Jan 2022

Thus, if the current price moves beyond $92, it indicates an overstretched market that may return to its average price of $70. So, a mean-reversion trader taking a longterm view of crude oil may consider selling the commodity because over the last decade most values fall below the recently breached $92 threshold. (The war in Ukraine may void this example, but the principle holds true.) By adjusting the look-back period in markets that exhibit mean reversion tendencies, traders can find new opportunities. Whether it’s intraday scalping or swing trading over several weeks, adjust the time frame and standard deviations to fine-tune entry and exit and thus gain control of profit and loss. Michael Gough enjoys retail trading and writing code. He works in business and product development at the Small Exchange, building index-based futures and professional partnerships. @small_exchange

Respecting the tendency of some securities prices to return to their long-term mean is an essential trading strategy. 56

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trades& tactics

ADVANCED

Hype and Skew Hyped-up stocks can have unusual option pricing with atypical option skew By Michael Rechenthin

Skew to one side doesn’t necessarily mean that traders are “predicting” the stock will move in that direction.

Michael Rechenthin, Ph.D., aka “Dr. Data,” is the head of research and development at tastytrade. @mrechenthin

+15% OTM call price

14 12 10 8 6 4 2 0

275

300

325

350 Strike

375

400

425

Hype

A hyped stock like Roblox has upside skew. Calls cost more than equidistance puts.

6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5

45.0

47.5

50.0

52.5

55.0 Strike

57.5

60.0

62.5

65.0

Bearish Strategy

Bullish Strategy

If the stock has Put Skew

Debit Spread on the “cheap” call side

Credit Spread on the “expensive” put side

If the stock has Call Skew

Credit Spread on the “expensive” call side

Debit Spread on the “cheap” put side

April 2022 | Luckbox

2204_TRADES_advanced.indd 57

Price of the OTM Option

RBLX’s Price of each OTM Strike

+15% OTM call price

ing that the stock will move in that direction. It’s where speculation or fear is occurring. Here’s a case in point: Back in November, when Roblox was above $125 per share, the calls were even more expensive compared with puts— much more expensive. With the price of Roblox considerably lower at press time at $45 per share, the market was pricing the risk incorrectly back in November. This is an important observation because hype stocks often have unusual option pricing with atypical option skew. But that fear of unusual option pricing rarely lasts for long. Options seldom stay with volatilities of 100% to 200%. So how does one take advantage of skew and hype? First, take advantage of skew and fear in the market. If the fear is to the downside, then puts will be more expensive. If speculation is causing upside skew, then those calls will be expensive. Depending on your risk tolerance and trading style, the idea is to purchase cheap options and sell expensive options. To trade this skew with risk-defined strategies (which are strategies that limit profit and loss), the idea is to sell credit spreads on the expensive, skewed side and trade debit spreads on the cheap, non-skew side. Therefore, follow the rules of thumb in Normal, upper right. By keeping an eye on the skew, traders can take advantage of the market’s perception of risk and make more informed decisions.

Price of the OTM Option

QQQ’s Price of each OTM Strike -15% OTM call price

A “normal” stock like QQQ has downside skew. Puts are more expensive than equidistance calls.

-15% OTM call price

ook at prices of the Nasdaq ETF (QQQ) out-of-themoney (OTM) strikes for the April 14 expiration. They’re highest at the current price of QQQ at 345 and get lower the farther out-ofthe-money the strikes are. Now notice that the 15% OTM put is 5 1/2 times more expensive than the equidistant call: $3.65 for the 295 put versus $0.70 for the 398 call. This is a classic put skew. According to traders, the risk is that protection is needed to the downside. After all, stocks tend to fall in price further and faster, and then rise. This market behavior makes puts more expensive than calls. Investors seek protection against an adverse move, thus driving up the cost of the option on the side of the perceived risk. Now look at a “hyped” stock: Roblox Corp. (RBLX). It’s rising and falling with the metaverse craze. It has skew toward the upside. In other words, the market is “bidding” up calls more than equivalent distance puts. In this example, with Roblox selling for $54 per share, the 15% OTM put is selling for $2.15 versus $3 for the call. It’s nearly 50% more costly for the calls. Skew to one side doesn’t necessarily mean traders are predict-

Normal

3/3/22 11:39 PM

trades& tactics

THE TECHNICIAN

A V E T E RA N T RA D ER TAC K LES T EC HNICALS

3D Printing: A Hype Cycle Case Study The public’s interest in 3D printers has waned because the devices failed to live up to the hype. What can that teach us about trading technology trends? By Tim Knight

hatever happened to 3D printing? It was supposed to be in every home in America by now, busily cranking out all the tools, human organs and automobiles anyone could ever want or need. Clearly things haven’t gone as planned. But studying the 3D saga can at least provide some insight into how hype and human psychology play out in the public arena of ticker symbols. Consultants at the Gartner Group have come up with a five-stage “hype cycle” to explain what happens with new technology. (See p. 52 for another take on the cycle.) The model drew criticism for its allegedly unscientific lack of rigor and its supposed dearth of hard data, but it provides an interesting narrative for the stories of “hyped” industries. The five stages are: 1. Innovation Trigger 2. Peak of Inflated Expectations 3. Trough of Disillusionment 4. Slope of Enlightenment 5. Plateau of Productivity It would seem 3D printing has descended into the Trough of Disillusionment. Consumers feel discouraged, startups have failed and the future seems uncertain.

Trigger to trough The first stage of 3D printing, the “innovation trigger,” took place in October 2009, more than a dozen years ago. That’s when a man by the name of Bre Pettis introduced what he called “a box with wires” and named it MakerBot. Retailing for about $1,000, it was the first 3D printer with a price low enough to appeal

Profits materialize

The price of stock in Materialise NV rose a mind-blowing 1,600% in four years.

85 80 75 70 65 60 55 50 45 40 35 30 25 20 15

Aug 2014 Feb 2015 Aug 2015 Feb 2016 Aug 2016 Feb 2017 Aug 2017 Feb 2018 Aug 2018 Feb 2019 Aug 2019 Jan 2020 Jul 2020 Jan 2021

slopecharts.com

to consumers. A quarter of a century after the first patent for 3D printing, people could finally afford to “print” something physical in their own homes. The hype machine swung into action. The media raved about this revolutionary new technology and predicted that in just a few years, people would be able to print just about anything imaginable—up to and including houses. Hobbyists and serious technologists jumped feet first into the new realm of 3D printing. But with very few exceptions, they used their new peripherals to print out only

Early adopters of 3D printing found they could create only so many trinkets before the process seemed pointless. Some might feel it’s time to pronounce the product dead.

Luckbox | April 2022

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the easiest and most instantly gratifying things possible. They made little toys, knickknacks and simple models. Those early adopters soon found they could print only so many trinkets before the process seemed pointless. As reality set in, they began to sell their seldom-used 3D printers. These were some of the problems: ⊲ Printers that sell for $1,000 aren’t made with professional-quality parts. Manufacturers have to cut corners to make them that affordable. ⊲ The early printers were based on new technology that required users to have a fair bit of hobbyist skill, much like radio in the 1920s and computers in the 1970s. To function well, the printers required nearly constant calibration. ⊲ There weren’t many useful objects that people could print at home, unless they knew computer-aided design and had the requisite software. Almost nothing but silly, useless trinkets materialized at the end of a time-consuming print cycle. Thus, the “peak of inflated expectations” came and went swiftly for 3D printing. Consumers felt they had bought something that fell far short of expectations, and their 3D printers became idle dust collectors. In public markets Personal computers first appeared in 1975, but it took a full five years for any companies in that industry to hit the public markets. These days, the world of high-tech is so mature and offers so much financial opportunity that it took very little time for 3D printing companies to go public. A good example, Materialise NV (MTLS), formed an exceptionally clean saucer pattern (tinted in green) and ascended from about $5 to about $85, an astonishing 1,600% rise in price, over four years. But the transition from “peak of inflated expectations” to “trough of disillusionment” can be devastating for equities, and thus Materialise crumbled from $85 to $20 in less than a year. A similar situation played out with Desktop Metal (DM). The special-purpose acquisition company (SPAC) that bought Desktop Metal was trading at about $10 before latching onto the 3D printer firm. After the purchase, the stock swiftly ascended by almost 250%. However, Desktop Metal peaked in February 2021, just the way

Crash and burn

The transition from Gartner’s “peak of inflated expectations” to “trough of disillusionment” caused Materialise to crumble in less than a year. 85 80 75 70 65 60 55 50 45 40 35 30 25 20

Feb 2020 Apr 2020 Jun 2020 Aug 2020 Oct 2020 Dec 2020 Feb 2021

Apr 2021

Jun 2021 Aug 2021 Oct 2021 Dec 2021 Feb 2022

slopecharts.com

Desktop dump

The SPAC that bought Desktop Metal shot up in price by almost 250%, but then it peaked and began shrinking in value. 30

June 2020

Sep 2020

Dec 2020

Mar 2021

Jun 2021

Sep 2021

Dec 2021

slopecharts.com

Materialise did, and it shrank in price from about $34 to a mere $4, representing a nearly 90% wipeout. These stocks have become dust collectors— just like the printers themselves. Volume tells the story Hype attracts attention and inspires feelings ranging from excitement to rancor. Those emotions find expression in the volume of

stock traded in the public markets. Positive press and word of mouth make a large number of investors want to join in on the fun and reap the profits. But like most phenomena in the trading world, hype can be a double-edged sword. Take the example of Cathie Wood’s Ark 3D printing exchange-traded fund (ETF), which trades under the ticker PRNT and tracks the performance of the “Total 3D Printing Index.” ⊲

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trades& tactics

The volume for this ETF had been modest for its entire history, but it began to receive a tremendous amount of attention in March 2020. That caused it to triple in price in less than a year, peaking in February 2021. As the volume portion of the accompanying chart illustrates, the higher the price went, the more active the fund became. Larger and larger sums of money piled into the fund. Success begets success, particularly in the world of tradable instruments. Once this phase of the hype cycle was completed, however, PRNT did precisely what it was supposed to do: track the index value of the component companies. Thus, it went on to lose more than half its value in a year’s time. Long-term holders were still all right, but the majority of owners (represented by the swelling volume of the stock while its price was peaking) faced unexpected losses, whether realized or not. Indeed, the highest volume for the fund in its entire history came on Feb. 8, 2021, and the fund peaked literally the very next day. Revival or denouement? Given the disillusion that pervades the consumer market for 3D printing, the massive plunges in stock prices and the discord among early adopters, some might feel it’s time to pronounce the product dead. But not necessarily. The technology seems to work well in two sectors: education and engineering. Rapidly prototyping a physical product from a desktop computer proves invaluable to engineers creating anything from automotive replacement parts to surgical devices. Operating 3D printers also teaches students a lot about writing computer code. No guarantees Progressing through the first three phases of the hype cycle by no means guarantees 3D printers or anything else will continue into the the final two phases and thus achieve success in the marketplace. Examples abound. In the early 1950s, lots of Americans were convinced they’d soon pick up their groceries in nuclear-powered automobiles. That was just one among many revolutions that were nothing more than hype. Yet 3D printing doesn’t seem far-fetched. And combining the design power of a

Volume follows price

The higher the price went for stock in the 3D Printer exchange-traded fund, the more active it became.

50 46 44 42 40

Chart headline Ipsantio ruptiseatio aperit

Chart explainer Ad utatibu sciasitaque perupta sperum doluptat aliqui iuntibus aces si occabor maximporro tempori

34 32 30 28

3,000,000 2,600,000 2,200,000 1,800,000 1,400,000 1,000,000 600,000 200,000 Mar 2019 May 2019

Jul 2019

Sep 2019 Oct 2019 Dec 2019 Feb 2020 Apr 2020 Jun 2020 Aug 2020 Oct 2020 Dec 2020

slopecharts.com

Out of print

Once the 3D Printer exchange-traded fund completed Gartner’s “peak of expectations” phase, the stock lost more than half its value in a year. Source: Unt voluptate sum 50 48 46 44 42 40 38 36 34 32 30 28 3,000,000 2,600,000 2,200,000 1,800,000 1,400,000 1,000,000 600,000 200,000 Nov 2020 Dec 2020 Jan 2021 Feb 2021 Mar 2021 Apr 2021 May 2021 Jun 2021 Aug 2021 Sep 2021 Oct 2021 Nov 2021 Dec 2021 Jan 2022

slopecharts.com

computer with the magic of a printer could easily capture the public imagination again. All it will take is that “killer app.” Tim Knight has been using technical analysis to trade the markets for 30 years. He’s the host of Trading Charts with Tim Knight on the tastytrade network and offers free access to his charting platform at slopecharts.com. @slopeofhope

The magic of 3D printing could capture the public imagination again. All it will take is that “killer app.” April 2022 | Luckbox

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trades& tactics

5 6

MEET

KIMBERLY JANE @mommavestor Home/Office location

Washington

Years trading

Three

How did you start trading?

I have been engaged in the stock market for most of my adult life, but at first I invested in the market through a portfolio manager. When the market pulled back in 2018, I began to manage one of my accounts. I began to research investment strategies and plunged headfirst into trading. It was then that I recognized my ability as a woman to direct my own financial outcome, which was both enlightening and empowering.

However, as a woman, mom and wife, I felt lonely in the trading realm. I did not know other female traders. I became passionate about connecting with women traders because our financial priorities and trading styles can be different from those of men. I began encouraging women to become financially literate. Then I came across the LIZ & JNY Show about trading on tastytrade, and this took my interest and passion for trading to a whole new level. To watch two moms trade together while talking about their kids and everyday lives helped me find my place as a female trader. Now I have a strong trading community. Favorite trading strategy for what you trade most?

I employ a wide range of trading

1. Micro futures watch list on tastyworks 2. My positions 3. tastytrade Live 4. MNQ future fills 5. Market news and analytics 6. NQ futures 15-min daily chart

strategies, as I like to try new methods and diversify my trading tactics to lower my overall portfolio risk. That said, I have two favorite trading strategies: the superbull and scooping micro futures. First, the superbull is a directional trade whereby the underlying premise is that the stock, index or commodity will go higher by expiration. To place the trade, I structure a debit spread with the long call around the .45 delta and the short call 1/3-1/2 the width of the long call. I then sell a put as far away from the current stock price as possible, either in the same month or back a month, to pay for the cost of the debit call spread, thus yielding a credit for the superbull trade. My second favorite trade is “scooping” micro futures. To place the trade, I make a directional assumption buying or selling one of the micro futures. Typically, I trade the equities or volatility such as the / M2K, /MES, /MNQ or /VXM. On Twitter there is a hashtag #scoopyscoopy where members of our trading community post their daily micro futures trades with the goal of booking $100 a day, which amounts to $24,000 a year. We call this the $100-a-day challenge. Most important, trading small and booking realistic gains while minimizing risk is the best way to have a profitable profit and loss ratio. Average number of trades per day?

Eight

What percentage of your outcomes do you attribute to luck?

When I began trading, I was less knowledgeable about the trades I was placing. Thus, I attribute more of my gains to luck. However, as I have become a more educated trader regarding IVR (implied volatility rank), probabilities of success and portfolio risk, there is less luck involved and more ability to manage my profit/loss ratio and overall portfolio outcome.

Luckbox | April 2022

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Moreover, what replaces luck is working on my patience, resisting fear of missing out (FOMO) by chasing, giving a trade time to go my way, trading small (which is key), reducing risk on any single trade and diversifying my portfolio. Also, I have become a more successful trader through continued education related to trading strategies, probabilities, the “Greeks,” and expanding my trading toolbox with the help of charts and technical tools, such as Fibonacci retracement and RSI (Relative Strength Index). The bottom line for me in trading is engaging in personal growth and knowing my weaknesses and my strengths. That puts me in control of my trading outcome, and luck plays a less relevant role. Worst trading moment?

It was during the March 2020

2204_TRADES_trader.indd 63

COVID correction. Though I had made portfolio gains of 6% during the market correction, I did not recognize that the liquidity injected by the Federal Reserve through quantitative easing and zero interest rates would lead to a rapid V-shaped recovery. I thought I had time on my side to redeploy capital, and therefore I mostly sat on the sidelines predominately in cash through April 2020. By the time I began reinvesting the cash in mid-May, the equity markets had run up at a furious pace. As such, this is where a deep understanding of how and when to use various options strategies might have worked in my favor. For example, in a stock or index that I wanted to own, such as Apple (AAPL) or the SPDR S&P 500 Trust exchange-traded fund (SPY), I could have sold a put, collecting the premium and making money as the

FAVORITE TRADING RESOURCE My favorite way to learn about stocks and options is watching live trades on the tastytrade network, especially on the LIZ & JNY Show. It’s better than any book on equities.

stock/index kept rising. Or, I could have used a debit call spread, superbull trade or poor person’s covered call, but because I lacked education on options strategies, I invested very little and thus underperformed the market at the end of 2020. The lessons from my worst trading moments are these: Learn all you can about a variety of investment and options strategies, use a wide range of trading tools, challenge your assumptions, discuss the markets and ideas with traders who care about your success, and move past your previous trading errors. Learn all this and place the next trade. Most important, trade small so that one trade does not make or break your P&L. As Liz and Jenny say on their trading show, “there’s no crying in trading.” I remind myself to stay humble. There is always a new trade.

3/3/22 11:35 PM

As this issue goes to press, more than a million refugees have poured across the borders of Ukraine into Poland, Romania, Hungary, Slovakia and Moldova, triggering what may become the largest humanitarian crisis in Europe since World War II. Most have been women and children leaving with only what they can carry. Meanwhile, other Ukrainian citizens have been displaced from their homes but remain inside the country. “The situation is spiraling out of control,” James Denselow, head of conflict and humanitarian policy and advocacy at Save the Children UK, told Luckbox. “If the conflict escalates further, we fear the death toll for children will continue to rise substantially in the coming days.” According to Save the Children, 7.5 million kids are in danger of physical harm, emotional distress and long-term displacement because of the invasion. The charity, which is providing cash assistance, food and other support to Ukrainian children and refugees, has earned Charity Navigator’s highest 4-star (“Give with Confidence”) rating. To donate to the Ukraine Crisis Relief Fund, visit the Save the Children website via the QR code below.

Save the Children

PHOTOGRAPH: COURTESY OF THE DISASTERS EMERGENCY COMMITTEE

THE LAST PICTURE

Save the Children

Luckbox | April 2022

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April 2022

Articles inside

Rock Redux for Millennials

The Rock is on a Roll

MUSIC’S MEMORABLE MOMENTS

THE JEEN-YUHS OF HYPE

Inflation, Hot Air & Wind

Insiders Aren't Buying Ark's Hype

INSIDERS AREN’T BUYING ARK’S HYPE

THE ROCK IS ON A ROLL