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JULY 2022
THE OUTDOOR ISSUE
HOUSING Troubles BACKYARD Bubbles Road Runners Free digital subscription: getluckbox.com
& Endless Summers
the control freak's guide to life, money & probability
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July 2022
PHOTOGRAPH: SHUTTERSTOCK
Builders can’t keep up with the nation’s demand for housing.
12 | Building Out
19 | Not Outdoors by Choice
24 | Shutter Savvy
16 | Housing Meltdown?
20 | Images with Impact
26 | American Outdoor Brands
Homeowners are transforming their lawns into outdoor living spaces and recouping a significant portion of the cost if they sell.
Don’t look for high housing prices to tumble anytime soon. It’s not a bubble.
More than half a million Americans face homelessness, up 30% over the last seven years. More federal assistance may be on the way.
Conservation photographer Robert Glenn Ketchum captures nature in a way that inspires others to protect the environment.
Nature and landscape photographer Patricia Davidson has a passion for exploring the outdoors that made her camera a natural fit.
AOB became an independent public company in August 2020, building 21 authentic lifestyle brands for outdoor adventures during the pandemic.
July 2022 | Luckbox
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Higher, faster, further. Why not more beautiful?
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America is rediscovering the outdoors with (clockwise from below) nomadic comedians, moonshine, outdoor music festivals and a sophisticated take on miniature golf.
editor in chief ed mckinley managing editors yesenia duran elizabeth schiele associate editors kendall polidori mike reddy editor at large garrett baldwin
PHOTOGRAPHY: (GOLF) POPSTROKE; (ROCKHOUND) TYLER STEVE CARLOS; (ROAD WARRIOR) ELIZABETH SCHIELE; (MOONSHINE) GARRETT ROODBERGEN
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 GAME THEORY
29 Different Strokes LIQUID ASSETS
32 In the Still of the Night DIVERSIONS
34 The New Road Warriors RECORD HIGH
40 Green Days at Music Festivals ROCKHOUND
trades&tactics CHEAT SHEET
ERT INS Dollar-cost
Averaging
CHERRY PICKS
49 Cyclical Stocks THE NORMAL DEVIATE
THE PREDICTION TRADE
52 Making Rain
ARTS & MEDIA
CRYPTO CURRENTLY
FINANCIAL FITNESS
CALENDAR
47 Open Roads, Bad Traders & Tequila
FUTURES
61 Gas Pump Arbitrage UNLUCKY INVESTOR
63 Post-pandemic Reset
50 Accuracy vs. Precision
55 Meet Tom Carlucci
46 Sunshine Superman
contributor’s guidelines, press releases & editorial inquiries editor@luckboxmagazine.com
actionable trading ideas
42 A Blues-Rock Shakedown 44 Outer Voices
comments, tips & story ideas feedback@luckboxmagazine.com
TRADER
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FAKE FINANCIAL NEWS
Happy Glamper THE LAST PICTURE
64 The Business of Education
advertising inquiries advertise@luckboxmagazine.com subscriptions & service support@luckboxmagazine.com media & business inquiries associate publisher elizabeth schiele es@luckboxmagazine.com 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 Printed at Lane Press in Vermont
56 Crypto’s New Consensus
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TACTICS BASIC
Luckbox magazine
58 First, Diversify DO DILIGENCE
@luckboxmag
60 On the Back Burner On the cover: Illustration by Jason Schneider
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!
July 2022 | Luckbox
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STRAP IN
What part of history we’ve learned When it’s repeated? Some things, we’ll never overcome If we don’t seek it We live in troubled times We live in troubled times —Troubled Times, Green Day, 2016
T
he May Consumer Price Index pegged year-over-year inflation at 8.6% sparking a dramatic market sell-off as Federal Reserve rate hike expectations shifted. At press time, the odds of at least a 75-basis point hike in July (to complement June’s 75-point hike) stood at a convincing 93%, according to CME Group’s FedWatch. We are witnessing the Federal Reserve’s most aggressive policy rate reaction since 1994. Fed Chair Jerome Powell said the central bank is committed to reducing inflation. But the spending habits of Congress and the White House are putting the Fed under more pressure than during the deep recession of the early 1980s. Powell shouldn’t count on any help. Once the government stops fantasizing about a blank-check economy that keeps printing money just because it can, it has two primary tactics to halt inflation. The central bank can reduce the money supply and aggregate demand, or the legislature can support an increase in supply through business-friendly policies. If a nation wants more supply, the government can cut environmental regulations, eliminate tariffs, suspend antiquated shipping laws and cut business taxes to help spur investment and deployment of capital. But with the Biden administration responding to the crisis with readings from the “corporate greed” playbook,
we will not likely see an accommodative regulatory posture emerge anytime soon. Meanwhile, to reduce aggregate demand, Congress could reduce spending—through austerity. It could raise taxes and keep that capital out of circulation to cool off spending. It could encourage consumers to save money instead of spending. But, again, that isn’t likely, given that Congress signed off on $3.9 trillion in fiscal stimulus in the past two years. The current Biden Fiscal Year 2023 budget calls for $3.5 trillion in taxes— but $5 trillion in spending. The administration’s plans limit supply and increase demand through central spending. That puts the pressure squarely on the Fed to tame inflation, but its toolbox is small and geared toward tempering demand. The Fed can reduce the amount of money in the system by raising interest rates and/or selling bonds from its balance sheet back into the economy. By selling bonds, the Fed drains liquidity from the economy. There is little dispute among economists that hawkish monetary policy is the only way to cool the economy when runaway inflation
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.
4
2 Greater market volatility brings greater opportunity for astute active 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.
takes hold. So, it’s fair to ask why we pay lip service to hyper-Keynesian econo-fantasies, such as Modern Monetary Theory. (Guilty. Our July 2020 issue is pictured.) What should you expect? In 2018, the Fed reduced its balance sheet from roughly $4.5 trillion to less than $4 trillion over 12 months. The S&P 500 fell 19.8% in December 2018. The Fed has told Americans that it can’t afford to worry about the stock market’s performance right now. But the Fed is the only backstop to reduce inflation in this economy. While a recession appears likely— there’s only been one soft landing and that was in 1994—the markets will be better off in the long term. But here’s something sobering to keep in mind. Most financial media report the June consumer price index number was the highest since 1981. But they disregarded the fact that today’s inflation formula differs significantly from the one used 40 years ago. ShadowStats, a website that tracks inflation based on the 1980 alternative calculation, suggests that real inflation is in the 15% to 16% range. Strap in. It feels like 2008—energy prices are surging, GDP is slowing and the Fed is fighting inflation while recession fears are looming. But as much as market gurus and economists scoff at the notion that “it is different this time,” truth be told, it is different every time. The depths of this downturn, and the resilience of the inevitable recovery to follow, are simply unpredictable. Still, something is certain. Now is not the time to be passive with your investments. Stay engaged, take control, find opportunity in chaos, and don’t rely upon luck. Ed McKinley Editor in Chief
Jeff Joseph Editorial Director
Luckbox | July 2022
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SCAN THIS
OPEN OUTCRY We asked Luckbox readers about the market’s likely comeback and their comments on the June “Comeback” issue.
I’m betting on a comeback of the indexes and crypto. Meme stocks/FOMO will come back in three to five years but not in the near future. They always come back, just with a different name. —Duncan Harvey Essex Junction, VT My favorite is the magazine cover [pinball machine]. It should be an NFT, hahaha. I would have loved to have seen a focus in the penny stocks with potential in the cannabis article, The Blunt Truth About Pot Stocks. —Oz Panda Alexandria, VA Enjoy the issue but feeling as if recently the magazine is pandering to an increasingly younger crowd with each subsequent issue. Not a problem, just an observation (perhaps incorrect). —Seth Miller Redmond, WA I loved Vonetta’s last two bits on trying out electric vehicles. I like her opinions like I like my orange juice. Unfiltered. —Noel Kurth Rochester, NY I especially enjoyed seeing what is happening with Stuckey’s. I hated to see it go and I’m glad it’s coming back. —David Keaton Travels 100% of the time
There’s more to Luckbox than meets the page.
85.2%
Of Luckbox readers said they would work remotely if given the opportunity.
I live in my RV and travel around. I have no need or desire to be attached to an office. More than 30 years ago, I found that I was healthier, happier and more productive working remotely, and I have been doing so for most of the time ever since. I lead several globally scattered teams, so tying myself to one location would be pointless anyway. —David Keaton
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 Two ways to send comments, criticism and suggestions to Luckbox
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Enjoy the additional content
6/17/22 12:56 PM
SHORT INTEREST
THE OUTDOOR ECONOMY
$2.35 billion The global glamping market in 2021 —Grand View Research SEE PAGE 12
SEE PAGE 8
Sales of kayaks grew by almost 30%, backpacking tents by almost 50% and sleeping bags by 28% from the year before. —as of May 2021, according to Forbes
58%
of Americans planned to purchase outdoor furniture or accessories in 2021. ―International Casual Furnishings Association
SEE PAGE 26
“... there is growing concern that U.S. house prices are again becoming unhinged from fundamentals.” —Federal Reserve Bank of Dallas, March 29, 2022
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PHOTO: SHUTTERSTOCK
SEE PAGE 16
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“Oil production still hasn’t recovered to pre-COVID levels. It’s going up, but it can’t recover quickly enough. We’re going to be stuck in this until demand comes down significantly, or supply goes up. That feels like a long shot at this point.” —Patrick De Haan of GasBuddy, quoted in The New York Post
SEE PAGE 61
48%
SEE PAGE 29
74%
Increase in golf apparel sales in 2021 —Forbes
YOY increase in Ole Smoky Distillery moonshine and whiskey sales volume in 2021 —Bar Business Magazine SEE PAGE 32
16 M+ SEE PAGE 34
Project Van Life’s total reach per month
400,000+
Average reach per feed post @project.vanlife
There are more golf courses in the U.S. than Starbucks or McDonald’s locations. —Erik Matuszewski, National Golf Foundation
God Only Knows –The Beach Boys
PAUL MCCARTNEY’S FAVORITE SONG OF ALL TIME
—Far Out magazine, March 2021 SEE PAGE 45
“... Ethereum prepares for its long-awaited merge ... completing the protocol’s transition to an energy-efficient proof-of-stake consensus mechanism.” —Will Hamilton, head of trading and research at Trovio Capital Management SEE PAGE 56
July 2022 | Luckbox
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FAKE FINANCIAL NEWS
Happy Glamper A longtime camper ditches her rustic tent for a more luxurious take on enjoying the outdoors By Vonetta Logan
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Glamping explained The Fields is the epitome of “glamping,” a portmanteau that simply means glamorous camping. Glamping offers accommodations and facilities that are more luxurious than
Glamp vs. Camp THE FIELDS OF SOUTH HAVEN
$385+ a night
PJ HOFFMASTER STATE PARK
$46 a night
( $10 day pass or a $36 yearly pass to visit Michigan state parks) $5 per wood bundle
“bare-bones” camping. The glamping market in the United States is expected to bring in $1 billion in revenue by 2024, according to Tents Xpert, a glamping tent manufacturer. And there’s no sign of slowing down. In fact, 21% of the 48 million households that camped at least once in 2020 classified themselves as first-time campers, according to the KOA 2021 North American Camping Report. More than half of these new campers stayed at campgrounds with at least some amenities, and nearly half of the new campers tried glamping. Setting up glamp As a longtime camper, I decided to up my game and try glamping. In early June, I rode my Triumph motorcycle the 125 miles from Chicago to South Haven, a jewel of a lakeside town in Michigan’s Harbor Country. After parking my bike in a field overlooking rows and rows of blueberries, I was greeted by friendly staff members who chauffeured me and my belongings to a tent. We drove up a path lined with cedar chips to the spacious and well-appointed tents from Montana Canvas. In front of each tent is a private fire pit surrounded with Adirondack chairs. A cute bistro table and chairs are positioned on the deck, complete with a plaid table-
PHOTOS BY VONETTA LOGAN
W
hen most of us drive home after work, the thoughts running through our minds are mundane at best: “Ope! I gotta run by Target real quick.” But for entrepreneur Irene Wood, a drive after work led to the creation of the Midwest’s premier destination for glamping. When she noticed a 30-acre blueberry farm with the Black River bisecting it was up for sale, she knew her after-work stop would cost more than a trip to Target. Wood had always wanted to capture the nostalgic feeling of camping in a way that connects visitors with nature and the outdoors, and that’s how she created an idyllic oasis called The Fields of South Haven, Michigan. Slightly scarred from childhood camping trips with her brothers cooking cans of beans over an open fire, Wood’s version of glamping comes with 400-square-foot luxury tents equipped with electricity, a king-sized bed, an en suite bathroom with a rain-style shower and an electric fireplace for heat. She opened The Fields in 2018 and this year doubled the number of luxury tents to 19. The Fields operates on that working blueberry farm and features a communal food hall, two massage huts, a communal fire pit and a newly planted lavender field.
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cloth and a Mason jar filled with local wild flowers. My tent faced the river and my first thought was, “OK, she did the damn thing. This is super swaggy.” Unzipping the tent, I stepped into a world of luxury. The enormous bed was swaddled in rustic-chic linens. A small leather chair was nestled in the corner, perfect for curling up to read a book. A secretary desk was filled with board games and other thoughtful touches, like fire-starters. The tent also comes equipped with a bathroom and shower. Guests are free to unplug and unwind in a variety of ways, but there’s no Wi-Fi, and that’s intentional. I’m an experienced camper and probably camp an average of 25 nights a year. I had never been glamping because I like to be miserable so I can brag about it later. But now, as I age, I’m considering staying at places like The Fields more often. Wood and her husband, Cary, have been very deliberate about the atmosphere they design for guests, but they’re also determined to make sure everyone has a unique experience. “We put back every cent we make into the resort,” Cary Wood said.“It’s not a labor of profit for us—it’s a labor of love.” The resort was fully booked during my stay, and most of the guests were repeat visitors. A couple from Chicago had visited the property four times and was accompanied by friends who had been twice. Another couple had just flown in from the West Coast on their private jet to visit The Fields for a second time. A group of four ladies who were enjoying a girls’ weekend were also repeat guests. A visitor named Hilary compared it with other glampgrounds: “We did Under Canvas in the Smoky Mountains,” she said. “It was more rugged than this. The finishings here are more luxurious, but the setup is similar.” A Midwestern feel The vibe was friendly and open at The Fields. It’s the Midwest after all, so while the guests are
Above: The Fields co-owner Cary Wood mans the breakfast bar as a guest helps herself to some coffee. Below: Four friends enjoy a ladies weekend. This is their second visit. Opposite, top to bottom: My glamping setup at the Fields. The king-sized bed is heated; An acoustic guitarist serenades dinner guests as they dine on a four-course dinner at a communal dinner table set up under the evening sky.
well-heeled, they’re more Detroit than Davos. Dinner is served at a communal table under the stars while a local musician softly plays acoustic guitar. The Fields’ chef, Cameron, is a culinary virtuoso. He got the gig by promising: “Let me cook what I want, and you won’t be disappointed.” The Woods agreed. My four-course dinner included Cameron’s burrata caprese salad with raspberry jam and a deconstructed chicken ballotine wrapped in its own crispy skin and served with a beurre blanc
so rich and delicious that I almost licked the plate. It sure beats the freeze-dried backpacker meals I normally consume on my camping trips. I’m never camping without Prosecco or goat cheese and broccolini again. At dinner, as the temperature dropped, Irene reminded guests they could preheat their beds and everyone giggled with delight. After devouring a scrumptious slice of cheesecake, I bid adieu to my new friends and headed back to my tent. I camp in temps down to the 20s, equipped with a heavy duty sleeping bag, insulated pad, base layers and bag liner. At The Fields, I simply pushed a button, and even though it was in the 40s, I was toasty warm. I will forever be a fan of not having to do the “boot scoot” out of a warm sleeping bag and into the frigid morning temps to answer “nature’s call.” Breakfast is served on-site, and it’s just as good as dinner. I asked other guests about their plans for the day, and they mentioned the many amenities The Fields has to offer. Some guests were going to ride bicycles on the Kal-Haven trail to Lake Michigan, others were getting massages and one group was attending a wine tasting. Every inch of the property is custom-made for Instagram. Yes, some catch-phrases are tossed around, such as “farm-to-table,” “locally sourced” and “environmentally conscious,” but none of it is forced down your throat. It’s a curated—yet, wholly authentic— outdoor experience. Studies prove nature rejuvenates, and trips closer to home are appealing to stressed-out urban dwellers seeking “travel-revenge” for the time lost to the pandemic. I can honestly see why people keep coming back to The Fields. It isn’t merely a field full of blueberries—it’s a gateway to the outdoors filled with unique experiences. Learn more about glamping at Thefieldsofmichigan.com. Vonetta Logan, a writer and comedian, appears daily on the tastytrade network. @vonettalogan
July 2022 | Luckbox
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Luckbox
OUTDOORS Illustration by Jason Schneider
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N
ancy Wynne Newhall, a 20th century photo critic who wrote text to accompany photographs by Ansel Adams, said something profound about the outdoors: “The wilderness holds answers to questions man has not yet learned to ask.” This issue of Luckbox may not plumb philosophical depths quite that deep, but readers will discover plenty that’s actionable and even inspiring in the magazine’s Outdoors section. It begins with a look at how the pandemic is continuing to shape outdoor home improvements, followed by an analysis of why housing prices aren’t likely to decline significantly anytime soon. Next comes a report on how the work of conservation photographer Robert Glenn Ketchum has helped spur action to preserve the nation’s outdoor treasures. That’s accompanied by a profile of nature photographer Patricia Davidson, who expresses her love of the outdoors through her pictures. The American Outdoor Brands CEO shares his views on how the company embraced customers who headed outdoors during the pandemic. The company
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has launched 21 brands of fishing, camping, hunting and shooting products. The outdoors theme spills over into the Trends section with articles on the growing interest in golf, the proliferation of PGA Tour Superstores and the advent of PopStroke, a sophisticated new take on miniature golf. There’s a report on summer music festivals and their environmental impact, and the story of The Rockhound returning from Rockville. Liquid Assets drinks in the culture surrounding moonshine whiskey, while three road warriors—a peripatetic comedian, a ultra-endurance athlete and a widely traveled couple who choose to see the country while living in their specially outfitted van—share their dreams. Finally, in Trades & Tactics, readers will see which grill stocks are smokin’, how home improvement retailers are leveraging their stocks, what weather predictions to make and how the financial markets hedge summer gasoline purchases. They’ll learn how to hit the bullseye by selling naked short puts in a variety of individual stocks and indexes. This issue may not address Newhall’s weighty questions about the outdoors and wilderness, but it’s a start.
n 12
BACKYARD UPGRADES
n 16
HOUSING BUBBLE
n 19
HOMELESSNESS
n 20
CONSERVATION ACTIVIST
n 24
VISUAL ARTIST
n 26
OUTDOOR BRANDS
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BUILDING OUT The pandemic convinced homebound homeowners to extend their living space out onto the lawn | By Ed McKinley
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mericans are transforming their lawns into outdoor living spaces by adding self-contained backyard kitchens, designated lounging areas, gaspowered fireplaces and freestanding “she sheds.” The trend exploded when COVID-19 forced most of the nation to stay home. Feeling confined, homeowners were inspired to extend their living space into the outdoors by planting bushes, cultivating turf, building decks, installing patio pavers, creating garden ponds and splurging on weatherresistant sofas. “We all spent so much time at home during the pandemic that space became the ultimate luxury,” said Amanda Pendleton, home trends expert for Zillow Group, a real estate marketplace. “Outdoor space is where we relaxed and where we played and where we entertained.” Life spilled out of the house and into the yard, agreed Drew Reading, homebuilding analyst for Bloomberg Intelligence.
“The pandemic certainly fueled a massive wave of investment into the home because it was viewed as a safe haven—a sanctuary,” he said, “and, importantly, it took on more functionality. Over the last two years, the home became the school, the office, the gym, the restaurant and everything else.” The longing to capitalize on outdoor space is reflected in the outdoor segment’s growth at Lowe’s (LOW) and The Home Depot (HD), the nation’s two biggest publicly traded home center chains, Reading noted. The Home Depot’s sales related to outdoor home improvement increased 5% in 2019, 29% in 2020 and 8% in 2021, while Lowe’s posted sales increases in those categories of 4% in 2019, 33% in 2020 and 5% in 2021, he said.
SALES REMAIN STRONG
Even though home-center outdoor sales are climbing at a more modest pace these days, they’re still climbing. Plus, they’re
Outdoor improvements with functionality, like a backyard lounging space, took on added importance when the pandemic forced families to stay home.
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building on an ever-growing base. What’s more, homeowners’ interest in outdoor improvements appears unabated. In fact, the desire for outdoor amenities shows no sign of slowing, according to statistics provided by Malcolm Conner, vice president and group general manager of Porch, a company that connects homeowners with movers, contractors and home insurance companies. Outdoor services accounted for 16% of the requests received on the Porch home services platform during May 2019 and 34% in May 2022. Those figures roughly correspond with the observations of Chris Egner, president of the National Association of the Remodeling Industry and owner of a Wisconsin-based design, build and remodeling company that bears his name. “Outdoor improvements have been gaining popularity for a number of years now, and the pandemic kicked that up two-, three- or four-fold,” he said.
PHOTOGRAPHY: (LIVING ROOM) SHUTTERSTOCK; (POND) PAT MCDONOGH/COURIER JOURNAL
OUTSIDE IN, INSIDE OUT
There’s plenty of talk about expanding the house into the yard with outdoor facilities that mimic indoor kitchens, sitting rooms and party spots, but Egner noted that the reverse is occurring, too. Homeowners are asking contractors to install bigger doors and windows to bring the outdoors inside. Accordion doors and multi-panel sliding doors can open 12 feet to 20 feet of wall space, making an outdoor “room” feel even more like part of the house, he said. Homeowners can link an outdoor in-ground pool to the house by building a roof with retractable screens for walls. Spectacular remodeling projects like these remain pricey, but the cost is coming down and the quality is improving because of the continuing boom in the sector, Egner said. If those improvements still seem like a bit much, they raise the question of exactly what outdoor luxuries have become most sought after during the pandemic.
POPULAR IMPROVEMENTS
Quantifying the most popular outdoor projects and purchases isn’t easy, according to Reading. “There’s not a whole lot of great
A garden pond lends serenity to an urban backyard.
data readily available on the project level within the outdoor segment,” he said. But solid numbers for Trex and AZEK, two types of composite decking, indicate sales of those products grew by 20% in 2020, climbed 35% in 2021 and are on track to increase by double digits this year, Reading observed. Everyone close to the industry develops a feeling for trends, and Egner cites outdoor kitchens as highly prized, provided they go beyond putting a charcoal grill on a deck. They should have a gas-fired grill and perhaps an oven in a permanent structure with counter space, cupboards, a sink and often some stools. Other popular outdoor features include fire pits, fireplaces and pizza ovens, he noted. Home trends reflect the times, including what’s hot on cable TV home improvement shows, said Zillow’s Pendleton. That includes growing interest in “she sheds”—small backyard outbuildings. “It’s the female equivalent of a man cave,” she said. “It’s an example of a retreat space [just outside] the home where you can go out, you can get some quiet time, you can read a book, you can unwind and relax.”
DISCRETIONARY DOLLARS
Consumers have had more money than usual for outdoor purchases and projects, thanks to stimulus checks and child tax credit payments provided courtesy of the federal government, Reading said. What’s more, homeowners redirected the funds they might otherwise have devoted to travel and dining out, instead using them to improve their homes, he said. Early on, the pandemic spawned a do-it-yourself craze as
CLEAR THE DECKS Deck additions provide a slightly better return on investment (ROI) than the average home improvement, according to Zonda, a national homebuilding database. In 2021, homeowners recouped about 60% of what they spent on all improvements. But wooden deck additions posted a ROI of 65%, and composite deck additions returned 62%. Households spent an average of $19,248 on a wooden deck in 2021 and raised the value of the house by $12,466. That same year, composite decks had an average price tag of $24,677 and returned $15,315 when the house was sold. By comparison, new garage doors have an ROI of 93%, and updating a master suite returned 46%, the Zonda 2021 survey indicated.
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WHY HOME CENTERS GREW DURING THE PANDEMIC National home center chains gained market share at the expense of regional and local lumber yards and hardware stores during the COVID-19 outbreak. It happened partly because home centers were deemed essential and were thus allowed to remain open while other retailers were forced to shut down, said Drew Reading, homebuilding analyst for Bloomberg Intelligence. As the pandemic became less threatening and more stores opened, the big box home centers offered the advantage of one-stop shopping that required less exposure to possible infection than would happen with trips to multiple stores, he noted. The advantages accrued to home centers during the height of a do-it-yourself home improvement craze that focused largely on enhancing outdoor living spaces.
homebound amateurs took on projects they’d been putting off, Reading maintained. Besides having time on their hands at home, COVID-shy homeowners were reluctant to open their doors to contractors. That sudden high demand for DIY materials took suppliers by surprise because they’d cut back production in anticipation of the exact opposite—a COVID-19-induced slowdown. Prices skyrocketed. From the beginning of the pandemic in early 2020 to the middle of 2021, lumber prices soared 500%, Reading noted. They declined around the start of this year and then began another ascent in the spring. The Producer Price Index for a basket of goods used in residential construction has increased by 40% since the start of the pandemic, and it’s up 7% in 2022, he said. But at
Dog/ pet house ▲ 2.30%
Pizza oven ▲ 2.30%
Outdoor kitchen ▲ 2.20%
She shed ▲ 2.20%
OUTDOOR ASSETS
Saltwater pool ▲ 2.10%
”She sheds,” often considered the female equivalent of a man cave, provide a relaxing retreat outside the home.
the beginning of the COVID-19 outbreak, not many foresaw that surge. “Everybody froze, and there was just so much uncertainty in the world,” Pendleton said of the days before the DIY phenomenon ignited. “People didn’t know what their lives were going to be looking like in six weeks or six months or six years.” By now, DIYers have apparently accomplished a lot of what they set out to do, and the emphasis is shifting to professional installation. Sometimes, the switch is occurring because bigger jobs require a professional’s expertise. Installing a door that opens 20 feet wide, for example, requires structural engineering that wouldn’t be needed to pop in a 36-inch exterior door, Egner said. Some DIY projects can grow into jobs that require a pro, he noted. Lots of homeowners who are handy with tools might have tackled a deck project in the old days, but decks are getting bigger, multiple layers are becoming popular and handrails are taking on ornate qualities. Then there’s the issue of complying with building codes. But economics may have a lot to do with the shift to professional installations, too, according to Reading. Many homeowners who could recently afford DIY projects have hit the wall of what they’re willing to pay for materials as costs continue to rise because of inflation, labor shortages, supply chain issues
Fire pit ▲ 1.80%
Landscape/ path/outdoor/ deck lighting Greenhouse ▲ 1.40% ▲ 1.60%
When any of the words above appear in the written sales pitch for a house, the price the property commands increases by the percentage shown. It happens because buyers associate those features with desirable homes. 14
Landscaping ▲ 1.40%
Outdoor fireplace/ chimenea ▲ 1.40%
SOURCE: ZILLOW GROUP
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and the law of supply and demand. Economic conditions also favor a shift to higher-end outdoor home improvement. With high prices for houses and rising interest rates, some homeowners are choosing to stay in their homes and make improvements instead of trading up to a more expensive house. Outdoor projects might even seem inexpensive compared to house payments in today’s market, Pendleton noted. “The cost of a monthly mortgage now is more than 50% higher compared to where it was a year ago,” she declared. “Our most recent figures show that home value appreciation has hit a record high in April—it was up more than 20% year-over-year nationwide,” she continued. “That signals an incredibly hot market. We’ve never seen that before.” Home prices may remain high, too. Zillow is forecasting they’ll increase another 11% over the next year. Millennials, the nation’s largest demographic group, are entering their mid-30s, the prime age to buy their first homes. By 2025, the contingent will form 6.4 million new households. Home value appreciation provides owners with more equity to draw upon to finance big improvement projects, contributing further to big-ticket outdoor amenities. In addition, sales of new and older homes have weakened, which also bodes well for the remodeling industry. The urban exodus to the suburbs that many believed was taking place during the pandemic would have supported the outdoor home improvement market. But with a couple of notable exceptions, like New York and San Francisco, it was largely a myth, Pendleton said, based on Zillow’s tracking of home sales.
CONTINUING DEMAND
PHOTOGRAPHY: (ALL) SHUTTERSTOCK
Strong demand for outdoor improvements doesn’t appear likely to end as the pandemic recedes. Many workers may never return to commuting to their offices five days a week. Besides, many have rediscovered the joys of home and family. But spending on outdoor home improvements may moderate, according to Reading. “Some of the tailwinds we’ve had over the last couple of years are starting to fade.” Inflation discourages outdoor home improvement, especially in the middle and lower end of the market, he noted. But so far, the high end is keeping the sector alive and growing. If recession strikes, pessimism could tamp down spending in all parts of the sector.
THE BUBBLE BUBBLE Homeowners cooped up during the pandemic have had the option of adding usable square footage to their domiciles by erecting transparent pop-up bubble tents in their backyards. The tents can serve as living rooms, dining rooms or camping facilities with a 360-degree view of the surrounding countryside, cityscape or starry midnight sky. Like many outdoor amenities, these backyard bubbles sold out quickly to families stranded at home during t COVID-19 and were in short supply in the face of unexpectedly strong demand. Some restaurants used them to stay open during the pandemic, putting additional pressure on supply. Many of the new owners may have been pleasantly surprised by the versatility of the structures. They can trap the sun’s heat, making them surprisingly cozy during colder weather and sometimes eliminating the need for a heater, reviewers said. The bubbles are generally manufactured from polyvinyl chloride, a type of plastic better known as PVC. Some feature UV-reflecting surfaces that can ward off sunburn. Prices start as low as $333.99 online for a 10-foot by 10-foot example and proceed upward in size and price.
THE ROI
Like just about all home improvements, outdoor amenities don’t pay for themselves when a homeowner sells the house. On average, home upgrades offer a return on investment (ROI) of 60%. (See “Clear the Decks!” p. 13.) But Egner noted that homeowners will recoup an increasing portion of their investment as the public’s fascination with the category continues to grow. Even if they lose money, the right improvements can increase the value of a home. A fire pit costs less than an outdoor fireplace but adds more to the price of a house when the property sells,
Pendleton noted. That means it pays to think about home improvement spending if the house may go on the market soon. But improvements are often about the here and now instead of some unknown future, she said. “If you’re thinking about resale in the near future, you’re going to want to be a little bit more strategic,” Pendleton advised. “If you’re making improvements to make your home more enjoyable, go for it and do it.”
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99 Economic Problems, but A HOUSING MELTDOWN Ain’t One Don’t look for high housing prices to tumble anytime soon. It’s not a bubble. | By Garrett Baldwin
T
he average price of single-family homes has increased for 40 consecutive quarters, and the Federal Reserve is hiking interest rates to curb inflation. It’s a combination that many fear will lead to a housing crisis. “Another housing bubble?” asks Fortune magazine.“We’re skating close to one,” warns a Realtor.com economist. “Signs of a housing bubble are brewing,” declares CNN. Luckbox doesn’t agree. The housing sector has solid fundamentals, and stock in some construction companies is trading for less than the sum of their parts. Let’s look at how the economists at the Dallas Federal Reserve Bank view the situation.
THE VIEW FROM DALLAS
The sizable gain in house prices over the last two years doesn’t constitute a bubble, according to Dallas Fed President Robert Kaplan and his team. They noted in a March 29 blog post that “shifts in disposable income, the cost of credit and access to it, supply disruptions, and rising labor and raw construction materials costs are the economic reasons for sustained real house-price gains.” Despite higher costs in the “3 Ls” of housing—land, labor and lumber—the Dallas Fed said it did not foresee a correction that would
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A 1,623-square-foot, three-bedroom, two-bath single-family home with a two-car garage located in Brandenton, Florida, has an asking price of $499,000.
“ SHIFTS IN DISPOSABLE INCOME, THE COST OF CREDIT AND ACCESS TO IT, SUPPLY DISRUPTIONS, AND RISING LABOR AND RAW CONSTRUCTION MATERIALS COSTS ARE THE ECONOMIC REASONS FOR SUSTAINED REAL HOUSE-PRICE GAINS.” — The Dallas Federal Reserve Bank
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PHOTOGRAPH: USA TODAY NETWORK VIA REUTERS CONNECT
WHERE CAPITAL WILL FLOW in any way resemble the housing crash of 2008. Back then, house prices fell more than 60% in Florida, Nevada and Arizona as the frenzy of Ponzi-style speculative buying crashed to a halt. Today, those three states are among the strongest markets for first-time buyers and retirees as the population continues to shift to the Sun Belt. As the Dallas Fed notes, the financial position of American consumers has improved over the last two years, and the housing sector is not in the grips of a frenzy of speculative buying. In May, the number of mortgage delinquencies—defined as a homeowner late on payment for 90 days—declined for the seventh consecutive month. That’s just one positive data point on the state of current incomes. Here’s another: During the 2008 housing bubble, Americans spent 7.2% of their disposable income on housing. At the end of 2021, it was just 3.8%. The way home loans are configured these days is also contributing to stability in the housing market, according to Marina Walsh, vice president of industry analysis at the Mortgage Bankers Association. “Given the nation’s limited housing inventory and the variety of home retention and foreclosure alternatives on the table across various loan types, the probability of a significant foreclosure surge is minimal,” Walsh said. “Borrowers have more choices today to either stay in their homes or sell without resorting to a foreclosure.”
SUPPLY AND DEMAND IMBALANCE
New construction has been strong
Housing stocks have felt the pinch of the market’s brutal sell-off over the first five months of 2022. The SPDR S&P Homebuilders Exchange-Traded Fund (XHB) is off 25.3% to start 2022. Fund managers are talking about buying cheap “cash flow” to capture as much green stuff as possible and toss it under the mattress. As price discovery and valuation compression continues, they’re causing a rotation to quality and value. But regardless of economic concerns, strategic investors should recognize that capital will flow into things Americans need, not what Americans want. That includes oil, shipping, utilities, mid-sized and community banks, and, yes, housing. at the start of 2022, with the fastest growth since 2006, analysts noted. But supply still struggled to keep up with demand. Some of today’s supply problems took root after the 2008 crash. That downturn forced some homebuilding companies out of business, and the survivors remained reluctant to start building again well into the next decade. Lots of construction workers retrained for other careers, and labor is still in short supply. Meanwhile, millennials—the largest generation in America—are beginning to settle down and buy their first homes. These factors compound a national supply gap of 3 million homes, as measured by the Federal Home Loan Mortgage Corp., better known as FreddieMac. Other organizations suggest that number could be as high as 5 million. Although a precise figure remains elusive, there’s little doubt that it will take years to close the gap, especially with builders coping with supply chain challenges and rising costs. In a balanced market, the U.S. typically has roughly six months of housing inventory. But after years in a sellers’ short market, the nation has only 1.6 months of inventory, according to RealtyTrac, an online marketplace for foreclosed properties. The national homeowner vacancy rate in the first quarter of 2022 fell to its lowest
The U.S. housing market has experienced positive annual appreciation EACH QUARTER since the start of 2012.
—Federal Housing Finance Agency
level since the U.S. Census Bureau began tracking the measure in 1956.
GEOGRAPHIC SHIFT
The federal government responded to COVID-19 with measures aimed at forestalling foreclosures and providing relief on governmentbacked mortgages. Those efforts prevented a panic of distressed home sales that could have occurred when hard-pressed homeowners sold their assets at deep discounts. The policy successes built on the Dodd-Frank Act’s reform of subprime lending practices, another major restraint on speculation in the housing market over the last decade. Today, consumers can no longer obtain adjustable-rate mortgages that can be subject to an unexpected surge in interest rates. Would-be homeowners with a credit score under 620 are unlikely to qualify for a loan, and buyers are required to make a down payment of at least 3% of the price of a house. But even though those restrictions limit the ability of lower-income Americans to buy a house, the market has remained in a major supply shortage. That hasn’t stopped some people from moving, though. During the pandemic-induced Great American Move, remote working has enabled the population to leave the Big Six 24-hour cities of Boston, Chicago, Los Angeles, New York, San Francisco and Washington, D.C. Many settled in smaller 18hour towns, such as Atlanta or the Florida cities Orlando, Tampa and Jacksonville. Other 18-hour places range from Austin, Texas,
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LESS THAN THE SUM OF ITS PARTS In June, Luckbox discussed an investment strategy called “rational liquidation value,” which is how much cash investors would receive for their stock if a company liquidates. The current broad market sell-off has presented an opportunity to buy stock in three homebuilders that are trading under a rational liquidation price. They’re valued at less than the sum of their parts. n Landsea Homes (LSEA), a California-based homebuilder, is trading at less than five times earnings and 58% of its tangible book value. The company announced plans to buy back $30 million in stock at $8.11. But its tangible book value is $12.11, and its net asset value is $11.20. n Taylor Morrison Homes (TMHC), a custom homes designer, trades near its tangible book value of $28.14, but its price-to-free cash flow of 5.3 makes it quite attractive. The company has benefited as the population has vacated megacities in favor of smaller towns, and it has announced plans to repurchase $500 million in shares. Should consolidation accelerate in the industry, TMHC could become an attractive takeover target. n Beazer Homes (BZH), a Georgia-based builder operating in 13 states, trades at 42 cents on the dollar. Beazer now trades at three times earnings and a price-to-projected cash flow of just 0.19x. If buying these stocks sounds like too much of a long-term hold strategy, look at Beazer’s options chain. Traders could sell the Beazer Homes on Aug. 19, $8 put in an inexpensive trade, or explore a spread. If the stock doesn’t fall below $8, traders get to keep the money. But in the worst case, they’ll find themselves assigned a more affordable stock than today and even lower than its liquidation value. Symbol 3-year return 2022 return (June 15) P/E ratio Market cap
BZH
LSEA
28.3%
-28.3%
18.6%
37.8%
-44.8%
-0.8%
-29.9%
-19.9%
2.35 $403 million
TMHC
4.63
4.14
$305 million
to Boise, Idaho, and Las Vegas to Scottsdale, Arizona. Eighteen-hour cities usually have populations of less than a million and tend to shut down for a few hours every night. They generally provide the amenities and opportunities of the Big Six metropolitan areas but at a lower cost of living and lower cost of doing business. “There was already a kind of movement of that segment out to the suburbs as the older edge of the millennials are starting families and looking for more space and maybe school districts,” Anita Kramer of the Urban Land Institute told Forbes last October. “That has been accelerated by people’s experience working from home and schooling from home
S&P 500
18.53
$2.9 billion
and wanting more space. If they ever have to go to the office, it would be for a smaller number of days. Their commute is no longer as onerous as it once was.”
LOCAL RESTRICTIONS
Even with a tight supply of houses, many local units of government don’t make it any easier to build. Roughly 25,000 regulatory bodies regulate housing in the United States, according to the Federal National Mortgage Association, or FannieMae. What’s more, neighbors often oppose construction of townhomes and condominiums because they fear heavy traffic and strained local resources. Meanwhile, demand for singlefamily homes appears likely to
Eighteen-hour cities are increasingly seen as viable alternatives for investment and living, compared with the Big Six markets of Boston, Chicago, Los Angeles, New York, San Francisco and Washington, D.C., that make up America’s first-tier or 24-hour cities. —Investopedia
increase—not decrease—because of key market fundamentals. First, Generation Z, the cohort born between the mid-’90s and the 2010s, is more financially stable than previous age groups, and they’re preparing to purchase their first homes. They’ll compete for starter homes against retiring baby boomers looking to downsize or relocate to the Sun Belt. In addition, companies like BlackRock (BLK), Tricon Residential (TCON) and private equity giants continue to invest in single-family homes to capitalize on strong rentals and robust cash flow. They’re buying just 1% to 2% of the homes sold nationally, and their share is expected to increase.
TRADE THE GAP
None of this means that housing prices can’t decline. A haircut correction for prices in the 10% range is on the table, but don’t expect a plunge remotely like the 2008 housing crisis. Today, markets depend on the Federal Reserve’s actions. As the central bank hikes interest rates, it may deter buyers from purchasing larger homes. Naturally, fear of a recession could alter buyer sentiment and potentially cool off the market. But the central bank can’t print more houses. Garrett Baldwin is a commodity and trade economist who serves as Luckbox’s editor at large. He actively trades value and momentum stocks and wagers on sports and prediction markets.
AS THE FEDERAL RESERVE HIKES INTEREST RATES, BUYERS MAY SHY AWAY FROM PURCHASING LARGER HOMES. FEAR OF A RECESSION COULD COOL OFF THE MARKET, BUT THE CENTRAL BANK CAN’T PRINT MORE HOUSES. 18
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N OT O U T D O ORS BY CHOIC E The last official census of the nation’s HOMELESS POPULATION was conducted just weeks before COVID-19 shut the country down By Elizabeth Owens-Schiele
PHOTOGRAPHY: SHUTTERSTOCK
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he numbers are staggering, yet they reflect an undercount. The last official census of the nation’s homeless population set the total at 580,466 in early 2020—right before the onset of the COVID-19 pandemic, according to the National Alliance to End Homelessness. Homelessness was on the rise for four years prior to 2020, but the statistics on the pandemic’s impact on this vulnerable population have yet to become available. Those numbers won’t arrive until early next year, but many of us witness homelessness daily in cities and towns across the country. Single adults make up the largest percentage of individuals experiencing homelessness, followed by families with children, veterans and unaccompanied youth, according to the National Alliance to End Homelessness. Victims of domestic violence and individuals suffering from chronic physical and mental health problems are often among the homeless. Every January, the U.S. Department of Housing and Urban Development, or HUD, asks communities across the country to conduct a “point-in-time” count of the homeless. Volunteers scour the the landscape, documenting those who are living in tent cities, under viaducts, on city streets, along rural roads and elsewhere. They then calculate a count of the unsheltered on the street, and those who stay overnight in shelters. Due to pandemic-related disruptions to counts of unsheltered homeless people in January 2021, a 2021 HUD report only counted people in shelters. On a single night in 2021, HUD found more than 326,000 people were experiencing sheltered homelessness in the United States. Meanwhile, President Joe Biden’s Fiscal Year 2023 budget proposes $8.732 billion in federal funding for homelessness assistance programs, according to the United States Interagency Council on Homelessness. Is relief on the way for the nation’s homeless?
STATE OF HOMELESSNESS California 161,548 New York 91,271 Florida 27,487 Texas 27,229 Washington 22,923 —THE FIVE STATES WITH THE LARGEST HOMELESS POPULATIONS, 2020 SOURCE: ENDHOMELESSNESS.ORG
30% Increase in unsheltered homeless people since 2015 —THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
580,466
Last official census of the nation’s unsheltered and sheltered homeless population in 2020 —THE NATIONAL ALLIANCE TO END HOMELESSNESS
$8.732 BILLION FY23 proposed federal funding for homelessness assistance programs —U.S. INTERAGENCY COUNCIL ON HOMELESSNESS
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IMAGES That Make an IMPACT Conservation photographer ROBERT GLENN KETCHUM captures nature in a way that inspires others to help preserve the environment | By Elizabeth Owens-Schiele
In the Sonoran Desert in Arizona, Robert Glenn Ketchum’s work led to the expansion of the Saguaro National Monument by more than 30,000 acres and granting it National Park status.
Davidson’s photo of Metlako Falls in the Columbia River Gorge National Scenic Area is her favorite from her collection.
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This EPA Superfund cleanup site in Cuyahoga Valley, Ohio, caused pollution along the Cuyahoga River. Robert Glenn Ketchum’s images inspired a restoration and later upgrade to National Park status.
PHOTOGRAPHY: ROBERT GLENN KETCHUM
A
s a one-time rock music photographer turned conservation photographer, Robert Glenn Ketchum has a resume that reads like a Who’s Who. His photography has helped clean up and restore the Hudson River Valley in New York, contributed to the establishment of the Sonoran Desert National Monument in Arizona and led to the prevention of a mine that would destroy the country’s largest fishery in southwest Alaska. He’s safely survived 60 grizzly encounters, and he’s taken photos from kayaks, boats, helicopters, float planes and airplanes. A lover of the outdoors, Ketchum, 76, has been a surfer, backpacker, hiker, climber, and cross-country and downhill skier who now bikes regularly through his hometown of Manhattan Beach, California. He wants others to enjoy the beauty of the outdoors as much as he does, so he captures nature in a way that inspires others to help preserve the environment. “I don’t shoot pretty pictures for the sake of pretty pictures,” Ketchum said. “If I’m going to take pictures in nature, I feel better about doing it for purpose. In my case, it’s for environmental purpose.” His many fans and partners have turned to him for decades to assist in documenting environmental concerns. “Robert Glenn Ketchum is both a great artist and a singular conservationist—someone who, more than anyone I’ve ever worked with, has figured out how to use his photography in service of the Earth,” said Joel Reynolds, western director and senior attorney at the Natural Resources Defense Council. He’s worked with Ketchum extensively over the past 25 years. Ketchum supported a NRDC
“ I DON’T SHOOT PRETTY PICTURES FOR THE SAKE OF PRETTY PICTURES. IF I’M GOING TO TAKE PICTURES IN NATURE, I FEEL BETTER ABOUT DOING IT FOR PURPOSE. IN MY CASE, IT’S FOR ENVIRONMENTAL PURPOSE.” —Robert Glenn Ketchum campaign to protect the last undisturbed breeding lagoon for the Pacific Gray Whale in Laguna San Ignacio, Mexico. It is a world heritage site, a biosphere reserve, and a whale and migratory bird sanctuary, but Mitsubishi Corporation and the Mexican government wanted to turn it into the world’s largest industrial salt works, Reynolds said. Ketchum took 1,000 pictures and donated them to NRDC, which used them in full-page print ads, activist alerts and blog posts. The industrialization project was later abandoned, Reynolds said, and today the lagoon remains fully protected. Most recently, Ketchum has worked with NRDC in the Bristol Bay region of Alaska in support of the area’s tribal communities
against the destructive Pebble Mine. This proposed massive open pit copper and gold mine would be built literally in the headwaters of the greatest wild salmon fishery on Earth, Reynolds said. If fully developed, the mine would generate over 10 billion tons of contaminated mining waste in a region that produced a record 66 million fish last summer, he noted. This single fishery generates $2.2 billion in revenue each year and 15,000 jobs, and this summer it is expected to produce yet another record run of 73.4 million fish— over half of the world’s sockeye salmon, he said. Throughout the 12-year campaign, Ketchum’s IMAGES OVER A extraordinary landscape photos have 55-YEAR CAREER
1 MILLION
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been used in full-page ads in The New York Times, The Washington Post, Financial Times of London, Politico, The Hill, in NRDC blogs, activist alerts and at speaking events around the country. Four major mining companies have abandoned the project, Reynolds said, adding that President Joe Biden’s administration is poised to provide long-term protection against the project. “Robert Glenn Ketchum is one of the great conservation photographers ever, unquestionably the Ansel Adams of our time,” Reynolds said. “His generosity and commitment are second to none, and NRDC’s work has been the direct beneficiary of both.”
HIS BACKSTORY
It was 1966, and the Sunset Strip in Los Angeles was rocking with new breakout bands. Ketchum was enjoying student life at UCLA and never picked up a camera until his girlfriend’s friend asked him to photograph a new band. He arrived at the house of guitarist Robby Krieger’s parents in Manhattan Beach, California. He took pictures of the garage band enlisted to play back up at a poetry reading for Jim Morrison at a cafe in Venice Beach. Morrison liked the band’s sound, Ketchum said, recast his poetry as song lyrics and began rehearsing with the band. Three weeks later, his friend asked if Ketchum wanted to go see the band on the strip. “I had no idea what to expect,” Ketchum recalls of seeing The Doors together for the first time. “They opened with Break On Through (To the Other Side), and they were hardly through the chorus when I THE YEAR HE it was going to be big.” PUT AWAY HIS knew Ketchum soon joined the band’s entourage and CAMERA AND contributed live photos PICKED UP regularly to The Daily Bruin, the UCLA student AN IPHONE
2012
22
The Tongass rainforest in southeast Alaska covers 17 million acres and 1,000 islands. Robert Glenn Ketchum photographed the rainforest to protest destructive clearcutting. He later published a photo book of his work and was chosen for the United Nations Outstanding Environmental Achievement Award.
newspaper. During the band’s travels, they stopped along Highway 1 at Big Sur to camp. Ketchum wanted to escape the people and noise and followed a trail into the woods, crossed a bridge, heard a waterfall and worked his way to the edge of a stream. He realized then he wanted to become a color photographer of nature working for the cause of conservation, just like Eliot Porter.
MAKING A DIFFERENCE Years later, the Wallace Foundation asked Ketchum to consider living in and photographing New York’s
Hudson River Valley to spur a cleanup and redevelopment of historic sites along the riverfront. He spent three years there, shooting photos daily of the beauty around him in the Adirondack Mountains and documenting the devastation wrought by logging and garbage dumps profiled in his book, The Hudson River & The Highlands. “We talked about the things wrong in the Hudson Valley,” Ketchum said. “They cleaned up the river, slowed down the logging, restored mansion homes and historical sites—former president homes—and made the Hudson Valley attractive to tourism.”
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“ ROBERT GLENN KETCHUM IS BOTH A GREAT ARTIST AND A SINGULAR CONSERVATIONIST—SOMEONE WHO, MORE THAN ANYONE I’VE EVER WORKED WITH, HAS FIGURED OUT HOW TO USE HIS PHOTOGRAPHY IN SERVICE OF THE EARTH.”—Joel Reynolds, Natural Resources Defense Council
Twin Lakes in Lake Clark National Park in southwest Alaska is near the proposed site for the Pebble mine. Robert Glenn Ketchum’s photos show how the mine would threaten the vast fishery of Bristol Bay.
Soon, he was commissioned by the Akron Art Museum to visit the Ohio cities of Akron and Cleveland to photograph the Cuyahoga River in the hope of inspiring a cleanup and national recreation area. Ketchum photographed the area for three years, and his images became a traveling photography exhibit. With the help of a state senator, the area was cleaned up and upgraded to national park status. Working with the Natural Resources Defense Council, Ketchum traveled to the Tongass National Forest in Alaska near the Arctic Circle. From his perch on a small tour boat, Ketchum
captured grizzlies, native Alaskan villages and the destruction of the rainforest by the forest service, ruining the animal habitat. “These are the kind of projects that I wanted to open up to when I was sitting by that stream in Big Sur,” Ketchum said, adding he also contributed to establishing the Sonoran Desert National Park near Tucson, Arizona. “One more place I could use my cameras to make something happen and bring attention.” Surprisingly, he stopped using a film camera in 2012 and has been using his iPhone 11 Pro since, planning to upgrade to an iPhone 13 Pro soon. He said the high-
definition resolution is better than most film. With a career spanning 55 years, Ketchum looks back on contributing photographs to accompany stories in National Geographic, Life and other magazines, not to mention his photo books, exhibits and sales of his prints. Beyond his photo shoots, he posts two pictures on Instagram daily and writes two blogs every day of the work week on Facebook.He shows no interest in slowing down. “I don’t see an artist as retiring,” Ketchum said. “You keep doing your work until you’re gone.”
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Patricia Davidson’s photo of Metlako Falls in the Columbia River Gorge National Scenic Area in Oregon, is her favorite from her collection.
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S H U T T E R S AV V Y Oregon-based nature and landscape photographer PATRICIA DAVIDSON has a passion for the outdoors that made her camera a natural fit | By Kendall Polidori
PHOTOGRAPHY: PATRICIA DAVIDSON
R
90%
but is never disappointed with her time in nature. She often finds herself exploring a site all OF DAVIDSON’S day, waiting for that moment when the lighting is perfect or SALES TAKE something stands out. PLACE ONLINE She provides the example of driving around in Washington, looking for promising locations: “I spotted these clouds that were giving the hillsides a certain glow ... and there was a barn in the shot, too. I waited for about an hour, and the clouds got just perfect.” Davidson’s photos have been featured in exhibits this year, and she is planning trips to Texas, Oregon, Washington and California. As long as she’s able to be out in nature, she will always have her camera in hand. “I feel so alive when I’m outdoors,” she said contently. “I just love the peace, the calm and the serenity. The beauty just kind of grounds me.”
estless in her day job, Patricia Davidson quit and joined her newly retired husband on an adventure of a lifetime: four years on the road in an RV. With her DSLR camera in hand, Davidson, 63, captured the beautiful landscapes the couple hiked—national parks, the Southwest and the Pacific Northwest. Once a hobby, nature photography soon became her passion and a full-time job. “Sometimes I go out in nature, and I am on a mission to get a certain shot,” Davidson said. “But maybe the conditions don’t line up properly. But I’ve had a great experience out in nature. Check out Davidson’s work on her website at So, I had a great hike. It’s still beautiful.” patriciadavidsonphotography.com A self-taught photographer for more than 12 years, she and her husband eventually settled near Portland, Oregon, to be close to their 12 grandchildren but still venture out monthly to hike, camp and travel. She says she travels about three weeks out of every month. The self-professed nature lover finds refuge in sunrises, sunsets and especially waterfalls. “The camera was a natural fit for me to take it everywhere because I love nature,” she said with a soft smile. From the turbulent sneaker waves off the Oregon coast to the depths of canyons in Utah and Arizona and the redwood forests of northern California, Davidson captures moments in time—often waiting for hours for the right timing. With her eye peeking through the viewfinder, she waits for the perfect frame, breathes in, lowers her finger on the push-button so it clicks, and she has her shot. Waterfall prints are her biggest sellers—priced at $75 to $2,100—and she enjoys the experience of taking those Cypress trees at Caddo Lake photos more than anything. State Park, Texas, in early Sometimes she walks away from a morning light in autumn. trip with zero photos she finds sellable
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LUCKBOX LEANS IN WITH
Ame ric a n Ou tdo o r Bra nd s P r e s ide n t and CEO BRIAN MURPHY AOB became an independent public company in August 2020, building 21 authentic lifestyle brands for outdoor adventures during the pandemic | By Elizabeth Owens-Schiele Brian Murphy
Q&A
WHAT ARE THE TRENDS IN HUNTING, FISHING, CAMPING AND OUTDOOR SPORTS? We believe the macro trends are very favorable. The markets we serve— fishing, camping, hunting, shooting sports and the rugged outdoor lifestyle—have all benefited from a new, higher level of participation that began in our last fiscal year with the emergence of COVID-19. Some people turned to these activities for the very
first time, and others for the first time in a long time. ARE THESE MARKETS GROWING? We believe the past two years have ushered in an exciting new era for the entire outdoor industry, resulting in a new, higher foundational level of consumer participation. Each one of the markets in which our brands play has delivered meaningful growth and, importantly, each has welcomed many new participants who, we believe, will continue to explore the outdoors in the future. For instance, calendar 2020 gave us nearly 8 million new campers, 8 million new firearm owners, over 3 million new fishing license holders and over 1 million new entrants to the hunting category. In March, we acquired Grilla Grills, a direct-to-consumer provider of high-quality grills, smokers and accessories, providing us access to the $7 billion U.S. barbecue grill market. With an estimated 9 million grills sold in the U.S. each year, the grill market has benefited from recent trends toward outdoor cooking and provides plenty of runway for future growth. Founded in 2015, Grilla has generated net sales growth of over 161% in the past two years, with a CAGR [compound annual growth rate] of about 50% over the past five years, and 2021 net sales of over $15 million. Along the way, Grilla has developed an impressive strong brand authenticity among a loyal consumer base.
THE MARKETS WE SERVE—FISHING, CAMPING, HUNTING, SHOOTING SPORTS AND THE RUGGED OUTDOOR LIFESTYLE—HAVE ALL BENEFITED FROM A NEW, HIGHER LEVEL OF PARTICIPATION THAT BEGAN ... WITH THE EMERGENCE OF COVID-19. 26
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These teams are focused on the consumer archetype that most aligns with that brand, so they are uniquely able to identify areas where a brand has permission to play and use that ability to fuel our new product development process.
(Above) After acquiring BUBBA Tidal Fishing Rod in 2017, AOB rebranded and expanded it to include fishing tools, apparel and inshore fishing rods.
PHOTOS BY AMERICAN OUTDOOR BRANDS
(Left) MEAT! Your Maker vacuum sealers, an organically developed brand of meat processing equipment, has delivered trailing 12-month sales growth of over 215%.
TELL US ABOUT YOUR COMPANY’S PRODUCT LANES. WHICH LANES ARE MOST SUCCESSFUL? DO YOU SEEK TO SUPPLY EVERYTHING NECESSARY IN EACH LANE? Our brand lanes—Defender, Marksman, Harvester and Adventurer—organize our brands by consumer activity and provide us with an ideal competitive advantage for developing innovative new products year after year that turn consumers into longterm advocates, as we take our brands from niche to known. As a result, our brand lanes don’t achieve success in their own right.
Rather, they serve as the mechanism by which our brands achieve individual success. In that regard, each lane contains multiple brands which vary in size and in the size of markets they serve. We believe each brand has ample opportunity to deliver growth. WOULD YOU EXPLAIN YOUR “NICHE TO KNOWN” STRATEGY? Once a brand is docked into its appropriate brand lane, we begin to unlock its potential by leveraging the lanes’ resources, which include brand marketing, creative product development, sourcing and e-commerce.
WHAT PERCENTAGE OF YOUR PRODUCTS ARE SOLD IN STORES VERSUS ONLINE? We have a strong presence in both traditional and e-commerce channels. We work with the large, known sporting goods national retailers, such as Academy, Bass Pro, Cabela’s, Dick’s and Sportsman’s Warehouse, as well as home, farm and automotive distributors and OEM’s [original equipment manufacturers]. In e-commerce, each of our key brands hosts its own website, and we have relationships with the large online retailers in the industry. Our strategy is to place our brands wherever consumers decide to shop for them, whether online or in a physical retail store. This approach is important in our current environment when consumers have the ability to alternate between in-store shopping and online options. Our e-commerce sales have grown over 122% in the past two years, delivering a CAGR of over 49% and demonstrating the positive impact of this strategy. This flexibility also means that on a quarterly basis, e-com can generate anywhere from one-third to onehalf of our net sales. WOULD OUTDOOR PRODUCTS BE A RECESSION-PROOF BUSINESS? I can’t speak for all businesses, but what I can tell you is that we have built a diverse portfolio of brands that span a number of consumer archetypes and activities. Whether a brand appeals to a consumer who is in the market for personal protection accessories, or one who is looking for a ‘closer to home’ outdoor vacation option, such as camping, hunting or outdoor cooking, we have authentic brands that align with those needs. We believe that positions us well for the future.
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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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trends life, luxury & the pursuit of happiness GAME THEORY
Different Strokes
The popular outdoor sport is attracting new players By Elizabeth Owens-Schiele Q&A WITH ERIK MATUSZEWSKI EDITORIAL DIRECTOR, NATIONAL GOLF FOUNDATION
How is technology changing the game of golf, with more powerful clubs and balls?
Technology has had a very broad impact on the golf industry, one that certainly includes advances in club and golf ball technology but extends far beyond. On the consumer side, this includes club sensors and shot/stat-tracking, mobile devices and apps, social networks, digital media, and golf-related tech gadgets, including rangefinders and GPS devices. All are intended to improve the customer experience in a game that has more than 25 million participants of all ages in the U.S. Away from the golf course, new forms of technologically driven, off-course golf—from golf simulators to golf-entertainment venues like Topgolf—are only increasing engagement, interest and access to the traditional on-course game.
PHOTOGRAPH: REUTERS
As an $84 billion industry, how has golf evolved in recent years?
Sepp Straka won the 2022 Honda Classic held in February at the PGA National Resort & Spa, Palm Beach Gardens, Florida.
As to evolution, there are any number of examples on course and off—from shorter golf offerings to more relaxed dress codes, music on course and golf entertainment. But there’s no question we continue to see a shift in the on-course participant pool. Here are some numbers that speak to some of that: • Total golf participation—on and off course— increased by 2% in 2021 to 37.5 million. This is a
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trends
measure of golf’s overall consumer base, with almost the same number playing both on- and off-course forms of the game. The net gain of 600,000 was split evenly between on-and off-course. • The number of active, on-course golfers in the U.S. grew by 300,000 in 2021 to 25.1 million. This total has increased by 800,000 over the past two years of the pandemic, the
“The number of active, on-course golfers in the U.S. grew by 300,000 in 2021 to 25.1 million. This total has increased by 800,000 over the past two years of the pandemic, the most significant rise since the Tiger Woods ‘boom years’ of the early 2000s during the pre-Great Recession.” most significant rise since the Tiger Woods “boom years” of the early 2000s during the pre-Great Recession. • The past two years have seen a record inflow of 11.8 million beginning and returning players, but also an outflow of 11 million Americans leaving the game for a variety of reasons (job, financial, family, health concerns, as well as mortality and infirmity). This outflow during each of the past two years rivals what the industry experienced during the 20072008 financial crisis. • The number of junior golfers (ages 6-17) remained steady at about 3.1 million in 2021, a year after a 24% increase (600,000) that was the largest since 1997. • The number of beginners—those who played on a golf course for the first time ever— hit a record high of 3.2 million in 2021. This is up from 3 million in 2020, but retention remains crucial. Over 14 million newcomers tried the game over the past five years, and yet net participation gain over that time is just over 1 million. • The number of female golfers rose by about 2% in 2021 to 6.2 million. The past two years marked the first time the female on-course participation cohort topped 2 million since 2007, prior to the financial crisis. • The number of non-Caucasian golfers rose about 8% the past two years to 5.2 million—the highest total since 2013.
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PGA National Resort & Spa, Palm Beach Gardens, Florida
MORE GOLF STORES OPENING The PGA Tour Superstore is opening eight PGA Tour Superstore, the company still stores in eight new markets in 2022 with had unprecedented growth during the last plans for more. two years, even with all stores closed for 48 “At the end of 2021, we had 50 stores days during the pandemic. As a result, new open during the last 12 years,” said Megan stores are opening this year in Maryland, Mahoney, director of communications for California, Wisconsin, Florida, Pennsylvania the PGA Tour Superstore. “We’re and North Carolina. looking to double that number “We’re seeing more families over the next five years. We golfing together and seeing more see an opportunity in the of a social golfing connection,” game and the growth.” Mahoney said. Increase in golf That growth includes an Female golfers between the equipment sales, 80% increase in the sale of ages of 6-17 are the fastestyear-over-year products—both hard and growing segment, posting a 35% –National Golf Foundation soft goods—over the last two increase over last year, according years, Mahoney said. In the last to the PGA Tour Superstore. year, sales are up 67% for women’s Personally, Mahoney believes more golf shoes and 59% for women’s apparel, people are being exposed to golf off the she said. course—especially at PGA Superstore golf The PGA Tour Superstore, licensed by simulators, practice hitting bays, lessons the PGA Tour, is a privately held company and more. Those golfers are then going on owned by Arthur Blank, co-founder of course to try their hand at the game, some The Home Depot (HD) and owner of the even adding Bushnell Wingman speakers to New England Patriots Atlanta Falcons. their golf carts to enjoy a little music during quarterback Tom Brady Although 2019 was a record year for the their golf game.
77%
PHOTOGRAPH: PGA National Resort & Spa
—NATIONAL GOLF FOUNDATION
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37.5 million Total golf participation— on and off course in 2021
800,000 The number of new active, on-course golfers in the U.S. since 2020—the largest increase in 20 years
3.1 million
POPSTROKE PopStroke, a new kind of miniature golf experience for adults and kids alike, is on par with some of the most luxurious golf courses. It skips the tricks and offers challenging putting paired with casual dining. Professional golf legend Tiger Woods co-owns the entertainment venues with founder Greg Bartoli. Each of the establishments features two 18-hole putting courses alongside an outdoor dining area, ice cream parlor, outdoor game area and playground. The first PopStroke opened in 2019 in Port St. Lucie, Florida. Facilities were added later in the Florida cities of Fort Myers and Sarasota, with more scheduled to open in the state this year in Orlando and Tampa. Other locations are slated to open this year in Houston and the Arizona cities of Glendale and Scottsdale. “PopStroke brings people together across generations to enjoy the game of golf in an affordable, fun and competitive environment,” said founder Greg Bartoli.
Junior golfers (ages 6-17)
3.2 million A record high number of people who played on a golf course for the first time ever
6.2 million
PHOTOGRAPH COURTESY OF POPSTROKE
Female golfers
5.2 million Non-Caucasian golfers –National Golf Foundation 2021 data
Trendy new PopStroke mini golf courses, co-owned by Tiger Woods and Greg Bartoli, take putt-putt to a whole new level.
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LIQUID ASSETS
In the Still of the Night Moonshine has always played a role in American spirits-making, but the 21st century saw the advent of legal ’shine sold on store shelves. Luckbox put some to the test. By Mike Reddy
C
enturies before Prohibition, American moonshiners were hard at work illegally concocting high-proof spirits and dodging federal whiskey taxes. Moonshine earned its name because, to avoid detection by law enforcement, it was often produced in the moonlit shroud of night. The story of moonshining is closely tied to American history. Taxes on liquor were enacted during George Washington’s presidency to generate much-needed revenue after the Revolutionary War. The young country became one of the first in the world to enact such a tax, according to Belle Isle Moonshine, a Richmond, Virginia, distillery, and to say it was unpopular would be an understatement. Pennsylvania farmers relied on homemade liquor to supplement their incomes and to make use of excess crops. In violent acts of protest, liquor tax collectors in the state were ambushed, stripped naked, tarred and feathered. The ordeal became known as the Whiskey Rebellion, and
Refusal to pay liquor taxes birthed American moonshining. 32
it’s often cited as the first major test of federal authority in the United States. Refusal to pay the liquor taxes birthed American moonshining, a practice that hasn’t ceased since. Its popularity has ebbed and flowed, reaching peaks after the Civil War and during Prohibition, but moonshine entered a new era in the 21st century. In 2005, the first legal moonshine— an oxymoron of sorts—was introduced to liquor store shelves with Piedmont Distillers’ Catdaddy Carolina Moonshine. As North Carolina’s first legal distillery since Prohibition, Piedmont made both state and moonshining history. Numerous brands would follow suit. By definition, moonshine is technically illicitly distilled. The jars and bottles sold in stores are perfectly legal to buy, sell and drink from, but many are made by adhering to time-honored recipes and traditions of moonshiners past. There aren’t strict rules or requirements to label a spirit a moonshine—they can be made from anything fermentable and have no limit on their alcohol content. That said, traditional
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moonshine is almost always made of corn or sugar-exclusive mash bills, distilled in stills and unaged, giving them their clear color. Adhering to the issue’s theme of the outdoors, the Luckbox editors wanted to put moonshine to the test. A far cry from the aged, sophisticated spirits usually covered in the magazine, we swapped bottles for canning jars. Here’s how it went.
“MOONSHINE” IN ITS SIMPLEST FORM IS MADE WITH CORNMEAL, SUGAR, WATER AND YEAST—ONE OF THE REASONS IT BECAME A FAVORITE AMONG BACKWOODS DISTILLERS.
REVIEWS
Junior Johnson’s 1963 Chevrolet Impala SS Mystery Motor car racing at Wilkesboro Speedway.
BEFORE DRIZLY
PHOTOS: (JUG) SHUTTERSTOCK, (CAR) REUTERS; OPPOSITE: PHOTO BY GARRETT ROODBERGEN
n Captain Santa Vapor Infused Moonshine Captain Santa has an interesting backstory: It’s named after the captain of a ship who, in the early 1900s, gave Christmas trees to churches and families in Chicago that couldn’t afford them. What that has to do with moonshine is lost on us and, take our word for it, it’s not worth trying to figure out. $34.99 n Ole Smoky Blue Flame Moonshine Moonshining folklore says that if ‘shine burns blue, it’s true. If it burns red, you’re dead. The rationale is that lead and other harmful contaminants emit red flames when ignited. At 128 proof, Ole Smoky’s Blue Flame is surprisingly inoffensive, definitely burns blue and will likely do the bulk of the lighting up. Spoiler Alert: The jar is blue, not the moonshine. $21.99 n Ole Smoky Moonshine Pickles “Picklebacks” are popular among old-school tipplers. They consist simply of a shot of pickle juice or a bite of a dill pickle as a chaser to a shot of whiskey. So for pickleback fans, Ole Smoky’s Moonshine Pickles are a big dill. But for the more pickle-averse, Ole Smoky also makes Moonshine Peaches and Moonshine Cherries. $21.99 n Midnight Moon Moonshine By far the smoothest and most palatable moonshine taste-tested, Midnight Moon is a must-try. Inspired by the family recipe of the late NASCAR legend Junior Johnson—who was a bootlegger before he was a race car driver—Midnight Moon captures moonshining history in a bottle. It’s Luckbox’s No. 1 pick for the moonshine curious. $21.99
XXX COMMON ON CARTOON DEPICTIONS OF MOONSHINE, EACH X REPRESENTS THE NUMBER OF TIMES A BATCH OF ’SHINE WENT THROUGH THE STILL. XXX TYPICALLY MEANS THE BATCH IS ESPECIALLY STRONG—NEARLY 100% PURE ALCOHOL.
THE TERM “BOOTLEGGER” ENTERED THE VERNACULAR IN THE 1880S TO DESCRIBE PEOPLE WHO CONCEALED FLASKS OF ILLICIT LIQUOR IN THE LEGS OF HIGH BOOTS. ITS MEANING HAS BROADENED TO INCLUDE ANYONE WHO PRODUCES OR DISTRIBUTES SOMETHING ILLEGALLY.
NASCAR descended directly from running illegal moonshine whiskey. Hill folk who distilled untaxed spirits needed to dodge government revenuers to deliver their product to customers down in the flatlands. So, the bootleggers modified Detroit-made sedans to carry more liquor and outrun the federal agents. The delivery drivers raced each other on country roads to practice eluding law enforcement, and their feats of automotive daring eventually became more important than the liquor they were carrying. Spectators came to witness their prowess, and one of the nation’s most popular sports was born.
MOONSHINE GOES BY MANY NAMES. PICK YOUR POISON:
Hooch Homebrew White lightning Mulekick Corn liquor Skull cracker Mountain dew Choop July 2022 | Luckbox
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DIVERSIONS
Road Warriors
WORKING FROM ANYWHERE is growing in popularity as the young and old alike hit the road on a mission in converted vans
and RVs. For some, the lifestyle sounds glamorous, liberating, exciting, affordable, environmentally sustainable and off-the-grid. The U.S. Census Bureau reported more than 140,000 people were living in vans, recreational vehicles or boats in 2019. But that was before the pandemic. In this issue, Luckbox profiles three road warriors who are working from anywhere to follow either their dreams or their mission. Video bloggers Dan Lieber and Mackenzie Hartrum have lived on the road for almost a year after decking out their black 2020 RAM ProMaster 3500 with plumbing, an electric fireplace, 100% solar-powered energy and two cats. They connected with a larger community through initiatives like Project Van Life on Instagram #vanlife. It’s no joke that comedian Reena Calm has taken her show on the road to 48 states and has no plans to slow down now that she just converted her 2017 Toyota Sienna to a “green room on wheels.” Ultra-endurance athlete and Marine veteran Tom “QuitProof” Jones travels in an RV cross-country to run upwards of 76 marathons in 76 days for a cause he is passionate about. Check out these road warriors working from anywhere.
ROAD WANDERERS By Kendall Polidori
O
n a typical day in their van, Dan Lieber and Mackenzie Hartrum knock out a few hours of remote work. Afterward, they’re driving or enjoying their surroundings, whether that’s hiking, heading toward off-grid locations or exploring unfamiliar towns. Sitting outside the van before an afternoon hike in Boulder, Colorado, Hartrum describes the conversation that launched the couple’s journey: “On one of our first dates, I said, ‘This might sound kind of crazy, but I would love to live in a van.’ Dan was like, ‘No way, so do I.’ So, we’ve always had this goal in mind.” Since September 2021, Hartrum and Lieber have been living out of their black 2020 RAM ProMaster 3500, decked out with plumbing (a toilet, sink and shower), an electric fireplace, solar panels and two cats. Leafy greens and vines line the inside of the van’s doors and windows, and string lights complement them with a soft yellow glow. It took about a year and a half to plan the logistics. Almost two years ago, they bought their new van and, with the help of their family, they spent three months building it out. The modifications cost an estimated $12,000, including $3,000 to $5,000 for mistakes they made in the beginning. But it opened a new chapter in their lives. When they met, Lieber was working a corporate job. With a dream of traveling and working from anywhere, he “made
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Dan Lieber and Mackenzie Hartrum have lived together out of their van, with their cats, one out of the three years they have been in a relationship.
a plan to escape by creating a small data analytics, operational development consulting agency, where I could pick up a couple of clients and still be able to maintain my lifestyle on the road,” he said. The idea was to have their home base in Philadelphia and travel every few weeks. But thanks to the isolation caused by the pandemic, full-time travel became reality. The two made the transition from
PHOTOGRAPHS: COURTESY OF DAN LIEBER AND MACKENZIE HARTRUM
WITH A LOVE FOR TRAVELING AND EXPLORING NATURE, THIS COUPLE FINDS COMFORT IN VAN LIFE. HERE’S HOW THEY MAKE IT WORK.
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operational development to more digital marketing, social media management and content creation for clients. “There’s so many ways to make money on the road,” Hartrum said. “People do all kinds of 9-to5 remote jobs, and there’s apps where you can pick up shifts or be a bartender for a few weeks.” Luckily, money has not been an issue. They swapped out rent for a van payment, insurance, food and gas. Each month, they only spend about Earlier this year, Dan and Mackenzie spent some time on the beach at Bahía Concepción, $1,400 altogether. a bay on the Gulf of California, with friends they met through the van life community. By buying a new van, the couple has dodged major repairs. But living on the road doesn’t come without challenges. platform to showcase the community, present With a van that’s solar-powered, they have visuals illustrating the lifestyle and connect liketo chase the sun. Before upgrading to lithium minded folks. batteries, their lead-acid batteries weren’t efficient Sami Syed, Project Van Life’s chief marketing on gloomy, rainy days. There would be days officer, said the platform strives to make people’s where they had to conserve as much energy as introduction to van life as easy as possible. possible: eating out, making only one cup of coffee “I would recommend getting educated on the and keeping the lights off. Since upgrading the lifestyle because a lot of people get interested in batteries, power has not been much of an issue. van life based on what they see on Instagram,” “This way of living is a more mindful way of Syed said. “That’s not very accurate because on being,” Hartrum said. “We have to Instagram, people are showcasing the always monitor how much water inspirational and dreamy side of it.” Cost of gas for a trip we have and are using, and we The platform has about 3 million from Philadelphia to have to always make sure we’re followers who tap into educational Boulder, Colorado not using too much of our energy.” articles and videos. Project Van But they still like to stay Life also showcases people’s van connected. Hartrum has stories, including the van owned by documented their journey since Hartrum and Lieber. the start, and they’ve recently “We want to empower people attracted a larger social media with unique tools and resources following. They post multiple that help them solve different photos and videos each week, as problems related to transitioning to —DAN LIEBER well as occasional blog posts on van life,” Syed said. their website. At press time, their Lieber notes that adjusting to van Instagram profile, vanziehartlieb, has 14,800 life has a learning curve, but they’ve found their Number of Instagram followers. groove over the past few months. Van life, he The couple uses Instagram to connect with said, introduced them to a tight-knit community, posts associated with new friends, as well as to form partnerships outweighing the burden of facing situations they #vanlife with brands that resonate with them. They also can’t always control. leveraged Lieber’s knowledge of data analytics to As for the long-term, they see themselves their advantage to gain more followers. owning a van or bus for the rest of their lives but “It’s so cool with van life because you just skip would like to find a home base to settle down in. the small talk. This kind of sounds gross, but I Lieber says they’re just taking it day by day, and swear one of the first conversations you have when it doesn’t feel right anymore, they’ll look with another van lifer is, ‘So, where do you go to for somewhere to call home. But for now, the two the bathroom?’” Hartrum said with a giggle. find comfort in feeling at home wherever they go. Van lifers looking for community can take “It’s a lot of what you make it,” Lieber said. advantage of apps and organizations—including “The lifestyle can be anything you want it to be. Project Van Life—that provide advice on how to If the road is calling you and nature’s calling you, make the transition to life on the road. and you have the ability to be flexible in terms of Project Van Life was started in 2016 to the way you’re living, then it’s a really beautiful document van lifers’ experiences—offering a way to live a slower, more deliberate life.”
“If the road is calling you ... it’s a really beautiful way to live a slower, more deliberate life.”
$444.29
12 Million
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ROAD COMIC
By Elizabeth Owens-Schiele REENA CALM NEVER IMAGINED BEING A COMIC ON THE ROAD—IT JUST HAPPENED. BUT DOING WELL IN COMEDY IS WHAT WILL LEAD HER TO OWN PROPERTY SOMEWHERE THAT MAKES HER HAPPY.
I
“I love going places where they don’t get a lot of people passing through. Am I a famous person yet? Not in Los Angeles, but in Bryan, Texas, I’m a pretty big deal, and West Virginia loves me.”
Her show Calm loves a good word play and relies on it often in her 45-minute sets. She describes her show as “an auto-biographical stroll through the mind of a traveler and a little bit inappropriate.” She said her goal is never to make people uncomfortable but admits she did get some pushback in the Bible Belt. “Part of what got me touring the most was going places that I especially felt like women weren’t talking enough about women’s sexuality,” Calm said. “Most comics have an opportunity to talk about sex, but it’s coming from a
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22 2,000 9 7 5 days
miles
shows
venues states
—REENA CALM man’s perspective. To be able to go to some of these places and speak from a woman’s perspective—I’ve gotten such incredible feedback from women who appreciate it so much more than someone who’s living in a big liberal city ever could.” Her backstory Born in Israel, Calm was raised in Sharon, Massachusetts. She jokes she was the souvenir after her parents spent one year abroad before returning to the East Coast. The oldest of four, Calm was raised Jewish and attended a Jewish Day School. Although she feels like she missed out on a lot of pop culture, her parents did allow the popular television comedy show Saturday Night Live every weekend. Her youngest brother, Moshe Calm, 31, who hosts his sister frequently in his home in Waukesha, Wisconsin, remembers those weekends well.
PHOTOGRAPH: ELIZABETH OWENS-SCHIELE
n 22 days, comedian Reena Calm drove 2,000 miles, headlined nine shows at seven venues in five states and squeezed in five open mics along the way. That’s life on the road for a comedian. Calm has been traveling as a comedian for the last seven years. She gave up her apartment three years ago to go full-time on the road, living first in her outfitted Toyota Prius. She averaged about 5,000 miles every month, doing five to 10 shows every week until COVID-19 hit the industry hard and Calm harder—she was unemployed, homeless, survived a car accident and needed to buy a new engine and transmission. In March 2021, she let her Prius go to hybrid heaven with 270,000 miles on the odometer. But life is looking a little brighter for Calm this year. She just bought a 2017 Toyota Sienna minivan and set it up as her green room on wheels, complete with an office, bed, wardrobe and storage. Although it doesn’t have a bathroom or kitchen, she has a cross-country network of friends providing showers and couch surfing. Along the way, Calm is getting booked at comedy clubs across the country. For a depressed kid who only wished to grow up to be happy, Calm is “living the dream,” albeit in her own way. Her wild journey has taken her to comedy clubs in 48 states. A woman of many goals, her first task is to perform in all 50 states—only Hawaii and Washington remain. Then, she’ll release her first album, #Calmedy, July 1. Her future may include a book of her travels, a dream to create a show with Jon Stewart exploring mental health, owning a home and eventually fostering a child. But for now, Calm is taking it one day at a time, juggling the logistics of living and working on the road—which include eating vegan—while trying to avoid decision fatigue. She jokes about her travels—and escapades—on stage and takes it all in stride.
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“Put me in a room, a dark room with a microphone and people that want to listen, I’m happy anywhere.”—REENA CALM
Comedian Reena Calm finally performed as a headliner in May at Zanies Chicago Comedy Club— an achievement she considered her “Everest.”
PHOTOGRAPH: ELIZABETH OWENS-SCHIELE
Below: Calm gave up her Chicago apartment three years ago because she was always on the road doing comedy. Now, she lives in her van, traveling cross-country following her dream.
“She did a good job trying to entertain us,” Moshe said. “She tried to make us laugh. It’s always been in her blood.” Their parents divorced when she was 11 years old, and soon after, Calm said she was hospitalized with depression and mental health issues. Later, she attended an alternative high school where a friend introduced her to Strangers with Candy, a comedy television series starring Stephen Colbert and Amy Sedaris—alums of The Second City in Chicago. A friend who worked at the club encouraged her visit. Calm moved to Chicago in 2004 at the age of 21, started taking classes at The Second City, and waitressed there and elsewhere before she realized she desperately needed to get out of the bar scene.
When she made a birthright visit to Israel, Calm discovered she was the funniest person on her tour bus. She returned to Chicago for improv and studied at the Annoyance Theatre, only to go on to start a stand-up comedy open mic in the back room at Will’s Northwoods Inn on March 6, 2011, and that’s where her career began. Kevin Kruse was the manager at Will’s Northwoods Inn at the time. “I was there from the very beginning. Seeing the transition from where she was then and where she is now, I’m not surprised,” said Kruse, 52, of Chicago, who hired Calm as a waitress. He knew her heart wasn’t in waitressing but instead behind the microphone. “She had a passion for comedy, and I encouraged her to go out and do it—I wanted her to live her dream,” Kruse said. “Think of how scary that is to go on the road, sharpen up your skills, live in your car to do this and pursue this—that’s scary. But she pursued it 100%.” Calm’s comedy tours started small with trips to the suburbs but then grew to renting cars to visit family in Indiana, Ohio, Massachusetts and Texas, stopping at comedy clubs along the way. “I decided I can make it to wherever doing these comedy trips,” she said. She discovered small towns with little comedy scenes are just about everywhere, and she became a regular at many. “I love going places where they don’t get a lot of people passing through,” Calm said. “Am I a famous person yet? Not in Los Angeles, but in Bryan, Texas, I’m a pretty big deal, and West Virginia loves me.” CALM PUNS Her brother, Moshe, tries not to worry about his sister being a ~ “I’m vegan, but I still eat eggs, because I’m also pro-choice.” road comic but admits he’d like to see her settle down, be happy and ~ “Road gigs don’t always bring successful. in a ton of money, but at least That is his sister’s end goal, too. I’m making a leaving!” “I would like to be happy. I spent a lot of ~ “Instant gratification is very my life very unhappy, and comedy is not a popular because these days comfortable lifestyle,” Reena Calm said. “But everyone’s trying to lose wait.” the reason I do comedy is because I want to make people feel good. ~ “The unsuccessful snake “I’m excited for whatever adventures this new charmer has a-reptile van brings, and I’m nowhere close to figuring out dysfunction.” which of these places I’ve been that I’d want to ~ “If you need ‘liquid courage,’ actually live in,” Calm said. “It feels like the road you have dilutions of grandeur.” is calling, and I am not done listening to it.”
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Ultra-endurance athlete Tom Jones is currently running 76 marathons in 76 days to raise money for United We Pledge to build an American Village West in St. George, Utah, meant to teach the public about American history and government.
ROAD RUNNER
By Elizabeth Owens-Schiele
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om Jones is quit proof. At age 59, Jones is about to complete his 76th consecutive marathon. Yes, that’s right—76 marathons in 76 days. He’s been running 26.2 miles every day for two-and-a-half months for a total of 1,991 miles. Crazy, or just extreme? Jones is neither. A Marine veteran and former professional boxer, he’s on a mission to make a difference using his gifts to inspire others while raising money for causes near and dear to his heart. His sports of choice are running marathons, paddleboarding and surfing, but he’s also a master of karate and Muay Thai kickboxing. He’s broken world records, received awards and has been recognized for running more than 50,000 miles in his lifetime. But it’s not just about being outside, enjoying the sports he loves and pushing beyond his physical limitations. It’s also a mental game—mind over matter to
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marathons
59
years old
1,991
miles run since April
1,043
nautical miles paddled from Key West, Florida, to New York City to set a world record
beat the odds and achieve the unthinkable. Ryan Murtha has witnessed that as a member of Jones’ team. He is visually documenting Jones’ journey. A U.S. Navy reservist and recent film school graduate, he’s been working side-by-side with Jones in their 32-foot Winnebago Minnie Winnie RV and telling his story, especially the last two months. “I feel like he’s the greatest athlete I’ve never heard of. It’s not rainbows all the time. He’s out there working his best,” Murtha said, adding Jones is “slow and steady” while inspiring others daily. “It’s about getting up and doing whatever your marathon is for the day.” Jones continues to overcome his own physical and mental challenges to inspire others with his life lesson. “I believe that in life, we have two choices—we can either be a victim and take the role of the victim, or we can be the victor and take the role of the victor,” Jones said. “And no matter what your circumstances are, there’s a victim on
PHOTOGRAPH: RYAN MURTHA
ULTRA-ENDURANCE ATHLETE TOM JONES IS ON A MISSION TO USE WHAT HE CALLS HIS DIVINE ATHLETIC ABILITY TO HELP OTHERS REACH THEIR GOALS AND TO RAISE FUNDS FOR CAUSES HE’S PASSIONATE ABOUT
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Ultra-endurance athlete Tom Jones (left) was a professional boxer and one-time sparring partner of Chuck Norris. He also set the first-ever stand-up paddleboard long distance world record (below) by paddleboarding from Oregon to Mexico—1,250 miles in 93 days.
one side and there’s a victor on the other side, and in the lane in the middle, there’s something called life. And life happens to all of us,” he said. His backstory Jones grew up with a father who was terminally ill and a mother who was chronically mentally ill. “I was removed from my home when I was 12 years old for child abuse. The state intervened and placed me into a children’s institution that was run by pedophiles,” Jones said. “I had to deal with that for several years until I ran away and joined the Marine Corps. The Marine Corps was a great parent—they taught me right from wrong. They taught me integrity and esprit de corps, which is doing things for people above and beyond yourself.” Jones graduated No. 1 in his boot camp class of 3,000 in San Diego and went on to serve in the Marines from 1982 to 1986 in Okinawa, Japan, the Philippines, Iraq and Afghanistan. After being honorably discharged, he mastered the mixed martial arts and toured with the USO. He also spent time as a bouncer at a Huntington Beach club owned by the legendary Chuck Norris. Jones soon became a training and sparring partner to Norris. “Chuck was another really great positive influence on me,” Jones said. Norris, an action film actor, is also
Ran
the length of California from Oregon to Mexico at a pace of 15 miles each day
Set
first-ever stand-up paddleboard long distance world record by paddleboarding from Oregon to Mexico—1,250 miles in 93 days
Set
the first ever flat water world record paddling 500 miles in 16 days
Ran
PHOTOGRAPHS: ALVARO J. MANRIQUE
across North America from Huntington Beach, California, to New York City at the pace of a marathon (26.2 miles) each day for 121 consecutive days philanthropic, working with the Make-a-Wish Foundation for children who are terminally ill. Later, Jones went on to work for Glenn McCusker, president of V2 Technologies Inc. At the time, Jones was a full-time professional fighter but became McCusker’s personal bodyguard, traveling the world with him. McCusker often hosted events with motivational speakers and partnered with professional athletes who were involved in community outreach. One day, McCusker asked Jones to fill in for one of the athletes who was supposed to tour an immediate care facility for children. Jones saw clingy toddlers, hardened teens and infants in body casts who had suffered from child abuse. “When I finished that day, I felt really guilty that I had turned my back on that world,” Jones said. “I had an empowering story to tell because I was only afforded a sixthgrade education and I was doing things that no kid should ever
“I’m out running 76 marathons in a row because I know that I can do it. I win in my mind first, and then I go to the battlefield.” —TOM JONES
be doing and I ended up making something out of myself.” When he learned the residents of that children’s facility wanted a playground, he decided it would be a good idea to run a long distance to raise money. So, he did. It was 1998 when Jones ran 1,250 miles from Oregon to Mexico. “When we dedicated that playground, my life changed,” he said. “I felt enriched and fulfilled and worthwhile. “That’s how my ultra-endurance athletic career was born,” said Jones, who is also an endurance mindset coach at quitproof.com. “It was because it became a feel-good addiction to me.” Just getting started That feel-good addiction drove him to run 121 marathons in a row from Huntington Beach, California, to New York City. That means he ran at his own pace 26.2 miles every day for four months, for a total of 3,170 miles. Twenty-five years later, Jones is still running marathons. This year, it’s for United We Pledge, a private, nonprofit organization established to “celebrate freedom, family and faith,” according to its mission. The organization is fundraising to build an American Village West in St. George, Utah, to teach the public about American history and government. It’s an immersive experience for children and families to learn through historical reenactments. The village will be modeled on the original American Village in Montevallo, Alabama. Jones is currently running “village to village,” from Alabama to Utah. This was the first time Jones was approached by an organization to help raise money and bring awareness. Jones is also a spokesman for Balance of Nature, a fruit and vegetable supplement owned by Lex Howard, who also owns United We Pledge. Before that, he would identify a cause and find corporate sponsors who wanted to cobrand with his athletic ability for a cause. That ability, he said, doesn’t come easily. Jones considers it a divine gift to be able to run that far, but it doesn’t come pain free. He leverages what he learned in the Marines to overcome mental and physical hardship. It’s called OODA: Observe, Orient, Decide, Act. “When I come up against the challenge, I observe what’s going on, I orient to that challenge, I make a decision and then I act upon it,” Jones said. Another trick he uses is to develop a sentinel in his mind which will alert him when he’s going down the wrong track mentally. “I redirect myself into a positive state of mind and then I maintain that positive state of mind. “Pain is only temporary, and quitting lasts a lifetime.”
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RECORD HIGH
Greening the Music Festival Industry
REVERB works with artists like My Morning Jacket to set up REVERB Action Villages at outdoor concerts. The goal is to involve fans in taking action on environmental issues.
Organizations like REVERB and Sustain Music & Nature are helping artists, fans and industry workers reduce the environmental impact of outdoor music By Kendall Polidori
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a problem as trash, Gursoy said. Fortunately, help is on the way. REVERB Organizations like REVERB are paving the way for sustainability and environmentalism in the music industry, says Chris Spinato, REVERB’s manager of communications. “It’s really about reducing the environmental footprint of music and being more sustainable and then engaging as many people as possible to take action,” Spinato said. The nonprofit organization was born in 2004 when environmentalist Lauren Sullivan and her husband Adam Gardner of the band Guster had become sick of feeling bad about the environmental impact of touring and decided to take action. Eighteen years later, REVERB has “greened” more than 350 tours and has supported around 4,800 other nonprofits focused on environmentalism, sustainability, climate change and social justice. The organization also works with artists,
5 TOP SPOTS FOR OUTDOOR MUSIC Based on acoustics, atmosphere, accessibility and the location of the stage, here are The Rockhound’s favorite outdoor music venues. n Red Rocks Amphitheatre Morrison, Colorado n Alpine Valley Music Theatre East Troy, Wisconsin n Gorge Amphitheatre George, Washington n Northwell Health at Jones Beach Theater Wantagh, New York n Lake Tahoe Outdoor Arena Stateline, Nevada –The Rockhound
PHOTOGRAPHS: COURTESY OF CHRIS SPINATO
hanks to a documentary film on the 1969 Woodstock Music and Art Fair in New York, generations of rockers know what a devastating effect an outdoor festival can have on the environment: mountains of garbage rising from a sea of mud. The movie’s message didn’t fall on deaf ears. Today, organizations are working to improve safety, security, cleanup and even sustainability at outdoor music venues and events. They’re still far from perfect, though. According to Dogan Gursoy, one of the editors of the book Festival and Event Tourism Impacts, as much as 80% of festival waste is not sorted for recycling. Since 2000, Gursoy, a professor at Washington State University, has studied how mega events reshape communities and alter the environment. With truckloads of trash and a lack of recycling, major festivals can even change the land itself, he said. In 2019, for example, Lollapalooza concert promoters were charged $645,133 to repair the damage the four-day festival inflicted on the grounds of Chicago’s Grant Park. That year, a rainstorm sent nearly 400,000 festival-goers stampeding through the grass, bushes and mud. It was the highest price tag for a Lollapalooza cleanup since 2011 and involved installing sod, spreading mulch and planting shrubs. Damaged landscaping costs festival heads a lot of dough, but it doesn’t pose nearly as big of
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venues, festivals and fans to spread their message through campaigns that include #RockNRefill, which provides concert goers with an alternative to single-use water bottles. There’s also REVERB’s Kitchen, farm programs for fresh produce and outreach to artists’ causes. According to Spinato, only 5% to 12% of plastic is recycled in the U.S., so while recycling initiatives are great, it’s better to reduce the amount of plastic used. Through REVERB campaigns—and local vendors—more festivals and venues are ditching plastic drinkware and utensils for reusables, aluminum cans and compostable materials.
thing we can do,” Spinato says. “We can make the music industry more sustainable. Sustainability is no longer just an optional, nice thing to do. It’s a must.” That’s a daunting task, but REVERB isn’t alone. Other groups are joining the effort.
Sustain Music & Nature Nonprofits like Sustain Music & Nature are using music to involve fans in the conservation of public lands. In 2015, the husband-and-wife team of musician Harrison Goodale and environmentalist Betsy Mortensen found a way to combine their two passions: music and conservation. They developed Sustain Music & Nature to combat the doom-andgloom messaging they were hearing. “It’s hard to know how to get n Eliminated more than 5x the emissions it created involved,” Goodale said. “When n Raised $577,000 to support greenhouse gas elimination you’re faced with an existential n Prevented the use of 19,000+ plastic water bottles crisis, it’s a lot easier to ignore it. –Dead & Company Impact Report: 2021 Tour We want to capitalize on the cultural capital that musicians have to really
Climate Positive Tour
“Climate change, environmental problems— these are huge issues,” Spinato said. “It’s not something that any single person can solve, but we have a responsibility to take action. If a single person brings a reusable water bottle to a show versus using plastic, it’s a small action. But imagine multiplying that across a whole tour.” Recently, REVERB has worked with touring artists such as Dead & Company, Billie Eilish, Harry Styles, The Lumineers, Lorde and the Dave Matthews Band. The result is different each time, but the mission is always the same: educate and empower fans while creating easy ways to get involved. For example, at the Dave Matthews Band’s Warm Up tour, fans can stop at an Eco-Village to refill on free water at the #RockNRefill stations, learn more about the Music Climate Revolution, get involved in DMB’s commitment to plant 1 million trees for their third year in a row, and register to vote. Spinato says REVERB looks at sustainability in the industry holistically: trash, single-use plastics, energy consumption and transportation. Activists often focus on one aspect of the problem, such as single-use plastics, but more issues need to be addressed. The idea is to reduce more than produce, whether it’s trash, greenhouse gases or carbon emissions. “The word is getting out that there is some-
CRASH INTO ME Eighteen years ago, a bus owned by the Dave Matthews Band was crossing a bridge in downtown Chicago when the driver decided to dump 800 pounds of human waste from the vehicle’s septic tank into the Chicago River. He assumed the sewage would cascade through the bridge’s grated metal floor. Ecologically, it wasn’t a good idea. But it gets worse. It happened that an open-air boat with rows of seated passengers on an architectural tour was passing under the bridge at the exact moment the driver liberated the waste. About two-thirds of the 120 sightseers were soaked. After an initial coverup, the driver pleaded guilty to reckless conduct and discharging contaminants. He was sentenced to probation and community service and fined $10,000. The band donated $50,000 to Friends of the Chicago River and $50,000 to the Chicago Park District and paid $200,000 to settle a lawsuit brought by the state. Reportedly, the passengers suffered no long-term health effects.
REVERB’s #RockNRefill stations offer an alternative to single-use plastic water bottles.
musicians stay for four to seven days, learn about the area and conservation efforts, and then write a song inspired by the experience. The goal is to turn the musicians into advocates for conserving and convince them to use the emotional hook of music to influence the public. Trail Sessions take a similar approach with people who aren’t musicians. In parks throughout Colorado, New York and New England, the sessions take people on guided educational hikes that end with an intimate acoustic performance by local musicians. n Eliminated 287,000+ tons of CO2 “Music has been a great way to bring folks n Raised $5.7 M+ for environmental causes together for a cause,” Goodale said. But nobody says it’s easy. bring people together. It’s about taking a celeSpinato noted that people often find it difficult bratory approach that involves getting outside.” to confront and acknowledge their own enviSustain Music & Nature has ronmental footprint, the first step launched two initiatives: Songstoward making progress. capes and Trail Sessions. In both, “The best way to deal with these the organization works with officoncerns that we have is to take cials who administer public lands action,” Spinato said. “Don’t put it across the U.S. to bring together all on a single moment. What’s more music and nature to become one. impactful is that you start taking More Sustain In Songscapes, the nonprofit actions in your everyday life or joinMusic & Nature Songscapes sends artists to songwriting ing groups that are doing really good retreats on public lands. The work in your local community.”
REVERB’s Impact
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ROCKHOUND
By Kendall Polidori
After a weather delay, Texas-based blues rockers Tyler Bryant & The Shakedown gave Welcome To Rockville fans a reason to get back to the stage
Tyler Bryant & The Shakedown played the Welcome To Rockville festival in Daytona Beach, Florida.
The Beatles, Stones and Zeppelin were awesome— but rock lives on. Why not break out of the classic rock cocoon and give new rock a chance? Rockhound is here to help. Think of it as a bridge from 1967 to today and beyond. 42
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PHOTOGRAPH: TYLER STEVE CARLOS
Best at Rockville
yler Bryant is fascinated by the way his fingers can graze the strings of a guitar. He picked one up when he was six and since then, a guitar has been like an additional limb. Playing is second nature. On stage, he gets lost in the craft, effortlessly strumming a pink resonator or Stratocaster, eyes closed, head leaning back with his chin pointing skyward. Bryant and his band—Caleb Crosby, drums; Graham Whitford, guitar; and Ryan Fitzgerald, bass—quickly garnered attention in the blues rock sphere after forming in 2009 and going on tour with the likes of Aerosmith, B.B. King, Eric Clapton and Guns N’ Roses. Their sound holds a distinct southern rock twang with brassy, echoing guitar work. Think of them as a mash-up of The Black Crowes, Sound Garden, Humble Pie, Bad Company, Tom Petty and the Heartbreakers, Muddy Waters, and The Rolling Stones. “We like to follow that voice that feels inspiring to us, and we’ve cultivated a fanbase that knows we are going to be authentically ourselves,” Bryant said before their set at the May music festival, Welcome To Rockville, in Daytona Beach, Florida. They strive to create an authentic experience for their fans, with each live show different from the one before. For them, it’s all about what feels right in the moment, Crosby noted. The Shakedown likes to take a DIY approach. They’ve built the band’s structure brick by brick, and Bryant recalls shows in the early years with six people in attendance. Their goal for the next one was to have 12 people in the audience, but it just kept getting better each time. “These are people that are like us,” Bryant said. “They listen to the same type of music that we do. We almost have a friendship with our fans. Something we have consistently done over our career is to try and have less of an ego.” They released their past four studio albums through labels Carved Records, Republic Records and Snakefarm Records but have recently created their own label: Rattlesnake Records. Bryant said the band never found anyone who was willing to work as hard as they were, so they decided to keep recording in-house. He added that many rock fans want to support artists directly but don’t realize they are often supporting the label more than the artists. “The models have been changing for years, but especially in 2020, we realized that we were able to move forward on our own,” Whitford said. “The music industry has shifted dramatically, and most artists are making that change.” Their next album, slated for fall, will be the first under their new label. There might be some hiccups along the way, but
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they’re the type of band that will trudge through hell and high water to get what they want. Tyler Bryant & The Shakedown are in their element on stage. It’s as though nothing else in the world matters— it’s just them, their audience and grooving to the music. At Rockville, the band created their own world within the limits of the stage. Bryant is intrigued with making the audience part of the show. During their last song at the fest, Lipstick Wonder Woman, Crosby stepped out from behind his drum kit and marched forward with a large plastic-top drum, banging on it repeatedly in line with the guitars. Although the performance looks like it comes to them easily, Crosby said they consider themselves students who look to be inspired and excited about music and new artists. They’re all deeply interested in the technique behind music, studying other musicians and music progressions. They let their songs carry themselves, instead of relying on overdone guitar solos. Passion is a factor, but Bryant noted that it takes a certain mentality to survive as a touring rock musician. “You have to have a purpose that goes beyond what anyone else thinks of you,” he said. “You have to have really thick skin, and you almost have to look forward to getting doors slammed in your face and people telling you ‘no.’ It’s not something you get into if you’re looking for a quick road to fame or success.” Common among modern rockers, Tyler Bryant & The Shakedown pride themselves on not being categorized. Each record and project feels like a new era for them. There’s never a set structure: Sometimes it starts with the drum grooves, or a simple concept, and other times it’s just a jam session. “We’re an interesting band because you can listen to one of our records and hear one thing and then listen to another and get something else,” Crosby said. “Those moments are More Bryant On To The Next snapshots of where we were and what we were inspired by in that time frame.” START WITH their song On To The Next, and you might notice the different elements that the band intends to convey in their lyrics.
PAY ATTENTION TO how guitar drives the song but does not drown out the varying layers of rhythm, bass and percussion. The song tips a hat to the band’s bluesy influences. Kendall Polidori is The Rockhound, Luckbox’s resident rock critic. Follow her reviews on Instagram and Twitter @rockhoundlb.
ROCKVILLE ROCKERS “Something unique about us is that all four of us sing … We’re like the Beach Boys mixed with Black Sabbath or Foo Fighters.” —Post Profit, one of four winners of the Battle for the Big Stage competition
“GROWING UP IN A SMALL TOWN, WE DIDN’T HAVE A LOT OF ACCESS TO OBSCURE MUSIC. BUT IN THE EARLY ’80S, THE LOCAL RECORD STORES STARTED BRINGING IN RECORDS FROM DEVO, JOY DIVISION, THE CURE AND DEPECHE MODE. MANY WERE ELECTRONIC, AND I JUST THOUGHT THAT WAS AMAZING, LIKE, ‘YOU MEAN ALL FOUR OF THEM [IN DEPECHE MODE] PLAY KEYBOARDS?’”
—John Bechdel, keyboardist for Ministry
“We tour and travel in our bus. We live at truck stops a lot. Truck stop showers are a slept-on secret in America—they’re fivestar showers. We get to see a new place every day. … We’re basically 10 grown men that never have to grow up.”
—Matt James, lead singer of Blacktop Mojo
“WE MADE IT INTO THE THIRD ROUND OF THE COMPETITION, AND WE’RE LIKE, ‘OH MY GOD, WE HAVE TO PLAY A LIVE SET. WE DON’T EVEN HAVE A DRUMMER.’ WE DIDN’T HAVE A VAN, WE DIDN’T HAVE MERCH, WE DIDN’T HAVE ANYTHING.” —A River Runs Thru It, one of four winners of the Battle for the Big Stage competition “We tend to work better under pressure, or during designated writing retreats. We recently went to Joshua Tree National Park and would wake up, make coffee and just write all day. Those are when those magic moments combust.”
—Marc LaBelle and John Notto, Dirty Honey “WE’RE PRETTY NEW TO THE SCENE, SO BEING AROUND PEOPLE WHO HAVE BEEN DOING IT FOR SO LONG SETS THE TONE FOR US, LIKE THIS IS SOMETHING WE CAN ACTUALLY PURSUE. THE VALIDATION FOR THAT IS INCREDIBLE.”
—NVRLESS, winner of the Battle for the Big Stage competition
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ARTS & MEDIA
Outer Voices
There’s no shortage of books, documentaries and podcasts with outdoor themes. Here are some of Luckbox’s favorites.
FILM
PODCAST
The Last One
Wild Ideas Worth Living
Cartoon depictions of moonshiners often paint unflattering caricatures of drunken mountain dwellers wearing tattered clothes and evading the law. In reality, moonshining is a highly technical process with deep
Cave diving, mountain climbing, camping and backpacking are just a few of the topics journalist Shelby Stanger explores with her guests on REI Co-op’s Wild Ideas Worth Living podcast. The show delivers the excitement and unpredictability of the outdoors to podcast listeners wherever they tune in. A recent episode featured the firsthand account of Rick Stanton, the diver who in 2018 helped rescue a Thai youth soccer team and their coach who were trapped in a flooded cave. Another episode tells the story of Eddie Taylor, one of the climbers poised to make history as part of the first all-Black team to climb Mount Everest. At about half an hour per episode, it’s easy to indulge in several episodes in one sitting—and with stories like Stanton’s and Taylor’s, it’d be hard not to.
BOOK roots in tradition, and it’s not for the faint of heart. PBS’s Emmy award-winning documentary The Last One shines a light on the ‘shine business by following the late, legendary moonshiner Marvin “Popcorn” Sutton as he prepares his last batch of white lightning. The simplicity of Popcorn’s outward appearance is juxtaposed with the complexity of his moonshine-producing prowess, from mash to Mason jar. Interviews with locals help highlight the role that the home-brewed spirit has played in defining Appalachian culture. If the documentary doesn’t leave you thirsty, it will definitely leave you more knowledgeable about America’s timeless moonshining business.
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The Worst-Case Scenario Survival Handbook: Expert Advice for Extreme Situations
Ever wonder how to escape from quicksand? How about the best way to treat frostbite? What do you do if you’re lost in the desert? All of those scenarios could occur when traversing the great outdoors, and all of those scenarios are covered in The Worst-Case Scenario Survival Handbook: Expert Advice for Extreme Situations. The New York Times bestselling authors Joshua Piven and David Borgenicht whimsically break down a variety of survival scenarios, from the practical to the preposterous. The book’s “How to Survive an Earthquake” entry is just a few chapters away from “How to Tell If a Clown Is Murderous,” but don’t let the authors’ humor mislead you, The Worst-Case Scenario Survival Handbook is packed with practical, digestible survival tips. Some readers claim, according to the preface, that it actually saved their lives.
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THE “ONE SONG” PLAYLIST — THE ROCK EDITION n Requiem, Killing Joke —MINISTRY (JOHN BECHDEL)
MUSIC
n Enjoy the Silence, Depeche Mode n Another Space Song, Failure n We Will Rock You, Queen n Ride, Samuel R. Hazo
The Essential Rock Playlist
—POST PROFIT
Everyone has that one song. So, The Rockhound asked accomplished rock musicians this question: “If you had to listen to one song for the rest of your life, what would it be?” Initially stumped, Welcome To Rockville rockers eventually came up with their tunes. For some, it was the song that started it all for them. Others picked what they considered a perfectly crafted piece of music. A few chose what resonated with them in the moment. Here are their responses.
n Hold On, I’m Comin’, Sam & Dave —BLACKTOP MOJO
n Take It With Me, Tom Waits n Everybody (Backstreet’s Back), The Backstreet Boys n Butterfly, Crazytown —TYLER BRYANT & THE SHAKEDOWN
n I Will Always Love You, Whitney Houston n Them Bones, Alice In Chains n Sidewinder, Avenged Sevenfold n Shogun, Trivium n Try, P!nk n Funhouse, P!nk n Diamond Eyes (Boom-Lay Boom-Lay Boom), Shinedown —YOUNG OTHER
n The Rain Song, Led Zeppelin n Flash Light, Parliament —DIRTY HONEY
n Map Change, Every Time I Die n A Favor House Atlantic, Coheed and Cambria n Flicker, Fade, Taking Back Sunday n The Devil in My Bloodstream, The Wonder Years n Time to Pretend, MGMT —A RIVER RUNS THRU IT
More Rock Listen to The “One Song” Playlist
n Don’t Go (with Justin Bieber & Don Toliver), Skrillex n Hypnosis, Sleep Token n Hanging By A Thread, PhaseOne n Manic, Wage War n Everyone’s Safe in the Treehouse, I See Stars —NVRLESS
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trends
FINANCIAL FITNESS
Sunshine Superman Vitamin D—either from supplements or sunshine— strengthens the immune system, elevates mood and lowers blood pressure By Jim Schultz
Our bodies effectively know the time of day from the rising and setting of the sun, and every cell in our bodies operates on a 24-hour clock. That’s 37 trillion clocks working together. Certain cells in the eyes are activated by specific wavelengths of light present only at low solar angles—like the sun rising in the morning and setting in the evening—instead of high solar angles when the sun is directly overhead at noon. When activated, these cells send a nerve pulse to a set of neurons that sit just above the roof of the mouth and are called the suprachiasmatic nucleus. These cells govern all the cellular processes of the body. They secrete all kinds of things that flow throughout the entire body to regulate those clocks for all other cells. If you view each organ of the body as a workstation in a factory, as Huberman puts it, then the suprachiasmatic nucleus is the supervisor that ensures each station of cells does what it needs to do when it needs to do it.
We’re hardwired to be outside and awake when the sun is up— and inside and asleep when the sun is down. 46
But, there’s more. Exposure to morning light also activates the cortisol pulse, which has a two-pronged effect. First, it moves your system into a heightened state of focus and activation. Second, it starts an internal clock that counts down from 16 hours, the amount of time your cells expect your body to be awake before it’s time to sleep again. If that isn’t wild enough, when time runs out on that 16-hour clock, the body begins producing more melatonin, a hormone that helps control the wake-sleep cycle. So, clearly, viewing a few minutes of morning light within the first hour of waking, provided you don’t get up at noon, has a cascade of positive effects on your system. We’re hardwired to be outside and awake when the sun is up and inside and asleep when the sun is down. The more we sync up with this natural rhythm, the more we optimize our bodies for peak physical performance and position our minds for high levels of mental acuity. Jim Schultz, Ph.D., a derivatives trader, fitness expert, owner of livefcubed.com and the daily host of From Theory to Practice on the tastytrade network, was named North American Natural Bodybuilding Federation’s 2017 Novice Bodybuilding Champion. @jschultzf3
PHOTOGRAPH: SHUTTERSTOCK
L
et me save you some time: Every single day, take 5,000 IUs of Vitamin D, absorb light early in the morning, avoid light late at night and feel incredible. Now, if you have an extra couple minutes to burn, let’s dig a bit deeper. Our bodies are biologically wired to settle into 24-hour cycles called circadian rhythms. That’s why most people feel better getting to bed earlier at night and getting up earlier in the morning. It’s also why most people who work nights and sleep days struggle mightily to get in sync with their schedule. But careers on the night shift aside, we live in a society that spews information and entertainment 24/7. It can be all too easy to spend the evening firing up a favorite video game, submitting to the automatic next episode on Netflix or getting lost in the black hole otherwise known as YouTube. Next thing you know, it’s already tomorrow. Just know that if you stay up late, shortchange yourself on sleep and cope with a sporadic schedule, you’re fighting the natural flow of your ancestors. It might help explain why over 80% of adults are deficient in Vitamin D, an overwhelmingly powerful nutrient they can maintain through a combination of supplements and time spent in the sun. But getting back to the bright light business, Andrew Huberman, associate professor of neurobiology at Stanford University, has studied the brain extensively, with an emphasis on health and physical performance. When it comes to bright light specifically, his interpretation of the research yields some pretty wild applications.
Luckbox | July 2022
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trends
CALENDAR
JULY 2 National Hop-A-Park Day 4 Independence Day 15-17 Pitchfork Music Festival Chicago 15-18 Open Roads Fest McCall, Idaho 16 tastytrade Bad Trader Tour Chicago 22 National Hammock Day 24 National Tequila Day
PHOTOGRAPHS: OPEN ROAD, TEQUILA (SHUTTERSTOCK); TOM SOSNOFF (JESSICA MCDERMOTT)
28-31 Lollapalooza Chicago 29 The 2022 Sundance Film Festival Short Film Tour Hanover, New Hampshire
Driving the Open Road The Open Roads Festival, a gathering that celebrates traveling the country while living in vans, is back for the first time since 2019, and it’s set to take place at the Jug Mountain Ranch in McCall, Idaho. The festival will provide space to camp out in a 7-acre grassy field and activities that include yoga, hiking, live music, cycling and running, plus paddleboarding on Jug Mountain’s private reservoir. Workshops on van life and camping will address power systems, insulation, backcountry van life and working from anywhere. Embrace Your Inner Bad Trader For the first time in two years, tastytrade is going back on the road with the Bad Trader Tour. tastytrade veterans Tom Sosnoff, Liz Dierking and Jenny Andrews will be joined by newbies Julia Spina, Victor Jones and Jermal Chandler for an all-new show. The Tom Sosnoff presentation will include short talks, storytelling and interactive games (think Wordle), and the first stop is in Chicago. Registration is free, and more dates and cities will be announced soon. For tickets, visit tastytrade.com/events. Mas Tequila Tequila is considered a type of mezcal, much the way bourbon is a type of whiskey. Definitions aside, tequila and mezcal are the second-fastest growing spirits category, right behind vodka. Sales have increased for 12 straight years and climbed by 30.1% last year to $5.2 billion, according to the Distilled Spirits Council of the United States. Tequila is made from a specific agave plant, and Mexican law specifies that true tequila is made only in a region that includes the state of Jalisco and parts of the states of Guanajuato, Michoacan, Nayarit and Tamaulipas. Agave-based distilled spirits from outside the region are considered mezcal.
July 2022 | Luckbox
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cheat sheet
NO.
trades& tactics
24
Dollar-cost Averaging DCA, the strategy of investing an equal amount of money at regular intervals regardless of the price of the underlying stock, removes emotion from the equation By Eddie Rajcevic on’t expect to time the market consistently. Just ask investors who foolishly insist on attempting to buy at the bottom and sell at the top. The likelihood of that actually happening is slim to none. So, instead of aiming for perfect timing, why not aim for consistent investing? Enter dollar-cost averaging (DCA), one of the simplest investment strategies for anyone who doesn’t have the time or the interest to monitor a portfolio. DCA consists of systematically investing an equal portion of money at regular intervals, regardless of the price of the underlying stock. That helps remove the emotion that may keep investors from buying when stocks are low or over-investing when stocks are high. DCA also helps prevent procrastination. Most people know the importance of investing but can’t seem to get themselves to start. Another benefit is that it eliminates the temptation to try to time the market, which may cost thousands in the long run if investors wait to invest because they believe “this isn’t the bottom.” Most brokerages provide a relatively simple way to start DCA. Let’s say an investor sets this up to take $100 a week from a bank account and put it into an investment account. From there, all the investor would need to do is log into the account each time the deposit clears, purchase whichever stock, exchange-traded fund or other fund they are DCA in, and they are good to go. Ultimately, DCA is a risk mitigation strategy that reduces the chance of poor timing or, more importantly, not investing at all. DCA takes the guesswork out of investing and removes the emotion associated with money management.
D
Eddie Rajcevic a member of the tastytrade research team, serves as co-host of the network’s Crypto Corner and Crypto Concepts programs. @erajcevic11
Investing versus saving Saving money is important in life, but so is investing. Consider the difference in value of investing versus saving in the last few decades. $1,000,000 $900,000
Portfolio value (investing) Principal (saving)
$800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0
1993 1995 1997
1999
2001 2003 2005 2007 2009 2011
2013 2015
2017
2019 2021
Dollar-cost averaged price Dollar-cost averaging takes the guesswork out of picking prices and entry points for a stock or exchange-traded fund. $500 $450 $400
SPY price Average purchase price
$350 $300 $250 $200 $150 $100 $50 $0
1993 1995 1997
1999
2001 2003 2005 2007 2009 2011
2013 2015
2017
2019 2021
July 2022 | Luckbox
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tools
tool kit PRICELESS (FREE!) RESOURCES FOR ACTIVE INVESTORS & TRADERS ALPHA BOOST
CHERRY BOMB
Intermediate to advanced
Basic to intermediate
An algorithmic trade-hunting system that focuses on strategic premium-collecting strategies. Timely trades are focused on active stocks and ETFs with robust options markets. Three emails per week.
Premarket analysis direct to your inbox! Daily analysis before the opening bell. tastytrade co-founder Tom Sosnoff kicks off every week followed by chief quantitative strategist Tom Preston. Five emails per week.
STOCK & ETF OPTIONS
SIGN UP AT QUIETFOUNDATION.COM/ALPHABOOST
STOCKS/ETFS, OPTIONS, FUTURES & CRYPTO
SIGN UP AT TASTYTRADE.COM/NEWSLETTERS
CHERRY PICKS
STOCKS/ETFS, OPTIONS, FUTURES & CRYPTO
Basic to intermediate A quantitative newsletter on the markets from tastytrade’s research department. Each week, the team discovers new opportunities and trade ideas. Also a quarterly earnings edition. Every Tuesday. SIGN UP AT TASTYTRADE.COM/CHERRY-PICKS
DAILYFX
FOREIGN EXCHANGE, FUTURES & COMMODITIES
Basic to intermediate A global digital publisher with news, analysis, educational content and tools for active traders and investors. DailyFX’s global team of analysts provides hourly updates from a variety of macro perspectives, fundamental and technical analytics. VISIT DAILYFX.COM
LEARN CENTER
STOCKS/ETFS, OPTIONS & FUTURES
Basic to intermediate Options? Futures? Implied volatility? This essential knowledge platform provides comprehensive online courses that teach the crucial concepts, strategies and mechanics that make successful traders. VISIT TASTYTRADE.COM/LEARN
LOOKBACK OPTIONS
Intermediate to advanced Backtest your stock option trade strategies. You can see how well they would perform historically by providing insight into the average profit/loss, the win rate and the maximum loss that the strategies saw, along with other metrics. In addition, lookback allows you to forecast the potential profit and loss before you enter a trade, so you can better understand how changes in price and time impact potential positions. VISIT TASTYTRADE.COM/LOOKBACK
tastytrade FINANCIAL NETWORK
STOCKS/ETFS, OPTIONS, FUTURES, CRYPTO & FOREX
Basic to advanced Sixty hours of live, educational, yet often irreverent, original programming each week. More than 20 on-air traders provide financial information, investment strategies and entertainment related to stock and options trading. Actionable information rooted in research and experience. VISIT TASTYTRADE.COM
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trades&tactics actionable trading ideas
CHERRY PICKS
R I PE & J U I CY T RADE IDEAS
Home in on Cyclical Stocks
Use a counter position to take advantage of the volatility of equities that move with the market By Michael Rechenthin
Cyclical stocks
Non-cyclical stocks
Sometimes called
Consumer discretionary
Consumer staples, consumer defensive
Implied volatility (median)
66%
56%
3-month price change (median)
-13%
-5%
Percentage of stocks that are up over the last 3 months
17%
40%
Stocks to watch
TSLA, NFLX, AMC, DIS, TOL, HD, LOW
WMT, COST, PG, KO, TGT, PEP, MO, DG
yclical stocks tend to move along with macroeconomic trends, going up in bull markets and down in bear markets. Demand for non-cyclical stocks can remain strong even in bear markets. Volatility between cyclical stocks and non-cyclical stocks is significant. Because cyclical stocks have more volatility and are down the most, it’s interesting to take a counter position. In keeping with the outdoors theme of this issue of Luckbox, let’s look at the two biggest home improvement retailers: The Home Depot (HD) and Lowe’s (LOW). Both have been down over the past six months but relatively flat compared with this time last year. The Home Depot is two-anda-half times larger than Lowe’s in capitalization. Volatilities, which are the expected price movements, are both high—as are their liquidities— which means they are easy to trade with very little slippage. So, here are some short-term bullish trade ideas:
option in the expiration closest to 30 days away. The strike should be above the stock price—consider selling the one that is $5 to $10 away from the current price. This can easily lower the cost to purchase by 2% to 3%.
Covered call Buy 100 shares in either The Home Depot or Lowe’s and sell a call
Bullish put credit spread This would require considerably less money than a covered call. Here’s an
C
Dividend
Market capitalization
Volatility
12-month price change
6-month price change
3-month price change
The Home Depot (HD)
2.51%
$311 billion
33.1%
-3.0%
-26%
-7.0%
Lowe’s (LOW)
2.16%
$124 billion
34.4%
2.0%
-23%
-15%
–Data through end of May 2022
example: With The Home Depot at a price of $304, sell the 295 put and buy the 290 put strike in the August expiration. Investors can do this for a credit of $170, with a risk of $330. Because the price is above the strikes, it would be a bullish higher-probability trade. Michael Rechenthin, Ph.D., aka “Dr. Data,” is the head of research and development at tastytrade. @mrechenthin
Subscribe to Cherry Picks, a free quantitative newsletter for current and armchair quants, which is short for quantitative analysts. Every week, the publication provides trade ideas for stock, options and futures traders. It also offers the latest insight into earnings, trade opportunities and market moves.
July 2022 | Luckbox
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trades& tactics
NORMAL DEVIATE
Let’s Be Precise About Accuracy They’re not the same, and knowing the difference could lead to successful investing By Tom Preston
Accuracy is hitting a bullseye. Precision is hitting it repeatedly. definition. But precision is different, and archery shows the relationship between the two words. Take the most famous archer, William Tell, for example. There would be no legend of William Tell if he had missed. If he missed a little high, he’d be a forgotten victim of medieval Swiss tyranny. If he missed a little low, he’d be charged with murder. What Tell needed was accuracy to hit the apple on his son’s head with one shot. Now, if the evil magistrate thought one time could be luck and that Tell would have to shoot a second apple to save his and his son’s lives, what Tell would need is precision. If someone shoots five arrows and they all hit the bullseye very close to each other, the archer is both accurate and precise. If the
50
L P AA
85%
SPX
88 %
ccuracy versus precision. Some might think they mean the same thing, but their differences are apparent in many outdoor activities and might lead to profitable trades. Examples of accuracy include a golfer sinking a putt, a pitcher grazing the strike zone and a hunter stopping a feral Texas hog dead in its tracks. Sometimes, the word “precision” is used to describe that type of action, and it muscles “accuracy” out of its rightful
A
T SL A % 84
DIS
84%
IBM
81%
A 32 DELTA PUT IS THEORETICALLY EXPECTED TO EXPIRE WORTHLESS 68% OF THE TIME. TASTYTRADE’S LOOKBACK FEATURE SHOWS THE ACTUAL RESULTS ABOVE.
Luckbox | July 2022
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TRADERS!
DON’T MISS SLOPE.
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In sports, it’s best to have high accuracy and high precision. In investing, precision might take precedence. See a pattern? Each of those puts had a 68% theoretical probability of expiring worthless, but historically, they expired worthless an average of 84.4% of the time, with a 2.5% standard deviation. That they expired worthless more frequently means that the delta isn’t the most accurate estimate of how often the put might expire worthless. But the results are fairly precise, all around that 84.4% average. Why is that? One of the main factors used to calculate delta is the implied volatility of the option. Implied volatility is based on the option’s market price, which is determined by the buying and selling pressures of all the people trading that option. For stocks and stock indexes, there is usually a strong opinion that they might drop faster than they can rise, and people are buying puts both as a hedge against long stock and as speculation that the stock might fall. That means OTM put prices are elevated, which translates into a higher implied volatility, which in turn increases the put’s delta. If the delta is higher, the probability of expiring worthless is lower. The results of the test indicate that the market is overstating how much the stock might drop. In other words, the market thinks that puts in those five symbols will be ITM about 32% of the time, but historically they’ve only been ITM about 16% of the time. Delta isn’t necessarily accurate, but the results are very precise. That’s why shorting options can be profitable over time. So, this summer, maybe skip playing William Tell. Try shorting high probability options instead.
• It’s FREE • Charts and Ideas • Active Community
slopeo fhope .com
five arrows land around the bullseye but are farther apart, the archer is accurate but not precise. And if the five arrows all hit the target far off to the side but are close together, the archer isn’t accurate but precise. In other words, accuracy is how close something comes to a target. Precision is how repeatable that accuracy is. In some sports, one instance of accuracy is enough. But in others, where success is determined by repeated instances of accuracy, precision is required. Using archery again as an example, accuracy is measured by how close an arrow lands in relation to the center of the bullseye. It might hit the bullseye in the absolute center and thus have zero deviation. Another arrow might hit the edge of a bullseye, and the distance between where it hits and the center of the bullseye can be measured. Precision considers the distances between where all the arrows land and the center of the bullseye to calculate the standard deviation of the distances. Low standard deviation means high precision, and vice versa. With sports, it’s best to have high accuracy and high precision. But in trading, precision might take precedence over accuracy. Here’s why. Selling naked short puts in a variety of individual stocks and indexes, it’s possible to see both accuracy and precision in action. Shorting puts is a bullish strategy, and some investors scan the deltas of a stock’s puts to find one to sell. Delta is a proxy for the probability that an option will be in-the-money (ITM) at expiration. One minus the option’s delta is an estimate of the probability that the option will be out-of-the-money (OTM) at expiration. So, a put that has a 32 delta should expire worthless about 68% of the time. Using tastytrade’s lookback tool (lookback. tastytrade.com) with a max of 17 years of data to backtest short put strategies in five popular stocks, with each put having a 32 delta (68% probability of expiring worthless) and 50 days to expiration (DTE), these are the results. The short put in IBM (IBM) expired worthless 81% of the time. The short put in Apple (AAPL) expired worthless 85% of the time. The short put in Tesla (TSLA) expired worthless 84% of the time. The short put in Disney (DIS) expired worthless 84% of the time. And the short put in the S&P Index (SPX) expired worthless 88% of the time.
Created by:
Tim Knight
Founder of Prophet & ProphetCharts
Tom Preston, Luckbox contributing editor, is the purveyor of all things probability-based and the poster boy for a standard normal deviate. @thetompreston
6/17/22 10:01 AM
trades& tactics
THE PREDICTION TRADE
Making Rain Prediction markets will pay you to get the weather forecast right—something made easier if you know what to look for By Mike Reddy abylonians attempted to predict the weather as early as 650 B.C. by looking at cloud patterns in the sky. Today, meteorologists use images and data transmitted by satellites tens of thousands of miles above the Earth’s surface. Forecasting has come a long way. Event-based prediction markets represent yet another tool for weather forecasting, albeit a terrestrial one still in its infancy. But what makes prediction markets unique is that virtually anyone can participate in them, and a forecaster’s accuracy—or lack thereof—bears real financial consequences. In short, it pays to be a better weather bettor. On the federally regulated events exchange Kalshi, daily recurring markets attempt to fore-
B
Chicago high temp <63°
Yes 44¢
No 56¢
63°- 64° Yes 31¢
No 69¢
>64°
No 75¢
Yes 25¢
— A daily weather market at kalshi.com cast high temperatures for New York City and Chicago. Other daily markets aim to forecast whether it will rain in New York City and Seattle. Market structures vary. For instance, a “Seattle rain” market may simply forecast whether the city will record greater than zero inches of rain on a given day. Traders could buy “Yes” or “No” shares for a fraction of a dollar, with share prices roughly representing the market’s fore-
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casted probability of a specific outcome. When the market ultimately resolves, correct shares pay out for the full dollar, and incorrect shares become worthless. Alternatively, high temperature markets may be broken up into multiple contracts, each with their own “Yes” and “No” shares. A “Chicago high temp” market, for example, may have contracts for “less than 63 degrees,” “63 degrees to 64 degrees” and “greater than 64 degrees.” To maximize profits, a trader convinced the temperature won’t break 63 degrees could buy “Yes” shares of the “less than 63 degrees” contract and “No” shares of all the others. Less confident traders could use the variety of contracts to hedge their forecasts. With advanced weather data just keystrokes away, it may seem tempting to dive headfirst into Kalshi’s climate markets. But the following tips are essential for first-time weather traders hoping to avoid rookie mistakes.
SEVEN-DAY FORECASTS can accurately predict the weather 80% of the time.
FIVE-DAY FORECASTS are accurate about 90% of the time.
1. Know what you’re forecasting New York City and Chicago are big cities—big enough that the weather in one part may differ from the weather in another. That’s why it’s critically important to read each market’s rules
Luckbox | July 2022
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summary and understand what determines its resolution before placing a trade. Doing so will show that Chicago markets are determined by data recorded at Chicago Midway International Airport, and New York City markets are based on records for Central Park. It could rain torrentially in Lower Manhattan, but if the rain never hits Central Park, it won’t affect the market’s outcome. Underlyings may change from day to day, too. A market forecasting if it will rain greater than zero inches in Seattle today may forecast whether it will rain greater than a half of an inch tomorrow. Always read the rules.
Forecasters can explore the NWS’s daily climate reports by going to weather.gov/wrh/ climate, but to access the data more easily, specific source agencies are hyperlinked under each market’s rules summary. Parsing the daily climate reports shows maximum, minimum and average temperature readings, precipitation amounts and other data that could aid in more informed forecasting.
2. Refer to reliable resources A market’s rules summary not only shows where to look for weather data but also what specific weather data to look at. All of Kalshi’s daily weather markets use the National Weather Service (NWS) as its source agency— more specifically, NWS daily climate reports.
3. Be prepared to hedge your bet Anyone who’s been hit by a surprise rainstorm knows the NWS is far from perfect, and making day-of trades based solely on its forecasts will undoubtedly result in losses. However, the earlier traders enter a climate market, the less they’ll likely pay for the shares.
It pays to be a better weather bettor.
Generally speaking, Kalshi’s climate markets are posted over a day in advance of their closures. With over 24 hours of uncertainty baked into their prices, it’s usually pretty affordable to hedge in markets with multiple contracts. Take the “Chicago high temp” example mentioned earlier. If “Yes” shares are hypothetically trading for 44 cents in the “less than 63 degrees” contract and 31 cents in the “63 degrees to 64 degrees” contract, buying an equal number of both shares effectively serves as a 75-cent “Yes” on the temperature staying under 64 degrees. If the NWS forecast for the day is 62 degrees, that two-degree buffer can help save More a forecaster’s portfoWeather Bets lio from burning up if Listen to the TPT podcast the weather gets hotter than predicted.
Listen Here Truth or Skepticism
Tom Sosnoff, entrepreneur, options trader and co-CEO of tastytrade, joins Dylan Ratigan, businessman, author and former host of MSNBC’s The Dylan Ratigan Show, for a weekly podcast covering everything from sports and investing to politics and monetary policy. One’s an iconoclast, and the other’s a contrarian. Tune in each week to find out who is who. It’s unscripted and unpretentious—some like to think of it as rants, but refined.
The Prediction Trade
If you can trade it, or bet on it, you can bet they'll talk about it on The Prediction Trade— the only podcast for gamblers, traders, investors, math geeks, data freaks and superforecasters devoted to the intersection of probability, prediction and profit. Each episode features expert guests with proprietary forecasting models and insights into the outcomes of prediction market events. So whether you live to bet or bet to live, check out the next episode of The Prediction Trade.
Truth or Skepticism and The Prediction Trade are available on your favorite podcast platform and the tastytrade financial network's YouTube channel.
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tastyworks.com/get200 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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trades& tactics
1. Trading screen
TRADER
2. Details of the stock I’m analyzing using tastyworks, my own app and Barchart
4 4
2
3 5
1
3. Watching tastytrade live 4. On the wall: Three paper calendars to track expirations quickly, and a whiteboard where I brainstorm ideas 5. The Statler and Waldorf Muppets criticize and laugh at all my trades
Battista did a great video on covered strangles in 2014, and that’s what got me started with it. Average number of trades per day?
Five trades per day. When the VIX is high, 15 trades per day.
MEET
TOM CARLUCCI Home/Office location
New Jersey and Vermont
process was manual, and he contacted me to create a software application that would automate it. As we worked through the programming, I became more and more interested in equities. He educated me on how to value companies, and I educated him on what was hot in technology. Once I got a taste of making my money work for me in the markets, there was no looking back.
Age
55
Favorite trading strategy for what you trade the most?
My favorite strategy is the covered strangle, especially in high implied volatility markets. I usually start by selling naked puts on stocks How did you start trading? I’ve researched and want to own. If I feel a After earning my bachelor’s degree in stock is undervalued, I sell a naked at-thecomputer science from Rutgers University money put, collect the premium, and either and the New Jersey Institute of Technology, I take the assignment if the stock falls or roll worked for a small systems intethe put up if the stock moves gration firm in New Jersey. One higher. If the stock is at fair value, of my clients ran a private investI usually sell a 25 delta naked ment company out of his home put. When I am assigned shares, I hold the stock and sell 30 delta office. This was back in the early 1990s, and he had two Bloomberg covered calls against the position. terminals in addition to other If I’m still bullish on the stock, I computers he used for research. sell another naked put along More on with the covered call to create He created a proprietary formula Strangles Sosnoff & Battista a covered strangle. tastytrade’s that determined whether a particular stock was undervalued. His Tom Sosnoff and Tony Years trading
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What percentage of your outcomes do you attribute to luck?
To some degree, luck is a factor in all my trades. Luck consists of all the outside forces we cannot control: Earnings results, geopolitical factors, scandals, Elon [Musk] tweets, etc. By doing extensive research to find undervalued companies and then applying “tasty” mechanics to the trade strategy, I can maximize my profits when good luck comes my way and minimize my losses when bad luck strikes. If I had to peg a percentage of how often luck plays a role, I’d say it’s just outside one standard deviation with good and bad luck each being 16%. Favorite trading moment?
In the beginning of the SPAC [special purpose acquisition company] craze, I sold naked puts on QuantumScape and used the premium collected to buy long calls. It was the quickest and largest percentage gain I have ever made. Favorite trading book
The Richest Man in Babylon by George S. Clason.
July 2022 | Luckbox
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trades
CRYPTO CURRENTLY
T H E STAT E O F DIG ITAL ASS ETS AND DEC ENT RALIZED FINANC E
Crypto Consensus Blockchain networks come to agreement through either proof-of-work or proof-of-stake protocols By Ryan Grace roponents of cryptocurrency tend to view blockchain technology as the future of the financial system because it improves efficiency by removing intermediaries. In blockchains, everyone who’s participating can view the same information in real time, speeding up settlement and reconciliation. Blockchains are trustless, meaning users don’t rely on third parties to verify transactions or prove something is true. Instead, blockchains verify transactions through “consensus,” a real-time process that calls upon participants to agree on the present state of the network. While that might seem like a mishmash of unnecessary technical jargon, consensus could be the key to whether blockchains can support the machinations of the financial system. For a blockchain to reach agreement on the current state of the network, 51% or more of the nodes running the blockchain’s code must attest to the validity of a transaction. That process records transactions and helps protect the blockchain from fraudulent activity. The process also rewards participants. The most prevalent mechanisms for achieving consensus are proofof-work (PoW) and proof-of-stake (PoS). The Bitcoin and Ethereum blockchains both use the former, though Ethereum is shifting to a PoS layer. (More on that later.)
P
Proof-of-work In a proof-of-work (PoW) blockchain network, miners race to process transactions and add newly processed
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PROOF OF WORK
Miners use powerful computers to process transactions and add new blocks to the chain. They are rewarded with cryptocurrency.
PROOF OF STAKE
Validators stake their tokens. The higher the stake, the higher the probability of validating a new block. Validators are rewarded with network fees.
blocks of transactions to the chain. They do it by solving a complex mathematical equation that connects the current block of transactions to the previous block in the chain. Miners are rewarded with cryptocurrency for completing the computation. Bitcoin miners, for example, receive bitcoin as payment. The process uses a lot of energy and computing power. The trade-off for the massive energy consumption is increased security. Today, it’s virtually impossible to
Everyone participating in a blockchain can view the same information in real time, speeding up settlement and reconciliation.
“hack” Bitcoin or a similar proof-ofwork chain. To accomplish it, a bad actor would have to take control of 51% of the network’s computing power. That’s theoretically possible, but the cost would dwarf any fraudulent gains. Proof-of-stake (PoS) In a PoS network, miners are replaced by “validators” who have staked their own tokens in the network. As opposed to PoW, where miners race to add transactions to the block-
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chain, PoS uses an elecstaked tokens across the tion process. In this entire network. That’s highly unlikely with election, a single node is a developed network. chosen to add the next The percentage of block to the blockchain staked tokens required The larger a network, the more difficult such and receive the reward. to commit fraud on a schemes become. In The process of select- proof-of-stake blockaddition, validators ing a validator is not chain network entirely random. The who commit fraudulent responsibility is allotransactions are penalcated to network participants depend- ized with a loss of staked tokens. ing on how many tokens they hold. Validators are required to stake Trade-offs a certain number of tokens in the Blockchains have to achieve network. The higher a validator’s consensus to function properly, stake, the higher the probability of but the process of reaching agreebeing chosen during the validator ment has trade-offs. PoW chains selection process. The process is less are extremely secure but require secure than achieving consensus via an enormous amount of energy to PoW but still results in a high degree power the network and verify transof security. actions. PoS chains give up some To defraud a PoS blockchain, a bad degree of security but use less energy actor would have to control 51% of the and can process many more transac-
51%
tions per second. The Ethereum network is scheduled to complete a shift from PoW to PoS this year. If successful, it should result in a faster, more efficient and more scalable Ethereum network, which has been held back by its PoW consensus mechanism. Given the efficiency of PoS, growth of these blockchains appears likely to continue. Once Ethereum makes the shift, its native token, ETH, will become the largest PoS token by market cap. Until then, the next largest PoS tokens by market cap are Cardano (ADA), Solana (SOL), Polkadot (DOT), Avalanche (AVAX) and Polygon (MATIC).
“PoW mining requires the purchase of specialized computers that depreciate rapidly in value as they are typically run very hard in less-than-ideal conditions. With the dozens of public companies now plowing into bitcoin mining, it is very difficult to ascertain if there is a high, or even a positive, business case because actual return on investment is extremely opaque.” –Charles Allen, CEO of BTCS, a blockchain technology company
Ryan Grace, head of digital assets for tastytrade, is co-host and co-producer of the Jones and Friends show on the tastytrade network. @tastytraderyan
BITCOIN & ETHEREUM AVAILABLE NOW AT tastyworks.com/tradecrypto tastyworks, Inc. provides its brokerage customers with access to cryptocurrency trading with Zero Hash Liquidity Services LLC, MSB # 31000181510564, and Zero Hash LLC, NMLS # 169937. tastyworks, Inc. is a separate company and is not an affiliate company of Zero Hash Liquidity Services LLC or Zero Hash LLC. Cryptocurrency accounts are not protected by SIPC coverage. Cryptocurrencies are not covered by the FDIC, which covers fiat currency. Cryptocurrency trading is not suitable for all investors due to the number of risks involved, including volatile market prices, illiquid market conditions, lack of regulatory oversight, market manipulation, and other risks. You are solely responsible for evaluating your financial circumstances and determining whether or not trading cryptocurrencies is appropriate for you. TASTYWORKS, INC. IS A MEMBER OF NFA AND IS SUBJECT TO NFA'S REGULATORY OVERSIGHT AND EXAMINATIONS. HOWEVER, YOU SHOULD BE AWARE THAT NFA DOES NOT HAVE REGULATORY OVERSIGHT AUTHORITY OVER UNDERLYING OR SPOT VIRTUAL CURRENCY PRODUCTS OR TRANSACTIONS OR VIRTUAL CURRENCY EXCHANGES, CUSTODIANS OR MARKETS.
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trades& tactics
TACTICS: BASIC
First, Diversify Reduce risk by investing in a variety of stocks, sectors and asset classes By Eddie Rajcevic rom the beginning of the year until mid-June at press time, the S&P technology sector exchange-traded fund (ETF), comprising 76 stocks, fell 28.2%. The broad S&P 500 ETF (SPY) fell 21.7% in the same time frame. Even though the technology sector accounts for the largest grouping of stocks in the S&P 500, investors exposed to the overall index were hurt less than those invested only in technology. This is the essence of diversification. Diversification minimizes risk by spreading money across different stocks, sectors and asset classes. A diversified portfolio can help investors weather even the toughest storms because it has assets unlikely to move in tandem. When one asset goes down, the other goes up to balance it out. While it’s not usually a perfect 1-to-1 relationship, diversification can help smooth out the larger losses characterized by drawdowns. When selecting assets to diversify a portfolio, consider correlation. It measures how two investments move in relation to one another. Let’s say an investor has a portfolio consisting of the S&P 500 ETF SPY, which itself is more diversified than an individual company because it holds 500 stocks across all sectors. This investment can get through sector-specific risks, such as the price of oil dropping, which drags down energy-related stocks. A broad-based ETF, such as SPY, mitigates some of that risk via diversification across sectors like financials and technology. However, there are times when the broader
F
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stock market sells off as a whole, and many single stocks and sectors drop 20% or more. That’s when diversification across uncorrelated assets is important. Uncorrelated assets can come in different forms, whether they are bonds and other fixed-income assets or in commodities, such as gold. While bonds may not be the flashiest investment, they play an essential role in diversification because
they have a weak correlation with most other major asset classes. Historically, bonds have a negative correlation with the S&P 500, even as low as -0.8, meaning that when one asset class goes down, the other goes up. In recent years, this relationship hasn’t been as extremely negative but still remains slightly negatively correlated to even uncorrelated at times. Active investors don’t need to
Drawdown mitigation Diversifying across assets can take the edge off the worst days, weeks and months investors have to endure.
Symbol
Implied volatility
Straddle value
Underlying price
Straddle value as percentage of stock price
BA
35
$20
222.68
9%
DIS
31
$14
176.87
8%
CRM
31
$25
309.96
8%
KO
18
$2
56.33
4%
PG
15
$6
144.95
4%
Bonds may not be flashy, but they help diversify a portfolio because they have weak correlation with most assets.
learn the ins and outs of bonds to invest in them but can instead use a bond ETF to gain exposure to the bond market. Take TLT, for example, a 20+ year Treasury Bond ETF. TLT has more than 30 different bond investments, all with varying maturity dates and yields, meaning that investors can get broad exposure to the bond market without hours of research. Gold is another asset class that can diversify a portfolio because of its weaker correlation with the broader equity market. The rela-
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Asset divergence Not all assets move together, which can be advantageous for investors looking to lower their portfolio volatility.
Gold ETF S&P 500 ETF
Jan 2022
Feb 2022
Mar 2022
April 2022
May 2022
Jun 2022
Source: tastytrade
tionship between gold and the S&P 500 fluctuates between weak negative correlation and weak positive correlation, remaining between -0.5 and 0.5 for the better part of the 21st century. We look for this type of relationship because it means the returns on the two asset classes are not likely to move together. Instead of investing in bars of gold and worrying about storing them, look at gold ETFs as a more cost-efficient and simple way to add exposure to a diversified portfolio. GLD is a popular example of a gold ETF because it has custody of gold bars, thus tracking the market price of gold. There are many ways to diversify a portfolio, but looking for uncorrelated assets is the first step. The next is deciding on the allocation of capital toward each asset. That
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depends on investors’ risk tolerance and when they will need access to that capital in the form of cash. Investors close to retirement might prefer a more conservative portfolio consisting of a larger portion of bonds and cash. Younger investors can afford to allocate more toward stocks because they have time to recoup losses. A diversified portfolio of stocks, bonds and gold may allocate 70%, 20% and 10%, respectively. That ensures the portfolio still has enough invested into stocks to reap the benefits of capital appreciation but enough of the portfolio in the uncorrelated assets, bonds and gold, to counteract volatility from the stock market. See Drawdown mitigation to understand how a simple, diversified portfolio helps decrease risk while maintaining returns.
6/17/22 9:55 AM
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 H EI R PORTFOLI OS
On the Back Burner Even with last year’s impressively robust sales, IPOs fizzled for two outdoor grill makers By James Blakeway
GRILLING PREFERENCES
70% wo manufacturers of outdoor grills turned up the heat last year—Weber 61% and Traeger both went public at the 60% very moment they were posting astounding increases in sales. Yet, neither company’s stock 49% has been cooking with gas. Most households own propane 50% Weber (WEBR) revenue climbed 17.7% in and charcoal grills, two of Weber’s 2020 from $1.30 billion to $1.53 billion. Not bad core product lines. Traeger hopes 40% for a 70-year-old company, though revenue did to tap into the unsaturated pellet fall 3% from 2018 to 2019. Traeger (COOK) saw grill market, convincing Americans an even more substantial revenue increase for there’s no substitute for that wood 30% 2020 of 50%, from $363 million to $546 million. fire flavor. The companies were raking in cash because consumers stuck at home during the pandemic 20% were spending thousands of dollars to upgrade their houses and yards. 10% 9% 10% They could afford home improvements 3% because they couldn’t spend their money dining out or traveling. What’s more, their income was 0% supplemented by stimulus checks and child tax credit payments. PROPANE CHARCOAL ELECTRIC NATURAL GAS WOOD PELLET GRILL Meanwhile, the companies had their initial public offerings when the markets seemed Note: Many Americans own more than one type of grill, so this breakdown of grill types comes out to more than 100% . Source: Hearth, Patio and Barbecue Association positively giddy for IPOs. A total of 431 IPOs occurred in 2020, the most since 1999, according to Statista. But it didn’t end there. IPO prices, Traeger and Weber lost 77% and be fairly priced at around $7. Last year, 951 companies went public. Active investors who believe Traeger could 49%, respectively, by the middle of June. They Traeger hit the markets first, with an IPO were losing value as quickly as cryptocurrencies. maintain its sales momentum and convince price of $18 and a first trade price of $22 per But investors interested in adding a position more consumers to buy pellet grills might look share on July 29. Weber debuted one week in Traeger or Weber might see now as a good for an aggressive trade in the options market. later with a first trade price of time to buy. The overall market With the stock trading below $5 per share, $17, 21% above the IPO price sell-off possibly dragged the a 7.5 strike call option for December expiraof $14. Both stocks appreciated two stocks down farther than tion costs $30. A call option gives buyers the GRILL MARKS after the debut and found high necessary. With shares priced exposure to 100 shares. So, if Traeger’s price prices on Aug. 10, Weber hitting WEBER sold one of the below $10, the downside is rallies to $9 or $10 by the end of this year, $20.36 (45% return from IPO first original charcoal limited for investors who want that option would be worth more than $100 to add small amounts of either or $200, respectively. price), while Traeger peaked at grills in the 1950s. stock. After all, the lowest they $32.59 (81%). Weber and Traeger shares took some heat can go to is zero. Unfortunately, it was down- In 1987, TRAEGER after their IPOs, but at these low prices they hill from there. While the broad introduced the pellet Wall Street analysts remain may provide opportunity for investors who market rallied the last few months grill, which uses an optimistic about Traeger. With believe the grill makers could recover. of 2021, Traeger and Weber both electric auger to pull the current stock price below initiated their descent. $5, analysts believe it could James Blakeway, Luckbox technical editor, serves wooden pellets into recover to more than $10. as CEO of Quiet Foundation, a data science-driven It got worse for the grill manufac- the grill at a variable subsidiary of tastytrade that provides fee-free They’re less optimistic about investment analysis and trade ideas for self-directed turers as the overall market moved speed regulated by Weber and say the stock may investors. @jamesblakeway lower in early 2022. From their a thermometer.
T
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trades& tactics
FUTURES
A SAV V Y F U T U R ES T RADER’S TAK E O N T HE M AR K ETS
Gas Pump Arbitrage
Futures enable active investors to hedge against higher fuel prices By Pete Mulmat
Summer hedge Despite crude oil’s high price and large futures contracts, investors can construct options spreads with relatively low maximum loss values. That can provide potential hedges to summer gasoline purchases. $200
$100
Profit/loss
mericans take to the highways more often in the summer than at any other time of year, but it’s no bargain with gasoline prices exceeding $5 per gallon. Let’s do the math for an entire summer driving season: Assume the family van or SUV averages 22 mpg, and daily drives and road trips add up to 6,000 miles. At $5 per gallon, the national average at press time, that costs a grand total of $1,360. So, a question arises. Is there any way to use the financial markets to hedge summer gasoline purchases? Yes. There’s a misconception that hedging is just for large institutions, but that’s not the case. Access to the futures options market and micro futures markets enables individual investors to trade products that have a direct relationship to gasoline prices. Gasoline futures are available but have limited options liquidity, and at more than $150,000, they’re too large in notional value for many retail investors. Instead, active investors might choose the micro-crude oil futures (/MCL), which control 100 barrels of crude oil and have a notional value of $10,000 (when crude oil is $100). While gasoline and crude oil can have a love-hate correlation relationship, they do track one another’s movements in reasonable fashion. As the price of oil goes up, so does the price of gasoline—same with downward moves. Investors who are worried oil and gasoline prices might jump through the summer months can buy a microcrude contract and make $100 for each $1 increase in the price of crude oil. Just remember, contracts for
A
$0
$-100
$-200
$-300 80
85
90
95
100
105
110
115
Crude oil price
crude oil expire monthly, and the current market is in backwardation, meaning later-dated contracts trade below the price of the current month. The October future, for example, is trading more than $4 lower than the August contract. More savvy investors might want to put the probabilities on their side, using the options on the larger crude oil futures (/CL). Even though this is a higher notional value contract, controlling 1,000 barrels, investors can use the options to create relatively small spread trades. Strikes for the options are listed in $0.50 increments. So, the maximum value of any spread is $500 ($0.50 x 1000 barrels). Traders who want to hedge their gasoline price with a high probability trade could look to sell put spreads. For example, with the October futures trading at $108.50, the 99.5 put option can be sold and the 99 put option can be purchased to create a spread that collects $190 in premium. If the price of crude oil stays above $99.50
Investors can buy a micro-crude contract and make $100 for each $1 increase in the price of crude oil. (60% probability) by October expiration, the investor keeps all $190. If the price of oil is below $99 at expiration, the loss on the spread is $310. But, if crude oil is trading back around $99, as it was in mid April, then gasoline would likely be closer to $3.90 per barrel again, with some serious savings at the pump. This isn’t a no-risk trade, but it offers active investors an opportunity to use the futures market for some personal expense hedging. Pete Mulmat, tastytrade chief futures strategist, hosts Splash Into Futures on the tastytrade network. @traderpetem
July 2022 | Luckbox
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trades& tactics
THE UNLUCKY INVESTOR
A M AT HEM AT IC IAN’S GU IDE TO SUSTAINAB LE T RADING — N O LUCK REQUI RED
Post-pandemic Reset Stock in companies specializing in home entertainment and home offices appreciated during the pandemic but stumbled as the world reopened By Julia Spina he COVID-19 pandemic Parabolically bipolar devastated global economies After a meteoric rise during the pandemic, these stocks in early 2020, but by sheer couldn’t hold onto their gains. happenstance, a handful of companies were perfectly positioned to Mid-Feb 2020 Nov 2020 to benefit from worldwide lockdowns. to Nov 2020 late May 2022 price change price change Driven largely by a massive shift in consumer spending preferences, stock prices for companies SPY -3% 17% such as Netflix (NFLX), Amazon (AMZN), Zoom Video CommuniNetflix 23% -63% cations (ZM) and Peloton Interactive (PTON) thrived in the midst of widespread economic turbulence Amazon 41% -32% throughout 2020. From mid-February 2020 (just before lockdowns began in the U.S.) 378% -80% Zoom until November of that year (just before COVID-19 vaccines became Peloton 307% -89% available), those stocks dramatically outpaced the S&P 500. However, as shown in Parabolically bipolar Consumer (right), much of the edge the compaDiscretionary 9% -4% ETF nies had during the onset of the pandemic diminished. Once the dust settled, economies began reopening 11% 17% Retail ETF and competitors had an opportunity to adapt. Although global lockdowns contributed to the exceptional growth of all sell-offs across U.S. markets, Amazon sold off four of those stocks, the sell-off points vary by 14% following its earnings announcement significantly. Zoom began to depreciate in in April 2022, and Netflix sold off by 22% and November 2020 and Peloton in February 35% following earnings reports in January 2021. 2022 and April 2022, respectively. Even though lockdowns have eased since Those sell-offs occurred for a variety of late 2020, Amazon and Netflix continued to reasons beyond the retreat from the great perform well until 2022. Caught in a slew of indoors, such as inflation and supply chain
T
Consistently predicting market trends and their timing is incredibly difficult. It’s not a reliable strategy for most retail investors.
disruptions in the case of Amazon, a saturated market in the case of Peloton, and more competition in the case of Zoom and Netflix. Those trends and their timing form a reasonable narrative for the past two years, but that’s in 20/20 hindsight. The core investments of a portfolio should offer somewhat dependable expectations of risk and reward. Investors can accomplish that by focusing capital on assets tied to broader markets and sectors, while reserving only a small fraction of the portfolio for aggressive growth stocks. For example, attempting to capitalize on consumer spending trends by picking single stocks is sensitive to timing, assuming the prediction is even correct in the first place. Consumer spending exchange-traded funds (ETFs), such as XLY (SPDR Consumer Discretionary ETF) or XRT (SPDR S&P Retail ETF), track consumer spending as a broader market and are less volatile overall and less sensitive to timing and cyclic trends. These characteristics are demonstrated in Parabolically bipolar, which compares how those ETFs performed against the single stocks during mid- and post-lockdown. The primary takeaway is that market trends are rarely black and white. Consistently predicting market trends and their timing is incredibly difficult—if not impossible. It is not a reliable investment strategy for the majority of retail investors. Julia Spina is a member of the tastytrade research team and author of The Unlucky Investor’s Guide to Options Trading. @financephoton
July 2022 | Luckbox
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THE LAST PICTURE
R
College students protested in front of the U.S. Department of Education in Washington, D.C., earlier this year, calling for President Joe Biden to abolish all student loan debt by executive order—a plea not expected to end anytime soon. Student debt reached $1.7 trillion this year—second only to mortgage debt, according to the Federal Reserve. Average student loan debt ranges from $33,000 to $43,000, which could take up to 10 years or more to pay off, sources say. Students took out those loans in response to the
64
staggering tuition costs they continue to face. The National Center for Education Statistics recently compared average in-state tuition and fees for one year in 1970-71 at $394 with the 2020-21 academic year at $10,560—an increase of 2,580%. During the same period, tuition and fees at private institutions jumped 2,107%, from $1,706 in 1970 to $37,650 in 2020. College tuition is big business, but in the August Education issue, Luckbox will take a look at whether higher ed is worth the higher costs and profile the companies and technologies providing new alternatives.
PHOTO: REUTERS
The Business of Education
Luckbox | July 2022
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