Rick Kinnaird

Tuesday December 22, 2020 (3 days til Christmas)

Election Day -49

30 Days until the Inauguration on January 20, 2021

When someone says, “It’s complicated,” it means one of three things:

1 – “I don’t really understand it. Please don’t ask me.”

2 – “I do understand it and most people don’t have the patience to listen long enough to understand it.”

3 – “There are lots of little bits to understand what is really happening and I’m looking at the effect not the cause so I don’t really understand it.”

#1 & #3 are the same thing just expressed in different ways.

We have had three major “It’s complicated” issues yesterday:

A – Why is December 21^st the shortest day of the year?

B – What is the Grand Conjunction? Why does it happen? Is that the Star of Bethlehem where Jesus was born?

C – The Ukraine Scandals: Rudy, Hunter, WTF is going on?

Let’s start with B. Jesus was not born in Bethlehem. He was born in Judea. The whole Bethlehem story was made up one hundred years after his birth/death to try and convince some Jews to convert. Bethlehem is a holier place than Judea. 

Jupiter, which is one of two planets in the Grand Conjunction is the Star of Bethlehem. Whether it was in conjunction with Saturn at the time of Jesus’ birth I don’t know; don’t remember. But it it true that Jupiter and all the planets were know as “wandering stars” for centuries because people here on Earth had figured out they were planets moving in elliptical orbits around the Sun. Because those planets are close to the Earth as compared to the stars, and because they take different amounts of time to go around the sun, they appear to us on Earth as moving back and forth agains the backdrop of the stars, which are very very far away. Ie They “wander’. 

Given that in a dark night sky Jupiter can be clearly seen. It is highly likely that around the time Jesus was born, +/- a few years, that Jupiter wandered over near the Levant (ie Bethlehem) then as Earth passed by the orbit of Jupiter the big gas planet seemed to stop in the sky and then wander back the other way. This is perfect for the story of the wisemen who were bringing gifts supposedly from somewhere in the Middle East, like where Saudi Arabia is now, to where Israel is now and then return. My guess is they were coming along the trade routes from Chins which would have passed through Petra in Jordan and they could have picked up some of that good Frankensense from what is now Yemen (very good stuff for headaches btw) and the myrrh, which is good for “sensing” (ie burning to infuse your clothes with a good scent, and gold they would have already had.

Let’s move to A, why is December 21^st the shortest day of the year in the Northern Hemisphere and the longest in the Southern? The simple explanation is that the Earth rotates on it’s axis about the North Pole, but in relation to the Sun that axis is tilted. What’s the effect of that? Here’s where people say it gets complicated. It’s not complicated; it’s confusing, if you take the wrong perspective. If you look at the situation from where you are located on Earth it’s confusing because, like the blind men touching the elephant, you are seeing the effect and not getting the whole picture. If however you realize that no matter what the Sun always lights up the same amount of the Earth and realize that as the Earth moves about the Sun then things start to make sense. But to entirely bring able to understand it requires a bit of a thought experiment, and that is put a dot on that Earth where you are. It should be somewhere above or below the Equator. If you flatten out your view of the Earth and look at the planet as a big round circle of light and only that circle is showing then you will notice that at the Equator gets the most light and you get less because your city is passing through a piece of the Earth lit by the Sun. So you aren’t getting as much light in the portion of the circle that doesn’t pass through the center of the circle. Think of it as cutting a slicing piece of cake in parallel to each other like you slice bread. Some pieces are bigger, ie get more sunlight, and some are smaller pieces they get less sunlight. Not only that but because the Earth is tilted in relation to the sun when you are in the part of the Earth’s moving around the sun that is tilted backwards from the sun you are slightly farther away from the Sun’s rays so it is colder too. The combination of less time in the Sunlight and being farther away makes it colder. The fact that you are passing through the shortest slice of the circle of light on December 21^st makes it the shortest day of sunlight for the year.

It’s not complicated. It takes thinking about it for a few minutes and having the proper perspective. 

I’ll address Rudy and Ukraine in the follow up to this Screed.

PS For those hard to find on your Christmas list

Monday December 21, 2020 (4 days til Christmas)

Election Day -48

31 Days until the Inauguration on January 20, 2021

Okay, now that I have your attention:

1. – Remember that December 21^st is the shortest day of the year. Review in your mind why that is and go out tonight as soon as it gets dark and look at Jupiter and Saturn in conjunction. That’s the Christmas star! (If you miss it don’t worry it’ll come around again in 800 years.) 

2. – Play this game with me, and this is the main point of this post as I’ll describe below: buy, or pretend to buy, 2 shares of Moderna stock (MRNA) and remember the price. That’s really what I want you to do – remember the price.

3. – If you don’t know the song “I know an old lady that swallowed a fly,” yell at your Siri or Alexa and ask her to play that song by Burl Ives.

Our niece Claire was over yesterday. She wanted to bake cookies with Shelby and wrap presents with me. ( I stayed masked. She did too, most of the time. ) I tried to describe to Claire why Dec 21^st was the shortest day of the year and why Jupiter and Saturn could line up ever once in awhile so we could see them as one. I spoke about “wandering stars,” retrograde, and The Star of Bethlehem. She looked at me and said, “Are you done?” 

I think it was a pretty successful conversation even though I got tangled up on why it’s the shortest day of the year, spring, fall, equinox, etc.

She also didn’t know the above mentioned song and I was surprised when Siri not only knew it but played it. Burl Ives has a very distinctive fatherly type voice. He’s the one singing in the Subaru commercial where the couple is getting the twins ready to back out of the drive way and the car slams on the brakes. Oh wait that’s Volvo. 

Okay, so that takes care of 1 & 3 now onto 2, but before I explain let me say this, “Trump was right!” Well, kind of, apparently UV light can kill the corona virus. You want one around 265 wave length. I think that’s what this little thing I have in my office does. I brought it down to the kitchen and plugged it in and hope to hell it’s killing any germs, viruses, and bacteria. That’s the problem with this virus; you don’t know. Better to be cautious or as they say, “risk adverse.” 

Which brings me to today’s topic. Why isn’t the Moderna stock price going through the roof? The reason is that I told people that I was buying it and suggested they do too. A few listened to me and bought in around $150 a share. The stock immediately went down to $138. This has led to some soul searching on my part, ( “Why do I tell anybody anything?” ) and my search for answers, because I’m a curious person. I’m more curious than smart.

One skill I have is that I’m interested and curious about a lot of things. Or as my wife and others say about me I’m an “Oh look! A chicken!” kind of guy. Or as I prefer to think about it, “I have a wide and diverse group of friends and acquaintances with whom I am willing to ask questions of and share information.”  In short, I’m willing to look like an idiot.

I, like Einstein, like to construct thought experiments and develop easy to understand models and explanations for complicated things. I do this until I understand them, the question at hand, to some degree of satisfaction. Many times I have to let the pieces of the puzzle sit in my lap for a long time. I, btw, have no problem understanding Einstein’s models and thought experiments – that’s easy. It’s the conclusions he comes to that is mind blowing.

Okay, where was I, oh yeah, why isn’t Moderna’s stock going up? And why did it go down right after I suggested to buy it? One explanation is God hates me and is trying to teach me a lesson. However, after some investigation and thought, both of which are ongoing I am willing to say this, I believe Moderna is like the fully field rocket sitting on the launch pad ready to take off, and that we are in the final days of the countdown. (There that should kill off any price rise in the stock.)

I have been schooled recently, or some might say taken to the woodshed of modern economic theory and had my behind paddled. Not really, but I have learned some new terms to impress my niece with, and I’ve begun to ask questions about how fund and money managers look at stocks. Let begin with the idea of risk aversion: you want to make money, but more importantly you don’t want to lose money.  How can you maximize your profit while minimizing your loss? How can you be sure you are getting the best deal, the best of both worlds? (Max profit, Min loss?)

It all comes down to what Clint Eastwood asked, “Do you feel lucky?”

If you don’t then you are highly risk averse and want something guaranteed with no hope of losing, that’s called Treasury Bills or T-Bills. The assumption is they always pay off. So whatever amount you invest you know how much you are going to make – no question. All the fancy economic stock models use T-Bills as their basis of comparison. As in, “Well you could invest in Fly-By-Night Homeopathic Lawn Chairs which pays 75% in a year, if they are still in business or you could get a T-Bill that pays 2%” Which do you want? Well, what do you know about FBNHLC? The guy has already left town? Better go with the T-Bill. 

So what we are talking about is risk and payoff. How much are you willing to risk for what payoff? You could buy a lottery ticket. Someone wins, what are your chances? Maybe you buy one ticket, just in case, but most people will say that it’s probably no likely. 

Here’s another example from the real world, kind of, I was listening to a show about re-insurance. Yeah, I know, I live an exciting life. But the example they gave was this: suppose you own a car dealership and you get hit by a hail storm and all the cars on the lot are ruined, or at least have to be sold at a reduced price. Wouldn’t you want to be insured against that? Of course, but the problem is that it’s a once in 100 year situation so are you willing to forego it for this year? (How many times have you heard about a group that buys the same lottery ticket every week and it hits one week only to discover the person who was supposed to buy the ticket that week didn’t make it to the convenience store to do so?)

Most insurance companies that are local don’t want to cover the risk either. What if it happens? Yikes! However, if you take a larger view and say, “Well, someone who owns a dealership will get hit with a hail storm this year what if I get all the potential car dealerships to chip in a few bucks just in case?” Okay, now you’re talking. You are willing to put in a few bucks, but not hundreds or thousands. That’s the idea behind re-insurance. They spread the risk over a large group, over a large area: fire, flood, volcano, that type of thing. Might not happen for one hundred years, but when it does, you’re covered.

The problem with picking one stock is, “What if you are wrong?” Better to pick a bunch of stocks. Better to pick them in areas that if one area is down another is up, etc.

How do you know which stocks to pick? Here is where all the fancy economic ideas come into play. With an existing company, one that’s been around for awhile, you can read it’s financial stuff and get a number that relates to how profitable it is. If it’s been doing well consistently over time you can make some assumptions that it will continue to do that well and you can derive a percentage of profitability. You can compare that to a T-Bill and look at the difference and ask yourself if it’s worth it to you. This is the basis of all the money management EFTs and managed accounts. They differ on what to pick and why and how to weigh various things but that’s the idea.

These models, philosophies, and formulas have various names: EMH, MPT, PMPT. Typically you take the profitability minus the T-Bill rate and get a rate of return or you express it as a ratio. That number is divided by either The Standard Deviation (The Sharpe Ratio) or by the Variance (the square of the Standard Deviation). The latter is supposed to be a better predictor of risk. (Standard Deviation is a way to look at the of a bunch of data, while variance tells you more about whether it is all clumped together or not. An example of Standard Deviation would be to look at SAT scores and describe how most people do relative to others. A percentage will be plus or minus within one standard deviation to the median (like average) score, then two , then three standard deviation. Three standard deviations will cover 99% of the scores. There will be a few outliers ( + and – ), but all the other scores are contained within three standard deviations.

But, all these formulas and theories are based on assumptions that a person makes. The formulas have gone a long way to eliminating human folly, so much so that many financial firms use computer programs to do most of their trading. So now you have ETFs (Exchange Traded Funds) which gather up a basketful of various securities and have certain weighted averages and things they invest in. That way, if you are a money manager, you can suggest to a client to get this or that fund based on what they say they are interested in and how much risk they want to take on. So if you are interested in biotech you could buy XBI or BIB. They are both market cap weighted ETFs in the biotech arena.

BIB is the more aggressive of the two. There done.

But this doesn’t answer my fundamental question of “How would you price a Moderna?” It had terrible downward financials. The company was founded by folks wanting to make a buck. They switched around what they were doing to focus on vaccines. Donald Trump supposedly invested in them and likes them. Yikes. 

On the positive side: they have developed a vaccine for the corona virus in 42 days using mRNA technology. It highly effective. It’s been approved by the FDA and it’s starting to ship.

So here we sit without the traditional formulaic stuff you need to invest in this company by the models that most traders use. Those models are based on risk aversion and this company does not qualify because they have no history or a bad history financially. But wait a second, there are pictures that came out this weekend that show boxes of the vaccine, ready to ship. None of that is in the equations that the financial models are using because they are based on history. So can we do some calculations as to how much money they will be making? I’m willing to say they will sell everything they can make until the world is vaccinated and that will take awhile. According to one news article 5.9 million doses this week are being shipped in this country. How much are they charging? The numbers I’ve seen say between $10 and $50 per dose and two doses are needed per person. 

At $10 that $59 million for the week for Moderna. At $50 it’s $295 million. Either way they are making money.

I think once some of those sales numbers are factored into the models the stock will take off. But I’ve been wrong before. I just think it’s a question that it will take a little longer than I thought. So much for “all knowledge is factored in already.” I think that statement doesn’t take into account believability or maybe it’s future events that aren’t considered objectively?

To my knowledge there are three vaccines available in the western world. I have heard that Russia has one and Australia but I’m not confident about either one. Here are the three and the prices being charged per dose:

Pfizer/BioNTech $20

Moderna $10-$50

Astra-Zeneca $4

That’s a pretty wide range. From what I have gathered AZT’s is aimed at the developing world and is part of a consortium to get vaccine to people cheaply. It’s efficacy is 70% not in the range with the other two, which are at 94-95%. However, 70% is good enough if enough people get vaccinated and the number can be higher if folks get the second shot as directed.

In China Fosun Pharmaceuticals is paying Pfizer $250 million for 50 million doses. That’s $5 a shot. They have an agreement with Pfizer.

The big disparity in prices depends on who backed them and for how much etc. Moderna supposedly got $1B from the U.S. Government for development. I haven’t confirmed that, but it would greatly reduce the price I would think.

However, to my major point. It seems that none of these stocks have moved up much since the announcement that they have a vaccine and are shipping it. Actually, they have gone down a bit. I contend it’s because the sales figures aren’t figured into the various pricing models – yet.

Sunday December 20, 2020 (5 days til Christmas)

Election Day -47

32 Days until the Inauguration on January 20, 2021

I happened to click on the TV for a few minutes yesterday while making lunch. Alex Witt was on MSNBC. She has a weekend show. She was complaining it seemed to me, and asking why can’t the Covid bill get passed? Why can’t Democrats compromise? 

One of her guests pulled her up short. Basically he said, “Hey, wait a minute. The Democrats have passed a bill on this. It’s been sitting on Mitch McConnell’s desk for months. The Dems have compromised. It’s the Republican who haven’t. The reason the Republicans haven’t budged is that they are beholding to corporations and the rich neither of whom give a damn about the average person. What the Republicans want Nancy Pelosi to do is to agree to absolve corporations from liability for forcing workers back to work in unsafe conditions. You know either go back to work and get Covid and possibly die or get fired and or lose unemployment benefits. That’s the deal Mitch wants. In the meantime he’ll continue to ram through ideologue right-wing out of touch judges.”

Why can’t anything get done? Because both sides have to be interested in getting something done. So far, the Republicans have shown no interest in doing that. 

A simple solution would be to put the House bill on the Senate floor for an up or down vote. 

What the question should be is “Why won’t McConnell put the House bill up for a vote?” The answer I think is simple – it would pass.

So as the Republicans look at their polls and as they look at the Covid numbers and the economic numbers and they realize they have to go home and explain why they aren’t doing anything I think we should make sure they know that the question will be asked, “Why don’t you put the House bill on the Senate floor and vote it up or down?” I mean it’s too much to ask those Senators to actually come up with an idea of their own that would help people. I get that. They are busy carrying out investigations into election fraud that never happened and worrying about Hunter Biden’s taxes. I wonder if they are worried that if they dig too deep it might be revealed how many of their relatives actually got government favors and jobs they didn’t deserve?

And don’t forget “We Want Them Infected” is the White House strategy for fighting Covid. Meanwhile, they are scurrying to get vaccinated while denying states the vaccine.