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Tesla and My Other Investing Mistakes of 2021

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Streetwise started the year with a prescient forecast: There is plenty of scope to be horribly wrong about predictions of speculative excess. As 2021 draws to a close, it is a good time for investors to look back at the decisions they made over the year, and why they made them, with the hope of learning from their mistakes. My mistakes are preserved for posterity in public columns, but investors should keep a diary of why they entered each trade, to avoid the human tendency to rationalize with hindsight.

Both my biggest mistake and one of my biggest successes was Tesla. Start with the mistake: In mid-January I argued that Tesla and other electric-car stocks were in a “wild bubble.” Tesla stock was at $845, up almost 20% in the first two weeks of the year and an eye-watering 685% in the previous 12 months. While it did fall hard for several months, it is now back above $1,000, helped both by an extraordinary rally in October and by another 20% gain in the days around Christmas. “Horribly wrong” just about captures it.

My Tesla success was in November, recommending that investors follow Chief Executive

Elon Musk’s

example and sell after the irrational October run-up. The company may be great, but expectations were too high. The shares plummeted in the following weeks, although they made back much of the loss in the pre-Christmas bounce.

Tesla has been both a bellwether indicator for and an unusual winner from the market in wildly speculative bubble stocks all year. Back in January its peak marked the beginning of the end for the SPAC, clean energy, cannabis and loony-long-shot-idea bubbles that inflated late in 2020. 

All had a bit of a revival during Tesla’s rollicking October. But strip away Tesla, and the thematic funds that followed the bubbles recorded losses of around 20% this year. Many individual names lost far more, with hot battery stock

QuantumScape

down 71%,

General Motors

-backed electric-car maker

Lordstown Motors

down 79% and popular Chinese rival NIO down 37%.

Something similar was true for the meme stocks led by

GameStop

and

AMC Entertainment.

I pondered the case for issuing new overvalued stock in June, concluding that AMC CEO—or “silverback,” as the self-styled apes who bought the shares call him—

Adam Aron

was right to issue as much stock as he could get away with. I also thought investors would be dumb to buy it, which has proven right as the shares are now half what they were then.

My correct call on the speculative bubble was marred by my failure to appreciate that Tesla, the bubble’s biggest winner, would be almost immune to its bursting. It could be that Tesla stock is just an outlier that will fall back eventually (still my core case). The alternative is that Tesla is doing in one year what it took

Amazon

20 years to do after its 1999-2000 dot-com peak: prove that it is such an outstanding company that its bubble valuation was justified after all.

Despite the visible froth in fashionable parts of the market, I stuck with stocks all year on the principle that the economy was recovering and the main alternative, bonds, was so unappealing. But while the stock market turned out to be a great place to be, I was entirely wrong about bonds from the end of March onward, as they repeatedly refused to follow the macroeconomic playbook. Because of the strong link between long-dated bond yields and the relative performance of growth stocks, this also meant I was wrong-footed in my expectation that cheap “value” stocks would do better.

Instead of bond yields rising as inflation took off, the 10-year Treasury yield peaked at the end of March and the 30-year is higher now than it was for most of the year.

Inflation was the economic story to watch. Again, I was right and wrong. My headline in May was “Everything Screams Inflation,” and it is tempting just to take the credit for being right and early. In fact, along with many economists I expected pandemic-induced inflation to come back down by itself, and the Fed to act if necessary; my headline was about the longer term. Inflation hasn’t come back down by itself, and as the year wore on the underlying price trends became more and more worrying, culminating in my reversing course and concluding the Fed was just making excuses to delay action.

SHARE YOUR THOUGHTS

What did you learn about investing in 2021? Weigh in below.

What have I learned from the year? It is possible to be exactly right at a high level—as with my bubble-spotting—but to lose money on the implementation, as anyone who shorted Tesla as a result would have done. It is important to be quick to change views as the facts change, shown by the developing patterns in inflation. And it is important to pay attention to details, which is where it first became clear that inflation was broadening out beyond pandemic-affected spending shifts.

As important as the lessons we learn are the ones we refuse to learn. Tempting as it is, I don’t think the lesson of 2021 is Just Buy Stocks, as that loses the nuance. Unfortunately, Just Buy Stocks When Bond Yields Are Low, the Economy Is Booming and the Fed Is Behind the Curve is a hopeless headline. It is also of little use for 2022 as the economy slows back to normal and the Fed moves toward rate rises. Too much has changed.

Write to James Mackintosh at james.mackintosh@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Teladoc Tumbled 38% After Big First-Quarter Loss. Is It Just a Pandemic Play?

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After pandemic drop, Canada’s detention of immigrants rises again By Reuters

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© Reuters. FILE PHOTO: Two closed Canadian border checkpoints are seen after it was announced that the border would close to “non-essential traffic” to combat the spread of novel coronavirus disease (COVID-19) at the U.S.-Canada border crossing at the Thousand Isla

By Anna Mehler Paperny

TORONTO (Reuters) – Canada is locking up more people in immigration detention without charge after the numbers fell during the pandemic, government data obtained by Reuters shows.

Authorities cite an overall rise in foreign travelers amid easing restrictions but lawyers say their detained clients came to Canada years ago.

Canada held 206 people in immigration detention as of March 1, 2022 – a 28% increase compared with March 1 of the previous year. Immigration detainees have not been charged with crimes in Canada and 68% of detainees as of March 1 were locked up because Canada Border Services Agency (CBSA) fears they are “unlikely to appear” at an immigration hearing, according to the data.

The rise puts Canada at odds with Amnesty International and other human rights groups that have urged Ottawa to end its use of indefinite immigration detention, noting CBSA has used factors such as a person’s mental illness as reason to detain them.

A CBSA spokesperson told Reuters that “when the number of entries (to Canada) goes up, an increase in detention is to be expected.” CBSA has said in the past it uses detention as a last resort.

A lawyer told Reuters her detained clients have been in Canada for years.

In the United Kingdom, too, immigration detention levels rose last year after dropping earlier in the pandemic, according to government statistics. Unlike Canada, the United States and Australia, European Union member states have limits on immigration detention and those limits cannot exceed six months.

The rise in detentions puts people at risk of contracting COVID-19 in harsh congregate settings, refugee lawyers say.

Julia Sande, Human Rights Law and Policy Campaigner with Amnesty, called the increase in detentions “disappointing but not surprising,” although she was reluctant to draw conclusions from limited data.

The number of immigration detainees in Canada dropped early in the pandemic, from a daily average of 301 in the fourth quarter (January through March) of 2019-20 to 126 in the first quarter (April through June) of 2020-21.

FEW NO-SHOWS AS DETENTIONS DROPPED

Detaining fewer people did not result in a significant increase in no-shows at immigration hearings – the most common reason for detention, according to Immigration and Refugee Board data.

The average number of no-shows as a percentage of admissibility hearings was about 5.5% in 2021, according to that data, compared to about 5.9% in 2019.

No-shows rose as high as 16% in October 2020, but a spokesperson for the Immigration and Refugee Board said this was due to people not receiving notifications when their hearings resumed after a pause in the pandemic.

Refugee lawyer Andrew Brouwer said the decline in detention earlier in the pandemic shows Canada does not need to lock up as many non-citizens.

“We didn’t see a bunch of no-shows. We didn’t see the sky fall … It for sure shows that the system can operate without throwing people in jail,” Brouwer said.

He added that detainees face harsh pandemic conditions in provincial jails – including extended lockdowns, sometimes with three people in a cell for 23 hours a day.

Refugee lawyer Swathi Sekhar said CBSA officials and the Immigration and Refugee Board members reviewing detentions took the risk of COVID-19 into account when deciding whether someone should be detained earlier in the pandemic but are doing so less now.

“Their position is that COVID is not a factor that should weigh in favor of release,” she said.

“We also see very, very perverse findings … [decision-makers] outright saying that individuals are going to be safer in jail.”

The Immigration and Refugee Board did not immediately respond to a Reuters request for comment.

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Nasdaq futures rise as market attempts comeback from April sell-off, Meta shares soar

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Stock futures rose in overnight trading as the market shook off the April sell-off and investors reacted positively to earnings from Meta Platforms.

Futures on the Dow Jones Industrial Average added 70 points or 0.2%. S&P 500 futures gained 0.7% and Nasdaq 100 futures jumped 1.2%.

The moves came as shares of Meta surged more than 18% after hours following a beat on earnings but a miss on revenue, a sign that investors may see signs of relief in the beaten-up tech sector. Shares were down 48% on the year heading into the results.

Meanwhile, shares of Qualcomm gained 5.6% in extended trading on the back of strong earnings while PayPal rose 5% despite issuing weak guidance for the second quarter.

“I think a lot of people want to believe that earnings are going to pull us out of this, but earnings are not what got us into this,” SoFi’s Liz Young told CNBC’s “Closing Bell: Overtime” on Wednesday. “… But the reality is there are so many macro headwinds still in front of us in the next 60 days that the market is just hard to impress.”

The after-hour activity followed a volatile regular trading session that saw the Nasdaq Composite stoop to its lowest level in 2022, as stocks looked to bounce back from a tech-led April sell-off. The index is down more than 12% since the start of April.

In Wednesday’s regular trading, the tech-heavy Nasdaq ended at 12,488.93, after rising to 1.7% at session highs. The Dow Jones Industrial Average rose 61.75 points, or 0.2%, to 33,301.93 propped up by gains from Visa and Microsoft, while the S&P 500 added 0.2% to 4,183.96.

Investors await big tech earnings on Thursday from Apple, Amazon and Twitter, along with results from Robinhood. Jobless claims are also due out Thursday.

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