Seven Days Until the Biggest Day in Legacy Research History…

It’s coming in seven days…

The inaugural Legacy Research Annual Report Card.

Behind the scenes, work continues.

Starting next Friday, we’ll begin the Report Card by profiling our seven entry-level services.

That will include our Palm Beach Letter, Near Future Report, and Distortion Report advisories (among others).

What will they get? Will they get top marks… a “nice try given the market conditions”… a “must do better” (Shudder! That phrase reminds your editor of our own school report card!)… or something else?

Right now, the final grades are still unknown. We’re compiling the data and deciding as many of the parameters as we can in advance.

In today’s Daily Cut, we’ll share some more of our thoughts on how we’ll compile and present the Report Card and share some recent emails from your fellow readers.

Read on for more. First, let’s check in on today’s market action…

Market Data

The S&P 500 closed up 1.2% to end the day at 4,839.81… the NASDAQ gained 1.7% to close at 15,31.97.

In commodities, West Texas Intermediate crude oil trades at $73.89, down 21 cents…

Gold is $2,030 per troy ounce, up $6…

And bitcoin is $41,648, up $786 since yesterday.

Now, back to our story…

Finding Our Baseline

We’ve mentioned previously how we’ve gone into this Report Card process without knowing the full results.

We don’t know for sure how each of our services will stack up… either against each other or against the market benchmarks.

But we believe as an exercise in helping to build trust between us and you, it’s important to be totally open with you… and to analyze the results honestly.

It means, at least theoretically, that over the next few weeks, we could be publishing a string of F grades. To say that would cause embarrassment would be an understatement.

By the way, based on what we know of the various services… and how we’ve seen them perform… we don’t think we need to worry about that.

So, how will we grade each service?

After all, doesn’t any grading system have a level of subjectivity to it? How can we ensure we’re not allowing any kind of bias to affect the results?

This took a little bit of thinking… but we figured the most important first step was to create a baseline. Once you have a baseline, you can then set some straightforward rules to make the result as objective as possible.

At the same time, it will still allow some subjectivity to allow for specific circumstances.

The baseline? Turns out it was quite simple. The objective of each of our investment services, regardless of whether it’s a trading service, macro, small-cap, tech, crypto, or anything else… is to help you make money.

So that becomes the baseline, or “ground zero,” for each service from which we will build the grades.

As an example, any service that has generated a positive return for subscribers will begin at a C-. The next step would be to then compare that return to the benchmark.

Has the service matched the benchmark return? If it hasn’t, it may stay as a C-. If it has matched the benchmark, the grade will move higher, say, to a B or B-.

Next, assuming the service has at least matched the benchmark, then we’ll want to see if it has outperformed the benchmark and by how much.

A small or middling outperformance could generate a further increase in the grade. Let’s say to a B+ or an A-. A bigger outperformance would then get us to A or A+ territory.

It will work similarly for underperforming services. Any service that records a big losing track record while the index has performed well is likely to get an F.

Now, as mentioned, there will be some subjectivity as not all outperformances are the same. For instance, a tech service in a tech bull market should match the benchmark performance… and arguably, should outperform it.

That may be deserving of an A grade. But a value investing service that managed to eke out a steady return may also get an A. After all, it’s not every investor’s goal to match the Nasdaq.

That’s why subjectivity is important in this. We have to ask, “What returns does a subscriber reasonably expect, and have we delivered that?”

Anyway, this is the final preview edition of the Report Card. Next Friday, you’ll see exactly what we’ve prepared. And, as always, we’d love to get your feedback.

Remember, you can email me directly at my business email address: [email protected]. Emails to that address go straight to my inbox. They don’t reach me via a customer service team.

Just note that while I read every email, I can’t reply personally.

We’re confident you’re going to love the Report Card, and that it will give you a better insight, not only into how each of our services performs but also an insight into our view on each of those services.

Reader Mail

Finally, we’ll share several of the emails we’ve received from your fellow readers, sharing their views on the upcoming Report Card…

You left off an option. Do the report on closed positions each year. It does not matter when each was opened. Just total up profit & loss percentage on all closed positions, including those partially closed, for the year (stock, options, crypto…). Show us what that looks like from year to year for each product. Why not do that?”

– KI

Thanks for all the ink. It’s nice to know I was heard. I have two comments. First, I don’t understand why you can’t do two periods: one annual and another any way you want.

Second, if a professional stock picker can’t pick winning positions in a bull market, he should not get a failing grade, he should be fired. There was one historically famous old-time stockbroker from the 1920s, I think. You probably remember his name. I don’t. Lots of folks would go to him for advice. Should I buy? Should I sell? His answer was always the same: “Well you know we are in a bull market.”

Good luck with your new grading system.

– Tom K.

I have been a subscriber of your services since 2017. It is a very good idea to do these Report Cards.

In my opinion, the period used should have begun on the date January 1, 2022. By doing so, we would have had one downtrend from January 1, 2022, to October 12, 2022. And after we have had an uptrend from October 12, 2022, to today. Thus we would have had a complete cycle of bear and bull.

Technically, I think it would not have been much more difficult to add 10 months to your report. As for now, it makes us suspicious…

I hope too for the future that the Report Cards every year include all the years since the start day, October 12, 2022.

– JV

I really see your point in picking the timing model that you have, but would it also be better to have at least a little in the commentary as if you also consider the other two? This is a huge project I know, and time constraints are a big factor, I’m sure!!

Thanks for letting me get in my two cents!

– David M.

These reader comments and others we’ve received have all helped us in putting together the Report Card.

We’re looking forward to sharing it with you next week. We doubt it will be perfect, and we’re sure there’s plenty we’ll be able to learn for next year.

The Winners Circle

The Winners Circle is an occasional feature in The Daily Cut where we showcase closed winning trades from our stable of experts.

We’ll typically publish these one or two days after they’re published in the individual publications. That gives paying subscribers enough time to exit their positions.

You won’t see this feature every day in The Daily Cut as it’s not necessarily every day that our publications close out gains.

But when they do, we’ll highlight them here.

Just note, from time to time, we’ll withhold the name of a sell recommendation if it was only a part-sell. That may be an occasion where the expert has recommended subscribers to sell enough to cover their initial stake.

This is what we call a “free ride.” That’s where after an investment doubles, you sell half, effectively meaning you’re playing with “house money” on the remainder of the investment (of course, that doesn’t factor in any tax liability you may have from selling).

Anyway, we hope this gives you a little more insight into what’s happening around Legacy Research.

Unconnected Dots

Our main task at the Daily Cut is to try to “connect the dots.” That is, we help you figure out what events are about, what makes them important, what their consequences are, and what it all means for you.

But sometimes, we see the individual “dots,” but can’t yet figure out how they connect to anything. Maybe they never will connect to anything.

Regardless, if those unconnected dots feel as though they could be important, we’ll mention them here. And we’ll let you draw your own conclusions.

Today’s unconnected dots…

• Is today the day the EV (electric vehicle) market died? Or is it just a natural part of the cycle for any growing industry?

  We ask based on today’s news, as reported by Bloomberg:

  Ford Motor Co. said that it would reduce the number of workers making its F-150 Lightning truck as demand for electric vehicles continues to weaken.

  About 1,400 employees will be impacted as the Rouge Electric Vehicle Center transitions to one shift beginning April 1…

  Your editor is neutral on EVs. We neither like nor dislike them. We test-drove a Tesla Model 3 last year. Except for the acceleration from a standing start, we found the experience underwhelming.

  The interior was barren… And while the car is, of course, very quiet, a lack of sound insulation still makes for a noisy drive.

  That was our experience anyway. Maybe others think differently. Saying that, philosophically, we don’t object to EVs. If it’s a good vehicle, we’ll consider it.

  The problem, of course, is that interference from the government through policies and subsidies has created a distorted market (our colleague Nomi Prins writes about distortions all the time).

  EV companies launched with the help of big subsidies and tax breaks… perhaps thinking that would last forever, or that consumers would flock to EVs. That hasn’t happened.

  Existing car companies have diversified into EVs for similar reasons. While EVs now have around 8.1% market share in the U.S., as Ford noted, the growth for the whole market will be less than they’d expected.

  Furthermore, many consumers still have doubts. Images over the past week of “frozen” EVs at recharging stations… unable to recharge due to the cold weather, is one reason folks are holding off converting to EVs.

  Then there’s the “range anxiety” issue. For most people, this shouldn’t be an issue. A typical EV has a range of 300 miles. For most people, that’s more than enough for commuting and daily use.

  And yet, in the back of people’s minds, they think about that one big trip per year where they may want to drive 250–350 miles for a vacation.

  Can they be sure there will be a charging station on the way? How long will they have to wait to access the charging point… and then how long will it take to recharge?

  There’s an element of irrationality to it, but people think that way, and it’s hard to overcome it. Ultimately, EVs will likely grab a big market share. But only when they address the consumers’ biggest fears of owning an EV.

  Range anxiety is still the biggest problem.

More Markets

Today’s top gaining ETFs…

• iShares Semiconductor ETF (SOXX) +3.9%

• First Trust Nasdaq Semiconductor ETF (FTXL) +3.9%

• ProShares Ultra QQQ (QLD) +3.9%

• Invesco Semiconductors ETF (PSI) +3.8%

• VanEck Semiconductor ETF (SMH) +3.8%

Today’s biggest losing ETFs…

• iShares U.S. Healthcare Providers ETF (IHF) -1.1%

• KraneShares MSCI China Clean Technology ETF (KGRN) -1%

• Global X Lithium & Battery Tech ETF (LIT) -0.9%

• Global X MSCI China Energy ETF (CHIE) -0.9%

• First Trust Flexible Municipal High Income ETF (MFLX) -0.6%

Mailbag

If you have any questions or comments for our experts here at Legacy Research, we’d love to hear from you.

Write to us at [email protected] and just type “Daily Cut mailbag” in the subject line.

Cheers,

Kris Sayce
Editor, The Daily Cut