Now What?

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The information contained herein is accurate to the best of the author’s knowledge, but the material and interpretations contained herein should be independently verified by any party using this information as part of any research, editorial, or decision making process. Any views expressed here represent the author’s opinion only, and as such readers should do their own research and come to their own conclusions if they are using the opinions contained herein as part of any larger due diligence process. The author may have long or short positions in the companies mentioned and may be buying or selling in the market depending on which way the wind is blowing at any given moment. Opinions are subject to change without notice. Prospective resources, predictions, comparisons, financial projections, and extrapolated metrics are, by their nature, subjective and interpretation dependent. The topics covered are highly speculative and involve a high degree of uncertainty and risk. Speculative companies can and do go to zero. By using this site, you agree that the author(s) and Hydra Capital is/are not responsible for any damages incurred by the use of the presented materials. Anyone reading these blog posts should know that they are the author’s thoughts and opinions, which are not to be confused with or construed as research reports.

Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long every stock in this article.

I love days like this in the market, because they force people to think about what they own and why they own it. It’s easy to lose the plot when anyone that threw darts at the market over the summer likely did quite well, regardless of what they bought. To me, liquidity continues to be the number one driving factor in the market, with the Fed signalling that interest rates could be on hold for “years” (or at least until sustained inflation picks up). Low rates are forcing a massive rotation of debt into equity at a time when governments around the world are pumping (and will continue to pump) as much money as they can into their economies to offset the impacts of COVID-19. Meanwhile, the impact of COVID-19 on the markets has been to concentrate business in the hands of tech companies and select retailers/goods manufacturers who were able to capitalize on the opportunities created by public policy response (i.e., school closures, working from home, mall closures, and lockdowns). Working in the hotel or airline business? It feels like the world has ended. Got a bike shop? Wow, I bet you didn’t know that business could be so good. Patio heater sales? Through the roof. That goes for Sea-doos as well. And Harleys apparently. The impact of COVID-19 has been dramatically different across different income levels. While some struggle to make ends meet, others are wondering which Porsche to buy after they got long ZOOM or NFLX a few months ago. THAT’s the market that I see correcting today… a bunch of overvalued stocks that have become such a big component of the indexes that they have split the market into over valued and undervalued silos. At times like these, every investor has to check their market views in the context of what’s happening out there and react, or not react, accordingly.

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