Sept 18, 2020
The markets continue to amaze me with their resilience. Some companies have benefited from lockdowns and restrictions. That is little consolation to the store, restaurant, bar, and salons, etc. who have willing patrons but can’t let them in.
Who would have guessed that governments would set up a situation where money is funneled to a small group of companies and thousands more go under, never to return?
The recovery continues to be narrow, meaning not all stocks are participating in this recovery. Investors haven’t gotten brave enough yet to buy companies that are doing well but whose share price is low. If they wait until they are “brave enough” it will be too late. Unfortunately, what usually makes us “brave” is watching the price of a stock going up steadily for a long period, then getting in. Of course, that is the opposite of what we need to do.
“The S&P 500 is up for the year thanks to the strength of these five companies [Facebook Inc., Amazon.com Inc., Apple Inc., Microsoft Corp. Facebook and Google-parent company Alphabet Inc.], but the other 495 members are down 5%. Still, that 5% decline pales in comparison to the earlier 35% plunge in the S&P 500. Goldman Sachs calculates that if those five tech stocks were to fall 10%, the bottom 100 in the S&P 500 would need to jump 90% to offset the decline.” — Goldman Sachs. Further, large cap value stocks (a favorite) are down -11.28% year to date. Banking stocks are down about -30% year to date.
This pattern has begun to change as companies who have been overlooked become attractive bargains. The exciting thing to me is to think about this pent-up demand consumers have. Nowhere is this more apparent than in Airline and Travel stocks. The pent-up demand in this field from hardcore “bucket-listers” should be staggering.
I believe the rebound and our reservoir of pent up wants and needs will drive the market next year or sooner. Of course, there are two big events that could move it. The election and the announcement of a bonafide vaccine that is ready to go.
For those of you nervous about a Biden win in November, here is a reassuring thought, (somewhat.) I follow and/or own many of the top tech companies. Apple, Amazon, Google, Microsoft, etc. The CEO’s of these four are all for Biden. I don’t know why a capitalist, which they must be to a large extent, would root for a candidate who signs on to Bernie Sanders 110 page “manifesto.” https://www.npr.org/2020/07/08/889189235/democratic-task-forces-deliver-biden-a-blueprint-for-a-progressive-presidency
If you are worried about a Trump win, it is generally not due to market factors. Pick your factor.
Cases continue to be high. The word case is a problem here. A case IMHO requires a sick person. The CDC in their Sept 11th report said that outpatient and emergency room visits to hospitals are no higher than any other year. Also, they are bombing every school with bodies in it with tests. Some positive tests, very few sick kids.
It is impossible (as far as I know) to get the number of sick people vs. the number of cases. If anyone knows that please contact me. The CDC estimates as many as 24 people get no symptoms to 1 who does. The lower range is 1 in 6 get symptoms. This is good. Let’s hope it is 24. The faster we build antibodies the faster we stop it.
The only other observation is that the CDC continues to divide us by race instead of the real factors, i.e., obesity, diabetes, smoking, drinking, number of occupants per home, and access to health care.
Craziest article of the week
Seattle pays ex-pimp $150,000 to offer ‘alternatives to policing’
Seattle now has on its payroll a convicted pimp who once vowed to “go to war” with the city — a $150,000 “street czar” whose mission is to come up with “alternatives to policing,” reports said.
I am not kidding, unfortunately. This guy is a convicted pimp and came to Seattle to “go to war” with the city. He now earns $150,000 a year to be a street advisor. He lists his employment as “Life Coach,” and likes to wear robes instead of a shirt and pants.
Letting the patients run the nut house comes to mind. How about picking some black businesspeople who have had businesses destroyed?
Please call or email me if you want to talk about the market or what is on your mind.
See you soon,