Alright, after a somewhat choppy March 2021 which I expected, the market ended the quarter on a high and the bubble begins. With Sleepy Joe Biden doing everything he can to force inflation and deflate the dollar…stimulus after stimulus after forgiving student debt after $2T Infrastructure plan…all just to make our products more appealing to emerging countries with larger population bases. Get ready America, inflation is real and everywhere I look…at the Gas Station, Toilet Paper, Hair Cuts, even the burrito I’m eating right now. Now is not the time to be long on the $USD. It’s all about future growth now and these large Corporations don’t see it in the US. Pump up the economy, reduce unemployment…only to set America up for the biggest crash ever. Enjoy it while it lasts. It won’t happen immediately, we still have a pandemic to get past which is still showing signs of one last final wave.
I wish I had a crystal ball, I really do. Because mine currently says it’ll be a choppy summer as Corporate reporting begins this month for Q1 and if I’m right, I’d expect a lot of Corporate earnings to indicate year over year revenue growth with a common caveat…increases in selling prices brought on by increases in core prices…INFLATION. Expect it to be a dominant theme over the next few months with the markets pulling and pushing as yields creep higher and Long-Term US bonds falling in value. That, combined with the big bankers and the rest of the economy taking a break and traveling for maybe the first time in over a year…There’s not a lot to get excited about right now as the markets look full to me. Low volume usually leads to short-selling in the near-term.
At least the SPAC craze appears to be taking a breather as well, but if inflation is real, I’d expect some desperation in some of these recently launched SPACs as we approach the end of next year. Increases in bond yields will put pressure on those remaining SPACs to find a company to take public, with maybe a SPAC rotation following the current rotation in the general public markets away from high growth/technology companies and into cyclicals or Company’s with proven revenue growth and profitability. Instead of sitting on cash which is earning essentially no return (ala Bill Ackman right now), if the markets do end up inflating later this year (hint, a X-mas rally seems all but certain coming off this pandemic), Mr. Ackman and SPAC Co will feel the pressure to buy into these markets again or return money to investors at no return over 2 years. Plus, if I’m not mistaken these empty SPACS flying around right now invest in low yielding government debt until they find a target, which may result in actual negative returns over 2 years when finally liquidated…not a good thing for those who invested in SPACs being launched today. So while this SPAC market takes a much needed breather, I’d expect a final round of SPAC activity later next year…call it panic buying. But who knows for certain, right? We still have a pandemic to get over.
Alas, here’s my speculative top-5 for April, knowing there appears to be more downside risk to the market in the near-term followed by a gigantic upswing once people wake up and realize asset prices are rising everywhere…
- Cash (Seems silly, right? I’m betting against the dollar but also remaining in cash. I’d just be saving here to hopefully buy in at a lower price later this summer. Plus saving cash provides you with more buying power should you find something you really like in or outside the public markets and you never, ever bet the farm on anything…$30-$50K again).
- Real Estate – Based on the increases in yields and real estate prices this year, 2021 may be the last time to buy at somewhat of a discount long-term.
- For those with long term time horizons…it’s risky but you might as well pick up the big 3 technology leveraged funds with technology being beaten down recently and after their recent split making them more affordable…TECL, SOXL and FNGU. All should benefit from a hopeful Christmas rally this year if we can just get past this stupid pandemic.
- TMV and TYO – See above discussion on yields regarding long-term Treasury Bonds, just don’t expect much in the short-term until inflation really sets in.
- Still like airline equities here (DAL and UAL are my personal favorites). All are potential M&A targets at the very least once the pandemic ends. As an aside, once/if the pandemic ever ends, expect the M&A markets to take off as Company’s still reeling from the pandemic synergize and combine together to create a better more “ESG” friendly Company.
High Risk/Low Reward – I really hate typing this but I can’t ignore the hype. Crypto – I won’t touch it, my brokerage firm won’t touch it and I think this could pose some systemic risk to the entire economy if/when this bubble ever bursts. But if it has replaced Gold temporarily as the predominant inflation hedge, I could see BTC going to $75K, easily. Just too risky, even for me.
Good luck and stay safe, hopefully a return to normalcy happens sometime in 2021…