A New President, Short Squeeze, Bitcoin, A Bull Market

 
So much has happened since my last note. It’s amazing how the markets have absorbed inconvenient events and moved ever higher. I don’t intend to dwell on the new President, other than to observe that his policies will deduct approximately 1.5% from anticipated economic growth.

Politics in the US are as divisive as I have ever seen and anger over politics and the management of the pandemic is growing. It is apparent that the citizenry have a short fuse and are getting more demanding.

I think the Oligarchs of the Social media are foolishly attacking Conservative thought. Eventually, the politicians will be forced to legislate on censorship and monopolistic business practices.

Promotional activity has turned Bitcoin into a darling of the market. The story relates that it is an alternative to fiat currencies and a shelter from money printing. To me, it is similar to a commodity, not a currency.

Currencies do not randomly fluctuate 20% to 35% in value.
Currencies must be trusted as a means of exchange to be viable and it’s impossible to know what a Bitcoin will be worth from one day to the next.

A Bitcoin has none of the essential requirements of an investible asset. It has no value, no assets, no earnings and requires a robust imagination to believe otherwise. It’s reminiscent of the Tulip mania in the 1630’s.

If a “thing” has hope but no assets and no earnings it is a “concept” and investing in a concept is the easiest way to lose money.
The short squeeze on GameStop is a classic example of a dumb way to lose money. The short sellers sold more stock than there are shares outstanding. Panic covering of the short sales is all over the news.

I have to confess we bought the stock at $14 and sold it at $39, for a gain of 160%. We underestimated the trading mania that ensued.
In this regard, we have several stocks with improving fortunes in our portfolios that have  large short positions. We expect at least double digit returns due to rising profits and the built-in demand by the short sellers.

I like selling short (if clients provide authority) as a defensive maneuver but you have to know what you are doing; 1. Don’t do it during a bull market, 2. Don’t do it if the short position amounts to several days of trading to cover. There are other rules but these are at the top of the list.

Speaking of bull markets, for some time, I have been overly cautious and it impaired our performance. I am a value investor but it is a mistake to wait for acceptable value.
It’s a mistake to wish for what should be rather than accept what is. Equity valuations are far above anytime in history so it’s important to keep an eye on the exit but recognize there are money making opportunities in all kinds of markets.

Looking ahead, the economy is on the recovery path, massive stimulus is in place and trillions more is expected. The stimulus underway by the US, Europe and Japan totals $2.3 Trillion and the US is proposing another $1.9 Trillion.

The consequence is that the economy is recovering (slowly) but there are industries that have a huge backlog of demand. It’s overlooked that retail stores still enjoy 80% of the retail market and retail sales comparisons are expected to be astronomical. Th