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A Short Update

My portfolio did not trend up with the market last week because of hedges that went down on the rally and the Canadian dollar which corrected back up.  But whatever, I’m happy to sit this out.

Honestly, thinking too much about the market right now makes me a little ill.  It seems like a sideshow to the reality that is playing out.

But I said that I will write through thick and thin and so I will.   I’ve resigned myself to the fact that I’m not smart enough to figure out what the market does from here.  Its some combination of death tolls, hospitals being overwhelmed, drug and vaccine trials that I have no insights into, and how an economy comes back after being shut down.

And then there is the question of if you can go back to normal or if it just brings the virus back.  Not to mention how/if these huge government stimulus programs change the way things are when this is over.  Do restaurants open up again, do airlines fly, it just could be a totally different world.  Or maybe not.  I just don’t have a clue.

I have been surprised and not so surprised about the move back up in the market.  I mean the market was incredibly oversold.  So it was probably bound to happen.  But at the same time, I cannot share the optimism.  I think that the timelines for some degree of normalcy that being bandied about are optimistic.  Consider that here in Canada, the British Columbia health minister said yesterday that she thought any easing of restrictions before the summer was unlikely.  And that after British Columbia has said that there measures are starting to impact the curve.

It is the medical experts that have been most consistently right through this pandemic.

In Alberta, the testing has been excellent, social distancing has set in, and that (at least so far) has helped immensely.  Our cases have not gone crazy.

I did a few things with the portfolio in the last couple of weeks.  I made a couple of tiny trades on the tankers, buying DHT Holdings and Ardmore Shipping.  The oversupply of oil is going to be tremendous.

While the focus is on OPEC+ and the supply increase from Saudi Arabia, that pales in comparison to the demand destruction of the virus.  I don’t think anyone really knows how much demand is being lost but the numbers I’ve seen are anywhere between 15mmbbl/d to 30mmbbl/d.  In the Great Financial Crisis of 2008 it was 5mmbbl/d and that amount sent oil into free fall.

So quite honestly, I think that the Saudi’s are a bit of a sideshow here.  It is a nice story to talk about but would OPEC+ really cut 15mmbbl/d anyway?  Could they even cut that much without damaging the fields?

I also took a position in GoodFood. It has moved up a bit since I bought it (at a little under $3).  My thesis was basically how can this stock be worth less now than before the virus hit?  GoodFood provides meal ingredients and recipes, delivered to your home.  They operate in Canada.  Their counterpart in the United States, Blue Apron, is up six-fold since the virus hit.  GoodFood is flat.  Yet GoodFood is growing faster and has a better balance sheet.  Our family used GoodFood even before the virus so I am familiar with the product and its great.

As I have been scratching my head about why the market could be so strong, I also decided to add a little to my index hedges and shorts in the last few days.  All on the edges, but I just don’t see how we get out of this quickly.  There would also seem to be an outside chance that things really go sideways.  I do not see how the market is pricing that in at these levels.

3 Comments Post a comment
  1. schotsaert #

    Thanks for your sharing your Research with us. Any idea why Scorpio Tankers is underperforming compared to DHF holding / Euronav/… in the tanker market? Kind regards

    April 2, 2020
    • My guess would be it is because Scorpio is more levered than others so they are a bit more precarious. These tankers are super-annoying, the only thing to do is keep positions super-small so you can handle these crazy ups and downs.

      April 3, 2020
  2. Can you comment on the CUI global latest acquisition?

    April 4, 2020

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