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Questions for my Portfolio

  1. Are we going to see the reverse of YE 2018?

I remember how I never really understood the decline that happened towards the end of the year 2018. The market went down every day and I just kept asking why? And then, starting just before the end of the year, things suddenly turned and it was like nothing had ever happened.

I have already related the prescient comment of my Uncle at Christmas dinner that year. He pointed out that everyone, himself included, was going to get rebalanced at year end because stocks were down and bonds were up and how that would be a tailwind.

Looking back, it seems that those with some expertise in the matter do attribute the turnaround at YE 2018, at least in part, to that rebalancing. It was all about flows and passive.

If there is a lesson this year, it is that flows and passive are now king. So I have to wonder, is year end going to mark a change as the rebalancing takes place in reverse?

2. How I can SaaS go?

In the early spring I wrote a few posts that basically could (together) have been titled – why SaaS should and will only go up. That turned out to be quite prescient, and I did well on the idea. But I do not have the constitution to hold SaaS completely without regard to gravity. I can’t do it. What remains of my SaaS holdings today (that would be CDLX, IDN, SHSP, TEAM) I have now mostly offset with other names that I am short. I am not usually one to talk about my shorts, but how can Zoom maintain its multiple once we are vaccinated?

3. It is not an everything bubble or is it?

Stocks are going up and some stocks are going up to degrees that I can only explain by calling them a bubble. But the big question is whether this is an everything bubble or not. If it is, then I should sell it all or at least hedge it all. But is it? I keep thinking back to 2000, when internet and tech stocks crumbled but many other parts of the market did fine. Can these banks that I have been buying really be part of a bubble at less than tangible book?

4. Biotechs?

The XBI is through the roof like everything else since November. But I hesitate to use the term bubble.

Unlike SaaS, EV, anything green, the biotech names don’t have the same bubbly quality to me. And the innovations here seem far earlier and far more important. Could this just be the run-of-the-mill start to a multi-year bull market?

5. Bitcoin versus or and Gold?

Gold did well for the first 4 months after the pandemic and now Bitcoin is doing well. I am starting to cycle back to gold names again. I sold half of Silvergate and half of my too sheepish to name crypto-mining POS that has traded up to la-la-land. I bought back Wesdome when it slipped below $10.

I think the timing of the moves in gold and Bitcoin is interesting. Gold moved right after the pandemic, when things were bad and the concern was real. Bitcoin moved well after that, at the same time the EV’s and ESG’s and SPACs started to go to speculative heights. And at that same time gold corrected. There is a time for owning both and that time did not appear to coincide. Is that telling us something?

3 Comments Post a comment
  1. Long time reader!

    With regard to #4
    I think biotech is a little different than other bubblicious sectors right now. XBI hasn’t moved much in the past 5 years, despite big declines in interest rates. As most biotech companies generate cash far in the future, big changes in the discount rate of those future cash flows ought to make the biotechs more valuable in the present. This logic has pushed up tech growth companies for years, but biotech hasn’t moved. Most of the analyst reports I have seen still use the same discount rates they were using 10 years ago, which are mostly derived from studies done by pharmaceuticals in prior decades.

    Furthermore, I see a good chance that COVID has sped up development timelines as companies were forced to adopt new methods for study recruiting and data analysis. I also think the FDA had to work to approve drugs faster than ever during COVID and will likely continue at a faster pace post-pandemic.

    Finally, I think trial success rates ought to improve going forward as companies get better at nixing bad drugs earlier in the process. Most analysts are using clinical trial success rates that are backwards looking. But as our understanding of physiology and ability to model human physiology improves, pre-clinical drug selection ought to improve, resulting in fewer duds overall.

    Curious for your thoughts!

    December 20, 2020
    • Yeah definitely had some of the same thoughts. Just on the XBI, it really does look like a breakout of a very long consolidation, definitely helped by low rates, and I’m just thinking that COVID could change the perspective on biotech, rather than drug prices being frowned upon, looked on as necessary for funding companies that can save us in a pinch

      December 21, 2020
      • kari727 #

        Totally agree!

        December 21, 2020

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