Looking through the Reddit forums, I can see a lot of people have been burned pretty badly. Quite a few hype stocks are trading around half of what they used to be a few weeks ago (Palantir, Nio, Lemonade, C3.AI are the ones off the top of my head). There’s blood on the streets, at least for the tech sector right now.
The supposed reason of raising interest rates for the downturn baffles me. So bond yields raise to 1.5-1.6%, and everyone panics? People are selling out their tech and growth stocks to go into treasuries, airlines, and cruises?
Completely irrational if you ask me. Is 1.5% an attractive return? I think you know the answer to that. It won’t even cover inflation.
In addition, are the value plays really going to perform? The casinos, oil players, hotels, and cruises have been holding up well. No brainer to assume that most people are dying to travel.
But most of them took on a lot of debt to survive. This needs to be serviced and will be a drag on growth. I also think people are way too optimistic on a return to normalcy quickly. Got vaccine doesn’t mean magic cure. Not everyone is vaccinated. There are virus variants, and governments will be cautious. No one knows how long vaccines last either. I’m fairly sure that even if vaccinated, we will still be wearing masks and social distancing for a while.
Travel and entertainment will probably still have restrictions, whether they are due to government regulations or lack of industry capacity. Industry capacity (seats on planes, rooms in hotels, etc) will be weak initially, as people have been laid off and hotels closed. It takes time for people to be rehired, hotels to open up, opened up, planes to be bought etc.
Just speaking from my point of view, I won’t travel if its expensive, overcrowded, or dangerous. I’ve waited over a year, I can wait a bit more. A drive up to Malaysia will be plenty for the start.
The Death of Growth Investing?
It’s hard to be a growth investor now, with everything down. When I look at my portfolio, I seriously want to puke.
But investing does depend on your convictions and world view. Do you think we will go back to normal quickly? That we will stop remote work, online shopping, and ignore climate change?
I don’t believe that its the end for digitisation, cybersecurity, climate change, and electric vehicles. These are trends that will continue, pandemic or not. Slightly higher interest rates won’t reverse them either.
The turmoil now is irrational and will blow over. My guess is that by 3-6 months, we would be back to where we were, or at least it won’t get much worse. We are about halfway through Mar 2020’s drop of about 20%, and it shouldn’t get worse than that.
I added to my holdings on Thursday night:
20 shares of Paypal at $249.4 ($4,988)
150 shares of Corsair Gaming at $32.7 ($4,905)
25 shares of Crowdstrike at $192.6 ($4,815)
Total = USD $14,700
A pretty modest amount overall. Really scrapping the barrel here for more money. I think even those who were prepared are getting low on ammo because the dip has just kept dipping.
I haven’t sold anything yet, though I’m thinking about it. Some holdings like Google and S&P 500 ETF haven’t been hit as hard. Maybe I’ll liquidate a moderate amount to direct into cheap stuff. Eyeing Palantir, Nio, and Tesla. If there is a big green day in the coming week, I’ll likely sell something.
Stay safe and have a good weekend everyone!