Fundamentals are Hot Again
Hi Everyone,
Hope you all indulged in some red wine this weekend to bury the sorrow of ongoing red days in the market. I tried that temporary sedation trick myself, and it does seem to help…temporarily! Thankfully, my girlfriends and I had other gossip to catch up on that kept me distracted from the crypto crash that ensued on Saturday.
Remember a few months ago when I wrote about Dirty John with his stress-induced-infidelity issues? Where he regularly cheated on his girlfriend but then was upset when she wouldn’t accept that he had made a ‘stupid’ mistake? Yeah, that guy. Well, I’ve got an update. So, turns out that Dirty John was persistent throughout the year in his efforts to reconnect with the girl. He regularly reached out, apologized and apparently held this quote by Winston Churchill as his guiding gospel - “Never give up on something that you can’t go a day without thinking about”. Well, so far so good. I believe that people can learn from their mistakes and change.
I guess the girl felt similarly, because she finally relented and agreed to have a conversation. Dirty John couldn’t believe his good luck, and so he decided to practice truthfulness for a change and reveal an additional fact - that while he didn’t go a day without thinking about her, he had also been seeing another girl. (Who btw is the same girl that he was caught cheating with). Ummm…ok, so why are you still reaching out to the old girl? And does your new girl know that you have been trying to get back with the old girl for the whole year? Well obviously not. It’s Dirty John after all! A leopard never changes its spots. Now does it?
Personally, at this point there is nothing Dirty John can do that would surprise me. But alas, there is more. He emphasized that this was just a casual relationship and the new girl was just a ‘placeholder’ while he hoped to win the old girl back. Yikes but ok. But not ok. Because Instagram would suggest otherwise. A quick search for his new girl revealed that they just celebrated their 1 year anniversary in Mexico!! And numerous other photos suggesting that it was quite the opposite of a casual relationship!
OMG this guy is a freak. It’s like misery is his equilibrium state of mind. I remember titling my last post as “Trust Issues”, but after hearing this part 2 (which I hope was the season finale), I have to say that it’s more than just trust issues. It’s like Dirty John has got multiple deeper darker issues, and has strayed too far from the basic fundamental values that make a person a decent human being.
There is nothing wrong with straying as long as we find a way back home. We are humans and prone to losing our way from time to time. But we must also then undertake the painful journey to return to the fundamentals.
But since again this is not a relationship blog, this story is my long winded way of saying how I feel about the current correction in the markets. The multi decade bull market fuelled by the last 2 years of pure debauchery had strayed us so far from the fundamentals, that the only way to go back home was via this painful correction. Thankfully, markets are more efficient than human relationships in their purging of the abscesses. And I feel, we are close to the final purge as the Nasdaq forward P/E is now down to 23x. Historically, bear markets have ended between 18-20x, and if that is any guide, we should see maybe another ~15-20% correction before we hit the reset button.
Below is a YTD chart of the $SPX, $DJIA, $NDX and the SPAC ETF $SPAK. The SPAC ETF has obviously been one of the harder hit asset classes as its down ~14% in the first three weeks of the new year. It was rather revealing of how gloomy the sentiment really is when Chamath’s merger announcement of $DNAC with ProKidney failed to have any impact on the stock price. It can partly be attributed to $DNAC being a very specific biotech SPAC with no warrants and also that the announcement coincided with his Uigher comment controversy, but it was still surprising to see the lacklustre response from the markets.
But not everyone has strayed from the fundamentals. ‘Tis the season of oil, commodities and metals. While everyone else is experiencing red days, the sector has been kicking ass and enjoying RAD days.
Kuppy is my fav on the subject and here is a great thread on the outlook for Oil in 2022 if you’ve still got some cash left!
I’m off to watching Australian Open for rest of the night. Hope y'all have a great week ahead!
-Nikita