Stocks Black Friday, Omicron and DIDI
Stocks Black Friday, Omicron and DIDI
It's impossible to predict the future but it's very interesting to analyze how markets reacts to news and black swan events: sell-offs and opportunities.
Bonjour! 👋👋
First of all, welcome to the new subscribers who joined this week! And I hope everyone had an awesome weekend!— On this week’s edition of Aconomics:
[1] News Roundup: Stock Market Black Friday with Omicron and DIDI
[2] Main topic: The fallacy of market timing
[3] A Stock I’m flirting with.
[4] Funny meme or recommendation
If you’re reading this but haven’t subscribed, do it 👇 And If you like it and want to share it on social media, you have my blessing 😉
[1] News Roundup
Last week we got hit by many bearish triggers in the market and even though consumers were probably buying a lot on Black Friday, Investors were like:
A Skittish Market deals with Omicron
Last week we saw the biggest drop since October 2020. The reports that the new Covid-19 variant -Omicron- might be stronger than others made nations close up shop and the market reacted by going in the red.
Companies that benefitted from lockdowns are showing some strengths after weeks and months of going down. Companies like Moderna went up +20%, BioNTech +14%, CureVac +13% (They don’t even work on Covid anymore!) and Pfizer +6%.
Even Peloton, the fitness one-hit wonder that reported horribly last quarter went up almost 10% and is now trading above 46,4 usd
China and Didi wont stop fighting
Just before Thanksgiving, the Chinese regulators decided to strike DIDI again. They now want Didi's executives to take the company off the New York Stock Exchange over worries about sensitive data leakage. The report from Bloomberg also added that privatization or a share float in Hong Kong are among options.
All this made the bulk of Chinese companies trading in the US market to go down. Investors have been afraid of Xi Jingping government for a while now, if we look at the MSCI China ETF, we see it hit the ATH of 96.98 back in February and its now trading at 65.98.
In my opinion, the companies like Alibaba (9.74% weight in MCHI) and Tencent (13.04% weight in MCHI) are extremely undervalued but to see a good return on investment we need to -among other things- see investors gaining more confidence in the Chinese government, better relations between Biden & Jingpin, and as its the case with most stocks, a decrease in Covid related alerts and surprises.
[2] The fallacy of market timing
One of the most interesting aspects of investing is managing the discrepancies that from time to time appear between your analysis and the price movement of a stock.
As it has been said by many, everybody has the brain to be a good investor, but few have the stomach. Or in the words of the investing legend Peter Lynch:
In the stock market, the most important organ is the stomach. It's not the brain.
And this brings me to what happened this week or the Sell-off triggers we witnessed. A trigger can be any number of events and will tend to pick up momentum as investor psychology begins to shift toward fear or panic. Last week it was a new coronavirus variant and China regulations on one company.
But how can we tell the difference? It comes down to each and every investors due diligence. The market is very irrational on short time frames but rational in long, that’s why most day-traders lose money and most long term passive investors make money.
The fallacy of market timing is something like Astrology, even though there is ample evidence that it cannot be done, we still see people buying or selling because the moon is aligned with Capricorn or what is the same, because the price line of the stock looks like a shoulder and a head, so obviously, we are going to see another shoulder :)
To quote Terry Smith of Fundsmith (has returned 440% to investors over a decade):
“When it comes to so-called market timing there are only two sorts of people: those who can’t do it and those who know they can’t do it”.
So, what to do as investors when we experience weeks like last-week? Stick to your guns and look for opportunities.
[3] A Stock I’m flirting with.
I have a different one this week. If you follow this newsletter and the YouTube channel, you probably know I like forward-thinking ideas and even though I don’t invest on them with my public Etoro portfolio to manage the risk for my copiers, I do like to study them and sometimes invest a little on my personal a-bit-riskier portfolio.
LILIUM ($LILM)
With a Market Cap of only 2.24B, this Munich based aerospace company with the first electric vertical take-off and landing jet is trading at 7.87$ and their jet is really impressive.
In August 2021, the Brazilian airline Azul, signed a letter of intent for 220 Lilium Jet seven-seaters.
If you like the industry, check them out:
https://lilium.com/
[4] Funny meme or recommendation
Around 10-12 years ago, I picked up this book at Barnes & Noble and I loved it so much, I carried it with me as I move homes and cities over the years but at some point I lost it and I just had to buy it again.
Basically, the book tells the story of how the development of mathematics and statistics provided human beings with ways of quantifying risks.
In this unique exploration of the role of risk in our society, Peter Bernstein argues that the notion of bringing risk under control is one of the central ideas that distinguishes modern times from the distant past. Against the Gods chronicles the remarkable intellectual adventure that liberated humanity from oracles and soothsayers by means of the powerful tools of risk management that are available to us today.
And that’s it!
If you got to this point you either have too much time on your hands or I made it compelling enough :) I’ll choose to believe the latter. If you can share this newsletter it would mean a lot to me. Thank you again and have a great week!!
Until next time!
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