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Happy Holidays!

We want to take this opportunity to wish all our clients and readers a Very Happy Holiday!

There are 6 Trillion reasons and counting why 2021 is shaping up to be a positive year for many asset classes.

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The Huge 2020 IPO Wave And What It Means for 2021

While COVID, the Stock Markets and yes, the election, can claim the most headlines this year, a lesser known headline is playing itself out in 2020, namely the resurgence of IPO's or Intitial Public Offerings with huge gains out of the gate. A cousin of this trend is the emergence of SPAC's (special purpose acquisition companies) which we will touch on more in a future blog article.

AirBnB debuted today as the biggest IPO of 2020. It ended up offering 52 million shares for sale at $68 each which was significantly above their December 1st target of around $44 to $50 per share. The shares (ABNB) started trading on the Nasdaq today at $146 per share rising to $160 per share valuing AirBnB at more than $110 billion. That is 12.5% of the total value of IPO's this year which have included DoorDash (DASH), Palantir Technologies (PLTR), Asana (ASAN) and others.

Yesterday, DoorDash (DASH) Pre-IPO shares which had sold at $102 a share, debuted it's first trading day at $182 per share rising to over $195 valuing the group at over 70 Billion dollars. These are lofty valuations for companies yet to turn a profit. If you are investing for quick profits you better have a clear game plan form the outset.

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The US Dollar - 2020 Trends & Beyond

We are dedicating todays Blog article to the US Dollar and how it has been tracking almost inversely to the US stock market this year. At the height of the COVID onslaught in March and April of 2020, we saw a steep rise in the US dollar to a new 3 year high as investors rushed to safety in the worlds reserve currency while US and global markets fell in rapid succession as the impact, risk and global spread of COVID was priced into the markets. Conversely, as stock markets rallied back to their pre-COVID highs we have seen the dollar steadily fall. A vast injection of liquidity by the Federal Reserve which dwarfed Bernanke's quanititative easing during 2007-2009 eased concerns, risk and pressures on the financial system which in conjunction with close to zero interest rates has fuelled a wave of money seeking higher yields.

At some point in the future, the Fed will reign in its uber generous bond-buying and liquidity injections. However, that point is unlikely to arrive in the next two years which means that investors appetite for seeking yield is unlikely to taper off until that point. An IPO boom coupled with strong market growth is likely to continue into 2021 not-withstanding any new black swan events.

A weaker dollar eased conditions after the 2007/8 financial crisis and it appears that this trend will be mirrored in 2021/2022. We expect the US economy to pick up considerable steam as we come out of a brutal 2020/2021 Winter and optimism around emerging post-COVID lifts people's spirits and business investment. A strong US economy coupled with a weaker dollar and close to zero interest rates should provide the impetus for the stock market to perform well.

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The Origins of Thanksgiving - It May Not Be What You Think

Thanksgiving roots are not in 1621, Plymouth as you might have been accustomed to think.

The Day of Thanksgiving was originally conceived in England in the English Reformation during the reign of Henry 8th. Prior to the reformation there were 95 church holidays and 52 sundays when people were required to attend church and forego work. 95 church holidays! That is not a typo.The priorities during that era were certainly very different from today.

The 1536 reforms reduced the number of holidays to just 27! Some wanted to eliminate even these holidays and replace them with Days of Thankgiving and Days of Fasting. Positive events such as winning a great war, the birth of a royal heir and so forth would be followed with a day of Thanksgiving whereas terrible crisis such as drought, plague or floods would be followed by days of fasting. Great Negative and Positive events were given divine significance that either required pennance to ensure the continued Blessings of the Divine or Thanks to the Divine.

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Generating Alpha. What is it and Why is it Desirable?

When somone in the investment world refers to "generating alpha" or "beating alpha" they are referring to out-performing a given market indexes annual performance. Alpha is a performance indicator and a component of MPT (Modern Potfolio Theory). The objective of modern portfolio theory (MPT) which was developed in the 1950's is to find the best possible diversification strategies with the objective of achieving a greater expected return with a lower amount of risk. In order to do this it evaluates the following five risk variables:

  • alpha
  • beta
  • standard deviation
  • R-squared, and
  • Sharpe ratio.

The overall objective of MPT, as it has evolved, is for investors or rather investment managers/advisors to find a combination of non-correlated investments that have the best potential expected level of return for an appropriate level of risk. 

Investors want to be able to assess the level of performance vs. the risk they are taking. If an investor is taking outsized risk they will expect outsized performance in the event the investment performs as anticipated. If that is not the case, one would naturally have to assess whether taking outsized risk is worth it. 

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Hawley Advisors
1600 South Main Street, Suite 190
Walnut Creek, CA 94596
Phone: 925-906-9800
Fax: 925-906-9884
info@hawleyadvisors.com

 

 

Hawley Advisors is an investment advisor, registered with the State of California. Any investment ideas or strategies on this website are for the purposes of education and general information only and should not be construed as specific investment advice. For more information about our firm please check the SEC Public Disclosure website: https://www.adviserinfo.sec.gov/

 

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