Vaccines are coming, what’s next?

Pfizer, Moderna, AstraZeneca.

Three weeks and three potential vaccines with extremely promising Phase III trial results that likely mean the first vaccinations will start within a few weeks.

These are remarkable scientific achievements well worth reading more about, but I want to focus on what this means for financial markets.

After stumbling through the darkness of much of this year, market participants finally see the light at the end of the Covid-19 tunnel. With a vaccine almost certainly coming within the next six months, and even sooner for targeted at-risk groups like doctors, nurses and other frontline workers, as well as the elderly, we can now plan ahead for a return to normalcy by next summer.

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On The Limits of Perception, The Power of Math, and Human Behavior

Here is the English version of my most recent article in Forbes Latvia. If you are heavily invested in technology stocks, you might want to pay particular attention…

I am going to tell you a story whose provenance I cannot ascertain, but that speaks to the limits of perception, the power of math, and human behavior.  

The one constant of this story is that there is a chessboard. Other key components are 1) a king or emperor, (2) a man, and (3) grains.  

Now at this point you might have guessed the story, but you will remember it the way you first heard it, and will most likely not know the alternative endings. For those of you who have no idea what I am talking about, here we go…  

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Post US Election Update

Last month, we wrote an article for Forbes magazine about how this year’s US presidential elections could impact the stock market.

https://www.axios.com/election-results-2020-trump-biden-3a07f4c7-fb4d-4d62-b18b-392ff6f1eeb5.html

Here is how our prognosis stacked up to what has come to pass over past couple of days:

The impact of mail-in votes

“The first major issue is that Covid-19 restrictions will create a very different in-person voting environment than in previous elections. It is also anticipated that there will be a record number of mail-in votes, which take considerably longer to tabulate. This means that there could still be many votes to count in the days following November 3rd.  

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Actually Investing in a Green Hydrogen Future

In my last blog post, Thinking About a Green Hydrogen Future, I laid out the increasing role for hydrogen as Europe transitions to a net-zero carbon economy over the coming decades.

Such a transition will require significant changes across the entire spectrum of the continent’s energy, industrial and transportation infrastructure, and there are already many companies working to address these needs. Whether it is large chemical suppliers investing to secure access to green hydrogen as a feedstock, automotive players partnering to develop fuel cell technology for commercial vehicles, or legacy businesses in the energy sector searching for new sustainable growth opportunities, all the major players are exploring their options. The realization that hydrogen investment is necessary provides a strong tailwind for the industry, especially for a number of smaller players that have spent years developing the technology that is about to be at the forefront of this transition.

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What’s Better Than Bitcoin? Companies That Dig Rocks (Seriously!)

We get a lot of questions about cryptocurrencies. Especially when there is upwards price movement. No one ever seems to ask about them when they are not performing so well… I always answer, that I cannot buy cryptocurrencies for clients, and that we are fully committed to finding profitable opportunities elsewhere.

One example is our investment in copper miners. Copper miners?!? Yes, copper miners.

Since the lows of March 16th, copper miners Freeport McMoRan and HudBay Minerals have actually outperformed Bitcoin:

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On US Presidential Elections and the Stock Market

FOUR YEARS AGO – NOVEMBER 8th

It was past midnight in Riga, but the voting results from the US presidential elections were just starting to trickle in. I had to be at the airport at 6am to catch the early flight to Berlin, but this was political drama at its best. Just a couple more exit polls. This was important. I could sleep on the plane.  

The odds were in largely in favor of the Democratic Party’s presidential candidate Hilary Clinton defeating the Republican Party’s Donald Trump – most polls gave Clinton a 60%-70% chance of victory. But the election results were starting to tell a different story. It would be close. And Trump had a chance. In fact, he had taken the lead in the projected count of Electoral College votes.  

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How To Own Your Weight In Gold

 “Someone once told me that you were not wealthy unless you owned your weight in gold” -said the client. I had not heard this argument before. Regardless, the implied sum sounded substantial. I started to calculate in my head just how many dollars’ worth of gold she was telling me she was considering to buy (somewhere around 3 million USD). Would we have to liquidate all of her investment portfolio to accomplish this goal? Was this a worthwhile goal? Was buying gold even a good idea? This was sometime in 2012. Gold had been selling off from its highs as the world continued to recover from the great financial crisis. Would it have another run higher? I thought not. Now how could I tell her politely that I thought that she would be better off staying invested in productive and income generating assets such as stocks and bonds rather than something shiny that was dug out of the ground just so that someone could buy it, and then pay to store it in the ground again? Or rather, how could I tell this to the private banker and hope that nothing was lost in translation? 

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Still Floating – An Update on Oil Markets

Seven weeks ago, I wrote a post about the contango in oil markets. To summarize, the world was falling apart and there was nowhere to put all the extra supply of crude oil and refined crude products, causing oil to briefly trade negative and oil tanker rates to skyrocket. As a result, tanker companies presented an extremely attractive investment opportunity.

What We Got Wrong

The length and severity of the oil price contango. The price of oil has rebounded significantly since its collapse into negative territory in April, leading to a flattening of the crude oil forward curve and a reduction in the contango opportunity:

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Our April Commentary

April was a considerably better month than March.

Massive global fiscal and monetary responses fueled a strong market rebound in April despite macroeconomic data that showed the huge economic cost of the COVID-19 shutdowns.

Once again, we were reminded that markets look to the future. However, in March, with markets down 35% from their peak in February, the future looked very bleak indeed. We saw the exact opposite when markets rallied on the day when the worst unemployment numbers in US history were released. Crazy.

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