Transcript
Hello, everybody, welcome to Wednesday. Much better day for us today as a whole, the S&P 500 was up .77%, which is great. But the big rally that we saw on Monday and a little bit on Tuesday into the stocks that need the vaccine to really function really fizzled today, I mentioned yesterday that these rallies have happened five or six times before, they’ve lasted two to five days. This one was two days so far, we’ll see what happens tomorrow and rest of this week. But that’s why we have to be careful, even though we give up some, you know, gains compared to the market. And those types of things still got to hang in there.
Today, it was quite a powerful rally in the types of stocks that we have, we saw some really good gains in our portfolios today. So, you know, I’m happy about that. But here’s a couple things that I think are important to understand about these rallies. First of all, one of the things that really drives these rallies is that there’s a lot of short interest on top of these stocks. So the airlines and the cruise lines. And what happens when you’re shorting a stock is you are believing it’s going to go even lower. And so what you do is you borrow the shares, and you sell them at current price. And then you’re hoping that when the market drops for that stock, you can come back in and buy it at a lower price. And that’s how you make your money.
But the problem is, when it starts to go up, well, it can go up forever, theoretically. And so then you have to buy it back at a higher price. And so once you see some movement, which happened with the you know, vaccine news on Monday, all of a sudden, all the short interest is buying that stock, which of course makes it go up even more. And we saw severe moves in some of these pieces that are really seem to be ahead of themselves, it’s not so much that it’s ahead of themselves. It’s short interest, covering the stock and buying it back. So that’s one thing that happens in the short term.
But longer term, I think one of the things we’ll have to consider here is just that even if we have a vaccine, and you take that vaccine, I take that vaccine, let’s say it works, we’re safe. But by poll right now, only 50% of people said they’re going to take the vaccine. So if you’re an airline, or cruise line or a restaurant, or what have you, and there’s still a virus running around the counties in the States, and even maybe even the federal government in this case, are still going to create a lot of regulations sitting on top of these businesses, to keep them from really gathering you might not have big sporting events, and live concerts and those types of things going on if the virus is still running around, because only 50% of the people have taken the vaccine.
So it’s more than just the vaccine to be able to see revenue growth back to normal for some of these companies. And so that is something we have to watch for and just really be careful with as we go. And when things really do start to move, we’ll be able to tell. And we’ll be able to shift and get into those areas and make sure that you know, we’ve got the exposure into the right areas. But that’s that’s what I see happening. I think it’s very, very fascinating. This is an incredible year, different than any other year I’ve seen that’s for certain. And let’s see what happens tomorrow. And I look forward to talking to you then. Thank you very much.