Inside the mind of the Master Investor: Influential British investor Jim Mellon reveals his latest thoughts on the markets.
Well, this has been a better week for those nursing losses from the Pandemonium Crash of 2020. Friends of mine have been predicting that there would be a retracement of the back to back gains in almost everything starting on Monday, but so far it hasn’t happened.
However, that doesn’t mean it won’t, and my bias now is to hedge a bit and while I have been adding dividend (or at least dividend in the future) names, I am a bit short S&P futures, and just now the DAX. Plenty of people expect the indices to retrace their bottoms, based on the experience of almost every prior precipitous index fall, but this might or might not happen.
What is important is to identify those sectors that will survive and the winners therein. It could be that the harder they fall (e.g. airlines, hotels) the better they bounce, and I imagine that airlines in Asia and probably soon, in Europe, will do just that, at least those that survive. Some canny operators are praying that the likes of Norwegian (OTCMKTS:NWARF), Air France (EPA:AF) and Lufthansa (ETR:LHA) go bust; in the case of the latter two, most unlikely, but in the first, highly likely. Possibly also Wizz Air (LON:WIZZ), Loganair, and, of course, Virgin. No loss there, in my opinion, except for the poor staff, who are now being redeployed (to save Sir Richard Branson their salaries), in the front line against coronavirus.
The winners are obvious: in the States, Delta (NYSE:DAL) and Southwest (NYSE:LUV), and in Europe, IAG (LON:IAG). When all is darkest, the dawn is closer etc.
In hotels, our own Whitbread (LON:WTB) looks good, and a punt on Marriot (NASDAQ:MAR) looks OK to me.
Gold and silver recovered, and although they are still off their highs, it won’t be long before they motor away again. Platinum is tightening also.
The Italians will not be in a forgiving mood to their tight-fisted Northern neighbours who really have displayed a singular lack of purpose, and I would imagine they wont be in any mood to speedily repay their government debt (surely now worth as much as Argentinian, in the real world, were the ECB not intervening).
According to government reports, China’s recovery is remarkable, but let us see. Surely exports will be badly affected over the next few months by the collapse of their Western markets?
What is clear, however, is that things are getting better, we are much closer to a vaccine or cure, and what the world needs to prepare for is the next pandemic, not the current one. The commercial ship has probably sailed on this one, and repurposing factories to make ventilators ad infinitum or engaging in trials for which the result is a year or more away is headline news today, and chip paper tomorrow.
The substantial increase in debt by governments is something to behold, and because debt always has an owner of the credit on the other side, I am sure that the solution to its eventual reduction will not be more direct taxation (as the state already occupies the wallets of most countries in an intrusive way), but a more insidious form of tax – inflation.
Keep the faith. the precious metals are your best bet.