MBMG Flash: Hoping that all our readers had a very merry Christmas and wishing much happiness in the new year ahead
“There are far better things ahead than any we leave behind.” – CS Lewis.
2020 was a year that many of us will be glad to see end. The question now is what will follow. We have tried to address this in our 2021 Outlook- ‘2020, They think it’s all over…’
Some key points to note are:
In our December monthly outlook for our clients, we quoted The Pogues’ Fairy Tale of New York but in reality, we’re living through a fairy tale of the New York Stock Exchange. The harsh reality is, potentially, much more grim than that and yet all the markets seem to want to do is sing happy Christmas songs. We get it. Everybody wants 2020 to end but there’s no guarantee that 2021 is going to be miraculously somehow better.
Weaker US Employment
The harsh reality consists of weaker employment numbers, a generally larger number of COVID deaths and the out-of-control infection numbers. Against that kind of backdrop, markets that are priced to perfection seem to us to be a real stretch and a potential accident waiting to happen. As Mike Tyson famously quipped ‘Hope is not a strategy.’
As MBMG Investment Advisory’s Paul Gambles recently told CNBC’s Sri Jegarah a few weeks ago:-
“Markets get excited about stimulus package, but even if that passes, it’s not going to be a stimulus package that addresses the underlying issues. Markets get happy about Brexit, but you know what, even if Brexit happens as well, we still have the UK and this particular Johnson government with all the problems that it’s unable to deal with and the EU under the ECB and all the EU policymakers who don’t know what to do either.
We could end up with a positive 2021, and we could be sitting here in a year’s time saying, ‘Oh my God, why are markets so high when we have all these problems?’ Or it could be that, at some point, reality bites in between now and then.”
I explained that this isn’t a call to bet against risk assets and assume that there’ll be an imminent collapse:-
“Some assets are priced to perfection and it’s not clear to us at what point markets are going to realize it’s not a perfect world out there.”
I also explained that it’s also not a call to move completely to the side lines either.
Portfolio Protection
The one gift that, Christmas 2020 is giving to all investors is that anti-fragile assets which are now really good value, so if you buy enough of those into your portfolio to balance your risk, then you don’t actually have to guess when things are going to go right, or things are going to go wrong. Somebody who’s got a perfect crystal ball and knows what’s going to happen in 2021 and when, is going to absolutely shoot the lights out. We don’t have one of those crystal balls or know anyone who does.
What we’re saying is we can see the problems. We can see the opportunities.
You can benefit from the opportunities, if you have equity beta, and even more so if you add equity alpha, while you can protect yourself against the downside by taking advantage of the fact that these anti-fragile assets are cheap and offer so much portfolio protection right now. So there’s no need to be on the side-lines.
Finally, no outlook for 2021 would be complete without at least taking into account ‘crypto’:-
“Bitcoin is ultimately worth zero. We think that Tesla is probably not worth a great deal more than that and we’re not sure how much Peloton is worth.
They are all the same space, they’re all artificially manipulated to price levels that are way beyond their inherent value, and that goes for most disruptive tech, most big tech, pretty much anything in the tech space. That doesn’t mean you still can’t have a tiny exposure to the fact that they could get ramped even higher, but be aware that the fundamental value of Bitcoin is zero. It could go to $50,000. It could go to $100,000. We don’t know what point a Bitcoin reaches before it implodes and it goes back to where it should do.
We know where it should go but the path there, like anything else in 2021, is impossible to predict.
So, as long as you’re aware of the fact that these assets are ramped to almost infinity, then you’re buying your lottery ticket and keeping your fingers crossed but don’t put all your money on the lottery.”
To request a copy of the MBMG IA 2021 Outlook – 2020 – They think it’s all over… please contact us at info@mbmg-investment.com
MBMG Investment Advisory is licensed by the Securities and Exchange Commission of Thailand as an Investment Advisor under licence number Dor 06-0055-21.
For more information and to speak with our advisor, please contact us at info@mbmg-investment.com or call on +66 2 665 2534.
About the Author:
Paul Gambles is licensed by the SEC as both a Securities Fundamental Investment Analyst and an Investment Planner.
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1. While every effort has been made to ensure that the information contained herein is correct, MBMG Investment Advisory cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Investment Advisory. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
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