Pandemic's Breaking Records, Lemmings, and Gas in Europe

29 בדצמ׳ 2021

Gas prices in Europe continue to crash. If a week ago quotations exceeded $ 2,000 per thousand cubic meters, then after five consecutive days of decline, quotations dropped to the $ 1100 region. The reasons are an increase in the supply of liquefied gas to Europe from the United States, as well as the expectation of warmer weather. This, of course, is not the end of the energy crisis, but a reason to reduce the upward pressure on oil. In general, our recommendation to sell oil has not lost its relevance, but, on the contrary, has added.

In general, this behavior of gas prices is largely synchronous with the general behavior of financial markets, which are very changeable in their moods and are ready to change their point of view rather quickly and strongly. So risky assets grew yesterday by inertia, but then they somehow deflated. And again, there was no reason to change the mood.

Rather, on the contrary, according to Omicron, the news could be interpreted in favor of risky assets: the CDC reduced the isolation period for the omicron from 10 to 5 days, those who had recovered from the omicron receive immunity from the delta.

However, all this does not negate the rapid growth of diseases: over 1.2 million people fall ill every day around the world, which is almost 2 times (!) Higher than just a couple of weeks ago. Well, there is no need to say that this is a new absolute record for the entire pandemic. The strain is becoming dominant throughout the world. In the US, already under 60% of new cases are omicron. It is hard to recommend buying risky assets after looking at the graph of the number of diseases around the world.

Note that the pandemic has caused a natural boom in retail investors and traders. As a result, the markets were flooded with an army of incompetent participants, due to which the behavior of the prices of financial assets was greatly detached from the fundamentals, and this must be taken into account when making trading decisions. According to brokers TD Ameritrade and Schwab, in 2021 they opened six million new accounts for two. But this is just the tip of the iceberg - Robingood and others like him, cryptocurrency exchanges and brokers - tens of millions of retail investors have become a real new force.

In the meantime, our favorite indicator of the behavior of extreme forms of risky assets - investments by Katie Woods - shows that the year actually turned out to be not so uniquely successful for the US stock market. All of Woods' key investments in 2021 are in the negative, and quite deep (over 10%): Block, Coinbase, Unity Software, Zoom Video.