Let’s Get Real

In a “cash is trash” world, there is an imminent need for investment channels in real assets. We need to “get real.” With or without possible inflation, the stock market remains a central source for such real assets, and realistic thinking forces us to also take into account consumer behaviour in a post-Covid world. So, where does the wind blow?

Investing short term with a long-term view is like flying a combat helicopter; you fly low, with limited visibility, and the chain of events moves amazingly fast underneath. Therefore, you must look ahead as far as you can. While you’re at it, there are various obstacles along the way, such as high voltage poles and cables, which pose an impending threat.
After a first career as a combat helicopter pilot in the Israeli air force, and a second one in the stock market – I cannot but see the similarity between the two.

Every time public officials comment on the economy, or any sudden yield change in the 10-year notes (which became an indicator for inflation expectations), I cannot but recall flying my helicopter low, while keeping away from those high voltage poles and cables.

Often, it seems as if the money supply chart (M2) looks like a biotech company stock, moments after announcing a new drug approval. The only difference betwen the two is that in the case of the M2 chart, ample cash is here to stay.
Therefore, no wonder “cash is trash” became a problem for many, including those who only have $1,400 in their savings account, which they received from President Biden, as part of the US monetary policy.

So let’s get real

One way to replace paper money with real assets is investing in stocks. The stock market’s constant incline reflects not only the 10 million new broker accounts opened just last year, but primarily the devaluation in currencies. Stocks are up big in nominal terms; however, I argue that in real terms the price increase is modest.

Betting on life

Cruise companies were hit especially hard by COVID-19. Poetic justice is now in the making as the CDC approved the renewal of cruises. For over a year, cruise companies were bleeding, as ships needed constant maintenance. These companies raised money through the stock market periodically, in order to satisfy that need. Once they start sailing, those ships will no longer be considered a liability, but a real cash machine.

Hotels and restaurants, like many other services, had to maintain their assets with little cashflow, while online services thrived. People spent ample amounts on home improvement, and many moved from the city back to the suburbs. Now, as restrictions will be lifted, it is likely to assume that there will be a shift from goods to services. Many (including myself) feel a need to compensate for lost time, which may cause a “boom” in travel, hospitality, dining, entertainment, leisure and similar industries.

It’s a “post war” type sentiment, where optimism and a sense of freedom replace the fear of an invisible virus.
While many are betting on Biden’s plan to stimulate the economy, I am betting on life.

Michael Jakoby
Michael (Miki) Jakoby is the Managing Partner of Defender Funds, a hedge fund investing in U.S markets.
Dedicated to Tamar Sheffi, a first class brand and graphic designer, as well as a part of the journey from the very start.