From Epsilon Theory
If you are early with your investment thesis and that thesis evolves into common knowledge, I think you’ll do very well. Wall Street is trying to identify which inflation narrative will be an investment thesis that makes lots of people nod their heads.
This is what it looks like when common knowledge – what everyone knows that everyone knows – is being formed.
Recognizing THAT – and maybe even trying to get ahead of THAT – is how you play the game of markets successfully.
From Money Stuff
“When the ducks are quacking, feed them.” Many IPOs are being delayed because owners think that if they IPO and their stock price doubles on the first day, they should have had a higher offering price. However, instead of actually repricing the offer, they are simply delaying it. And that’s a strange move from firms like Affirm and Roblox, who did just that.
Some tidbits:
The rules of IPOs are not set in stone, and many people just follow conventions without thinking about what they’re signing up for. In 2020, many IPOs did think and did modify their contracts, like getting rid of a lock-up period or a greenshoe, setting the stage for changes to come.
The IPO pops of 2020 are not because the company is suddenly more valuable. They happen because such a small amount of total shares are offerred into the stock market, sometimes close to 5%, that supply cannot meet demand - doesn’t take many speculators to pile in and propell the price vertically.
How does RobinHood work?
This deserves a post of its own, so we’ll come back to it.
Seems like low interest rates not only help your mortgage but also your portfolio. How? Companies raise money by issuing bonds. A bond is like a loan. If I buy Apple bonds, Apple promises to pay me interest on the bond and, when it reaches maturity, they pay back the money I gave them in the first place. So, if interest rates are low, companies don’t have to pay much interest on their bonds, which makes the future valuation expectations higher. Thanks, Bill Gross, for the note.
The number of thematic funds rise in bull markets. Beware because trends fade and they tend to underperform right after. Lucrative for the fund manager because there’s hype and they ride the train, but not lucrative for investors. Morningstar.
Index tracking funds are dominating the market due to their sheer size. Similarly, many index-tracked equities move intandem because they’re tied to these indices. Nothing new, nothing new. Except for this good bit which I never had in mind: The average fund manager typically holds about 4-5 per cent of assets in cash, as a buffer against investor outflows or to take advantage of opportunities that may arise. From Robin Wigglesworth at FT.