By: Ross Silver

One of my favorite bands, Red Hot Chili Peppers, has a song named “Road Trippin” that has meaning to me given I grew up near the ocean. In the song, a portion of the lyrics state, “Blue you sit so pretty west of the one. Sparkles light with yellow icing, just a mirror for the sun.” Blue is the Pacific Ocean that lies to the west of Pacific Coast Highway aka Highway 1. The ocean sparkles from sunlight and the yellow icing is kelp laying on the surface of the ocean. I have spent thousands of hours in various surf breaks along the California coast and there is nothing more beautiful in nature than the Pacific Ocean in my opinion. The part that intrigued me about this song is the fact that Anthony Kides, lead singer of Red Hot Chili Peppers, references the ocean as a mirror for the sun. A mirror for the sun can go a lot of different directions when extracting meaning. Not to get cryptic, but I am thinking the ocean is serving as a blocker of the light from the dark. Kides’ only references the ocean surface, “sparkles light with yellow icing…” but fails to mention what is below the surface of the ocean which is darkness. These lyrics made me think about equity markets and the massive mirror being placed on the surface of equities by retail investors and more significantly the Fed so that we may only see the sun and not the darkness. The mirror concerns me.

In the past 3 weeks equity funds have had a whopping $40B of outflows: http://www.lipperusfundflows.com/#create:home:Home:/php/signup_trial.php

Despite the fact equity funds are returning money to investors, equities have moved higher. How can equity markets rise when funds are being pulled out of equities by institutional investors? One answer is retail investors. Retail investors have been buying stocks with two hands. Fascinated with industries that fell most in the coronavirus crash -- airlines, cruise operators, auto sellers -- and egged on by Twitter impresarios and in chat rooms, tiny day traders are betting big on the recovery. Their trading has been at the very least prescient. Lured by zero trading fees, a historic selloff and probably boredom while stuck at home, the group often viewed as “dumb money,” opened record new trading accounts in the first quarter. While Wall Street icons denounced the rally, retail traders kept on buying -- a decision that paid off as the S&P 500 jumped more than 40%. 

The other reason equities have been rallying is the Fed. The worse things get economically, the better it is for markets as the Fed will intervene even more aggressively; and vice versa. The stronger the economy, the tighter financial conditions will get until we get a Q4 2018-type crash. That's really all there is to "fundamental analysis" today. So, for those of you wondering how on earth equities are rallying in the middle of a pandemic, there is your answer.

We are in an equities utopia fueled by rampant Fed purchases and retail investors potentially forcing institutional investors off the sidelines and back into equities which may drive equity prices even higher. As such, the en vogue theme is to buy highly speculative stocks and watch them rip. Caveat emptor. 

Tickers to consider: FRSX, JAGX, POAI, MYOV, ARPO, PPCB, CEI & TZA (if you think the sky is falling)

My two older boys are in sports camp this summer and both are opting to play football which means big things may come once the flag football season starts in September. I am going to be coaching a 1st & 2nd grade team as well a 3rd & 4th grade team this upcoming season and I am excited as are my boys. My daughter loves the movie Leap and as such I have enrolled her in ballet and she has the athleticism and drive to become a special ballerina. I wish I could coach ballet but I know nothing about ballet other than it looks extremely difficult. My youngest son may become a professional race car driver. I purchased an electric fire truck that he drives around my driveway and challenges his older siblings to race via the mini megaphone embedded into the fire truck. 

Thank you for reading!