Unless it is Fed-related or possibly tax-related, the markets don't care much about policy or action in politics. It provides us with themes that play out over longer periods but reactions like we saw yesterday tend to be temporary. Granted, yesterday's action was so temporary you could measure it with a stopwatch. I mentioned the big one day hit to start the year was exactly what the bulls needed for another leg. While I didn't factor in the "coup" attempt from yesterday, it turned out to be what was needed. Honestly, I'm not exactly sure what to term yesterday. Coup? Treason? Sedition? All three? In my view, it fits the mold of something you know is wrong when you see it. But again, the market doesn't care.
The market is sticking with themes. Same ones. Nothing news.
In that theme department, Social Capital Hedosophia V (IPOE) is rumored to be on the verge of a deal with SoFi (Social Finance). This has lit a fire under the SPAC. It continues the huge run of wins for the Social Capital SPACs. If consummated, that will put IPOA through (IPOC) and IPOE with partners, leaving (IPOD) , (IPOF) searching for its partner. Traders are already anticipating the move there with shares now pushing $13. That also means we'll see the next set of the IPO-ticker SPACs IPOG, IPOH, and IPOI coming down the pipe, no pun intended.
Again, it's a theme that has worked. Until we see one of these Social Capital SPACs fail, buying the units, stock, or warrants as early as possible has been a hugely rewarding strategy. My preferred approach remains buying the units. Then, when they are eligible to split, I do so, which gives me more flexibility in scaling out plus I can more easily layer option strategies if the opportunity presents itself.
While traders buying shares in the $13 to $14 range pre-merger have been ultimately rewarded, they have had to fight through dips and drawdowns. I prefer buying sub $11 for the vast majority of pre-merger SPACs, but I've relented on Chamath's Social Capital batches to pay upwards of $12 pre-merger. I recognize at some point a merger won't be well received or will take an extended period of time, thus impacting my return on the position. When that time will be, I have no idea, so until the trend ends, I will continue to play it.
These themes aren't going to go away quietly nor will they abandon us overnight. Stay with it.
