Last Friday's market action was about what I'd expect in the more typical panic-driven mini-selloff; smaller names suffered the brunt of the damage. While large-caps, as measured by the S&P 500, were down nearly 2.3%, their smaller cousins were hit harder as the Russell 2000 and Russell Microcap Indexes fell 3.41% and 3.46%, respectively.
The Russell 2000 Value Index suffered even greater damage, dropping 3.92%. You typically expect the smaller, more speculative names to get hit harder in a selloff, but in the Twilight Zone that is 2021, that has not always been the case. During the down days of 2021, I've seen several occasions where smaller names have held up pretty well relative to the big guys. The selloffs that are most frightening and most real (at least in my view) are what we saw on Friday as investors ditch smaller names first. We don't know if this is the beginning of a market drawdown or just typical Black Friday market action put on steroids by fear of the latest COVID variant, but buckle up for what could be a wild end to 2021.
Travel stocks were among last Friday's biggest sufferers, in particular cruise stocks. Royal Caribbean Cruises (RCL) (down 13.2%), Norwegian Cruise Line Holdings (NCLH) (down 11.4%) and Carnival Corp. (CCL) (down 11%) suffered similar fates. Carnival, which I believe is still overvalued due big changes to its capital structure, including massive debt and equity issuance during the pandemic in order to survive, was up a bit in early trading here on Monday morning. I still don't see how you can make the long case for the stock at these levels.
Meanwhile, as inflation becomes the buzzword for 2021, silver's price action has been a bit surprising and disappointing. Year to date, the "poor man's gold" is actually down 11%, while Sprott Physical Silver Trust (PSLV) is down 13.5%. Yet, physical silver, as represented by a $100 bag of "junk" silver coins, which contain 71.5 ounces of silver, will still set you back about $2,172 -- that is, if you can source it. That's the equivalent of $30.38 an ounce, a 30% premium to the silver spot price. That's a much smaller premium than we saw at the outset of the pandemic, when silver fell to about $12.50 an ounce, an 11-year low, in late March 2020, but it's still considerable. One difference between now and March 2020, when the pandemic was new and there was no vaccine yet, is the onset of inflation.
