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How to (try to) understand the market

As soon as the news was out, it was clear that the market was about to make a U turn: Pfizer announced that they had a reliable vaccine in Phase 3. But, how to understand the news?

Many have been asking for months how to invest and how to understand the market. The most repeated sentence is usually “I wish I have the knowledge” but as Mr. Buffet made clear many years ago, the kind of knowledge you need is for sure (if you are reading this) one you already have: to read.

We forget really often that we learn to read, so that we can read to learn. Reading is the most awesome tool you are going to have and use, and for sure one of the cheapest. You probably learnt to read in the early days of your life but maybe you have forgotten how to read a little bit now that everything is a Youtube video or a Netflix film. But I can assure you that the only thing you need is reading. Of course it is important to filter what you read, and that you use what you read to think ahead and beyond the letters.

Being the main idea clear, let's get to the stock market. Remember that the market is something that predicts what the consumer will be doing from now into several months, but the way it reacts is normally not in a linear way but in a butterfly effect. This means that whatever you read (either from history, economy or future technologies) is very likely to be applicable into whatever nonlinear dynamic is present.

This may be a little tricky but let's get into today's numbers in the market as we try to understand them:

Peloton: -20%

Zoom: -17%

Snowflake: -9,5%

Amazon: - 5%

Pfizer: +7,7%

American Airlines:15%

Repsol: 18%

Lufthansa: 20%

Melia: 37%

AMC: 50% 

This 10 stock list may be apparently just a list of very popular stocks that have quite an interesting day today. For sure everyone would think that Pfizer, being the one with the vaccine, should be the top performer. Unfortunately it is not, indeed it is the one in the middle on the list. Why is that? The development of the vaccine will for sure have many extra costs, while the price will be limited by governments due to healthy security and they (Pfizer) have already been outperforming this year.

But what happens if the vaccine is out and we are all once again safe from the virus? That people will go out. People going out means people going to museums, restaurants, coffee shops, cinemas… BAMMM!! AMC is 50% up as they will see how demand will rise once the virus is away from the theaters and people can finally get to see all the movies that haven't been jet presented (like Bond… James Bond new movie, film that i personally can't wait to see). To go to the cinema, restaurants, other cities people will have to get in the car… BAMMM!! Repsol, one of the biggest oil companies in europe, 18% up as the demand will increase in the future once we start driving again or once we start travelling again in planes… BAMMM!! Lufthansa (20% up) and American Airlines (15%) will also have a demand increase as people jump into the planes. And once people arrive at their destination? They will go into hotels… BAMMM!! Melia (35% up) will for sure see how rooms are once again booked as people go on holidays or conferences. 

Conferences… meetings… something we for sure hate doing in videoconferences even if we try to lie to ourselves… We are eagering to be in the next Ted Talk, to be in the team meeting with some pastry and to shake hands with other people as we expand our network… And this explains why Zoom is 17% down. 

As we head to the streets we will go to buy once again to our supermarkets, groceries and shops as we did some months ago… BAMMM!! Amazon is also down 5% as demand will decrease at least for sometime. This doesn't mean that we are not going to buy on Amazon anymore, but that we are likely to be spending more time out once we can once again be out and therefore away from our Amazon account. 

As companies return to their offices the Cloud base system will not be as vital as it was now, meaning a decrease in services as the ones provided by Snowflake. This, again, doesn't mean that we are not going to use cloud services anymore… this means that the demand will very likely decrease for a time (but it is for sure one very interesting company for the long future… consider buying).

And if we hated something, if we really hated something from being home, that was not being able to exercise in our gyms, with trainers and colleagues… so we opted to use Peloton (and others) that will decrease the demand as the services provided will no longer suit every lifestyle as when we were all in quarantine at home.

As I said, none of them means that companies are going to always go up or to go bankrupt. It is just an example of how by reading and understanding the information we can understand the market in a very easy way. The infinite amount of nonlinear dynamics make it a very complicated system, but nevertheless the more you read and understand, the more you will understand the dynamics.

All this information, all this thinking, come from only one news: Pfizer announced that they had a reliable vaccine in Phase 3.


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