Markets show resilience
Abraham George Market Musings
I have written a lot about Amazon in the past. All good things. If you believe in capitalism and the power of the markets watch Amazon. It has more than doubled from its prices in 2019 but it is still a buy. To make buying easy, they have recently gone for a 20 to 1 stock split. This should attract renewed retail investor interest to Amazon. The split is effective as of June 3. So for every share of Amazon you hold now, you will have 20 of them from Jun 3.
A stock split yields no economic benefit directly, as one owns the same percentage of stock that you did before the split. However, in actual practice, companies typically outperform the market after a split. Research shows that stock split gains on average 25% over the following 12 months. For that matter, Amazon was up 2.5% yesterday. Not only Amazon but many major growth stocks that were badly beaten down recently were sharply up too: DocuSign +4%, Zoom +3%, Roku +4% and Doordash +9%.
Though yesterday’s up move in the markets is not really worth mentioning, it has happened under the cover of two major news headwinds. First is the comment from President Biden over the weekend about removing Putin. Though the White House has gone to extra lengths in clarifying Biden’s statements, any discussions from the West for regime change in Russia could escalate situations in a different way and could lead to a messy global war. One would have expected oil to shoot up significantly as the supply/demand situation will get compounded and gold should have risen up more as well.
Instead gold and oil came down significantly. Maybe the markets are pinning hopes on some direct talks between Russia and Ukraine in Istanbul starting today.
Meanwhile, the Biden administration is planning and pushing for some higher taxes for their 2023 budget. It is rumored that it will also include taxing you for unrealized gains. This surely will not go well with American capitalism. It will completely destroy wealth creation at the top and will be met with fierce resistance in the US Congress.
So, why didn’t stocks go down? I think the market is at a point of absorbing a lot of bad news. We can expect a much bigger stimulus from China as the fear of further lockdowns is gaining more momentum in China.
If you received value from this post, and you’d like to send some back, or if you’d like to signal to me to continue spending time on these types of explorations, feel free to buy me coffees (thank you!):
So, there we go. Thanks for reading Breezy Briefings. If you enjoyed this, I'd really appreciate it if you could take a second and tell a friend. Honestly. It makes such a big difference.
Forward this email. Recommend the newsletter. Share on Twitter, WhatsApp, Telegram, LinkedIn, Slack, wherever!
Join Breezy Briefings’ Official Telegram Channel: https://t.me/BreezyBriefings
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund. Currently, he is a co-founder of a new hedge fund where foreign citizens can invest in Indian growth stocks like Tanla operating in hyper-growth markets like CPaaS.