Larry David Sighting …A Zoom Update and ‘The Rally About Nothing’

I woke up early and drove up to Los Angeles by 9 am for a round of golf at Riviera.

Riviera is one of my favorite golf walks and although it is a hard course it is really playable.

On the first hole, a par 5, I made a birdie and when coming off the green, we noticed Larry David up ahead in a golf cart. He is a member there and plays all the time. He was wearing the full face mask and if it were a public course I would have had to go say hello and pitch him my show about ‘nothing’ but I will have to wait for a formal introduction. I posted the picture to Twitter and got some funny responses.

Speaking about a show about nothing, this stock market seems to be help up by ‘nothing’.

My partner at Compound Charlie had a great post titled ‘Are Tech Stocks Immune From Recession?‘. The gist:

The 2000-02 and 2008 examples seem to suggest otherwise, but a stay-at-home recession caused by a pandemic appears to be a different animal.

That is, at least in terms of storytelling and stock prices.

If we look at the actual GAAP earnings for the S&P 500 Tech sector, we find a decline of 10% in the first quarter versus the prior year (data via S&P Dow Jones). This was considerably better than the S&P 500 as a whole (-66% YoY), but still down nonetheless.

Second quarter earnings are expected to be lower once again, calling into question the notion of total immunity.

But the story remains in tact (“this recession is bullish for tech”), and the market is nothing more than a real-time reflection of the belief investors have in a story.

Tech stocks today are pricing in a fairy-tale outcome: a v-shaped recovery with no impact whatsoever from the deepest economic contraction and highest unemployment the world has seen the Depression.

Will this fairy tale come true, or will there be a plot twist at the end?

Speaking of ‘fairy tale’ outcomes, in April I added Zoom to my 8-80 list, which I shared here on the blog and bought stock for everyone in the family below $120.

The stock has already more than doubled to north of $250. I sold a little today once again. This stock has been a ‘fairly tale’ of gains and I am in Charlie’s camp worried about a plot twist so am happy to realize some ‘fairy tale’ speedy profits.