The final SPAC in my portfolio that was awaiting a deal found one this past week. RedBall Acquisition (RBACU) has agreed to take SeatGeek public. Now it’s not the sports team that was previously bandied about, but the more I mull it over it’s kinda growing on me. Perhaps the fact I’m underwater on this one colors my opinion, but it’s a pure reopening trade, their exclusive deal partners are A-list and while they are losing money, at the moment their margins are stellar. So I’ll hold this one for awhile unless I can exit profitability.
While we were at it, we concluded the final leg of the Required Minimum Distribution (RMD) from the IRAs for the current tax year. This round, Starbucks (SBUX) shares were moved into the taxable account and a chunk of cash hit my wife’s checking account. The cost basis on these shares (which I’ll complain about at tax time and has now reset to $111.00) from $3.226.
With the housekeeping items out of the way, my attention has to revert back to earnings season which by most accounts is starting off generally strong. Let’s ignore the fact that most of the headlines report analyst estimates versus actuals. Personal due diligence is necessary to derive the relative performance numbers.
The more interesting item are the indexes – we’ll use the DOW as an example. Last earnings season had the DOW hitting then record closes. Today we’re just shy of hitting new records which brings a question to the table, namely: How is this quarter different than the last? The starting point for the answer begins with my Buying The Dips post. The Second Quarter issues identified were: the Delta variant, China and distorted comps. Fast forward three months and these issues remain, albeit on the back burner. The news highlights the case reduction in the southern states while barely acknowledging the uptick in the northern border states; China’s a case of out of sight, out of mind – but Evergrande’s dollar denominated bond payment, currently in a 30-day grace period comes due on the 23rd; and digging under the hood on the banks reflects stagnant loan demand and earnings powered significantly by reserve releases.
In a booming economy, any of these are manageable, but there are questions as to the true strength of the economy. With the taper looming, inflation rising, demand for workers outpacing supply and supply chain imbalances distorting any semblance of normalcy, I fear the earnings hoopla will be short-lived. Which is not to say I’m exiting stage left, just a continuation of my selective buy and sells and keeping some cash on the side for the inevitable opportunities.
Basically food for thought – at least my current line of thinking. Hope your week was well and the weekend better!
Seeking Returns 