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Market vertigo galore

Last week we wrote how the ‘sell in May and go away’ maxim has historically not shown much merit for investors. At the end of last week, some of our readers may have looked back at those sentences ruefully. Markets have certainly lost a bit of that exuberance displayed in recent weeks. However, the risen inflation expectations that have been blamed for the sell-off, are now merely – at last – reflecting what the US Federal Reserve (Fed) had told markets to expect since the beginning of the year. Moreover, the global economy continues to motor towards a post pandemic recovery boom. Therefore, we view this sell-off as more to do with market participants experiencing a wave of vertigo, rather than a fundamental change of direction.

 

Used car market revs up as car buyers wait for ‘green’ light

A year ago, car rental company Hertz was on its knees, forced into bankruptcy amid longstanding problems and the sudden shock from the COVID-19-induced demand collapse, leaving it with few options and fewer funds. At the time, a ragtag bunch of retail investors bid up the stock in the suspicion markets had sunk it too far, and Hertz could come through its Chapter 11 bankruptcy filing and proceedings without too much pain. Oh, how everyone laughed. It was seen as another case of irrational exuberance from the newlyminted retail investing public – albeit before Reddit and GameStop made irrational exuberance ‘cool’.

Now, Hertz has been bought out of bankruptcy by a consortium of capital managers – in a deal that gives the reorganised company an enterprise value of $7.43 billion. In fact, it turned out to be quite a dramatic battle for control of the company, with multiple groups vying for ownership in a contest that seemed unimaginable just a few months ago. According to the new owners, shareholders will see a recovery of
about $8 a share. A decent bit of business, as it turns out.

 

Read the full commentary here

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