There cannot be Ups in a roller-coaster ride unless there are Downs.

Siddharth Katragadda

Riding a roller coaster is one of the wonderful experiences people have, especially when they are around the junior high school or high school age. Roller coasters are typically located in amusement parks. As you get older, roller coasters don’t seem to warrant the same excitement.The lasting and pertinent observation about roller coasters is that in a very short period of time, you will experience quick changes in your environment, which might include long lulls, a violent drop down, and even immersion in water. As we turn towards the investment environment, last week was very much like riding a roller coaster. Why might that be the case?

If you were not paying attention, US equity markets saw multiple days where the market swung between going up or down nearly 1,000 points. Of particular interest is the continued fall in the interest rate on 10 year Treasury bonds, which now sit at a paltry .7060%. The fear of the continued impact of the coronavirus on the US economy has ramped up. Investors are now paying attention to daily numbers of those affected in each state. It makes information which ordinarily would be considered normal turn into another data point to reinforce selling your assets.

The most obvious parts of the market have taken it on the chin, and in a big way. Airlines, anything travel related, the long-hated energy complex, and banks have all been scorched. Closer to home, the casino industry is also a whipping boy because of its dependence on visitors, especially in Macao and anything centered around Las Vegas. The focus on the strip is the impending merger between Eldorado Resorts and Caesars Entertainment (owner of Caesars Palace and formerly Harrah’s Entertainment). The volatility in the markets is causing concern that the financing for the merger may not close on time. I suspect it eventually will get completed. Also of note is a few weeks ago, long time CEO of MGM, Jim Murren, resigned suddenly after more than 10 years of holding that perch. He was the architect of the City Center, a very expensive project which nearly bankrupted the company. It never generated returns close to what were projected. It cost the company many years trying to dig out of the hole of building those massive structures. Clearly, the ride was not pleasant for MGM shareholders but I am sure they wish Mr. Murren well in his future endeavors.

Elsewhere in the market, retail was the focus as Target and Ross Stores beat expectations while Nordstrom slightly missed. Wil Scott and Mobile Mini merged, while Splunk went splat as Zoom zoomed, literally. Zoom is benefiting from the idea that the world will stay at home and teleconference instead of traveling for corporate meetings. In other earnings news, Dollar Tree, Kohl's, and Autozone showed retail has solid areas and JD.com also showed there is strength in China, outside of the Hubei province. On the macro front, Chairman Powell and the Fed cut interest rates 50 basis points on Tuesday, not out of the blue, but certainly a pretty big move so quickly. It did not help sentiment as the market subsequently sold off quite hard. Yesterday, a strong jobs report in February was also ignored as the US economy added 275,000 jobs (175,000 expected). As part of the uncertainty, the political spectrum was quite unsettled as we started the week. It also provided quite a ride.

You see, going into Super Tuesday, the Social Democrat Bernie Sanders was thought to be in a strong position to clean up and become the frontrunner for the Democratic nomination. Voters didn’t quite see it that way as his victory in South Carolina, followed by endorsements by Mayor Pete, Senator Klobuchar, and Texas Congressman Beto O’Rourke, changed the dynamic. Joltin' Joe swept all the important southern states (Virginia, Alabama, Tennessee, Arkansas) along with surprises in Minnesota and Massachusetts, and the second biggest prize, Texas. Sanders was victorious in California and Colorado. Elizabeth Warren fizzled out as her highest showing was third place, including her home state of Massachusetts. Some think she will be a kingmaker by endorsing either Sanders or Biden as a way to attract her base of liberal followers. Naturally, both Biden and Sanders want her endorsement.

The map looks good for Joltin' Joe as Michigan is the big prize this week, and next week Florida and Illinois will cast their ballots. The mayor of Chicago has endorsed Biden, as has the current and ex governor of Michigan. Finally, if ever there was a guy who rode the roller coaster over the last month it was Mike Bloomberg. He was riding high heading into the Las Vegas debate, where Mrs. Warren and Bernie decided he would be the focus of their fury. His debate performance fell flat, to say the least. His return on capital was also less than stellar. He spent over 600 million dollars and wound up winning one area- the important geographic mass of American Samoa, which was worth a whopping 6 electoral votes. Well done, Mike, well done. The lesson to be learned is one Mr. Bloomberg didn’t understand because he spent so much money getting elected as New York Mayor. Just because a candidate spends a bunch of dough does not mean voters want them. Anyway, it was quite a ride over the last few days. Buckle up as we may have more thrills and spills ahead.