Serenity Alternative Investment Fund - January 2021 Newsletter

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Has the market gone mad? Last week a mob of faceless internet warriors pushed an obscure video game retailer into the living room of mainstream America. Along the way they took down a variety of multi-billion-dollar hedge funds and seemed to turn the edifice of Wall Street firmly on its head. Trading was frenzied, emotions were high, and fortunes were made and lost.

Madness is what the market does best. It amplifies our emotions, excites our lizard brains, and triggers fight or flight decisions that are often sub-optimal. Madness can be painful, but it can also lead to opportunity. Keeping a cool head amidst market chaos is how some of the best in the business make fortunes for their clients.

The market will always entertain pockets of madness, but over the long term it conforms to the shape of the economy and the direction of economic data. This is why, at Serenity, we always focus on the data. We can trade the market’s irrationality by identifying situations in which investors are falling under the sway of false narratives as opposed to calm, rational analysis.

In the REIT market this means taking an honest look at heavily shorted names that have suddenly ripped higher. Has the value of bankrupt Mall REITs really doubled or tripled over the past two weeks?

It also means taking an honest appraisal of the coronavirus pandemic. With a never-ending cacophony of negative news headlines, it’s easy to be pessimistic about COVID-19. The data, however, tell a different story; one of rapidly declining cases, accelerating vaccinations, and a more rapid timetable for herd immunity than many acknowledge in the media.

So sit back, have a drink, and try not to get worked up over events that are out of your control. Serenity clients have been able to rest easy as our process removes as much emotion as possible, and has even profited from some of the recent short covering mania.

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