The Warrant Report – Is Speculation Dead? – January 16, 2022

By Dudley Pierce Baker
Founder – Editor
Common Stock Warrants

Investors in many sectors, including mining and SPACs, are asking the question, ‘what the heck is going on’? We are caught up in a ‘risk-on, risk-off’ environment and everyone is hanging on every word out of the Federal Reserve with respect to interest rates. Inflation talks are now a reality and we should know soon ( 3 to 6 months maximum) as to the continuing direction of rates and the effects of inflation on our investments.

I have included several articles below which will bring more clarity and direction to the markets.

Also, we continue to work on a daily basis to speed up and improve all of the features and filters on our website. Please be patient as great things are coming.

I have mentioned to Jeff on numerous occasions that I am seeing the SPAC warrants performing similarly to the mining shares and the warrants trading thereon. The mining shares are very sensitive to this ‘risk-on, risk-off’ environment and have been struggling here to find a bottom in many of the companies that we follow. Of course, the mining shares/warrants are tied closely to the price of the underlying commodity, i.e. gold, silver, nickel, or copper. While gold continues to hold around the $1800 level and silver around $23, the appetite to buy the shares or warrants is not there for the average investor. I continue to be very bullish on the precious metals sector and believe that 2022 could be our breakout year.

The SPAC warrants are currently reaching undervalued levels that we have not seen since we began our aggressive coverage of this sector in September of 2020. From a charting perspective, the lows of many of the then trading warrants on SPACs was in March of 2020 at the tip of the COVID crisis. As new variants come along, the Delta and now Omicron we see continuing weakness. Jeff and I believe we have reached ridiculous levels of undervaluation in the SPAC warrants. While it is always risky to call the timing for a bottom in any market, I believe we are there or very close.

I recall conversations with Jeff back in October or November of 2020 about so many of the warrants on the SPACs trading below $1.00. In January and early February of 2021, there were virtually no warrants trading for less than $1.00. In effect, the warrants had gone from a greatly undervalued level to an overbought level in a few months’ time. Looking back February of 2021 represented the height of the SPAC warrant market as it reached unsustainable heights. Now the pendulum has swung to the undervalued level and we now find many of the SPAC warrants trading well under $1.00 and many at $0.50 or less. As a general statement, I believe the SPAC warrants are currently undervalued at least 50% to 100%. This too will change and one day and we will be again talking about greatly overbought levels and most warrants trading for $1, $2, $3, or more. It will happen so more patience is necessary.

Jeff and I are big believers in dollar-cost averaging and this has paid off for us as we have continued to buy as the warrants drop in value and will be and have been well served when a Definitive Agreement (DA) is announced by any of the SPACs. This is not an easy decision for anyone to make as no one can correctly time the bottom, but as a contrarian investor, there are times when we must step up to the plate and make some serious decisions. This is one of those times.

For the SPACs, we are experiencing very few announcements of mergers (Definitive Agreements – DAs) over the last several weeks. True, this has been the Holiday Season, but we are left to speculate as to why over 500 SPACs are seemingly on hold or delaying any announcements. As I recall, we have only had one DA in the last 3 weeks. Perhaps the management of the given SPACs also see the current weakness in the sector and are waiting for a more opportune time (market environment) to make any announcements. Another thought is that there is a backlog at the SEC with the filings and the approval process and the companies are caught up in the middle of this delay process. Is anyone actually working in the offices of the SEC? How is Covid affecting the filings and approval process? Are the SEC attorneys working at home during this COVID crisis? As a retired IRS agent auditing the largest of the large corporations for many years, I know we could not have taken any of the companies documents home and all work was conducted at the company’s offices. I do not know the current situation at either the IRS or the SEC, but it seems reasonable that COVID is creating delays at all levels.

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Our SEARCH FEATURE and FILTERS continue to improve and provide investors, professional and everyday investors, powerful tools allowing subscribers to search from all of the data points in our system, which is everything you could ever imagine. If you find something not there, just let me know and we will do our best to add it to our system.

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US Federal Reserve – Playing With Fire Part II
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Thanks for being with us on this amazing journey

Dudley Pierce Baker
Founder – Editor

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