• K-Ratio


WFH (Work From Home for the rare, lucky few unaware) is not just an acronym for the term commonly used to describe what much of America’s working populace endured in 2020 and looks to shed in 2021; WFH is a lifestyle these days. A mantra of the pajama-suited spreadsheet jockeys with one ear listening to Bill in Accounting and both eyes on Queen’s Gambit in the TV just above the Zoom call they’re pretending to attend. Further still, the number of remote workers and workplaces is predicted to grow, not shrink, in the months and years to come. This experiment in remote workplaces has longer term human behavior implications than municipal lockdowns bring forth. So much so, that even Wall Street has entered this space in a way that only Wall Street can; the first WFH-themed ETF was listed last June. Unsurprisingly, its price has risen 45%.

That last bit is the troubling part. Not so much the ETF, that’s an entirely different can of worms for another time, but the performance of what that ETF tracks, the WFH tech companies that make it possible. Those companies have seen their share price and market capitalization soar since Covid-19 first hit. That is understandable. Slack, Zoom, DocuSign, and Dropbox all make remote workspaces easier and companies like Peloton, Roku, and Netflix make quarantined life better. It gets confusing, however, when we look at the performance of certain commodity markets like diesel and gasoline. Both crude products have exploded in price, up 55% since the announcement of Covid vaccines back in November. Since then, a sustained and persistent rally centered around a return to normalcy. In fact, prices for both commodities are now roughly equal to their prices before Covid-induced lockdowns hit the US. The issue is that in between those WFH stocks and the energy commodities lays a contradictory inconsistency.

We can debate the future of the average American’s daily life all we want but a collective, objective viewpoint exists, and it’s expressed financially through capital markets. Putting aside the argument that all assets are overvalued by way of hyperinflation right now, WFH stocks and gasoline/diesel cannot both be correct, one must be wrong. We’re either going back to life before Covid or we’re not. Are we working from home or returning to work? In-person business meetings and conferences or Zoom calls? After work, are we driving to the gym before dinner and a movie or hopping on our stationary bike before some Netflix and chill? Was that dinner from Grubhub or cooked with ingredients delivered by Instacart? The answers to all of those questions contain serious implications to the levels of freight and fuel demand and bring a consequential influence on prices.

Market anomalies pop-up from time to time, especially in periods of excess liquidity, but all of them revert back regularity at some point. Perhaps, rather than pretending we can predict when this freight boom will end, maybe we let the market tell us instead.

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