October 2022: Portfolio Performance, Net Worth

Throughout October, I spent much of my free time inputting all of my trades into the application Portfolio Performance.

I wanted to answer the question: am I any good at this? What have I gained by trading individual stocks? I'm not interested in bullshitting myself or anyone who reads this, and so despite the tedious nature of inputting hundreds of transactions and the RSI issues of sitting at a computer that long, I just took the time and did it.

The answer was mixed.

There were many times that I groaned at an ill timed buy or sell. But there were also times when my instincts served me well and saved me from a painful drawdown. It's not a stellar record by any means, but it's not horrible either for someone who barely knows what he's doing.

To summarize: I stumbled along and avoided doing anything disastrous. However, all my efforts added up to underperforming the S&P significantly.

One major takeaway is how fees add up. In my Interactive Brokers account, I've paid over $1,000 just in fees since 2017. Their fees are low, so it's hard to see just how they add up over time. That doesn't include interest costs from using margin either.

It's also clear that maintaining a steady asset allocation somewhere in there is important. The decision to implement the Wiseguy Portfolio was a good one. I'm a mediocre stock picker, and I shouldn't keep all my money in individual names.

The project isn't totally finished; I still want to enter my high yield savings account, since that has been my preferred holding place for cash the past few years. I also need to include the loan I took out, but that's trickier. My goal is an honest accounting, but that's easier said than done.

Here's an image for you though:

Image: Portfolio performance in 2022

Notice how the blue line drops a bit then flat lines with small ticks upwards? That's my IRA gone to cash in February 2022 when the trend following rule was hit and receiving monthly interest payments. This tweet from Cliff Asness sums it up:

Net Worth

As of October 31, our net worth rose in October 4.06% in USD and 3.14% in EUR to $121,828 and €123,220 respectively. Liquid net worth sits at $93,016 and €94,078.

Image: Net worth chart in USD

The stock market did well, and my various portfolios also performed well:

Image: October's portfolio performance chart

You can see that they underperformed the S&P 500 (red line), though my individual stock holdings (yellow line) traded places throughout the month. The Wiseguy Portfolio (green line) fared less well.

The euro strengthened, which lowered the value of USD assets relative to euros and raised the burden of our euro debt relative to dollars. However, my general belief is that I win either way: a strengthening euro is a raise for my income, while a strengthening dollar makes me richer in Europe. It's not a terrible position.

Image: net worth chart in euros

Portfolio Changes

After selling Store Capital at the end of September, I used the money to add to Enbridge, Alphabet, Lowe's and Ally Financial while starting new positions in Pepsico, Exxon Mobile, and Cloudflare.

Purchases

I bought an iPad Air. I love the thing. They've improved so much since my last iPad, and I used Amazon's incremental payments scheme to spread the cost over five months (reflected in the additional euro liabilities burden).

November Outlook

There have been some big portfolio changes in November, sadly. Namely, I sold Ally and spread that around to other companies. That was a long holding, and I hope to re-enter one day, but I would like to lower my tax burden before the end of the year, and selling at a loss can do that.

Otherwise, it's a normal month. Until next time, take care of yourselves and those you love.

July and August 2022 Updates: Travel, Inflation, Rent

In most of July and early August, I was taking advantage of my summer vacation to travel through Europe and the United States. Meanwhile, Europe's bad news kept piling up.

With power prices rising and the rivers drying up and a war and the currency falling in value, it's a worrying moment here. To put it mildly. I've been captivated by the potential for major disruptions to our lives and for the lives of millions of Europeans whose livelihoods rely on industries, which themselves rely on inputs such as natural gas and electricity, both of which have exploded in price.

What does Germany do if its major industries shut down? I don't know.

That said, even while vacationing within Europe, it all felt far away. Shops were open and happy to sell over-priced chocolates or locally made clothing. The wine and cheese in France were still excellent. Paris is still beautiful. The museums remain treasures. People were generally pleasant and happy to see us. My family who visited France loved it and some said they wanted to move there.

To be fair, when I visited the US, all of its problems felt far away too. American food is great. Everyone is nice in a way that feels increasingly foreign and yet increasingly welcome. I think "Maybe I should move back!" after I've touristed in the US, but when I speak to my younger family members about their jobs, the prospect seems less appealing.

All of them are in the rat race. All of them are working their butts off. All of them don't get enough vacation time. I didn't ask about health care, but I know what that's like. All of them are likely earning more than I do, but the price for that is enormous uncertainty and very little freedom with their time. Whenever I spoke about my job, I couldn't help but feel like I was bragging, even though I'm somewhat unhappy with my career and am considering other prospects.

But as soon as the words leave my lips, "Six weeks summer vacation.... yes, it's paid," I know I have something valuable that my working-age American family doesn't have. It's a tricky social minefield, and it's an inevitable topic of conversation because I just have so much free time in the summer. Meanwhile, my American loved ones balance seeing me with their work schedules.

We'll see though. If Germany can't manage its current troubles, it's possible that the system that supports me and my colleagues falls apart. That's unlikely, but it can't be ruled out.

Net Worth: Inflation and Stocks

Our net worth increased 7.46% in July ($123,947) and fell 2.01% in August ($121,453) in USD. In euros, it rose 9.45% in July (€121,160) and rose .44% in August (€121,697). Liquid net worth at the end of August stood at $89,890 and €90,070.

Image: Chart of our USD net worth over time. Notice the value of euro debt decreasing quickly.

The falling euro is scary. On the one hand, my euro wealth continues to rise because of my overwhelming reliance on dollar assets for my savings. On the other, I have received a large pay cut relative to the US, which I felt acutely whenever I paid for a restaurant bill in the US. Inflation in the US plus a falling euro equals pain for euro jobbers like me.

The upsides are that if there's an emergency over here, my USD cash has become more valuable in euros. Likewise, the value of my European debt has decreased significantly in dollar terms.

Stock Market

The stock market since June has been volatile. The S&P 500 rose in price in July to touch the 200 day moving average and has since fallen. My assumption is that it's in a downtrend, and so my IRA remains in a money market account. Ironically, my lack of action since February in the IRA has been the best trade of my life. The interest I earn in it has gone up over time even as the overall market continues trending downwards.

So far, despite the new downward price action, I don't feel any urge to make major portfolio changes.

My Evolving Rent Thoughts

I have to admit: I've been triggered by the rent increase we got in June. Until then, I'd never had a landlord increase their rent on me. And for him to do it then, just as all our economic realities were getting more precarious, felt especially grating.

I admit that this is irrational. He's also an investor, and investors want rising cash flows from their investments. I get it. But I don't like being a landlord's cash flow¹, and so we've been looking at buying properties again. I still hate the upfront cost of buying something here, but man, I hate having my rent raised. So I'll keep looking.

For a few weeks there, I felt like I was in a rush to buy something. But that has subsided. I've calmed down. I'm still worried about a potential rent increase next year too, but I see that our requirements for a property are specific enough that I can't and shouldn't just buy any old thing.

Other Notes: Computer, Refund, €9 ticket

In July, we bought a new computer for my wife. Her's starting crashing, and since she relies on a stable computer for her work, we bought a new MacBook Air for her. We were going to pay for this from occupational cash flow, but amazingly we finally got the second federal stimulus payment in the form of our 2020 tax return refund. Plus interest! That more or less covered the cost, and it came at a perfect time.

That said, we're going to be financially tight for awhile here. She's making a major change in her business, and the short term effects are likely to be reduced cash flow in the short term with increased cash flow later since she'll be in greater control of her time and pricing. She's being bold, and I'm happy for her.

Finally, we will both miss Germany's €9 ticket, which allowed us both to travel throughout Germany for €18 total per month in June, July, and August. It's back to the old complicated expensive system here, and we'll mourn grievously.

That's all I have for this time around. Take care of yourselves and your families. Until next time.

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1. Especially for this landlord. I like our apartment and its location, but his management of this building leaves a lot to be desired, and we're currently fighting with him about our Nebenkosten. ↩︎

February 2022 Update: War, Trend, Hobbies

On February 28, 2022, our net worth stood at $121,069 and €107,904, which represents a -0.09% decline and 0.09% rise in USD and EUR respectively.

Basically, we were flat month over month. However, we were net savers in February, which means that our savings were offset by losses elsewhere. Those losses were in the stock market, where prices bounced around from fear of high valuations, rising interest rates, and war in Ukraine.

Ukraine

I'm not going to expound on the politics of the war beyond my support for the Ukrainians and hope for a swift and just end to the violence. However, since Ukraine is just a long day's drive away from us, the war is felt very keenly here. I have Russian and Ukrainian colleagues, not to mention the many eastern European colleagues who remember Soviet occupation or hegemony. There is panic in the air.

The Ukrainian colleagues are bearing their burdens well, however, their pain is showing. One has family hunkered down in shelters in Kyiv. A Russian colleague made a point of hugging him last week. On the first day of the war, several Russian colleagues called in sick. Who can blame them? Generally, they've been quiet about the war.

A friend's spouse is Russian, and she's very stressed. Her sister is in jail after protesting in Moscow, and they're not sure how they will get the money to get her out, especially now that money transfers are impossible. At the same time, she's losing business from her local Russian customers; their wealth is in rubles, and they both can't transfer it, and the value has crashed.

There is fear of nuclear war. There was one day where, upon reading the news, I became afraid of spiraling escalation and considered dropping everything, grabbing my wife, getting on a plane, and flying someplace remote in the American midwest. Of course, in the case of nuclear war, that probably wouldn't be enough.

My mother is worried about us. I've tried to downplay the risk, but events have proven me wrong.

Trend Following

I've decided to implement a simple trend following strategy in my tax-deferred IRAs. The basic rule is this: if above the 10 month moving average, buy or hold. If below that line, then sell. The "buy" is for a broad based index fund like the Vanguard All World Stock fund.

I got this strategy from Meb Faber, and its major advantage is that it saves an investor from long draw downs. Yes, it will sometimes whip you in and out of positions, but when it saves you from a 2000 or 2008 type crash, it makes up for those mild inefficiencies.

The one challenge is that my account with Vanguard is still based around mutual funds. Their rules prevent me from buying shares within one month of selling them. That means there's a minimum one month wait to rejoin the market, or else I have to choose a different fund.

As of now, I'm not doing this in my taxable account. I may ultimately regret that choice, but I can't decide how I'd logically implement it when some stocks are doing very well (ABBV, BRK.B, ENB), and others are in big drawdowns. I'm not interested in trend following each name individually. So I guess I'll have periods where I just go down with the ship and am forced to watch.

At least I'll have this Charlie Munger clip to keep me company in my bag holding:

Hobbies and the Value of Stuff

I have a few expensive hobbies. Namely, I'm into photography, which is a high cost hobby no matter which way you look at it. Recently, I've decided to switch camera systems due to having a new interest in video, which does demand more cutting edge gear.

This has meant trying to sell my older stuff, which reveals the value - or lack thereof - laden in the object. However, there's always a challenge in doing it with high end stuff, because there might be a lag time, especially if you try to bypass a site like eBay. Perhaps no one in my city needs that specific wide angle lens for that particular camera system.

In any case, I'm sitting on gear that's not valued as part of my net worth, which I'm hoping to transform into cash at some point soon. At the same time, the new gear I bought has most certainly knocked down our net worth. I did manage to sell the camera, but lenses can have a longer lead time before they're purchased.

I will likely have to use eBay in the end with all the risks inherent in that choice.

Forecast

I'm not particularly hopeful right now regarding the economy. Commodity prices are spiking as Russian and Ukrainian exports are closed out of the market. Europe is in a vulnerable spot with their energy supplies. There's risk of not enough food to feed the world.

So far, March has been another difficult month in the stock market, which is where most of my wealth resides. I'm trying to look at it with equanimity, but it's hard. I'm also trying to see market prices declines as an opportunity rather than as a curse to avoid at all costs. Since I'm in a lucky position, I can continue to accumulate cash and/or buy attractively priced shares. Though I'm all spent at this point in the month.

A family emergency has arisen in the US with the health of a family member. It will likely mean a trip to the US by my wife sometime in the near future. This will be a real cost, but there are more important things than money.