2022…Post-Pandemic Hangover

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Alphabet, annual review, balance sheet, crypto, Donegal Investment Group, KR1, KR1 plc, multi-bagger, owner-operators, portfolio allocation, portfolio performance, Record plc, Saga Furs, Tetragon Financial Group, VinaCapital Vietnam Opportunity Fund

Seems like everyone on Twitter (if they didn’t just disappear already) scrambled to post their 2022 returns this year, either to bury a horrific result in the New Year’s rush, or because they’re one of the few who can boast a minor loss (or even a gain!) last year. As always, especially if you’re nursing your own portfolio (& pride) after an excruciating year, you should take all of this with a grain of salt…because, alas, it’s Twitter’s job to surface the outliers & the blowhards, so #FinTwit is definitely NOT a good (or even accurate) benchmark to reference as an investor in good years, let alone bad.

But as always, I’m here with a genuine/auditable portfolio, where all changes (if any) to my disclosed holdings have been tracked here & on Twitter on a real-time basis, for over a decade now. [Seriously, if you’re a new reader, take a peep: There’s countless posts on old & current portfolio holdings, plus my entire investing philosophy & approach…some of which may even be useful & interesting today!] And this year, my main (selfless) purpose is to make you feel better about your own performance. ‘Cos yeah, you probably did much better than me…and if you didn’t, maybe you should question your investing choices!? And I want to remind you: a) it could be worse, there’s plenty of bad ‘investors’ out there who’ve been trapped in a savage bear market for two years now (since Q1-2021), and b) once again that, esp. noting the past year, nobody knows anything…

So let’s jump right in, here’s the damage in benchmark terms – my FY-2022 Benchmark Return is still* a simple average of the four main indices which best represent my portfolio, which produced a benchmark (11.8)% loss:

[*NB: As I flagged this time last year, I adopted the STOXX Euro 600 as my new European index in 2022.]

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2021…Wow, Another Crazy (Good) Year!

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Alphabet, annual review, balance sheet, bubble thesis, crypto, Donegal Investment Group, inflation, KR1, KR1 plc, multi-bagger, owner-operators, portfolio allocation, portfolio performance, Record plc, Saga Furs, Tetragon Financial Group, VinaCapital Vietnam Opportunity Fund

At this point, maybe you’re done with 2021 – right?!

But face it, we gotta look back to figure out how we arrived…in this mess today! And hopefully recall & reinforce any lessons learned. ‘Cos sure, there’s plenty of good & bad luck involved, but outcomes for both nations & investors are ultimately a result of our (cumulative) decisions & actions, often stretching back years. And last year, as the pandemic dragged on, our drinking problem got a wee bit out of control & we enjoyed that punchbowl just a little too long. And now it feels like the inevitable hangover’s finally starting to kick in.

Well, except for those who started early…God love ’em, how many punters have been trapped in a savage bear market for almost a year now?!

But for the rest of us, last year’s market was the pandemic silver lining. As always, the US led the way with a 26.9% gain in the S&P 500. [The Nasdaq still clocked up a magnificent 21.4% gain, despite some sectors being deep in bear market territory]. Europe was nearly as magnificent, with the Bloomberg Euro 500 clocking a 19.7% gain. And Ireland & the UK brought up the rear, but still delivered higher than average returns, with a 14.5% gain for the ISEQ & a 14.3% gain for the FTSE 100. [On both sides of the Atlantic, the FTSE 250 & the Russell 2000 enjoyed similar 14% gains, whereas a risk-off/stonk bear market reduced the AIM All-Share to a mere 5.2% gain]. Notably, despite H2 price reversals & increasing volatility, all major indices – with the exception of the ISEQ – climbed steadily & closed out the year near annual/all-time highs.

My FY-2021 Benchmark Return remains* a simple average of the four main indices which best represent my portfolio…overall, they produced a benchmark 18.8% gain:

H1-2021 Wexboy Portfolio Performance…Yeah, It’s a Biggie!

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Alphabet, annual review, bubble thesis, crypto, financial repression, inflation, KR1, KR1 plc, multi-bagger, pandemic, portfolio performance, Record plc, Saga Furs, VinaCapital Vietnam Opportunity Fund

Time to celebrate – we made it through the #pandemic!

Well, almost…

Vaccine roll-outs continue, some fast some slow, but crossing the actual finish line remains maddeningly elusive here. Unfortunately, as so often proves the case, the loudest & craziest perspectives tend to control the narrative. On one side, we have the #antivaxx nutters & their ever-expanding conspiracy theory complex to debate – you may as well wrestle a pig (you both get dirty & the pig likes it!), so the sooner we abandon them to herd immunity & their Darwinian fate the better. And on the other side, we’ve got the #Delta nutters who apparently don’t believe in vaccines either – like them, they’d prefer we all stay masked up & locked down forever, despite being vaccinated. [Seriously, imagine being told two years ago most people would be walking ’round in masks in 2021…after being vaccinated!?] And since the latter are still imposing their will on all of us – to a greater or lesser degree – arguably, they win the crazy selfish stakes. As Upton Sinclair might have said:

‘It is difficult to get a man to understand vaccine efficacy, when his cushy new working-from-home white-collar career depends on his not understanding it.’

But hey, touch wood, we’re still almost home free! And while it may be hard to believe right now, history’s proven it time & again…we’re gonna move on just as quickly, with little reason to presume this specific pandemic leaves any radical permanent change in its wake. But clearly, as I’ve argued from the start, it has & will continue to accelerate certain existing trends – both positive & negative – including America’s heroic fiscal & monetary stimulus, and its disproportionate impact on the S&P 500. How many investors have forgotten (or never even noticed) its +16.3% gain last year was actually a total outlier – my 2020 index benchmark, for example, was still flat regardless:

2021 has been far more democratic though, with most indices chalking up at least a good year’s worth of gains (albeit led by the S&P, as always!) in H1 – no real surprise, as investors applaud successful vaccine roll-out programmes & the still breaking tsunami of #YOLO re-opening spending. [And maybe even a New Roaring Twenties to come?!] As usual, my H1-2021 Benchmark Return (a +11.7% gain) is a simple average of the four main indices which best represent my portfolio:

Soooo, 2020…What A Crazy Year!?

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Alphabet, annual review, Applegreen, COVID, CPL Resources, crypto, KR1, KR1 plc, owner-operators, portfolio allocation, portfolio performance, Record plc, staking, VinaCapital Vietnam Opportunity Fund

‘It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.’

A Happy (& Safe) New Year to my readers & fellow investors!

This time last year – or even last April – we had little/no idea of the #COVID challenge still ahead, but we’ve made it this far…and doubtless, after surviving 2020, we can surely look forward (America willing) to a far better 2021! If not, perhaps, in terms of superlative returns…but hey, that’s a hedge I think we can all accept.

Let’s try skip the #pandemic itself – I leave that to countless articles (‘The Plague Year‘) & a library of books to come – but obviously its consequences will reverberate here (& for us all). I must say though: I’ve been awed & inspired by the incredible effort & sacrifice humanity’s made to save lives, help those directly & indirectly impacted by COVID & come up with multiple vaccines at such an accelerated pace. But equally saddened – by comparison – to reflect on the fraction of preparation, effort, ingenuity & most of all expense that was perhaps required to prevent the worst ravages of COVID, let alone reduce or even eliminate some of the major health & social issues we endure (or scarcely even notice) today. Above all, great investors will focus on the character of management…it’s time we realize we need to assess the character of countries & their leaders too. And in both cases:

‘Luck is what happens when preparation meets opportunity.’

Or not…

So let’s dive in – as a reminder, here’s a mid-year snapshot of my benchmark:

KR1 plc…The #Crypto #Alpha Bet

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Bitcoin, bleeding edge, blockchain, Cosmos, crypto, DeFi, digital gold, Ethereum, fiat money, Galaxy Digital Holdings, George McDonaugh, KR1, KR1 plc, network effects, Owner-Operator, Peter Thiel, Polkadot, proof of stake, venture capital

My main 2020 investment thesis is the assumption this #pandemic does not herald new & permanent societal change. But it will reinforce & accelerate existing trends, with #cryptocurrency/#blockchain innovation, development & adoption poised to benefit hugely. It’s just three years since my first & last crypto post (& Bitcoin‘s only twelve years old!), but its progress since has been astonishing…

We kicked off with a spectacular crypto-bubble in late-2017, with the launch of Bitcoin futures triggering the devastating early-2018 collapse…which fortunately played out in less than a year. Fidelity, Coinbase & Bakkt launched institutional-grade digital custody platforms & even the OCC confirmed US banks can now offer digital custody services. Crypto exchanges like Binance, BitMex, Coinbase, Huobi & Kraken now boast hundreds of millions/billions of dollars in daily crypto volume. Libra was announced by Facebook. More & more hedge funds are getting involved – Mike Novogratz launched Galaxy Digital, with Paul Tudor Jones & even Stan Druckenmiller buying into Bitcoin as a digital asset/inflation hedge – not to mention, family office/college endowments (are pension funds & sovereign wealth funds next?). Square & PayPal now accept crypto & more payment companies will follow. Proof of stake has emerged as a green alternative to crypto-mining. Grayscale‘s listed crypto funds now boast a $14 billion+ aggregate market cap (alas, most of the US fund industry still awaits SEC crypto approval), while Total Value Locked Up in #DecentralizedFinance is also at a $14B+ all-time high (& doubling every month/two since June!). Stablecoins are also emerging as stable-value/high-volume bridges to the fiat world. We’ve even seen listed companies like MicroStrategy & Square buy Bitcoin as a corporate treasury asset. And Bitcoin’s now only 6% off its all-time high…

The volte-face in attitudes has also been impressive, with the crypto sector recognizing that embracing (& promoting change in) existing financial/regulatory regimes offers a slice of an infinitely larger pie. While regulators are also more open too – though US regulators may remain as schizophrenic & over-reaching as ever – with central banks (like the PBoC, Fed & BoE) now floating (& trialing) digital currency proposals, to co-operate/compete with crypto. As for investors, the Bitcoin survival debate’s dead…it’s been anointed digital gold & nobody could disagree it’s not a contender. While the mantle of blockchain innovation passed to Ethereum (& the imminent Ethereum 2.0), plus the smart-contract projects & infrastructure being built atop it (3,750 DApps & counting, mostly on Ethereum). And #DeFi is shaping up as a killer app for blockchain…to join forces with #fintech & eventually #BigTech to challenge the legacy financial services/payments industry. [Maybe even value investors get this…look at bank valuations!?] Its IPO may be on ice, but Ant Group‘s still a prescient reminder (for the West) of how easily bank-customer relationships & economics can be cannibalized by disruptive technology & business models.

H1-2020 Wexboy Portfolio Performance

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Alphabet, Applegreen, Asia, bubble thesis, coronavirus, COVID, crypto, financial strength, floating world, KR1 plc, owner-operators, portfolio allocation, portfolio performance, property, QEInfinity, Saga Furs

So yeah…quite the bloody year, eh?!

I hope you & yours have kept safe & well during this #COVIDcrisis – even if you’re not exactly sheltering-in-place anymore, I presume you’re still a conscientious mask-wearer (as needed) in public? All else being equal, it’s disappointing the weather (apparently) isn’t a sure-fire virus-killer – remember when we all assumed, at worst, the summer would offer a welcome & effective respite? You know, meeting people, I used to joke investing was simply the ‘job’ I invented to keep me off the mean streets…I never imagined it would literally turn out like this!?

Anyway, let’s survey the carnage…

As usual, my H1-2020 Benchmark Return is a simple average of the four main indices which best represent the majority of my portfolio:

A (13.2)% benchmark loss is grim…though apologies to my puzzled American readers, who are wondering what carnage? [Apparently 100% of US investors now practice 0% global diversification!?]. If you didn’t know better – i.e. had avoided the media’s water-boarding over the last six months – you’d surely think a (4.0)% loss in the S&P was nothing more than some random market oscillation. Nothing to see here…

But in reality, lots of (US) investors now lean into technology stocks…and the Nasdaq didn’t disappoint, delivering a spectacular COVID-driven +12.1% gain! [C’mon, I tweeted ‘Nasdaq 10,000’ enough in the last year!] Of course, there’s a flip-side, with travel & hospitality being the most obvious sectors to experience devastating (& sustained) share price declines. We see a far more realistic ex-technology US performance in the Russell 2000, which recorded a (13.6)% loss in H1.

FY-2019…Hella Surprise Of A Year!?

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absolute valuation, Alphabet, annual review, buy and hold, coronavirus, Cpl Resources plc, Donegal Investment Group, Ebola, GARP investing, growth stocks, isolationism, KR1 plc, populism, portfolio performance, Record plc, relative valuation

It’s still January…so by now, I’m sweating to wrap this up by month-end (at the very latest!), while you’re probably feeling besieged (& bamboozled) by the media’s parade of talking heads who seamlessly re-write their broken #2019 narratives & still pitch their #2020 market prognostications with undaunted confidence. Which is a tad discouraging when I’m busy trying to come up with my own unique version & perspective…albeit, in the wake of a fantastic year (talk about looking a gift horse in the mouth!).

Seriously…name a market/asset class that actually declined!?

But rewind a year & check the gamut of their 2019 predictions, and (once again) you’ll remember/realise they’re full of highly paid shit! So before I even start – let alone, God forbid, pontificate – I’ll share the only piece of market wisdom you really need to know, above all else:

‘Nobody knows anything…’

And that quote’s about the movie business! Granted, for anyone who cares, Hollywood probably seems like the most impressive Rube Goldberg contraption in the world…but frankly, figuring it out is a total cake-walk compared to grappling with & predicting what might actually happen next in the markets & the global economy! But unfortunately, that’s how we all step up & play the game:

Like useless office work expanding to fill all available time…useless market forecasts expand to fill all available airtime & news holes!

Probably my greatest investing achievement in the last year was switching off the financial media – and yeah, I stopped paying attention to brokers years ago – is it any wonder I reported such negligible portfolio activity? [It’s a real travesty seeing #buyandhold investors re-classified as chumps over the years (& decades)]. And in reality, markets are primarily focused on trying to discount a 12-18 month time-horizon, which means a diet of narrative manufactured to simply explain yesterday & today’s market/stock zig-zags is just irrelevant & misleading anyway. And so, I recommend you do the same: Go on, just switch off that guy on the box, you know the one…he just happened to attend some ‘school in Boston’, and is now an instant expert on epidemiology and up & to the right #coronavirus charts! Again:

‘Nobody knows anything…’

H1-2019 Wexboy Portfolio Performance

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#GenerationWar, #WallofWorry, Alphabet, benchmarking, bubbles, crypto, Donegal Investment Group, floating world, KR1 plc, negative yields, portfolio performance, quantitative easing, Saga Furs

And once more…into battle!

Before the month is out, it’s time I look back & share a H1 portfolio update. Of course, in the wake of last year’s Q4 carnage, it wasn’t all that surprising to see markets chalking up a near-perfect YTD performance across the board. Equally unsurprising was the US market’s continued leadership…which seems like an inevitability these days, to the chagrin of long-suffering European & value investors. [Um, aren’t they synonymous?!] So here’s the scoreboard – as usual, my H1-2019 Benchmark Return is a simple average of the four main indices which represent the majority of my portfolio:

On average, a 13.4% benchmark gain…led by the S&P with a 17.3% gain (bested by the Nasdaq, which boasted a 20.7% gain). More surprising was the robust performance of the FTSE 100…despite a tsunami of Brexit nonsense, it still managed to deliver a 10.4% gain. [Not an index-related fluke – the more domestic FTSE 250 & the AIM All-Share (despite a glut of profit warnings) clocked up (on average) similar gains of 11.2% & 7.1%, respectively]. As for the ISEQ & Bloomberg Euro 500, they did themselves proud too, recording respective gains of 12.3% & 13.6%.

Overall, this is a reversal of the 13.5% benchmark loss I reported last year. Which, noting the S&P’s consistent out-performance, is an unwelcome reminder European markets are still actually lower/no better off than end-2017 levels! And really, I’m just cherry-picking here – my European benchmarks have pretty much gone nowhere for the last four years. And again, that’s another flattering perspective…believe it or not, Euro indices have mostly traded sideways for close to two decades now! [Read ’em & weep: FTSE 100, ISEQ, STOXX Europe 600]*. Sure, you still earned a dividend yield…but this savages the comforting notion that equities will always make you decent money/are the superior asset class in the medium & long-term. Though maybe, just maybe, there’s a silver lining to that bag you’re holding:

FY-2018: What The Market Gods Giveth, They Also Taketh Away…

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absolute return, annual review, Applegreen, benchmarking, blockchain, bubbles, cryptocurrencies, Donegal Investment Group, KR1 plc, portfolio performance, Rasmala, relative return, shareholder activism, Trump, Zamano

Back in much happier days (last July!), faced with indices that were (on average) broadly flat, I sagely accepted that:

‘Looking back, the first half this year seems kind of inevitable now…’

Of course, this now haunts me as absurd understatement. And an unfortunate reminder the hardest time to sell is…inevitably, when you should sell! But after a crackerjack 2017, I did see 2018 as more of a market time-out, than anything else – as reflected here, consciously or not, in the lack of blog posts & commentary. My bad…but sometimes it’s better to take stock & just enjoy how wonderful real life can be!

The same is true of my disclosed portfolio – my only reported activity was to: i) top up my Record (REC:LN) holding (which I still prefer to call bad timing, vs. an actual bad decision), and ii) re-establish my Donegal Investment Group (DQ7A:ID) portfolio allocation, after management redeemed over 50% of its outstanding shares. Elsewhere, after enjoying rapid/substantial price run-ups on certain undisclosed holdings (the main reason they never quite made it onto the blog), I focused on positioning myself for a rough October. Pals will back me up on that…but obviously it wasn’t visible here, it’s never enough when you’re right (cheap buys won’t offset damage in the rest of your portfolio), the market proved far worse than I expected, and only fools believe in all or nothing market timing anyway.

[Forget the guy who pissed you off the other day – you know the one, that dude boasting only an idiot wasn’t all in cash & set for the crash – because he’s also the guy forgets how many other times he (wrongly) went to cash, plus all the gains he’s missed out on over the years].

So let’s just go ahead & survey the actual market carnage – here’s my FY-2018 Benchmark Return – as usual, it’s a simple average of the four main indices covering most of my portfolio (& my readers’ too, I expect):

H1-2018 Wexboy Portfolio Performance

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Applegreen, benchmarking, blockchain, Brexit, crypto, cryptocurrencies, Donegal Investment Group, investing, KR1 plc, MAGA, portfolio performance, reality TV star, relative performance, tariffs, Trump, Zamano

Looking back, the first half this year seems kind of inevitable now…

In the wake of last year’s momentum – possibly even euphoria (see my FY-2017 performance review) – H1-2018 was an unwelcome cold shower for investors. But such is how the market gods operate… And in reality, momentum was limited mostly to US investors (in particular, FAANG fans), who enjoyed 19-25%+ returns last year. Spare a thought for (unhedged) European investors: A weak dollar (down 14% vs. the euro) diluted away most of their US stock returns, while locally they earned a fairly pedestrian sub-8% return. So it’s clearly galling for European investors to now see their local markets down year-to-date (vs. a small US gain)…particularly when most of the ‘blame’ (if there is such a thing) for recent market wobbles arguably belongs to America.

But surveying other markets, we’ve seen more savage reversals of fortune elsewhere this year. Emerging & frontier markets investors enjoyed 32%+ returns last year, but were blindsided this year as markets plunged across the board, with negative returns exacerbated by local currency weakness (high current account deficits being targeted in particular). In fact, quite a few individual markets entered bear market territory. And yes, I mean actual 20%+ declines…not the feeble 5-10% ‘bear markets’ the financial media breathlessly reports these days!

Of course, the real disaster bear apocalypse happened in the crypto market – remember this table?

Take a moment & marvel once more…seems like an awful long time ago now, eh?! While Bitcoin peaked mid-December (rather unfortunate for all those kids who persuaded their folks to buy in over Xmas!), Ethereum & the rest of the market’s incredible momentum carried right into the first/second week of January. Since that peak, the entire crypto market has collapsed almost 70%, with its end-June market cap now barely exceeding $250 billion. Clearly, my #CryptoFOMO theory hit a brick wall: Despite noting a possible crypto-wobble (as I published this post mid-Jan), I argued that new money might not be ready to dive into crypto, but last year’s crypto gains would surely inflame & elevate investors’ risk appetite in the equity markets. Obviously, at the time, I didn’t quite envision such a horrific crypto collapse…or the subsequent schadenfreude.

However, I’d still argue there’s a significant asymmetry here, in terms of potential risk/reward: Crypto euphoria could well re-emerge & spill over into equities…but on the other hand (hopefully, I’m not being too blasé here!) the popping of an asset class/bubble that can be measured in the mere hundreds of billions isn’t all that relevant or serious in the global scheme of things.