At this point, we are right around the same net worth as we had on March 1. Two of our micro-holdings remain down around half their original value. Most of our portfolio has basically recovered to where it was before the pandemic and one of our holdings is significantly up. The net worth recover has little to do with my mitigation efforts. The amount of money I picked up buying calls on Carnival, PSQ, etc., help but most of the recovery came from the market healing itself. This feels like a get-out-of-jail-free card but I'm not sure I will take advantage of it. Certainly, I won't sell the two back markers. They were tiny holdings before crashing. Now they are half that. One of them is an oil field service company and the other holds an array of restaurants. I don't know what or if we will sell. I'm a long term hold guy. We are certainly letting the distributions build up, though. Our cash remains below 20%.
This is a curious comment. I'm not sure if it is intended to denigrate my long term approach by trying to create a narrative of me as a hypocrite to justify your own trading approach or if it purely in jest. Either way, it's worthy of consideration. I'm still a long term investor but your point is not entirely lost or incorrect. Here's how it went down. It's all in this blog but a summation is an interesting exploration of the approach I have selected. We were out of the country in January, returning by mid February. The virus caught my attention the first week in January. By the second week in January, I could see it was going to come to North America in a significant way. By the third week in January, I could see most of us were going to get it because we don't have the power to respond as China did. Despite the black cloud slowly moving in, analysts and pundits declared the bull market unstoppable and mentions of the virus were met with anger. The third week in February, our portfolio of non-exciting companies (except Tesla) was 5% higher than it was on February 1. Markets went up faster than I've seen them go up in 30 years. It made no sense to me. My first reaction was at the end of January. We sold a wildly over bought utility. We sold it right at it's peak. I considered other responses at this time, but did not do anything else. I've never owned PSQ before and don't recall having ever purchased calls before. In Mid February, I purchased quite a few 90 day calls on CCL at $30. It's the first short term move I made since 1998 when I realized the futility of short term trading. A few days later, I purchased some PSQ. Neither of these were large positions, with the CCL calls being far more significant, based on the leverage they are built on. The CCL calls were sold the day I purchased the PSQ. That money, small quantity as it was, well over doubled in four days. The PSQ went up a lot and now is down around the price I purchased it at. At the time, I also shorted a company. It's the second time in my life I have shorted a stock. I'm not ready to share that company but it was a very profitable move, but not quite as profitable as the CCL calls I publicly posted about buying and selling in the CCL thread. The take away, for me, is that I appreciate the comfort PSQ gives me. It's a cash lever for troubled times. If the S&P goes up, PSQ will go down but I won't need cash. If the S&P goes down, PSQ will go up providing cash to shop the discount counter when it brings the most power. I plan to hold a small amount of PSQ until late summer. Back to March, we expanded two of our core holdings at a 26% discount to the price on March 1 (one of my buy triggers) the first couple of trading days and then expanded a smaller amount at 50% discount later that week. The deep discount was not acted upon as strongly because I was thinking about devending our cash position. I don't want to head into a fully retired life phase with no cash. Since then, CCL recovered to almost $20, at which point I purchased more calls and subsequently sold them for another nice profit. I've also expanded our base of PSQ by about 4x. It's still a small holding but it is large enough to have some significance. So, am I a trader? I have traded in the last 60 days so I am not a pure long term investor. Just as significantly, I sold a power utility that I like (but don't love) because the price got to double my calculated value point. We held that utility since 2012. It was originally a nice distributor but the distribution only increased twice in that time, while the market cap tripled. It was sold due to the lack of value so, while not a trade, it was not the long term ownership position I advocate. It was more of a value investor move. Given the quantities involved in the pursuit of each strategy, I am primarily a long term investor. These trades aren't that significant, but they do demonstrate my lack of reservation in departing from an orthodox dogma. When I'm not sure what to do, I do nothing. When I responded, I did so with confidence and would probably make the same moves again. Perhaps more interesting is that I let many clear events pass with no response and I continue to do so. CCL is back at $16.50 and I have no plans to buy more calls, despite having extreme confidence that is the right move. While being 95% confidence in buying more calls, it would be lower reward and higher risk than my original call position so it has lost interest. That brings me to thoughts of the future. I can see two more dips on the horizon. We are in the Q1 ER zone. I'm not going to trade this ER zone but I do have some thoughts to trade the Q2 ER zone. Again, it will not be with any of our primary holdings or with significant amounts of money. Back to Q1 earnings. I expect a lot of people will be caught off guard when our hospital REIT posts a Q1 profit that beats the Q4 period. Nothing has happened to stop that earnings growth story. I'm already bulked up on that stock with no plans to make further moves. The Tesla maniacs will likely be surprised when Tesla posts a significant loss. Curiously, most institutions are upgrading Tesla these days so they are going to be wrong again. If ever there was a time to make a play against Tesla, it would be now. I will do nothing. My holding will not be sold for another 5+ years (based on current analysis) I expect the S&P to take a noticeable dip in the next couple of weeks, as earning reports come out and economy deniers are blind sided with reality. I may exit our PSQ position at that time with the intention of re-entering it by late June when people think things are starting to return to normal. That will be a trade, if it happens. Here's where it ends: If you were to subtract trading gains/losses from our portfolio, it would not make a significant difference. If you were to subtract long term investing gains/losses from our portfolio, I would not be remotely close to being in a position that allows us to retire. To cite my approach as 99% long term and 1% trading is to inappropriately downplay our long term approach.
Sorry, I thought it would be clear I was kidding. You’ve been more consistently all-in on the long-term approach than anyone on this forum and I respect that. It was just a tongue-in-cheek comment because you made a few trades. Hopefully no hard feelings as I enjoy reading your commentary.
Absolutely no need to apologize and absolutely no hard feelings. Thank you for the comment. Sincerely. Please don't retreat from that position. One of the reasons I'm here is because I want to hang out with peers I respect. People such as yourself and WXYZ but there are others. [Edit: I forgot Marvan and I'm sure many others] When I do something hypocritical, I appreciate being called on it. Despite their minor role in our investment trajectory, I have made trades while railing against trading. There is hypocrisy in my "Do as I say, not as I do" approach. Most interesting of all, to me, are thoughts about how much of my motivation stems from boredom. I believe trading is born of a compulsion rooted in boredom. That is one of the reasons I rail against it. It's largely a compulsion. How much of my motivation was boredom and compulsion? I wish I was more self aware, in this regard. All I can do is speculate. This is where people like you can help me understand myself. This really interests me so I'm going to drone on a bit..... People are not objective. It's universal. Objectivity is needed to navigate the financial world. To gain objectivity, I have engaged in a study of my prejudices and tried to compensate for them. It has been mostly effective. People are compulsive. If you give 100 people instructions to drive exactly 100 miles and then turn right, nobody is going to go the full 100 miles before turning. By mile 15, people are going to start thinking they should turn right. A couple of people might make it to the 85 mile point. People error on the side of over-responding to input. I have these urges, just like everyone else. I try to compensate by under-responding to my urges. I just realized that nobody understood why I stressed earlier in this blog that I don't generally sell stock to respond to market conditions like the WBI, I do hold back capital that would be reinvested if the WBI were more favorable. To me, this is an under-response and a non-trade approach. This was a better approach than what I would have done, had I not have held myself back from a larger response to these signals. In other words, my judgement needs glasses.
Hey Tom, We are only human so we need from time to time a variation to avoid to be bored, investing for the very long time is very boring because we have only to collect our dividends. 80% of my stocks are "long", the rest change from time to time .....
I have a surprisingly good ability to see the bottom of a price trough for our companies. I have absolutely no ability to predict the top of a price fluctuation. This has me thinking. In the early 2000s, I started following Warren Buffet keenly. Like many of his disciples, I have read every writing available and watched every interview. I've spent a lot of time watching Mr. Buffet on YouTube. He has always maintained, "I don't know what's going to happen today, tomorrow, or next week but I do have a pretty good idea of what will happen 10 years from now." These are golden words. If you combine that with value investing, it closes the loop. For the handful of companies I am able to value, I know when they are a great deal. When those deals come up, it becomes easy to see that I can buy them and do great in 10 years. I may not double my money tomorrow or next week but I will do very well over time. Based on this, I can look at macro factors and predict buy opportunities. If I'm wrong, and I often am, I just don't buy. If I'm right, I upload a bunch of stock at a discount. When the WBI is low, it's not as easy. When there is more value around, time away from the market is more expensive so trying to time the market is futile. That's why I go all-in and don't try to time anything when the WBI is low. The WBI is currently 138%, so things still look precarious to me.
I've never seen a market less rational than this. Q1 earnings are down across the board. Q2 is going to be a blood bath. Prices are up from the crash, not far from previous levels. Our portfolio has now fully recovered from the hit. Fully. We are back at all time highs. While stock prices are still down a little, on average, we bought enough stock at the discount counter to compensate. Most of my investment platform operates on a specific system with triggers and a mostly objective re-investment strategy. I do not have anything pre-decided with regard to dealing with an irrational market such as we have. Do we pull out and remain all cash while the Q2 blood balloon bursts or do we stay the course and just let cash build? Of course, we will stay the course but that is based purely on my philosophy of under-responding to input.
The fed is no longer buying as many securities from the market. It appears markets are sufficiently healthy for the fed to step back a bit. Meanwhile, airline travel is down 95%. Wages are down 2%.
Interesting point. That has me thinking: If the fed is going to guarantee market returns, why aren't we all attacking the markets like maniacs, buying anything that isn't bolted down with the understanding the fed will provide buoyancy in the event of a down turn? I'm being extra cautious, right now. Perhaps my strategy is exactly the opposite of the correct one. Any thoughts?
I mean that’s the evidence we’re seeing so far. It’s why I was out of the market for 2 months and finally got back in. I realized after the bottom was hit - but far too late - that every possible step will be taken to prop the market up. I’d try to keep politics out of it, but it’s too intertwined to ignore. The economy is all Trump has/had to run on and it crashed. Thankfully for him, he’s stacked almost every position in government with those who will kiss the ring. Every countermeasure will be deployed for the remainder of his first term to hold it up the best it can be, regardless if it’s the best move for the majority of Americans or the long-term health of the economy. Just my opinion.
I don't see how it's possible to isolate investing from politics. We have two news streams that are going to move the markets and they will also play off each other, a bit. Just having an election usually throws cold water on the market. If Biden wins, I expect the market to stay soft for a few months and then, as always happens, it will return to as strong as ever. I'm not sure what will happen if Trump wins. Most likely, business as usual but for how long is uncertain. That will take us into mid to late 2021 and that's when wide release of COVID vaccines will start to become imminent. I'm not confident a vaccine will be released before 2022 but all that will be needed to fuel the market is talk of a release, not an actual release. Then there is the $6T that is going to be spent buoying up the economy through the shut down. Surely, at some point, the endless spending will cause problems in the real world. A country can only handle so much debt service. We're at $25T of debt with plenty more pork to be served. This is the first time in my investing history I feel like I have a handle on the next 24 months of macro factors. Time will tell how it plays out but I expect plenty of highs and plenty of lows. This is an ideal time for traders but I think there are opportunities for long term investors to manually re-allocate funds into some of the troughs, also.
The number of coronavirus deaths is currently at 72,000. That number is expected to double. It's hard to imagine it will only double with a re-opening of the economy on the near horizon but I desperately hope so.
Important to remember that the models are continually being adjusted based on new information. As the economy re-opens early in many places, I'm sure the model will adjust upwards. As it shuts down, the models will decrease. The balancing act that is being played is very sad, as many will die with an open economy, but some will also die (or be crushed financially permanently) with very few business running. Just goes to show how broken things were even before this.
This post is about Mike Davis, CEO of Tiger Oil. About 10 years ago, Mr. Davis agreed to have his memos published and they revealed one of the most epic revelations of management style since Roman times. This is some of the most entertaining reading I've ever done. These memos are real and they are legendary. Let me give you a taste: More here: https://www.scotthambrick.com/article/288/
“The proper attitude toward investing is much more important than any technical skills,” - Warren Buffett I've come to believe the key to having a good attitude, which is heavily pragmatic, is to have the correct expectations. For me, that means 8~10% per year total return. Not only do I expect those numbers, I strive for them. Stocks paying 30% dividend are invisible to me. Any stock that pays over 12% dividend is likely in trouble, about to cut the dividend, and has recently taken a big price hit based on the dividend cut which makes the dividend look extremely cheesecake for a short period of time. Stocks promising to double my money on the short term are also invisible to me. I look for stable businesses that are making a solid return and reasonable profit with a stable, long term, view. I scrutinize the books, before buying a piece of them. While we've done extremely well with Tesla, and we have a non-trivial amount of it, it is not one of our primary holdings. Our core companies are extremely stable. When the markets are exploding, we probably are not going up all that fast. When the markets are collapsing, we are probably holding steady. Recently, we've had a few years that topped 30%. In 2011 and 2012, we made 0.4% and 0.6% respectively. Our returns blend into something very reasonable. By having reasonable expectations and looking for companies that can meet our expectations, we avoid the trap of looking for companies that promise to make us rich quickly. Since the beginning of time, an endless stream of charlatans have announced they wanted to give away huge amounts of money and people have swooned to give these people money. I have no interest in participating in these schemes. You can start to do very well, once you disconnect from thinking about what the stock price will do and start thinking about what the company will do. How much can they earn? Are those earnings stable? How much do I have to pay to buy a piece of those earnings? Figuring out value is a simple task of considering your money, inflation, and where it will be in 5 years. Now, figure out where your money would be in 5 years if you buy a piece of the company in question.
The WBI is currently at 135. This would be a comfortable number, if people were working and the economy was switched on. Given the current situation, it looks like a bubble to me.
