Current WBI is 178. Our portfolio continues to sink. We are now down 2.55% from peak. Our portfolio was designed to be resistant to recession. This is why we don't make huge gains every time the FED has a press conference. We probably are not in a recession but we are newly retired and this is the first test of the portfolio's resistance to sequence of return risk. It is still early days. The curious aspect of our holdings is our three largest holdings are up a smidgeon. The only holding that is down significantly is one of our smaller holdings, but it is down substantially. That, along with two others which are down a bit, knocks us back 2.5%. With most of our distributions due the next week, the net worth roll-back will be mitigated to about 2% if current valuations hold. Current thoughts are: - Why is a residential REIT down 16%? The books look as healthy as ever. There are no adverse events effecting it, that I'm aware of. PE is 6.6. LTV is 0.41. Should I buy more? - How desperately should I cling to the three year cash rule? We currently have far more than 3 years of cash. I haven't purchased anything in a while. How much can I spend down if an amazing deal comes along?
We were up until just before close when our two biggest holdings took a dive to see us close down. We are now 2.7% below our peak. My expectation is a long, slow march to a lower net worth. Meanwhile, inflation is taking a substantial bite out of our retirement buying power. Why then, do I not sell most/all of our companies? It's times like this when you have to believe in your partnerships. I only hold companies I like and want to own. I believe in their management teams, to the point I trust them with our nest egg. I won't sell based on market factors. I might buy, though. If prices become sufficiently attractive, I will move heavily on a couple of companies. More likely, good companies will slowly reduce earnings along with their valuation so the relative attractiveness will remain the same, despite a price drop. This, from the perspective of a value investor. In this case, there are a few companies I will buy but will not move in heavy with all of the cash we can spare. There is never a rush to make a move inside a well designed portfolio. In fact, this is how I define a good portfolio.
OK... so... those results didn't seem quite right so I did a deeper dive. It turned out, Yahoo is not currently reporting on one of my companies. The company in question is "FCD-UN.V". This is a venture capitalized real estate company based out of Vancouver. Yahoo is not currently quoting them, for some reason. This is a reporting day, so perhaps they stopped trading? My brokerage is quoting this equity so perhaps it's an issue with Yahoo. In light of this, we are down 0.9% from peak.
Several companies are no longer reporting via Google Finance. Perhaps this will be repaired in the near future. This is the function I use. =googlefinance(<stock>,"price") https://support.google.com/docs/answer/3093281?hl=en Oddly, our portfolio has all but matched the previous ATH. We are down 0.02%. Keep in mind, this is total valuation so it includes dividend and other cash income which has not been reinvested. Our equity ratio is slowly going down.
Our portfolio has been stable but our individual holdings have not. It is a case of diversity creating stability. Since we have plenty of cash, it has occurred to me that I could place limit order to buy at a price a few percent below the expected price and also a limit order to sell at a price a few percent above the expected price. If the number of shares are relatively small, it would not impact our chance of success in retirement. I definitely think about trading on occasions like now. The reason I almost never do it is because that is simply not how I want to do it. I will confess I sold quite a few put contracts at a price that I desperately hope fill. It doesn't make sense that someone would buy my ultra-low priced put contracts for a REIT but I appreciate that they did.
Our portfolio is in a strange position. We are back within $150 of our ATH, so that's good. What has changed, however, is our cash ratio is growing. We are back at just a hair under 20% near-cash. Three years of liquid spending needs to remain in near-cash, as our sequence of return insurance, but the rest is available for investment, should a value appear. All of our companies distribute. Two of our six companies are set up to DRIP. The others produce cash. With more R-E money scheduled to arrive in the near future, we will probably be very cash heavy by summer.
The reason for sharing these micro updates is to provide some insight into the mindset of a long term investor. Some other folks have provided this over the years so I'm trying to share my own point of view, in case it is helpful to someone. I hope readers pick up the chill vibe. Market fluctuations, ratios out of preferred profile, and long term positions that are down for no known reason, are not reasons to panic. Over the years, I have arrived at a portfolio that I trust so there is absolutely no need to make any sudden moves. I will continue to bottom fish with long term limit orders and generally not worry about minor adjustments.
We hit a new ATH for about 45m, this morning. We are a bit down from that point, after close. If I was a trader, I wouldn't know what to do in this market. I suspect, I would sell out of fear. As an investor, I carefully select companies to partner with, buy them, and then weather any gains or beatings that come along. It is easy as it could be.
I've been studying COVID since day 1, trying to stay on top of it, partially for global finance reasons. It's been surprising how far behind public health policy has been from the research, just about everywhere. If Omicron is as unstoppable as I believe and it appears to be, China is going to continue to cause horrendous supply chain issues with their massive scale lock downs. They will probably also brew up another variant. At this point, the correct approach appears to be vax and infect so it will be interesting to watch Finland over the next couple of weeks. Business leaders all seem to indicate we about through supply chain issues but I don't see how we can get past them for another three months, or so, unless China changes their COVID protocol. Tesla is currently under a brief shutdown in Shanghai but it will undoubtedly be extended and the problem will grow. They have been minimally affected in the past but I think even Fremont will be impacted by supply issues in the near future. Ford is now selling the Explorer without a rear HVAC system due to lack of availability of components and that is not their only struggling program. GM has been heavily impacted by supply chain issues. For now, I keep my powder dry while China handles Omicron like the Wuhan variant but I am ready for an opportunity between now and June when the problem is essentially dealt with.
Let's see.... - The war in Ukraine is grinding on for the 23rd day - Europe is scrambling to re-light coal fired power production to replace power generated with Russian gas - Europe is scrambling to source CNG for heating this fall - Russia is sending war ships carrying supplies and munitions through the sea of Japan in what hopefully is an exercise to scare Europe - China is shutting down massive chunks of their country to prevent Omicron from spreading. Omicron is still spreading and their industrial output is heavily curtailed ... and, this afternoon, we blew past our ATH with an annual salary. It is difficult to believe anyone can make sense of this. Certainly, I can't.
It looks like Evergrande is going down. They have more than 300bn in debt and are shedding asserts at best speed to generate liquidity. Time will tell how much this impacts the global financial system.
Gather around, kids. Uncle Tom is going to tell a story about rainbows and beautiful princess. This story is in this thread but not with this detail and it would not be recognizable but you can scroll back for my thoughts at the time. Sometime around 2014~2015, I picked up some debentures which paid 6.5%. They were underwritten by Northwest Healthcare, a company I like and own considerable common shares for. It was not a deeply strategic position. It was more a matter of getting an email indicating the IPO of some nice looking debentures and pulling the trigger about 20 minutes later. For the last decade, decent bonds and debentures have a shelf life of about 1~2 hours so the decisions are made quickly. In 2018, with retirement imminent, I decided to build up a 5 year bond ladder. To that end, I picked up another series of debentures from NWH-UN on the secondary market for $98.50 and a series of bonds IPOing from another company I like. At that point, I had three of five rungs of a decent bond ladder. I'm fussy about bonds. They are a loan. Common bonds are too, in a way. As such, I scrutinize companies I buy very closely. Because of this, I did not have confidence of ever having a full bond ladder but my goal was to do the best I could. With retirement imminent, it was insurance against sequence of return risk. That series of 6.5% yielding bonds was re-purchased by NWH, sometime in 2018~2019, so I picked up another series of debentures on the secondary market. That got me back to a three rung ladder while I kept my ear to the ground for a good fit to add rungs. Yields ranged from 4.5~5.75%. At the beginning of March, 2020, the market started diving and my bonds started going up. NWH-UN common stock was selling at something like $9 which produced a yield of about 8%. The conversion ratio of my best NWH debentures was at a price of something like $17. NWH is a REIT. It was comfortable trading at 11~12. It wasn't going to hit $17 without a buy-out so that was a long shot. I decided to sell all bonds and buy NWH common shares, thinking it would provide 50% additional fixed income plus a substantial equity opportunity. So, I posted limit sell orders for all three tranches of bonds and debentures. Two were set to sell at $108.50 and the bonds were priced at $107.50. Only one series was expected to sell but, by the end of the week, all three were gone. That week, I placed a limit buy order set to expire on Friday. That order was not filled. The morning of March 10, I placed a limit buy order at $6.71 to convert all cash into NWH-UN common shares. It filled, later that day. NWH at $6.71 has it yielding at roughly 12%. I knew it was a good move, even if hard times had them cut the dividend for a year or two. There was not huge amounts of bonds so it's not like we doubled our money overnight but it has added about $1000/mo of dividend income to our retirement. Not bad. The point of this story - I am not a trader but I'm not adverse to picking up money when I see it laying on the ground - Good things come to patient people who are prepared to strike - If I had held a bond ETF, it would have crashed with the market reducing the spread of this trading pair - The majority of our NWH-UN was held through the COVID correction so our net worth didn't fully reflect the swing trade until later in the summer There have been times when we have come into money, perhaps a corporate buy-out or R-E sale, when I have not had a great opportunity and ended up buying a great company at a good price. There have also been times when I have had opportunities to buy great companies at amazing prices. I've tried hard to make the best decision at the moment with full understanding that I have no gifts or ability to conjure money from the air. Not all decisions go as well as this one did but good things happen, here and there. It doesn't hurt to have a bit of cash sitting around in a form that can be deployed quickly.
Over the last 15 years, there have been several Cinderella moves, such as the one above. These are the moments everyone fixates on and they have come up every few years. These situations require a lot of knowledge, patience, and positioning. These are not the moments I live for, although they are a significant part of our investing history. I don't just onboard any asset class, in the hope of cashing in big one day. I only buy companies and investment products I feel are solid choices on their own merit from a long term perspective. The arbitrage moves are just a happy coincidence. A good portfolio will benefit from a few periods of good fortune but it needs to do reasonably well the rest of the time, also. I think the boring times are the most important and the most difficult times to manage well. People have an insatiable desire to make changes. The reason I cite "the last 15 years" is because this is the period during which I've had an ability to see how the pieces fit together. I did not have investing clarity, prior to this. In fact, I attribute success previous to the GFC in 2008 to the winds of the market being generally favourable. We were barely impacted by the GFC, as we were mostly in real estate. That was luck, not by design. Post GFC, it has been really clear how some market factors will play out. This clarity does not cover much at all but I now have the confidence to hit the very few things that I do know very hard and without hessitation. One of our bond series was scheduled to mature in 21 months, paid 5.25%, and was trading at an 8.5% premium. That's almost all of the interest payable on the spot without waiting 21 months. You don't have to be Karnak to know what to do in this situation. On the other hand, why someone would pay almost all of the interest for a basically flat, non-renewing, position for the next 21 months is beyond my comprehension. Perhaps they anticipated negative interest rates or perhaps they simply thought those bonds would go up even further? The best skill an investor can have is the ability to do nothing for extremely long periods of time. To be able to hold tight and not flinch in the face of drama, world events, and boredom is not to be underestimated.
With Tesla gaining $46 so far this morning, I am again doing worse than if I had held $TSLA through the past year. I'm still pleased with our portfolio. It is a distribution monster that is lacking in growth, at the moment. This is a case of me defining a loss as a win. It isn't rational but it is real. There is something comforting about knowing you have plenty of dividends to have a great life plus a solid cash buffer to smooth out some pretty major pot-holes. I'm past wanting to get rich. At this point, I'd like to be comfortable.
There is no reason to gamble your retirement at a later age. It is nice to sit back and be content with what you achieved.
WBI = 187.8 Our portfolio took a dip, on the day. We are down nearly 1% from our ATH on close of March 31. Today's post is about the matching engine. My broker is TD Ameritrade. I've had a long term limit buy order for a specific company. It was priced about 7% below the market price of late February when I entered the order. Last week, I entered a second market order at the same price for my wife and, on Monday of this week, someone else in my family (different broker) also placed a limit order at the same limit price. Three buy orders, same limit price, different entry days. Today, the bid ended up at my limit price. It sat there for a few hours. The ask was $0.35 more than my limit price, for most of the day. There were very few trades today but I ended up getting a partial fill of 200 shares, just before close. I assume the partial fill is someone selling 200 shares at market and the matching engine selected my order for the partial fill. Further, it may be because my order was likely the oldest limit order in the system. I'm not stating this is how the matching engine works, it is just theory but seems a reasonable guess. If this is the case, it does shed some light on why my long term limit orders sometimes fill after a month or two of dormancy.
Something is going on in China that defies comprehension. The Shanghai lockdown has been extended until May. They are having severe food shortages. The virus is spreading by 10% per day, despite the city wide lockdown. If this continues, supply chain problems will continue indefinitely.
I've come to the conclusion that investors are among the most religious people around. They embrace ideas and philosophy that is proven to not work. They under perform year after year and explain to people how well they are doing. Even people honest enough to admit they are underperforming still believe they will do great in the future. The best thing a new investor can do is think for themselves. Avoid indoctrination. A/B compare everything using a spreadsheet to model different ideas and scenarios. Objectify your study to the extent possible. Remember, even if something is working as well for someone else as they suggest, it probably won't work as well for you. It is important to think for yourself. If you buy a hot-pick without conviction, you are nearly certain to sell it into the first down tick. Here are some conclusions I've come to that set me apart from almost every other investor: - managed funds under perform the market, long term, almost without exception - balancing is a bad idea without purpose - bond funds are not bonds nor do they serve the same purpose - hot picks are fools bait - ETFs are only good for broad market indices which would be impractical to implement at a retail investor level - the odds of someone's "new" idea being better than what has been thought of before are infinitesimal - group think is the worst approach to investing and has not shown any sign of success in the 40 years I've been investing There are extreme few people who think as I do, so check my work. There are a couple of people who do share some common ground with me, including one individual on this site. When people show me their returns, I'm always heart broken by their portfolio performance. I know what I've made each year since 1998, to the penny. My data before then was lost in a hard disk crash. A friend showed me a statement from her financial adviser and she made 28%. Unfortunately, that was total gain since 2003. A lot of people would be far better served to go with the Warren Buffett recommendations for his chidren (90% VOO, 10% bonds, never balance) , rather than spin the wheel on an adviser, or engage a fad such as couch potato. Rant done. Happy Easter!
Follow up... When I point out that people have under performed the S&P 500, I've always gotten the same response... without exception. "Well sure but nobody can match the S&P 500." You know who can do just as well as the S&P 500 index? People who own the S&P 500 index. lol! You know who can do just as well as Berkshire Hathaway? People who own BRK.B. My gawd. When the champion fighter who is unbeaten in 100 bouts takes on Joe Newguy, you bet on the champion. Forget your hunch. Ignore your gut. Learn to tune out the noise. People will sew seeds of doubt; that's what they do. Maybe Joe has a magic right hook? Maybe but there is a 99% chance he will not win. VOO is the champion. This is the only thing you have to know about investing. If you have a complex idea that you are sure will rocket you to riches, make women notice you, and get you prompt customer service at Walmart, you need to test the idea objectively (track with a spreadsheet and chart against VOO) to get that crap out of your system so you can get on with the task of buying VOO so you can retire. Somehow, that rant resurrected from the dead! What the....????
WBI = 183.6 Our portfolio does not currently have a growth stock. It is all utilities/REITs/financials/etc. While I would like to have a company with growth opportunity, I am not going to buy a random business to put a check box in that column. I am patient. When the right company comes along, I will buy it. Like Tesla, I'm sure people will be pleased to explain to me how stupid I am for buying it. They might be right. That's all part of growth. lol! We are up 2.3% from the beginning of the year but down a tick from our ATH in February. The thought about our current position is: FI is sufficient, equities are doing OK, balance is not right but I don't worry all that much about that. Sure, I'd like to have a slightly different mix but I have purchased the best values I could find. If I had been balancing our portfolio, we would be in significantly worse shape.
