TomB16 investing blog

I don't think North Americans realize how big of a deal China's Belt and Road Initiative (BRI) is and how many countries it affects. It is a ton of projects and the majority of that debt is now in default.

This won't end the Chinese economy but it's one hell of a wet blanket.

Xi is not doing the Chinese economy any favors with his war mongering and talk of invading Taiwan. It will be interesting to see how much the massive military build up dents the Chinese economy. Again, I don't predict their economy will shut down but it is certainly not hitting on all cylinders, at the moment.

 

This is a rant on technical analysis.

I have very carefully chosen my words on technical analysis. I believe there is something to it. I do not practice it. I do not believe in it, as I've seen implemented.

This is an area on which WXYZ and I disagree, however, I suspect we don't disagree as much as it might seem.

Technical analysis is an attempt to quantify market emotion. It makes sense to do this, since part of the market operates on emotion. Keep in mind, much of the market pivots on fundamentals. If Apple is killing it with record iPhone sales and margins are good, AAPL is simply not going to $0 regardless of market sentiment.

My belief, backed up by nothing but intuition is, it is possible to quantify emotion to a point. The trick will be to, objectively as possible, identify the crossover point where information ends and random noise begins.

Recently, we have had two major banking failures. Both times, my portfolio took a 2.5% hit that lasted one day and then fully rebounded. I've seen this on negative fed news, as well.

I believe this is indicative of a market which wants to own stock. In other words, optimistic.

Intuition suggests this market buoyancy is caused by plenty of capitalization. Lots of people are buying the dips.

I absolutely don't believe market analysis can predict the next tick. That is deep into noise and far from signal.

We can discuss opinion on where signal ends and noise begins, if there is an interest in this topic. I write "opinion" because there is no objective truth as to a specific level but I do believe it gets more objective at the extremes.

My point is that market emotion is displayed in the numbers, at least to some extent. I would also argue that predicting the next tick with regularity is not possible. In an expanding market, the next tick will be positive a wee bit more frequently than it will negative. In a shrinking market, the opposite. Of course, a neutral market will be 50/50. In other words, random with a tiny bit of trend influence.

The point of discussion would be to share opinions and not to identify a precise SNR. More likely, I've just offended technical analysts as well as fundamentalists so things will likely be pretty quiet.

 

For sure, RTN.

People have a pro-trading bias. I am no exception. That is one of the reasons I don't trade based on market sentiment.

On the other hand, every time a piece of bad news comes along (bank failure, rate hike, etc) two of our companies take a one day hit and then immediately recover. That tells me there is money waiting in the wings to deploy into dips.

If I were to play this sentimental analysis, I am confident I would lose money. This is evidence the analysis is incorrect, although it's not iron clad. Still, I will not test the idea. I'm not a trader.


Meanwhile, in base reality, something interesting is happening with my two companies that dip on bad news. I have a small, locked in, account I'm trying to drain and close. Now that I'm retired, my goal is to crush it first. This account holds two companies.

I've had sell orders in for these two companies since late last year. I renew the orders every 90 days (the maximum my broker allows). They were priced 13% above close on March 6 of this year. I'm not yet in a rush to sell.

One of the two companies made some gains this morning and then took a big step up where it plateaued. That step was the shares leaving my account.

There is currently a big spread on that stock. I'm confident I could submit a buy order at 8% below market, leave it open for 90 days, and re-acquire the stock. Really. Confident.

Despite declaring myself a non-trader, I am considering a low-ball buy order. It's a nicely distributing company that I own a lot of in other accounts so it would make me happy to own it again, at a discount. It would be a nice 20% bump to the already lofty distribution.

If I buy it back, I will not be able to crap on trading ever again.

 

I haven't bought or sold anything new in months. I'm letting cash build and don't expect that mode to change this year or even next. No trading for me.

Meanwhile, I've been trying to assess the condition of the global economy. It's tough to estimate. There is little real information and massive misinformation.

I continue to do nothing... as usual.

 

After a recent down turn, my portfolio is down 6% from ATH last year. Oddly, I don't really care all that much about it. If you had described my current point of view to me 5 years ago, I would have had a good laugh.

So, I found an exciting young company based in Alberta. These guys are the most exciting group I've come across in a long time. This company has received three rounds of incubator capital and are preparing to raise venture capital. The numbers to date are tiny. They are hoping to raise close to 3m. I know it's a 1:1000 shot but I'm going to sprinkle a bit of money on them.

It's not just their science chops on recycling that is exciting. I'm confident they have intimate knowledge of how to productize and scale their technology. Few startups have any idea of how to scale. In fact, given how impressive these young men are, I estimate their chance of success is probably closer to 1:15.

There is something weird about watching a bunch of YouTube videos (everything I could find on them) and then speaking with them directly on the phone (happened just this morning). I've been invited for a tour of their lab.

Instead of looking for a frog to kiss in hopes it turns into a prince, I'm far more excited by a frog that is working out and training hard to be as successful as possible in it's pond. Despite my advancing age, I continue to ignore any sort of get-rich-quickly ideas that come along. My life is all about business and making the trains run on time.

 

Our portfolio hasn't been doing much, these last months. We are letting cash build with DRIPs mostly turned off. Also, selling some RE has really cashed us up. Meanwhile, two of our companies are not doing particularly well but seem to have a bright future.

What to do?

We could roll in heavy on a couple of companies I feel are under valued. We could buy an index and let our future vary with the market (always a good choice). We could do nothing.

For now, we do nothing . Doing nothing is nearly always the right thing to do. Eventually, we will have to do something as there is too much cash to ignore. For now, we are using money markets to ear 4.7% on the spare cash.

 

As Asia melts down, Europe stumbles, and North America treads water, I find myself investing in two new ventures. Macro economic factors appear to be in opposition to my effort.

Our portfolio is going to be fine. The companies will succeed or not, on their own merits. There is no need for me to move into a bomb shelter until street level conversations become more positive.

Of course, economic conditions are having an impact on us. I found someone to split a container of components from Asia. In better times, I would have filled my own container. I'm trying to keep costs, and therefore risk, down but I am living my life.

Best wishes to everyone here on Stockaholics.

 

I want to post on objectivity and hubris. Objectivity is far more rare than is widely believed.

So, I have a buddy who comes up with some pretty whacked out ideas. He has tried his hand at several businesses which did not do well, to say the least. If I shared some of the failed ideas, I suspect they would bring a chuckle.

One of the reasons we are friends is because I encourage him. Instead of declaring him a moron, as many do, I encourage him and generally try to be positive.

Some years ago, he shared an idea to build a subscription based car wash. When he described it, it sounded like the closest thing to a sane idea I had heard from him. He had such a long string of failures, I was trying to be gentle. I thought the subscription thing probably won't work but there is money to be made in the car wash business in our city. So, I told him I thought it was an idea with potential.

These days, he a bunch of large commercial buildings to host his business and a lifestyle that would be the envy of just about anyone. The car wash business has done well, including the subscription aspect.

I'm glad I didn't crap on the subscription idea. I'm glad I tried to bias my response in a positive and encouraging way, as I did when commenting on anything he has done.

Anything you want to do in life will be considered a terrible idea and just plain wrong by anyone who does not have the identical idea. People are astonishingly closed minded.

If you want to do well in life, try to be as open minded as you can be.

 

Our last big move was selling Tesla in early 2021. 2/3 of that money was used to expand existing positions and a big chunk was put into money markets. We already had significant cash reserves, as that was the outset of our full retirement.

Since then, we have sold some real estate and our near cash is more than our entire portfolio was not all that long ago.

I could brag about our best money market investments but our blended return of all money markets is a touch over 4.5%. That is far lower than my expected average annual return.

I'm a buy-low guy so why haven't I deployed the bulk of this near cash into the market?

The answer is that I simply don't see an obvious vehicle. We hold as much of a small number of companies as we would like. I love owning those companies. We have some VFV (VFV is an ETF with a single holding... VOO) in our Canadian accounts, although not a lot. It isn't obvious what to do with the rest.

I'm trying to have infinite patience. When an investment is obvious and I believe in it, I will hit it hard. Until then, I am enjoying the financial and logistical abuse of starting two businesses at the same time.

 

Two posts today....

So, one of the businesses I'm starting has just taken direct competition from someone who seems keen on selling below cost. I have a container of product from Malaysia so my cost base is pretty low. What little I know about the other guy is he is a 20 year old with big ideas but he is just getting started where I have already begun operating.

None the less, I am faced with a decision point. Do I get out of the business and let Captain America Jr. take over the market or do I keep doing what I do and pretend everything is OK. I've decided to do the latter. Young guys have no attention span.

My next Asian orders will drive my costs down further but I expect the other guy to be less professional and run out of money long before my container of cheap Asian electronics is consumed. No guarantees, though. You place your bets. You take your chances.

Basically, this is the same approach I take to market investing. Pretend everything is fine, regardless of conditions, and be patient.

 

It is astonishing how few people understand the Fed's mission. Even among investors, nobody seems to get it. There are a couple of people on this site who seem up to speed and that's about it.

The fed doesn't want to cool the economy. They are trying to crash it. They need unemployment up, housing defaults up, and everyone panicking. Until then, they will continue to tighten the noose until the patient chokes.

Once the economy crashes, they will immediately switch to cutting interest rates and quantitative easing.

One day, we will probably look back on this mode of monetary policy as ignorant flailing. I do now, although I do believe it has some merit.

Summary:

Look for continued jerky policy until things crash. That will be an over correction. Once things are dire, they will shift to loose money, low rates, and people spending like drunkards until things stabilize again.

 

On the Canadian side, BC is in trouble. They are seeing a high number of mortgage defaults and Ottawa is going to continue to jack rates. BC is begging Ottawa to stop, while their economy still has some life, but that will not happen.

My family are from Western Canada, although about half of us are now in the US. It is extremely difficult to find anyone in Western Canada who likes Justin Trudeau. They exist but are rare.

Canada is a tough problem to solve. Toronto and Vancouver are like a different country. National policy is set for Toronto. Even Vancouver is not being considered, at the moment. Meanwhile, on the prairies, there is an angry uprising under way.

Speaking of politics, if the Conservatives gain power in 2025 (or when the Liberals fall), they will improve the situation but only slightly. No one has successfully managed the entire country. They either have to forsake the country in favor of Toronto or they tend to the country and let Toronto burn. Perhaps someone will figure it out, one day.

 

For many years, we out performed the market. Everything I touched, seemed to turn to gold. It wasn't just Tesla that hurled us to a new level of life. There were several other companies doing a great job, as well.

That all ended in January 2021, when I sold Tesla. Tesla is lower than I sold it for in 2021, so that's not the problem specifically.

About 10 days ago, we set a new ATH. Things have been looking better the last couple of months. One week ago, on Friday, our residential REIT announced a distribution cut. They cut it in half. Suffice to say, we are no longer near an ATH.

Jack Boggle is the Albert Einstein of the investing world. You simply cannot beat the market, long term. He called it, "return to mean". An individual investor will do better or worse than average but, over time, they will return to average.

This is why I started buying a broad index, a while ago. I'm not against picking companies, I just don't see any obvious choices right now. Our index fund is a tiny holding but it will grow over time.

BTW, the REIT is a company I stopped re-investing in early 2018. It literally returned all of our investment since then. I'm unhappy with management. That's why I stopped re-investing. I could have sold the company but chose not to.

At this point, I'm making the classic mistake of hoping for new management. That is unlikely to happen, as the CEO is also the chairman and is the largest shareholder. But, I continue to have hope and don't expect the company to go bankrupt; I just don't think they will perform well again with current management.

 

In the wake of the Gaza conflict, oil futures have gone up 4%.

 

There are a couple of wildly interesting wind power breakthroughs on the horizon. If these technologies can be successfully commercialized, it will be a break through for power production. Amazing stuff.

Here is one.

https://newatlas.com/energy/airloom-energy-wind-track/