It is time for my monthly personal finance and investing journal update. Let us examine the State of my Stash…
Stash Status
As a reminder, I ended December 2020 at about $320,000.
In January, I automatically saved about $4,000. I continued my strategy of managing my behavior (and limiting the willpower required to stay on plan) by basically saving first and then dealing with the consequences in the rest of my budget.
I’ve yet to do my 2020 second half spending audit, just to make sure nothing unexpected is going on in our household budget. I like to check in periodically to look at trends and see if there are any hidden issues in spending. I just go into mint and fix all the double counted and misclassified transactions (of which there are plenty). It’s sort of a pain, but not as bad as doing the data entry from scratch I’m sure. I will hope to have that completed and to have a total net worth update pulled together next time.
Setting aside those items on my to do list, with the savings and investment gains in January, I ended up with around $330,000 in my investment accounts.
CURRENT PORTFOLIO Allocation
As I’ve mentioned before, most of my stock exposure is through index funds. I continue to hold a good chunk of foreign stocks. See Media Pin of the Week – More GMO, Weekly Media Pin – Grantham on Graham, Best Foreign Value Factor ETFs, Resource Roundup: More CAPE, and Foreign Value Factor ETFs Update. This is nothing crazy; about 30% of my total invested accounts is allocated to foreign stocks.
Most of this exposure is via EAFE stock index funds. I am trying to limit exposure to China (and some other emerging markets). I think Jack Ma and ANT/BABA are a good example of why I take this view.
EFA was down (.78%) in January. The S&P 500 was down (1.02%) in January, largely due to a pretty big sell off on the last day of the month. The completion index (basically everything not in the SPY) was up 2.70%. I am allocated to all of these, but I have about 15% each in SPY and VXF versus 30% in EFA. (this includes the investments via my value + trend account).
Value stocks crushed the broader indexes in January. RPV was up 2.44%, ZIG was up 2.97%, and QVAL was up 6.42%! I don’t actually have much $$$ allocated to these value funds, but they tend to correlate closely with my active stock picks.
Minor Adventures in Capitalism
Speaking of my allocation to active accounts, I allow myself to “pick stocks” with about 10% of my overall portfolio.
My “fun fund” should serve as a decent proxy for how I’m doing in this bucket (and it’s easier, since I track that more closely than the other accounts in this category). As I previously shared (through tears and convulsive sobs), my Fun Fund was down (11.72%) in 2020. Well, I bounced back a little in January 2021, with a 2.04% gain.
I haven’t really made any big changes in this area during January. I did buy a little bit of Markel @ ~$950 (just enough to make me pay reasonably close attention).
The Investor’s Podcast had a good interview with Tom Gayner, the Co-CEO of Markel, which sort of re-kindled my interest (as did the sub $1,000 stock price).
Markel is an insurance company which appears to emulate Berkshire Hathaway. That is to say they combine a good insurance operation (hopefully producing free or negative cost funds to invest) with investing in public securities and buying whole businesses. The theory is that you have more options to deploy capital into attractive markets versus just writing/deploying capital into insurance or investing in stonks or buying whole businesses. More options for a good capital allocator to “fish where the fish are”.
They are often referred to as a “baby Berkshire”. Obviously at ~$14 billion in market cap they have more room to easily grow than does Berkshire at $540 billion.
I have read and watched most things about Markel in the public domain, but I’ve never owned the stock before. I get Gayner’s investment and business philosophy (he discusses that in the podcast episode). His track record is really quite good (as is Markel’s historical stock performance).
I do, however, have some reservations about Markel. First, I don’t really know how to take the fact that they go to Omaha to promote their company/stock. I guess I get that they wanted to attract the same shareholder base. But it seems pretty promotional to horn in on Berkshire’s thing like that (Then again, thousands of others do it). If you were a purely rational investor/operator, wouldn’t you prefer to keep it quiet (like Buffett did in the early decades of Berkshire and maybe just operate and buyback cheap stock if it’s under appreciated)? Put up numbers and the people will come.
This sort of relates to another potential concern/issue. Gayner is the “investment/rational capital allocator guy” at Markel. The other top executives are all insurance people. From what I can tell Gayner owns about 40,000 shares of Markel.
A nice fortune to be sure, but seemingly well shy of enough to control the vote/flex your skin in the game like Buffett has at Berkshire (which was largely amassed while he toiled in relative obscurity).
Also, Markel talks a lot about admiring Berkshire but they blow off the teachings of the masters in order to pay a lot of compensation in stock and then offset it largely with repurchases that don’t really seem to be rational/impacted by the price. That’s routine corporate behavior, which is not terrible, but we’re talking about whether something is the next Berkshire here.
Finally, I don’t like that they largely expanded their insurance linked securities and reinsurance business over the past several years and also apparently are taking hits from the business interruption insurance policies that they wrote.
No one is omniscient, but it all goes back to my B.S. meter. Buffett and Ajit Jain have been lamenting inadequate pricing in these markets and the Markel guys are over there setting up shop during Berkshire’s thing in Omaha every year, seeking that association/imprimatur all while blithely blowing off the public lamentations of “gods of insurance” (and issuing SBC that is neatly offset with buybacks)?
It doesn’t strike me very favorably. The MKL managers also seem to sell a lot of freaking stock and get nice stock-based compensation. Basically, I just wonder if the insurance/sales bros are running the show and the rational, capital allocator guy is just the hired hand who talks nice. I would be a lot more interested if the managers (especially Gayner) had more skin in the game/control. Gayner’s 40K shares don’t have a lot of stroke when you are talking about 13.7MM total outstanding.
Anyways, I bought a little bit below $1K, just to track it more closely, because I do think Gayner talks pretty.
Other than that I’ve also been buying a little bit (more) of some “disrupted” media stocks. I will likely write more about that next time.
Value + Trend
I also manage some of my portfolio based on a very simplistic, systematic trend and value strategy. The account is divided equally: 33% each to the S&P 500 ($SPY), the Dow Jones Completion Index ($VXF), and foreign stocks (basically, $VXUS).
If the valuation of one of these indices/funds is rich (as determined by me based on a somewhat discretionary “process”), then I apply a simple moving average trend-following rule.
The idea is to have some risk management in place when stocks are expensive by selling when they also have negative time-series momentum/trend (for example, when stocks are down over the last 12 months).
When stocks aren’t “expensive” I just want to be long and strong. I only allow changes once a month in an effort to limit the number of “whipsaws”(when I sell and am forced to buy back into the equity exposure at a higher price).
If you’re interested in learning more about trend-following, I would recommend you start by searching for info on Alpha Architect and Meb Faber’s site.
I still have about 17% of my investments in this account/strategy. I am prioritizing contributions into this account. So, it should become a larger allocation over time (unless the relative performance stinks).
I made a change back in June to go back “full long,” after moving to t-bills with the U.S. allocations back in March. I took a whipsaw on that move out and back. This trend + valuation account roared back from the whipsaw, however, and ended 2020 up 17.29%.
In January, this account was up .58% beating the primary benchmark I’m using: AOR, a Blackrock ETF tracking a globally diversified version of a 60-40 portfolio. AOR was down (.04%). I think this outperformance, however, was attributable to the timing of a new contribution to the account.
GOals?
I think I’m going to tweak the goal setting and monitoring section of my journal. I’m debating whether to set annual goals and track them monthly here or maybe just set more discrete monthly goals.
On the one hand, it is kind of boring to touch them every month (probably horrendous to read), but on the other hand, it reminds me of their existence and publishing them here gives me some incentive to try to make progress toward their completion.
Most of the writing in this section over the last year has been about books I’m reading. So maybe I could add a section summarizing media (including books) that I’m consuming (I find it helpful to have a place to come back and reference that sort of stuff. Another alternative would be to start (or bring back) another series of posts about the books and other (finance and investment) stuff I’m consuming.
Speaking of…I am still reading The River of Doubt and Captive Audience. I kind of hate the River of Doubt, but I have a hard time quitting books, so it is bogging me down. Now I feel more motivated to finish these books before the next update. hah! So maybe I should continue posting about this stuff every month.
Maybe I will just focus on investment and finance media/lessons or something. For example, I am also currently re-reading a compilation of all Michael Burry’s old Scion letters (put together by @austinvalue on Twitter).
I would probably be more likely to memorialize some current impressions of this stuff if I had to regularly write a blurb about it. One current impression I have is how weird/interesting it is that Burry uses technical analysis. I guess his consideration of stock supply and demand factors has been essential in his recent $GME investment.
I am, however, kind of becoming disenchanted with him even though he’s currently riding to new fame with the $GME position. I have come to understand/adopt the (reported) view of Li Lu and Charlie Munger, that the “big short” at least as executed (via derivatives contracts with suspect counter-parties who, by the way, also controlled the marks to a large degree) was not a good bet and would not have paid off without the government bailouts. He was also so very very wrong about his covid takes and to be honest $GME is due to a large dash of fortune with the entry of Ryan Cohen and the WSB pump. I don’t know that it redeems the buybacks/distribution strategy for which he was lobbying.
That’s a Wrap
So anyways, that’s the state of my stash as of 01/31/2020. Market returns exceeded my own contributions, that’s always cool.
In the investing world, I did not do a lot. I changed the tagline/quote for my site as you may have noticed, which is reflects my general mental state about the markets currently. It is probably a time to be on guard.
To summarize my current portfolio allocation, I have about 30% of my portfolio in EAFE stocks, about 18% in my “value + trend” thing (which is currently long index stonk funds), about 10% has been sentenced to almost certain death in my stock picking accounts (which is all either in trash or cash), about 10% each in SPY and VXF, and the remaining ~22% is in t-bills/cash equivalents.
Thanks for reading!