I've Never Had The Feeling That My Money In The Bank Is Worth Less Than It Is Today
How we avoid this by having a (very) positive return YTD
As we have already said several times, money is useless if we do not have peace in the world. What is happening in Ukraine is a humanitarian crisis. We see it far away because we live in more developed countries, but at any moment, it can happen to all of us: to be separated from our families, to see how they raze our city, our houses, bombs on public buildings, schools,... it is terrible.
"We are running out of food and that we have nothing for the children. There is also no electricity, no water, no heating and the temperature right now is 5 below zero" -- Explains a 45 year old woman in the former circus headquarters of Zaporiyia.
From here, all our strength.
No to war!
This week's volatility spiked during Monday and Tuesday's sessions only to pull back a bit on Wednesday.
This has made us materialize some of our positions and get enough performance to keep our portfolio in (very) positive this year (returns below).
People don't believe that you can make money in every market situation, but Asymmetric Finance is a clear example.
Many people are assimilating this volatile environment with 1929, and we see that two clear differences can make it even worse:
The number of "investors" that were in the market in 1929 and are in the market today.
Most "investors" today have never experienced extreme volatility in the markets.
The barriers to entry for investment today are very low. This means that it is (much) more complicated to get rich by investing. For example, if everyone were an entrepreneur, owning a company that is above average in terms of revenue would be very complex. If everyone practiced the same sport, becoming a professional would be much more complicated. In addition, the athletes who would now be practicing this sport at the second level would be more on the average and would make (even) less money.
The same thing happens with investment; when everyone invests, the returns diminish, and only those who do different things are the ones who can take advantage of it.
One of my main fears is when I see everyone investing in passive funds. If everyone put their money into passive funds (as is happening), they would contribute their money linearly to the companies. These companies would increase in value, and the relative market cap difference between them would be equal, but the absolute difference would be much greater.
This would mean that we would leave much more power in much fewer hands, with the danger that this entails and that when liquidity stopped flowing in, the crises would be infinitely worse.
As I say, this is only our opinion, but we can already see that the market share of index funds has increased to 60%.
What is clear is that by doing the same thing, you will not have extraordinary results, and even less so today when the number of players is infinitely greater.
Moreover, if there are more "investors", they have never experienced a recession in their lives (2).
We have long shown our genuine disagreement with monetary policy. Central bankers think they are alchemists in the markets, and the truth is that they are not. "I put little interest rates in, take a little money out, put a little more money in, etc."
The laws of nature and free markets argue that these experiments have NEVER gone well. We have already seen it, for example, this week with the price of gasoline where it has gone up more than 15 cents a liter.
On the other hand, I have never had the feeling that my money in the bank is worth less than it is today. More seeing cases like Ukraine and Russia, hence we continue to have in our balance cryptocurrencies as a possible alternative.
This is a lesson I think we will learn the hard way this year, or in less than a couple of them.
For the past 15 years, we have seen people make fortunes in the market by simply investing in an index and adding money while the Fed put the turbo in the markets, pumping money in.
The options for central banks and investors are diminishing. Either the FED allows this inflation we see with the price of all commodities to continue (when we already have most commodities in ATH), or it goes about raising rates aggressively (at which point you will regret not taking out a mortgage, as we told you).
If he chooses the second option, and that is what he will do, he will be preparing a time bomb that, added to the geopolitical conflict, is likely to explode soon.
The dispersion between the CPI YoY and the FED Target Rate is maximum:
Two fun facts this week.
Amazon has announced that it will do the first 20:1 stock split since 1999. In addition, Amazon has authorized the purchase of $10B in company stock. This could make retail investors jump for shares and has catapulted the share price by +10% (aftermarket).
The DAX confirmed on Wednesday the biggest absolute rise in its history (where it gained more than 1,000 points).
This week in our portfolio we made a 233% return on a covered call in just one week. Our system continues to have zero emotional bias and to behave correctly.
Now we tell you what's new in our portfolio.