I miss this blog.
I don't know 99.99% of you guys but I am sure folks read what I put up.
The reason why I took a short break was that market changes forced a rethink of my course slides and I was suddenly asked to submit the slides for printing by this weekend. Couple that with adjusting my portfolio to avoid margin calls, it was a shitstorm for the past few days.
a) Death of the Leveraged REITs strategy
Risking sounding too dramatic, the Leveraged REIT Strategy died a horrible death last week. I have been selling for weeks and informed all my students of my change in investment approach but my selling was still too slow to mitigate the damage to my leveraged portfolio. I think a series of articles on Dr Wealth would be more appropriate and I expect readers to look forward to it.
You guys should know I don't do the "I knew it all along" kind of articles, I prefer to think about what went wrong for me and I promise to showcase the stupidity that got me to this stage. My advice to critics is to gloat now and be as public about it as possible. I mistimed the market even though I documented everything on how my own strategy could fail in my older slides.
On the brighter side, I no longer owe my brokers money and, unless a miracle V-shaped recovery occurs, I can make my kids millionaires with the bargains we are getting in the markets.
The wealth exchange between one generation and the next generation has begun.
b) COVID-19 and lifestyle adjustment
Removing margin also has a strong psychological dimension. I am now free to think about things that matter.
As an extrovert, I have been too focused on life outside my home. Now it is time to look at the large volume of books and games and finally, find a way to play them. I will see whether I can teach my kids to play The Fantasy Trip, an old retro game only the oldest fogeys will know about. Each character sheet is the size of a credit card.
c) Impact on training business
Make no mistake - COVID-19 will hurt the investment training business. Attendance is down as a proportion of registrations and registrations is also down. As a response, I am adding a lot of COVID-19 related investment analytics into my presentation to spur demand.
My fear is that classes cannot continue. We have changed venues once yesterday to ensure the 1-metre safety distance and I will be experimenting with webinars once my course prep is complete.
The upside to all this is that I get to interact with my 370+ community.
d) Sharpening the Saw
At least two areas in my life is not a total shitstorm. My Python programming is moving along fine and I managed to get some leeway building websites with flask.
The best progress is my exercise. As gym sessions continue, my body has stopped aching after an aggressive workout. I also have developed an unholy breakfast concoction using yoghurt, blueberries and granola that does not taste like shit so I can sustain it. Today I even managed to make avocado edible by adding lemon juice, salt and yoghurt.
Yoghurt is very key because the acidophilus bacteria helps with controlling my blood sugar. Problem is that this class of yoghurts are very sour and needs some bit of hacking.
e) Reading
I am torturing myself by reading Playing at the World by Jon Peterson. It is more boring than legal cases I used to read but it is a painstaking description of my D&D hobby. I learnt about the kind of wargames Prussian generals played 300 years ago and mythical roots of elves and dwarves.
Anything to get me out of overthinking about the markets.
f) Hobbies and entertainment
So far I have held back from taking the easy way out buy playing computer games or binge-watching anime. This is probably not sustainable. Right now, anything can happen as I try to stay indoors. Maybe I'll watch Star Trek Picard. Maybe I'll buy a PS4 or Nintendo Switch.
I've also reduced my workload to focus on leisure this weekend.
Anyway, without the weight of a margin account, I am actually much happier than before COVID-19. Bargains galore in the markets for those who can hold indefinitely and I am forced to think about my hobbies and leisure.
Condolences on the late leveraged REITs portfolio. The going was good while it lasted.
ReplyDeleteMaybe still workable with an "ejection seat handle" for certain triggered market / macro conditions i.e. when economic conditions have reached a stage whereby good chance of significant price dislocations & you'll win by being solvent & liquid to scoop up bargains in the months ahead.
I've been spending the past year learning how to use Python to modify the behaviour & internals of a 12-year old CRPG. But my graphics editing sucks so I'm shamelessly copying & mixing & mashing from various mods. Many of the characters & monsters still look like retards though...
Ehhh .... yogurt (the original greek kind) + blueberries + granola is among my favourite foods!! And avocados .... yum!!! As long as they are adequately ripened ... super creamy & good fats!
The only thing I can thank millennials for is the avocado demand (real or imagined) so that there is now affordable avocados from NTUC or Giant thru supply chain economies of scale.
Lay off the sodium & chilies for 3 months ... your tongue (& brain) will reset itself to like these more bland but healthier foods.
Thank you for the honest update.
ReplyDeleteI have been checking out your blog very often these days because of the interest in your REITs portfolio.
Looking forward to the articles on Dr Wealth.
Cheers!
I'd gloat, but my portfolio is down too.
ReplyDeleteThis crash is more like 1987 than 2008. Did you backtest against 87 data, possibly using US REITs?
Good for ditching the margin, SG REITs are starting to become fairly priced again, there will be some bargains around! The types you see only several times in your life...
Most commercial yogurt contains fuckloads of sugar. If you can eat the unflavoured stuff, I salute you.
All the best
Hi Chris,
ReplyDeleteI hope that you are not affected much by the leveraged portfolio. I think that it is best to have the cash which one does not need for his/her emergency and monthly expenses, in the investment portfolio.
My two cents worth of views.
WTK
wow, you are deleting negative comments. tsk tsk tsk...
ReplyDeleteI attended your teaser session on 18 Mar and you mentioned you have a margin as well as non margin portfolio. What's the benefit of separating them. By splitting them up, won't you make it easier to get a margin call since you cant use the non margin portion as additional collateral?
ReplyDeleteIts mental accounting. But in practice i don't like to use leveraged payout for home expenses.
ReplyDeleteFrom your blog you didn't come across as a person who would be prone to mental accounting and not try to fix it.... especially if there are cons to the setup like in this case. :)
ReplyDeleteFurther question, would it not be better to try keep the mortgage at its max (80%). And pay lower interest rates and have a lower risk of margin call (ie easier to hold indefinitely). Cash flow buffer will need to be managed better since its P+I but that can be mitigated esp given the lower spread between FD/Mortgage rate.
If you have a sufficiently large portfolio with the bank(and this is helped by above question about mortgage), you can also use it to withdraw cash for investment which also counts as LTV or for tie you over if you need cash for whatever reasons. Best of all interest is lower than margin financing. And you can borrow in any currency.
So if you combine the 2 together, you will get a much cheaper and yet lower risk way to get leverage.