July 2017: Congratulations, Mr Bezos

July saw a hotchpotch of news of all shapes and sizes.

Poor baby Charlie Gard caught the world’s attention.  I feel terrible for the parents, and also somewhat indignant about the hysterical coverage of the doctors and judges involved.  But from this blog’s point of view none of this is relevant so I will move on.

In the UK, pay was high on the agenda.  First of all with the post-election focus on the 1% public sector pay cap, now well below inflation.  Later in the month the BBC disclosed its highest paid staff, with a predictable fuss ensuing about an apparent gender pay gap. Meanwhile, across the pond Mr Bezos briefly became the world’s richest man, a rather less impressive fact when you consider how much more his gazillionaire rivals Buffett and Gates have supported charity and some of the astounding results the Bill & Melinda Gates is achieving (in part thanks to Buffett’s donated billions).

From a market point of view, what’s been going on?  The below-inflation pay cap bodes well for corporate earnings but badly for wider society.  And Bezos’s 15 minutes of fame stemmed from continued boom for USA tech stocks, as well as the wider markets. I only have a couple of the FAANGs in my portfolio but I’m not complaining.  USA equities were up over 1%, with UK and Oz markets rising a bit too.

In the currency markets, the pound and the US dollar both fell.  The Euro and the Aussie dollar both gained over 3% against the pound and dollar. Accordingly, European equities fell around 2% – this is a similar effect I think to what happens with the globally-exposed FTSE-100 when the pound gyrates. The more domestically-focused Australian equity market managed to rise despite a strengthening Australian dollar.

The bond markets in July saw little to report.

Weighted by my target exposure, the markets rose around 0.5% in their local currencies. The currencies, again weighted to suit my target, rose against the pound too – by almost 1% on average.  So the market I’m benchmarketing against, the total of these, was up about 1.3% as measured in GBP.

2017 07 FIRE v London July markets weights.jpg

Against the benchmark’s gain of 1.3%, how did I do myself?  I said last month how the sharp currency drop at the end of June looked likely to be reversed, and if that happened I’d expect a July bounce of over 1%.  That’s basically what happened.  My investment portfolio gained about 1.8%.  This beat the market by about half a point.

My one year returns are still almost 15%.  The Brexit effect has been almost as drawn-out as it is enormous.

2017 07 FIRE v London July returns

For July, that’s about it.  My portfolio loan held steady, and it remains a priority of mine to reduce my leverage. I’m a little overweight on fixed income, and a little underweight on UK, and this feels as it should be.

 

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5 Comments on “July 2017: Congratulations, Mr Bezos”

  1. fireinlondon says:

    Hi FvL,

    On the pay cap – dont assume that the 1% is guaranteed. My other half works for the NHS and so far hasn’t had a pay rise in 5 years….

    A good solid run being up 15% – nothing to be sniffed at especially in these markets!

    Cheers,
    FiL

    Liked by 1 person

  2. Richard says:

    Hi FvL,

    Thanks for the blog – great to see people being so honest about their investments and you’ve got a real wealth of information on here. I’ll admit this is a bit off topic for the blog post in question but I couldn’t find a way of contacting you about the ETFs that you list directly so I figured I would just post here.

    On your Useful ETF page you list both “iShares FTSE100 UCITS ETF” and “Vanguard FTSE100 UCITS ETF” – why is the yield on the Vanguard tracker 3.5% and the yield on the iShares tracker 3.1%?

    I was also wondering if there was any particular reason you didn’t list the iShares UK Equity Index (UK) D Acc? ISIN: GB00B7C44X99, description: http://www.iii.co.uk/investing/factsheet/G6IG/ishares-uk-equity-index-uk-d-acc – it’s a FTSE All Share Tracker with a very low OCF and seems to fit the principles that you outline on this blog well.

    regards,

    Richard

    Liked by 1 person

    • Richard – thanks for this. I like the look of your UK Equity index security and will check it out. Generally all-share holdings are under-represented as ETFs, leaving us resorting to the top 100/500/etc.

      The yield difference between Vanguard and iShares ETFs is probably more apparent than real. I take the quoted figure from the fact sheet when I add it and don’t keep them up to date very well. Assume the yields are the same.

      I will dig a bit further with these insights and refresh the ETF page. Any more ETFs that I should consider?

      Like

      • Richard says:

        Hi FvL,

        Thanks for your reply, it makes sense now. I’m far from an expert on ETFs but I will mention the Vanguard “LifeStrategy” range that combine global equities and government bonds, coming in different percentage version: 100/80/60 etc depending upon the proportion of the fund that is invested in equities. Very useful for the lazy/casual investor!

        regards,

        Richard

        Liked by 3 people

  3. So year to date you’re at 6.6%. You’ve continued to outperform my best efforts which are 4.7%
    year to date. I am losing out because of a big chunk of cash waiting in low interest bank accounts/NS&I ILSC’s for a home purchase. Even netting that off I think you’d still just have me though. Congratulations!

    Like


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