Nov 2017: The King is gone.

Without meaningful term limits, the tyrant just went on and on. Well into his dotage, he seemed to have become preoccupied with furthering his dynasty by handing over power to his family.  And to preserving the family billions.  As his grip on power finally began to slip, the superficial stability of his regime visibly crumbled, replaced by an excited whooping and baying by the masses.  A mighty era, ending, this very month?

In fact, Rupert Murdoch remains in power for now. But the rumours are that the dirty digger may sell critical parts of his empire – studios, newspapers etc.

Slightly closer to home, Robert Mugabe is gone.  The king is dead, almost.  And good riddance.  I’ve held off visiting Zimbabwe until he’s gone and now the place has just opened up for me.  Except that his thuggish henchman, by all accounts, has replaced him with the full support of the army.  I may be waiting a little longer.

Meanwhile, out in the markets, what’s been happening?  Supposedly Brexit is all starting to come together, notwithstanding the not-very-minor issue of the only land border between the UK and the EU.  Certainly the forex markets cheered both the EU and the UK, with GBP up to a level it hasn’t seen since its steep Brexit slide. Meanwhile US markets continued their relentless upward glide, providing a benign backdrop for the bitcoin hysteria.

The pound rose about 2% in the end, versus USD and AUD.  The Euro rose with it, more in fact.  When GBP rises, FTSE drops, and November was no exception, so FTSE finished around 7300.  But on the other side of the pond the mood music remains very sunny, with the Dow breaking new records and S&P 500 breaking through 2600.

Given my 75% overseas weighting, forex was a -0.8% drag on my portfolio.  But with almost half my allocation into US equities, the 3% gain in US stocks gave me a solid tailwind.  The blended constant-currency market movement was up 0.3% for me.  Net net my weighted benchmark was therefore down by around 0.5% (+0.3%, less 0.8%, before leverage effects).

2017 11 FIREvLondon markets

How did I actually do?  My portfolio lost 0.1% in the month.  Another red, loss-making month – making November the fourth loss-making month this year.  After October’s +3.3%, I’m not grumbling at losing 0.1%.

2017 11 FIREvLondon growth 1m

Behind the scenes, I managed to pay down a further £10k or so of my portfolio loan, so my Loan-To-Value ratio fell slightly.  I remain pretty close to my target allocation.  I have moved about £20k from a high tax account into a lower-tax account, which is more than normal but not enough to hit my £200k objective for the year.

I enter December with a bit more anticipation than normal.  December will be my sixtieth month of tracking my portfolio returns properly.  I’ll soon have the full five year track record that, in the world of asset management, is a key milestone.  If December is a good month, I’m on track to achieve about 13% compound growth over five years – a very respectable performance.  My fingers are crossed.

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4 Comments on “Nov 2017: The King is gone.”

  1. Olivier says:

    Hi Mr FvL,
    Perhaps a stupid question, but why do you use a portfolio loan rather than CFDs to gain leverage ?

    My understanding is that interest payable on the margin loan is not deductible from income tax on the dividend received, whereas with a CFD you’re charged CGT @ 20% on the total gain including dividends, net of interest expenses. That would make borrowing through a CFD more tax efficient than through a portfolio loan.

    Thanks

    Like

    • @Olivier – Perhaps a stupid answer, but for me the margin loan beats CFDs in a few ways
      – no change to my portfolio – no need to crystallise existing holdings/gains
      – I can maintain full range of investments – including in direct company bonds, Australian equities, traditional funds, etc
      – I can directly access the loan and blow/spend it on houses/cars/groceries/etc. This is the key one really
      – I am not very experienced in CFDs but am aware of the horror stories – 80%+ of customers lose money, etc. Debt is intuitively easier, even though I accept that margin loans are quite hard to understand too.

      Against that, I accept that the margin loans are not tax-deductible, or certainly when they are in my own name (margin loan in my company’s account *is* deductible, which I do make use of).

      Like

  2. Looking forward to a big update at the 60th month mark! Be good to see a graph of your loan to value over time, and hear more about how you think about the exposure psychologically/emotionally, as well as in terms of risk control. (I know you’ve written about this before, but always like an update.)

    I’m about to have a massive chunk of debt with my name on it for the first time really in my life, and am interested in learning more. (In fact, I expect the whole debt to be one learning experience!)

    Cheers for the link. $15,000+ on Bitcoin now, and almost touched $20,000 on one of the exchanges (at a $3K premium to price.) Efficient schmifficient. 😉

    Liked by 1 person


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