Feb 2018: Vix is not a vapor rub.Posted: 2018-03-07
Well well, February was an interesting month in the markets. For once, the markets were the news. Heck, versus Italian general elections and German coalition building, almost anything would be interesting.
Writing about one month on, and a few days into March, I can’t even remember what triggered the commotion.
But commotion there was. Markets fell by around 10% in early Feb. The VIX volatility index skyrocketed and then, if memory serves, stopped being tradeable.
By the end of the month there wasn’t so much to report, except flesh wounds almost everywhere you looked. The pound fell, plus ca change, and the Ozzie markets didn’t move much, but most developed world equities ended the month down by around 3% or more.
But actually a 3-4% drop doesn’t capture the emotions of that first week of February. Entering February at almost 7600, the FTSE-100 index dropped by 9 February below 7100. And the S&P-500 fell from around 2850 at the end of January to below 2550, a fall of more than 10%, on Feb 9th. As various blogs have reminded us, such volatility is in fact the long term norm, but it felt very unusual compared to the last few years. I felt curiously Zen about the drop – as aware of my cognitive biases as I ever have been.
Back in my ranch, I finally made the jump in moving my main portfolio tracking spreadsheet over from Microsoft Excel to Google Sheets. This is not a painless process but certainly makes updating the totals a lot easier thanks to the GOOGLEFINANCE() function. It has however slowed me down for the various month end processes I follow – hence this post is about a week late.
With my leveraged portfolio, my benchmark for the month (in constant currencies) dropped about 3.6%. Ouch. The fall of the pound should have helped my GBP reporting by 1.3%, but I was still expecting a drop, in GBP, of over 2% on the month.
So I admit to being a little surprised to find that my invested portfolio only fell, after adjusting for withdrawals, by 0.1% on the month. This feels like my tracking may have a bug in it, though if so it is deeply buried. I am tempted to do a full-on performance attribution analysis, but life is too short.
In other news, I have temporarily extended my margin loan to make a couple of property-related loans outside my ‘invested portfolio’. This leaves my margin LTV at just over 25%, up from less than 22% at year end. These loans are relatively short term, and are not obviously correlated with stock markets, so I don’t feel they have increased my risk by much. But I am temporarily deviating from my ‘track my target allocation ultra closely’ objective. Hey, it’s mid quarter, and the year is yet young.