October has been one of those months where I wonder whether I should be doing weekly updates, not monthly ones.
But rather than subject you all to 20k words, I feel like it has been such a blur I can’t even do it justice. The end result is that we have a new PM (a billionaire mews dweller, no less – probably the only one in the country!), a new chancellor, and long term interest rates/etc are back where they were two months ago. Energy prices appear to be dropping, through no fault of our government. Short term rates are up – at the time of writing they have just jumped 0.75% to 3.0%.
The difference from two months ago is that our £40bn-£50bn fiscal hole now actually matters. That stray £10bn between £40bn and £50bn is caused because the government now accepts it needs to tighten policy, and thus reduce growth, which ups the deficit from £40bn to £50bn. But in the meantime energy prices have dropped enough that much of that £10bn is clawed back as a smaller subsidy under the Kwarteng Energy Price Guarantee.
I became disillusioned, last month, with index-linked gilts. This train of thought continued in October leading to me becoming quite enamoured of individual gilts. I have repurposed one of my subaccounts into a fixed-income-only account. And I have even been buying some government bonds – both in the UK and in the USA – reasoning that yields of 4%+ over 30 years don’t sound too bad, I don’t trust the ETF’s pseudo-index process to get me that yield, and IB gives me very good margin arrangements for these bond holdings (much better than the Lyxor fixed income ETFs, at any rate). The good news is that I am already 10% up on one of these investments; the bad news it that the holding in question is less than 0.1% of my portfolio, and yields are now about 3% which doesn’t feel like such a tasty proposition to continue topping up.
The pound recovered somewhat in October, after its mauling in September. Likewise UK bonds rose 4% too as the ‘moron premium’ faded, reducing yields / increasing bond values. Equities rose everywhere, particularly in the USA. The markets I’m exposed to rose 5.6% in October; currencies then pulled my non-UK values down 2.3%. Which left the markets up, in GBP, by 3.2%. (As a bit of small print – some of my monthly figures are rather approximate because the iShares website doesn’t seem to have updated since 20 October).
But my portfolio contained a whole range of dynamics. I have a variety of subaccounts / accounts with separate reporting and it was interesting to see the range of results.
- My passive ETFs portfolio, a leveraged IB portfolio, rose 6% in USD. Very similar to the market benchmark cited above.
- My (leveraged, ahem) Tech portfolio dropped 3%. Amazon’s share price dropped 10%, and my Shopify holding, though up 25%, is much smaller.
- My Ltd company portfolio, another (very) leveraged IB portfolio but almost all active holdings, rose only 0.1%. My META/Facebook and ADS (Adidas) holdings took a beating, and I have Amazon in this portfolio too.
- My blended Australian portfolio rose 4.7%. This was mostly driven by Xero.
- My brand new fixed income portfolio was up a bit too – though this portfolio only came into existence mid month.
- Most bizarrely, my hotchpotch active equities account rose 14% in GBP, admittedly benefiting from mild leverage. Berkshire Hathaway, Disney and Pepsi being up 10% and JP Morgan climbing 20% all proved very helpful – tho my trimming of my JPM position a couple of months ago does not look so smart now.
Separately, and due to a combination of reasons including taking a couple of profits, my margin loan reduced by five figure sum. This reduces my Loan to Value to 24.2% (from 24.9%). I remain significantly overleveraged but the loan is 10% smaller than it was at the start of the year. I remain comfortable it’s under control, even though the monthly interest expense is 50% higher than it was at the start of 2022.