Analysis & comment – FIRE v London

Feb ’24: Envyidia

2024-03-032024-03-03 FIRE v LondonLeave a comment

I’ve had quite a lot of culture to enjoy in February.

Aside from some travel for the Six Nations rugby, I’ve been to two shows – one in London’s Royal Opera House and one on the south coast.

Both events were either full or practically full. Covid feels fully behind us now. But the prices have stayed with us.

I was struck by the demographic difference between these two nights out. I know, I know, the demographics of opera and concerts are not a fully reliable guage. But I was practically the youngest person in the audience at Poole’s Lighthouse concert hall, whereas I felt 2nd quartile old in London’s Royal Opera House. Is this a reflection of where the money sits – with retirees only in Dorset, and with well-heeled workers and tourists in London? A rhetorical question, for now.

Markets in February 2024

The USA stock market continued to be the main story in February.

Though if you were paying attention, the Japanese market has been setting new records too – the Nikkei 225 is up 20% Year to Date.

It wasn’t just Japan that’s booming, with Asia ex Japan up 4.5% in February itself. Over in Europe and Australia we had much less excitement; Europe ex UK was up 2.8%, Australia up only 1.2% and the misery-guts UK’s market rose only 0.5%.

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In praise of Berkshire Hathaway

2024-01-27 FIRE v London8 Comments

I think I first clocked Warren Buffett’s (and Charlie Munger RIP’s) Berkshire Hathaway around the year 2000. I loved the story. Starting from, as the story was told back then, humble beginnings and a paper round, Warren Buffett (and Charlie – who I will stop mentioning but absolutely deserves practically half the credit) had built Berkshire into a giant.

Buy & hold – what’s not to like?

Berkshire was the holding company of an investing approach par excellence. Buy great businesses at a fair price, hold forever, reinvest dividends, job done.

The business had never paid a dividend or split the stock, which by that point had reached over $70k per (Class A) share. It had annual meetings in Omaha, its home town, which were already becoming a cult following.

There was also something about Warren Buffett’s penny pinching ways that appealed to me. He lived in his first house, he drove practically his original car. Part of his aversion to splitting the stock was the (tiny, in the scheme of things) cost of a stock split (though he did thankfully create the B shares in 1996, which are identical to A shares but a fraction of the price). He preached from the book of compound interest and his lectures were very compelling.

And yet

There was something sufficiently compelling about Berkshire Hathaway to me, as a baby FIREr back in 2000ish, that I named one of my assets after the business. That asset remains to this day, though it has sadly failed to prosper in line with the mighty BRK.

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Dec ’23 – 2023 in review

2024-01-022024-01-03 FIRE v London8 Comments

It’s the start of a calendar year. Let’s take a look at what 2023 did to me financially. I’m following the same structure I’ve used for the last few years (2022, 2021, and 2020). Overall, 2023 was a good year on almost all measures – thanks in particular to Q4 which saw the US stock market drag the year into a top quartile performance.

Q1 How did markets do?

First of all, what happened out there? Well, the year felt pretty ‘meh’ for the first nine months – as illustrated by my rather depressed blog post in mid October. But almost as soon as I hit Publish, the US market in particular led a dramatic recovery – reflecting a sharply improved outlook for inflation and interest rates. You can see below firstly the performance in December.

*December 2023 market returns, by geography and asset class*

Then we get to the year as a whole. Bonds rose by 3-5% across the board, but equities did strikingly better – particularly in the USA where the S&P500 rose around 26%. The UK equity market looks like the runt of the litter, which given the tech-driven nature of the uptick and the lack of UK tech wouldn’t be a big surprise. However it isn’t quite that simple, because the GBP rose against most currencies.

*2023 market returns, by geography and asset class*

Another way to look at the benchmarks is to look at the world equities (e.g. VWRL) and world bonds (e.g. AGG/BND or the UK’s IGLT). My portfolio has often pretty closely tracked the VWRL ETF. The graph below shows VWRL and IGLT’s share prices (but not dividends) for the year, showing the world equity bundle up (in GBP) 13.4% and the UK government bond index roughly flat.