The market’s in freefall: what should I do?

Last week was the worst week since, well, a very nasty week quite a long time ago. And this week has started even worse. We are now officially into S&P correction territory.

Jeremy Grantham types (thank you @Monevator for the link) will tell you this wolf has been lurking just around the corner and we had it coming.

Typical, really. Just after I have leveraged up. And published a piece about ‘feeling rich’. Maybe I caused the global stock market drop, through sheer hubris? Just to compound the sense of nemesis , I am about 3% overweight on USA equities going into this correction.

When is a fall a fall?

Mind you, the fall has barely started. Jeremy Grantham describes how these corrections start with the riskiest stuff. Maybe that is why, until today, FTSE hadn’t moved yet.

In fact my portfolio – and its graveyard – are full of surprises.

I have a few ‘spec tech’ holdings that are down over 30% – e.g. HUBS, DOCU, ESTC. So is Homeserve, though Homeserve’s decline pre-dates the recent woes by several months.

And my big tech is down materially – Amazon down to $2800, MSFT, GOOG and so on down 12-15%. Not nearly as big a drop as the ‘spec tech’ but more impactful to my portfolio due to my substantial holdings in a couple of these.

Key indices, and a sample ‘spec tech’ stock, performance year to date

But, reflecting FTSE remaining at 7300+, some stocks I gave up on a while ago though are doing OK – HSBC is above £5, and Shell is above £20.

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Feeling rich

Throughout my past N years, I’ve always been a saver.

I find being frugal pretty easy. Not at the Warren Buffett level – I have changed both car and house a few times now. In fact not even to the level of my parents or grandparents (who were very much the war generation). But between me and Mrs FvL, I have always been the saver.

My expenses have been well above the national average for years, but much of this has been discretionary around two or three particular themes – travel, dining out and gadgetry. Over the years, lifestyle inflation has crept in. My ‘standard’ restaurant meal out in London now costs £150 for two – whereas not too long ago £90 would have covered most eventualities. But I have avoided too many fixed costs – and I have always had the mindset that if times were hard I could change down gears and still lead an independent, fulfilled life.

Something has changed this year. I’m not quite sure what, but it is probably some or all of the following:

  • 2021 has been something of a bumper year for my net worth, driven both by market returns and also a couple of income/angel investing windfalls.
  • My spending has dropped significantly since Covid-19, with travel and dining out both being massively curtailed in London at least until recently
  • I have an increased sense of my own mortality – partly due to catching Covid-19, and partly due to the passage of time / friends getting cancer / similar. I’ve been playing the FIRE game for 9 years now, and during that time my net worth has grown dramatically, and my expected remaining life span has shrunk significantly.
Continue reading “Feeling rich”