Well the usual December recovery from the typical annual volatility between October and November did not happen this year and just goes to show how unpredictable the world is today! The total monthly return was negative as many assets we held are suddenly no longer “in favour” despite some gainers helping reduce the “losses”. Our portfolio’s total return is now still positive at 3.9% since inception but lower than last months return (of 6.6%). The Spreadsheet summary can be downloaded here.
We understand there are fears about inflation and the prospect of higher interest rates. The main inflation problems are not necessarily from growing demand but more from struggling supplies due to Covid restrictions in trade. These are only short term in nature as companies will adjust and adapt to either change their suppliers or existing suppliers ramp up production. After that happens, it could be that demand stabilises or even reduces (eg. some tech items demand could reduce as saturation may occur) and that could reduce pressure on future inflation? Under that outcome, if the global economy slows down again because people still don’t want to travel, then the pressure to increase interest rates could actually disappear too. In addition, any threat of wars (Russia, China, North Korea, or Iran) could also impact the global economy with further trade and travel disruptions.
The Interactive brokers monthly report, showing a -3.7% return for the period, can be seen here. The main losers were stocks that at some stage in 2021 gave us very good gains but it shows how quickly people are changing their minds and having little patience about the future. AXE, HZR, and TSLA are all medium and longer term plays that could be worth a lot more than the prices shown recently. So the sell off is quite “irrational” and they will come back into favour one day – of course when is the “million dollar question”? Even more irrational is the sell-off of the MRNA (Moderna vaccine company) which we first had a 30% gain before it being sold off again – despite the generally good conditions for them to perform well as Covid vaccine demands should continue for years to come. There were some gainers, especially FMG and CHL, with FMG especially being one of the best examples of holding our nerve as they fell from around $28 to under $14 (i.e. 50% down) and now back over $21 (which is 50% up) and our average cost around $16. It’s important to remember that so much has happened and we are waiting for us reach the preferred 12 months of holding stocks before we reassess them. In other words, too many investors must be making very short term decisions to be buying / selling these stocks in such short time frames that they clearly have no idea about what the companies are dowing and how to “value” them. Of course, some things change (that’s one of life’s certainties) but many things don’t. We know there are risks in stocks – some will make good progress on their promises and others wont. Either way, companies need patience from investors to research and plan things over years not months. Maybe technology speeds up some things (especially people’s expectations) and that’s why stocks are being “traded” more than ever before? However, I don’t believe such short term thinking helps the inventors trying to make the breakthroughs needed to make the world a better place. The best gains often come from companies that appear to be doing very little until they succeed with a big sale or contract that catapults them into another league – that’s what can happen for those who wait patiently. Let’s see what happens in 2022 as we are well positioned for some recoveries.
The Bell Potter report, showing a 1.5% return that offset some of the other losses, can be seen here. The fund managers have generally struggled and we can only hope that 2022 is a better year for them too.
Cryptocurrencies are certainly out of favour again! The chart below clearly shows how we have fallen almost 50% from the highs.
The individual holdings below shows us only the 24hr price changes. At the time of writing, we have seen further falls as more people are getting worried about their losses – which is typical of the quick profit expectations out there. It looks like things will continue to get worse before they get better. However, we will remain patient as there’s so much cash out there from government stimulus, that one day the money is likely to search for bargains again. The main reason being that this is not a “fad” and most of the cryptos selected still have reasonably good commercial prospects for the future that is well on its way and generally accelerated by Covid.
