This past quarter has certainly been one of the worst since our brief time in this investor group! It also didn’t help that my family caught Covid in the last week of March but that’s another reason why we have a more passive position that simply needs time to grow rather than constant daily actions.
Of course we all know that wars are very disruptive but the inexcusable acts of racial cleansing by Russia to Ukrainians is something the world should have learnt their lessons by now. Russia was after all, supposed to have embraced democratic values and understood that violence should be something of the past. However, whilst the politics behind Russian aggression is complicated, in my opinion, there should be no place for leaders of “super powers” to abuse their powers and kill thousands of men, women, and children for what is essentially ethnic cleasing and a land grab. All because Russians have been decieved by Putin that they should FEAR the growing enthusiam of Ukrainians for everything the “decadent West” has to offer. The proposal by Ukraine to join NATO was merely used as the excuse for Putin’s attack but despite the now clear position that will not happen, he continues to attack anyway. I always believe actions speak louder than words and that Russia orchestrated the whole crisis because they are still living in the 20th Century and did the same thing with Chechnya, Georgia, and Belarus. In conclusion, I do believe these countries should all strive to be neutral in future rather than “puppets” of Russia for a more lasting peace in the 21st Century.
Back to investments, they had a roller coaster ride but have already partially recovered to the point that we fluctuate around our breakeven position again. Looking at the Interactive brokers report here for March 2022, page 4, you can see that whilst our portfolio is down from it’s above average highs, it still has managed to outperform 2 of the 3 benchmarks and I hope it will outperform all 3 again sometime in the future. Most shares have recovered with Z1P, A2 Milk, AXE, and AI (USA) being the main shares setting us back (see page 6 for more details). If there is any share that possibly should be sold, it’s Z1P because it remains the most risky due to the ever changing financial environment. However. whilst they are burning through cash, they continue to invest in new systems, services, and growing internationally at a rapid rate which could possibly see their share price rebound if they can get their cashflows positive soon? Happy to talk more about the other shares directly should you want to further details.
The Bell Direct portfolio was similar but Emerging markets fund managers continue to struggle the most. The AMP Australian Equity fund has been able to break even during this period which shows how well Australia has done to live with Covid. See Bell March MTD Report 31-3-22
The consolidated spreadsheet to report these is here.
In broad terms, the poor performers of yesterday are typically setting themselves up as the outperformers of tomorrow. If that’s true, then maybe AXE and Emerging Markets (eg the UBS managed funds) are in fact where we should be increasing our exposure? We see that Covid and now the Russian trade sanctions are having global impacts of many nations and that it takes time to adjust to the new rules. Australia is in a good position to withstand these problems because we are rich in resources that many other countries simply don’t have. So it makes sense to invest in Australia because we will find that our exports are expected to benefit from the supply problems that many other countries are having. In particular, wheat farmers, will get a boost as global prices rise due to the Ukraine war and destruction of their crops. For example, I was reading how Turkey’s rising hyperinflation for food is because they relied on wheat from Ukraine! But the true impact is much broader than that and even Russians are leaving Russia because of their frustrations with work and food too.
Crypto currencies have also been equally as volatile but we were profitable at 31 March (over $21,000) only to fall again recently. That just goes to show how we could easily fall or recover from here again depending on world events and the general mood which has nothing to do with “reality or fundamentals”. So we stick with these until the “mood swings” back into our favour again, before we contemplate taking any profits, and after we hold them at least 12 months to minimise any tax implications.
The more detailed holdings are as per the below table – which largely remains unchanged from prior periods. The primary reason against trading is the high costs of doing so and the relatively small net benefit we get from the time it takes to follow them and speed at which the prices can move. It’s true that we can place orders but they often miss targets too.
