It is time for my monthly personal finance journal update. September was a huge bounce back from August. I made some real progress. Mr. Market put his shoulder to the wheel as well.
All of the prior updates in this series are available on the Savings Diary page. The first, I’m Just Saving…Personal Finance Diary kind of provides the “origins story.”
Prior Update
In the August update, I was basically flat from the prior month due to a decrease in market valuations (my savings remained pretty much on autopilot). I ended the month at about $220,000.
CURRENT PORTFOLIO
I remain “overweight” foreign stocks. See Media Pin of the Week – More GMO, Weekly Media Pin – Grantham on Graham, Best Foreign Value Factor ETFs, Resource Roundup: More CAPE, and Foreign Value Factor ETFs Update.
Overall, about 50% of my overall portfolio is allocated to non-U.S. domiciled stocks. I also manage a bit of my portfolio based on a little systematic, trend and value strategy. The trend stuff is all long. I’m down a little exposure in the value based strategy.
Other than the Tapestry (“TPR”) purchase I discussed last month I’ve made no recent changes. I recently finished reading the Misbehavior of Markets by the mathematician Benoit Mandelbrot. It was worth reading if for no other reason than to introduce some healthy skepticism to many of the statistical statements made about the markets.
My main takeaway (recall, I’m an attorney/retail investor not a mathematician) was that the random walk and efficient markets hypothesis have been pretty soundly disproven at this point. If I had to describe the book quickly, I might say it is sort of the math/theory foundation for a lot of Taleb’s books. Essentially, the range of outcomes in markets is a lot wilder and less predictable than a bell curve (“fatter tails” probably partially due to clustering/dependence among results). He also talks a fair amount about the markets propensity to trend and also to mean revert.
I actually probably enjoyed it more than most of Taleb’s works (I don’t really find analogies to the tactics of Scipio Africanus prima facie dispositive of modern financial arguments/questions….haha). I think I have gained even greater skepticism for a lot of the probabilistic statements concerning markets (and risk) that are thrown around. For example, the number of stocks required to diversify a portfolio.
In addition, I finished basically every FundSmith video on youtube. I’ve been reading and watching lots of other “quality” investor stuff lately. I just started reading 100 Baggers by Chris Mayer. I’ve also got the Thomas Phelps book, which Mayer updates in his book. I started reading Mayer’s book first because I have a copy on kindle and it doesn’t disturb my wife. haha. Mayer also has a good blog that I read.
My big concern about that style of investing is yeah quality is great (and easy to sell/get behind) but it has got to be much more challenging to predict durability of a moat than to buy cheap stuff (and benefit from our well documented lack of ability to predict the future).
Some stocks I’ve been looking at thinking about/looking into are: AXP, EBAY, WFC, SLG, SRG, VNO, TIF, CPRI, PM, FIZZ, DNKN. Let me know in the comments if you want me to publish a post about any of these. Perhaps we could have a discussion.
For example, why does the market think MA and V are so much more valuable than AXP? It seems to me that AXP has a network that is “eating cash” too. Don’t MA&V have some material relative disadvantages given their near total reliance/captivity to their issuer bank/constituents that could make them less “anti-fragile” able to response to change? AXP actually seems to have a brand with a little luxury cachet as well. Hmmm.
THIS MONTH
Nothing unusual happened on the income and spending fronts. In September the equity bounced back. My overweight to foreign stocks paid off last month. The S&P 500 was up about 1.9%. Developed foreign stocks were up more: 2.9% for EAFE. The emerging markets (EEM) were up 1.9%. REITs were also 2.9%. Bonds were down (0.5%).
I am most overweight developed foreign markets. I know EEM is cheaper but I am not overly comfortable allocating where the rule of law upon which all the investment values rely is so weak and unproven/nonexistent. You cannot build without a foundation.
Thanks to the rebound in the markets and my savings/contributions (about $4,000) ended the month at $230,000, so Mr. Market did more work growing my balances than I was able to last month.
ONWARD
So far, October has been pretty volatile. I am thankful for having my “release valve” of the trend + value allocation. It is still “long” as of writing, but it is close to hitting the sell mark. I am planning to put up some more posts this month more focused on investing. I am mulling over starting some kind of informal investing diary/diligence posts, so I can refer back to them when I do stuff like look at the stock ownership breakdown/control dynamics of Ebay. Maybe we can then thresh out some details via comments. That would probably lead to more posting. It is challenging to find time to put together even a moderately polished post being a full-time practicing attorney and a new dad. Let me know if you have any interest in those sorts of “investing diary/stream of consciousness” type posts.
Thanks for reading!