State of the FIRE – Feb 2020


Investing, Strategy / Monday, March 23rd, 2020

Coronavirus – The Undoing of the Stock Markets

After hearing talk of impending doom for the last year or so, it’s finally here! Let history be witness to the fact that it was Feb 2020 when the stock markets finally sat up and recognised the threat of the Novel Coronavirus (named COVID-19). Shit finally hit the fan and things only seem to be getting worse at the time of writing this.

But the reaction of the stock markets have been quite delayed. COVID-19 had started to disrupt the Chinese economy back in mid Jan 2020. Wuhan was locked down along with other cities where the coronavirus cases had surged. The Chinese Lunar Year holiday was extended in the end of Jan to reduce the spread of the virus, factories and offices were shut down. Given that a large part of the global manufacturing happens in China, a shutdown of factories and offices was expected to disrupt the global supply-chain for a lot of industries. It was surprising that the stock markets paid no heed to that and continued to climb newer heights everyday. Even the spread of the virus to Japan, South Korea, Hong Kong and other south-east Asian countries had little effect on the markets. In such a globally connected world, they seemed unimpacted.

It was perhaps when the virus reached European shores, infecting Italians by scores, that the investors realised that the peril was not so far away from home as they had thought. Since then the markets have fallen like there is no tomorrow, breaching into bear territory. 

Investment pundits had presumed that it would be another bubble, like the sub-prime loans during the GFC in 2009 or like the dot-com bubble in the 1990s that would lead to the next recession. Many thought that it would be the US-China trade dispute that grabbed headlines throughout the second half of 2019. But who knew that the world economy and the markets would fall ill to a virus!

Combined Net-worth

Time for our Portfolio Performance Review. As of 28 Feb 2020 our combined net-worth is only slightly higher from last month’s, but looks are deceptive here. In the month of Feb, we invested a total of about $10,000. So if all things had been normal, our Net-worth would have been increased by $10,000 at least. But instead it increased only by $4,000, which means we actually lost $6,000 in the last few days of Feb.

Total Assets – $136,517

Debt Outstanding – $0

That would be a combined Net-Worth of $136,517, only 3.2% higher than last month’s Portfolio Performance Review. Quite measly in contrast to last month, when we grew by 15.8%.

In comparison to the portfolio split from Jan 2020, the proportion of Stocks has gone up by ~3%, while that of Cash and Super has gone down by  ~1% and ~2% respectively. This has been because we have been investing all our spare cash. The investments we made in Feb have all gone into shares and none into bonds or gold, the prices of which have rallied. That is why bonds & gold have been able to maintain their share of the pie. And because the prices for shares have fallen, the increase in their proportion is not as high as it should have otherwise been.

(Wo)Man vs Machine

Time for our monthly bout, the ongoing battle between (Wo)Man and Machine. And the prognosis does not seem very good. The bears are clawing down the market. And if you remember last month’s Portfolio Performance Review, we saw how much more gold the Machine had in its portfolio vs me. And while I had said that I would look to rebalance my portfolio, gold prices have been soaring and I haven’t done it. With the share prices falling, I, the (wo)man have an obvious handicap. A handicap that promises to negatively impact me in the next few months. 

First up, the Machine.

Performance Report of Roboadvisor from 1 Feb 2020 to 29 Feb 2020

Machine Portfolio Mix

The proportion of shares has slightly gone up for the Machine since last month. That’s because in Feb the Machine purchased a large chunk of Aussie shares and a smaller chunk of Global shares. Which is also the reason that the percentage of Aussie shares is higher since last month and the proportion for Emerging Markets is  lower.

Machine Returns

With the way that the stock markets have been moving, it looks like it’s a race to the bottom and the one who comes last, wins. This time around and perhaps for the next few months, we’re only going to be dealing in negatives. So how low did the machine’s returns go this month? Well, it was a capital loss of  -3.68%. And because there were no dividends, there was nothing to offset that.

If you are curious and somehow missed why we invested with a roboadvisor, you can read all about it here.

And now for the Portfolio Performance Review of the (Wo)Man.

Performance Report of Self-directed Investments from 1 Feb 2020 to 29 Feb 2020

(Wo)Man Portfolio Mix

Like I was saying at the beginning of this post, because stocks are down I ended up buying more. So you will see that the proportion of shares in my portfolio gradually crept up, while that of bonds and gold came down. Even though this should probably have been the other way around given that the doomsday predictions were indeed coming true. But the cost of both bonds and gold is just so high at the moment and climbing higher, it did not make any economic sense for me to buy at the moment.

(Wo)Man Returns

My portfolio contracted by -4.33%. No surprises that it was a higher loss than the machine’s. You will see that the Machine’s stock returns were actually more negative than mine. The Machine’s stocks had a loos of -7.72% while mine de-grew at -5.96%. But despite that, overall, gold saved the day for it and it ended up at a much lower loss than me.

Gold will be the bane of my existence for the next few months at least, I can see it!

With profound sadness, Gold for the Machine this time around…

Ms. FieryIce

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