March 2021


A General Overview

No news 2021 seems to continue, also in March there is little that it’s worth talking about. I wonder if this has to do with Covid and all, it seems that the media are interested in talking only about the pandemic.

In Italy things are not going that well, after a great start of the vaccination campaign things started to slow down considerably, a mix of poor choices, incompetence and slow vaccines arrival seem to have dampen the fireworks that we saw at the beginning.

Political issues have also played a major role here, as Italy underwent yet another change in government at the beginning of the year, and the new setup (which has all the favours of mainstream media) is proving to be similar if not worse than the previous one.

Personal life is still in a very low gear, good weather helped me in picking up the bike once more and fortunately I was able to get some mileage. Nothing major, but it’s a start into trying to get fit again. Secretly, I am toying with the idea that maybe in May I can go back football training with my friends, although I am aware that’s more of an hope than a reality, right now.

Family is all great, and the little one is showing signs of growing up each day, which of course is great.

LH FUND

Explanation of terminology and graphs is HERE.

Let’s see the numbers:

MonthTRYTERNYYoCForex
31 Dec 20140.00%0.00%0.00%0.00%
31 Dec 2015-3.33%1.22%-0.13%-1.00%
31 Dec 20167.06%1.14%1.16%-4.35%
31 Dec 20179.94%1.04%2.64%-5.94%
31 Dec 20183.28%1.24%2.70%-3.53%
31 Dec 201923.50%1.35%2.72%-1.40%
31 Dec 202015.76%1.28%2.70%-7.60%
Jan 202115.52%1.27%2.71%-7.03%
Feb 202117.42%1.26%2.71%-6.69%
Mar 202125.19%1.24%2.67%-4.85%

TR is increasing (vs. previous month) – ATH for the portfolio! Beating a 25.04% made on the 15th February 2020! Way to go!

YTER is decreasing (vs. previous month) – Slight decrease of 2BPS, not a lot of activity these months means less commissions…

Net Yearly YoC is decreasing (vs. previous month) – 4BPS lost in March. Bad news, but dividend intake has been low, and options did not help thins month…

Forex is getting better (vs. previous month) – Pound is getting stronger and the Dollar decided to cool down on the devaluation path it took.

Dividends and Options

December income was 60 Euro

Dividends accounted for 909 Euro (-17% vs 2020) and Options ended up with a -850 Euro score (-N.A. vs 2020).

Dividends

Three out of three. This is the worst negative streak that the portfolio hit since inception. I guess I am still paying for all the cutting and selling done last year, after all I am still comparing non-Covid results with Covid ones. Needless to say that my hope is to reverse this trend, as it’s all getting a bit upsetting…

Options

Technically another great month, fiscally (and therefore result-wise) quite tragic. Decided to roll some positions for credit, but that means as always taking a loss today for more profit tomorrow. Nothing but an accountancy issue, but numbers have to be reported correctly, hence the loss.

DCA/Increased Positions

Nothing to report

New Positions – Sold Position

Sold 15 ETR:ENR @ 28.75 EUR

Nothing much to say here, Siemens Energy was given to me as a spinoff, I really had no intention to keep it, so managed to sell it for quite a big percentage profit (despite the small position). Nothing more than spring cleaning.

The Financial Conclusions

March did not see much change in the stance that markets have taken since the beginning of the year, albeit with rate of increase less violent than in previous months, indexes kept going up relentlessly.

Inflation talks made it to mainstream media, and now everyone is a bit more aware of how bad inflation can be for financial markets. The reality is that it’s far too early to worry about it, there is a rise in prices but it’s still below the “dangerous” level that could mean a move from central banks and a subsequent market collapse.

What is this level? Well, in my opinion it’s impossible to establish a threshold, mostly because we are not experiencing an inflation that is touching all aspects of economy (yet), and most importantly people seem to take out of the equation one very important factor which is economic growth.

If economic growth will be high enough then inflation is not a bad thing per-se. If we will see inflation fuelled by higher raw material costs with no sufficient economic growth then we are going to be in a different scenario.

It seems to me that central banks are betting (and hoping) on the economic growth to be strong enough to be the real driver of future inflation, it’s not an easy path to walk because all it takes is a small glitch in the way and we might find ourselves with raw material prices increase and a sluggish recovery.

One other threat is represented by how fast inflation grows. We are basing our models on previous observations, but on this aspect I have my doubts. History repeats itself, but almost never exactly in the same way. During the last 3 years we have seen extreme volatility, unprecedented moves of the markets, occurring in very short times. What if inflation will behave like that too?

One thing is sure, we’ll cross our swords with inflation a lot in the near to mid future, it’s part of the economic cycle, so it’s a totally normal phenomenon. Whoever talks about “new paradigm” is behaving like an ostrich that hides the head in the sand when feeling threatened. Economics as a subject evolved a lot, but the fundamentals remain almost unchanged, interest rates at near 0 have happened already in the past, it’s not new as some commentator seem to hint to.

In practical terms the LH Portfolio will not change its stance. Growing dividend and value investing can prove effective vs.inflation, unfortunately in times like the one we are now it’s really hard to find value for me in the market.

This is the main reason why I am almost only working with options right now, the target remains 200 euros worth of premiums each month, and “so far so good” I’d say.

Back to the market situation, the feeling I get is that we are in a stage where good news get the market to rise, good hopes for the future after Covid get the market to rise and bad news… Well, bad news are overshadowed by “the future after Covid” and recovery packages that governments are still about to roll. If you follow me, you know that I do not like this situation, not one bit.

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