August 2021

A General Overview

If you are an Italian national, working and staying home in August is perceived as quite strange. Even in 2021, where some companies and factories are staying open, most of the county seems to “have” to go on holidays, flocking beaches, mountains and leaving cities empty.

I am a major hater of the “throng of people” on holidays, and that’s why we try to hit June/July/September for our family outings, staying home in August and the busiest periods.

So in August I’ve got my first shot of Moderna vaccine, worked in a new school and generally didn’t do much else in an empty Florence which we all love.

Yes there was a major heatwave hitting the city, but it’s August after all, what can you do about it?

Nothing else to report really, at the end of August we went few days on the coast, which was a great family outing especially because Leonardo has never been to the seaside before (well, he did but he was too little to remember).

Now September, lots of things are going to happen.. but that’s another story, for another post…

LH FUND

Explanation of terminology and graphs is HERE.

Let’s see the numbers:

Month	TR	YTER	NYYoC	Forex
31 Dec 2014	0.00%	0.00%	0.00%	0.00%
31 Dec 2015	-3.33%	1.22%	-0.13%	-1.00%
31 Dec 2016	7.06%	1.14%	1.16%	-4.35%
31 Dec 2017	9.94%	1.04%	2.64%	-5.94%
31 Dec 2018	3.28%	1.24%	2.70%	-3.53%
31 Dec 2019	23.50%	1.35%	2.72%	-1.40%
31 Dec 2020	15.76%	1.28%	2.70%	-7.60%
Jan 2021	15.52%	1.27%	2.71%	-7.03%
Feb 2021	17.42%	1.26%	2.71%	-6.69%
Mar 2021	25.19%	1.24%	2.67%	-4.85%
Apr 2021	24.93%	1.23%	2.69%	-6.98%
May 2021	28.02%	1.24%	2.76%	-8.12%
June 2021	27.67%	1.40%	2.61%	-5.59%
July 2021	27.39%	1.39%	2.61%	-5.54%
August 2021	28.79%	1.37%	2.62%	-5.64%

LH Portfolio Milestones + Monthly current year

TR is increasing (vs. previous month) – Lovely 140 BPS increase! Well, stocks are going higher and higher, what do you expect?

YTER is decreasing (vs. previous month) – 2 BPS, important as ever, seeing this metric go down is always a pleasure!

Net Yearly YoC is increasing (vs. previous month) – 1 BPS is not a lot, but it’s better than losing ground. 3% is still a dream though…

Forex is getting worse (vs. previous month) – Here we are talking peanuts (10BPS), but still…

Dividends and Options

June income was 1340 Euro

Dividends accounted for 1094 Euro (+11% vs 2020) and Options ended up with a 245 Euro score (+37%% vs 2020).

Dividends

Not bad at all, August has been a difficult month in the past, numbers were falling since 2018 so seeing an improvement it’s a breath of fresh air!

Options

Thanks to some Calls that expired this month I managed to hit the 200 Euro target that I needed. Either than that, it’s a difficult market for put sellers like me…

DCA/Increased Positions

Bought 100 GOLD @ 19.50 USD

A Put option being assigned, nothing more, nothing less. Still going to be using GOLD for speculative reasons, selling calls near my average price when it’s a good time to pocket nice premiums. While waiting I’ll be collecting the (small) dividend that the stock pays.

New Positions – Sold Position

Sold CNP @ 26 USD

A call that ended ITM, I get a little bit of profit (100 USD) and the premium from this sale. CNP was a mistake in hindsight, as they cut the dividend soon after I bought them. This is the main reason for selling the calls neat my average price (25), and not being sad at all about seeing it gone.

The Financial Conclusions

I think that August has been one of the least volatile Augusts in the history of the stock maarket. Usually, due to lower volumes there is a bit more of “action”, but this time nothing happened. Markets are getting all time highs every other day, and we are in a state where bad news are seen as “good news” and good news, well… they are good news!

The result is that no matter what, the market keeps going higher and higher.

It seems that all lies in the hands of central banks, on when and whether they’ll start reducing acquisitions of state bonds, hence reducing money supply and increasing interest rates.

In a normal economic cycle this happens when inflation rises steadily, forcing the government to increase premiums on bonds, and pushing interest rates up. I think that right now central banks are trying to fight the inevitable rise of interest rates in any possible way, my impression is that they don’t really know what might happen when rates will go up, and they are trying everything possible to delay the rise and, if possible, to control the increase so that it doesn’t happen so quickly.

If I remember my economics studies, when tightening central banks are in control of the economy, but when the opposite happens (rates go up) they cannot control anything at all, as the driving force is inflation and not the amount of debt that the central banks can buy.

In real terms inflation is already rising quickly, at lest here in Italy. Scarcity of prime materials drove many products up in price. To put more pressure on prices we also have some policies that our government is adopting, where basically you can do a series of renovations to your house almost for free. On one side this is great, and it’s helping the economy to recover, on the other side there is too much demand for anything remotely construction related, which turned out to be a major inflationary force too.

Right now with companies not being allowed to fire people and lots of renovations starting there is no issue with this, nobody is feeling it, but sooner or later the incentives will end, and things will be back as they were.

That will be the point where rates are likely to pick up pace…