What caught my eye this week.
Well, it looks like we are gonna make it. No, not in the sense of the crypto mania catchphase (wagmi), which already feels about as relevant as a minstrel who verily does doth his bonnet to such tomfoolery.
But rather, it’s nearly Christmas and a lousy year for investors is coming to an end.
Actually, I’ve kind of lost track of how Monevator readers feel about their portfolios in 2022.
When I was bemoaning my active strategy having blown up in the first-half of the year, sensible world tracker owners and LifeStrategy players largely shrugged their shoulders.
British passive investors and even many UK-focused stock pickers were doing fine – the former helped by currency gains, the latter by tech stocks being as rare on the London market as a Brexit benefit.
However it feels like value destruction has now reached into even those doughty portfolios.
In particular the bond blow-up has caused more emotional distress than I can remember equities ever doling out. (To reiterate, today’s pain with high-quality government bonds is literally tomorrow’s gain. Okay, or maybe the day after.)
Indeed by September Bloomberg was estimating the carnage of the combined crash in equities and bonds had wiped out $36 trillion in wealth. That’s worse than 2008.
Still, a few readers with very unusual portfolios occasionally chime in that they’re doing fine.
Genuinely: good for them!
But remember, most if not all portfolios that were unusually successful in 2022 won’t have delivered the returns you chalked up last year. Or in most previous years, for that matter.
That’s not a criticism. Portfolios are personal things, and higher returns aren’t everything. Some people prefer lower volatility, say, or maybe more income now for lower future gains. But it is a reality check.
Regardless, I’d have loved a slab of what they’ve been eating this year, and unlike my co-blogger I’m violently agnostic about how people go about investing.
Investing is a long-term game, with results best measured over many years.
That’s as true when meme stock traders are making us feel like losers in a bullish year as when someone with, for example, a permanent 25% allocation to gold is beating a bear market.
For my part, my ten-year dalliance with growth stocks (I began life more as an opportunistic value seeking curmudgeon) finally caught up with me.
Despite suspecting the sell-off in highly-rated US stocks in late 2021 was an early portent, I began buying those fallen darlings. Funded mostly by selling cheap UK equities that I’d previously in-part reallocated into.
It’s hard to imagine a worse move, except to compound it by not cutting bait sooner as the market continued to go against me. Instead I dribbled out of my positions, my portfolio bleeding.
The result is that even after shifting a huge chunk of my portfolio to ‘lower volatility’ assets fairly early in 2022 (as a response to my upcoming remortgaging uncertainty) and the growth rout finally stabilizing, I’m well behind my benchmarks this year. And it’s not like they’re looking very healthy, either.
Of course it didn’t help, again, that the lower volatility assets I’d finally acquired – especially UK government bonds – proceeded to swan dive, then turned to full-on synchronised
swimming drowning in the wake of Liz Truss’ Mini Budget.
That’s been the story of my 2022 in a nutshell. Get your tiny violins out!
Monevator was noting inflation was a potential threat as far back as December 2021. Expectations then were still for interest rates to go to about 1% by the end of 2022.
Yet I (re)allocated far too much to rate sensitive ‘long duration’ stocks regardless.
And even though we were early in warning readers to stress test your mortgages, there was nothing much I could do with mine (reminder: unusual circumstances) until my remortgaging window opened.
Which it finally did… post-Truss. My monthly payments are set to near-triple in the new year.
Fairytale Of New York
If you live by the sword, you die by the sword. Active investing has been good to me overall, but in 2022 I screwed up.
Nothing even half-fatal, but also not something I can blame on the flapping of Black Swans, with the possible exception of the war in Ukraine.
The signs were there, and my game for years has been to act on them. But this year I’ve been more Harry the Hoofer than Lionel Messi. My only consolation is almost all the stockpickers I know or follow are also in the relegation zone.
It’s rarely a good idea to do a deep rethink strategy in the middle of a funk, but I am wondering if it’s finally time to end my longstanding ultra-active investing experiment – I trade something most days – to go back to the sleepier buy-and-hold style where I made my bones.
Keen readers might find out in our upcoming membership service in 2023. And the rest of you will be spared too much more self-indulgent bewailing.
(I’m mostly sharing to show we’re all in the same boat, grumpy pants, but feel free to snicker.)
Rockin’ Around The Christmas Tree
I guess there have been a couple of reasons to be cheerful in 2022, if you squint a bit.
Covid as a threat to life has mostly retreated for most of us, as best we can tell.
And UK politics currently looks more stable, albeit that’s a bit like an 18th Century surgeon reassuring a patient that the gangrene has been arrested now their leg has been chopped off.
But otherwise: is it hyperbole to say it’s been another bummer of a year?
I know – it feels like every year has been a duff one recently. But war in Europe, an inflation surge, widespread strikes, rising energy bills, a stock market crash and bond market implosion, political chaos, the economic consequences of Brexit finally coming home…
…it could certainly be worse, but it’s not just me, is it?
As ever reading has been a comfort. Both for its practical insights and on the grounds that when you see what others have gone through, you take everything less personally.
Here are a few from this year that would make great last-minute presents.
Richer, Wiser, Happier by William Green
Ostensibly a recap of various investors who found ways to best the market – including Vanguard founder Jack Bogle, who saw an investor could do better than most by simply making peace with it – William Green’s book also has a lot of wisdom on living tucked into its pages.
How to Fund the Life You Want by Powell and Hollow
My co-blogger The Accumulator raved in his recent review: “If I was starting from scratch, this is the UK personal finance book I’d want to read first”. He’s not an ebullient chap at the best of times, so I’d be inclined to believe him.
The Power Law by Sebastian Mallaby
After More Money Than God, his previous work on hedge funds, I knew the Mallaby treatment applied to venture capital was just what my doctor ordered. A deep dive into an opaque industry, Mallaby should be working on a new edition given how things turned south for the sector in 2022.
The Psychology of Money by Morgan Housel
Okay, this was a re-read. But Morgan Housel’s two-year old treatise on the ways money acts on our thinking and in our lives has sold two million copies for a reason. Brain food for anyone in your life.
The Man from the Future by Ananyo Bhattacharya
I think this also came out in 2021. Never mind, I’ve been in awe of von Neumann since I came across his work as a student and this book reminded me why. One of a genius generation of Hungarians who US colleagues dubbed The Martians, so brilliant was ‘Johnny’ that even the Martians thought he must be a time traveler.
All I Want For Christmas Is You
And that’ll do it for Monevator in 2022.
Actually, not quite – checking the calendar I see the next Weekend Reading I plan to send out will be on Saturday 31 December.
But that strange period between Christmas and New Year’s Day always feels out of time to me. It’s perhaps my favourite week of the year.
It’s been an odd year for the site, too, incidentally, and you can expect some changes in 2023.
Far more people now read new Monevator articles on email than on the web (subscribe if you haven’t) and we were hit by some kind of Google algorithm change about 18 months ago that has further flattened website traffic.
One result is we’ll probably de-cloak and highlight our identities soon, to try to convince our Google overlords that we’re not nefarious swindlers.
Do please curb your enthusiasm.
We’re also finally going to roll out some sort of membership/paywall offering.
Internet display advertising continues to dwindle. And despite what people keep telling us, affiliate sales don’t do much around here either – probably because we’ve trained or cultivated an audience of proud skinflints, but also because I refuse to run most stuff that would make more money (despite what the house troll complains).
Fear not! Monevator will mostly remain a free site and newsletter; we’ll just be hiving off a few morsels for those who are willing to chuck us a few quid.
At times this blog cost me money to keep going this year, which after 17 years and a lot of kind reviews is a bit ridiculous. Moreover it badly needs a redesign, which needs more funding. 2008 chic can only last for so long.
Finally – whisper it – but I think we’re going to get the Monevator book out at last in 2023. It’s written. It’s down to me to buckle down to the faff of publishing.
With a schedule of investing-related treats like that to come, who needs a stock market rally, eh?
Thanks for sticking with our long and deep posts in an ever more bite-sized and TikTok-ified world. We honestly try.
Merry Christmas, and a happy new year to you all.
p.s. Bumper list of links this week to get you through the holidays. Enjoy!
How to Fund the Life You Want review – Monevator
Investment trusts discounts and premiums – Monevator
From the archive-ator: What are growth investors looking for? – Monevator
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Bank of England raises rate to 3.5%: what does it mean for you? – Moneyfacts
Property sales volumes to fall 21% next year as mortgage arrears rise… – FT Advisor
…while Halifax is predicting an 8% fall in house prices – Guardian
Microsoft to buy 4% of London Stock Exchange on cloud deal – Bloomberg via Yahoo Finance
Monevator ranked UK’s top personal finance blog for the second year running – Vuelio
ONS figures show the rise of ‘unretirement’ – This Is Money
Nuclear fusion breakthrough: what is it and how does it work? – BBC
SpaceX tender offer is said to value company at $140bn – Bloomberg via Yahoo Finance
Games Workshop signs deal with Amazon for Warhammer films – Hollywood Reporter
Alt strategies haven’t done much for diversified portfolios this century… – Finominal
…though KKR says these ones can usefully diversify a 60/40 portfolio right now – II
Products and services
Wise has a new wrapped-gilt product it calls ‘Interest’ – Wise
N&SI has upped its rates, including the prize fund for Premium Bonds – NS&I
Transfer your pension to an ii Self-Invested Personal Pension (SIPP) before 31 December 2022 and claim up to £1,000 cashback. Terms apply – Interactive Investor
Jeremy Hunt floats ‘stretchy mortgages’ to lower monthly bills and curb repossessions – This Is Money
Zopa, Chase, and Chip apps are all paying more following the BOE rate rise – This Is Money
How much power do your gadgets use? – Guardian
Britain’s forgotten benefit: thousands missing out on bereavement support – Which
Morningstar CEO says direct indexing can make investing fun again – Investment News
Homes for sale in historic villages, in pictures – Guardian
Comment and opinion
The California effect – Mr Money Mustache
Riding out the storm – Humble Dollar
Should retail investors buy gold? [Search result] – FT
Inflation’s final destination – Bond Vigilantes
Rich friends and the wealth game [Inspired by our post, podcast] – Stacking Benjamins
Defining ‘enough’ – Young Money
Take calculated risks – Collaborative Fund
Tremors felt in the UK housing market – The Motley Fool
Overpaying your mortgage? Perhaps you shouldn’t [Search result] – FT
How often is the [US] stock and bond market down in consecutive years? – AWOCS
Why isn’t it more expensive? – Fortunes & Frictions
A nation deep in debt: part two [Podcast] – A Long Time In Finance
Saxo Bank’s outrageous predictions for 2023: the war economy – Saxo Bank
FTX collapse has lessons for everyone mini-special
A key ingredient of the FTX fraud – Demystifying markets
The FTX lesson that all investors should learn – Portfolio Charts
Crypt o’ crypto
Binance outflows hit $6bn as Mazars halts ‘proof of reserves’ work [Search result] – FT
No one is happier about Sam Bankman-Fried’s downfall than the Bitcoin people – Slate
How CoinDesk’s crypto FTX scoop left a hole in its corporate overlord – The Verge
The fall of FTX shocked everybody. Except this guy – The Atlantic
Naughty corner: Active antics
UK equities: mispriced opportunities abound – Schroders
Sea change – Howard Marks
End of ‘fantasy’ stock market brings relief and pressure for short sellers [Search result] – FT
The importance of the FAANG stocks is fading – Bloomberg via Yahoo Finance
Monetary policy may have a longer lag than we thought – Klement on Investing
Investing in the African future – The Motley Fool
Valuing private companies is hard, and the pros are conflicted – Institutional Investor
Should your portfolio protection act fast or slow? [Research, PDF download] – AQR
Did a CPI leak spark a 60-seconds-too-early rally? – Bloomberg via Yahoo Finance
Kindle book bargains
I Am Zlatan Ibrahimovic by Zlatan Ibrahimovic [Holiday read!] – £0.99 on Kindle
Surrounded by Bad Bosses and Lazy Employees by Thomas Erikson – £0.99 on Kindle
The Business Book by DK Publishing – £1.99 on Kindle
Quiet Leadership: Winning Hearts, Minds, and Matches by Carlo Ancelotti – £0.99 on Kindle
The rampaging avian influenza is entering unknown territory – Hakai
The ESG backlash is partly driven by (some of) the right’s climate change denial… – Vox
…but Vanguard’s recent net zero backtracking is more about index fund reality – P&I
Should we build wind turbines from wood? [A couple of weeks old] – New Scientist
Health-y debate mini-special
Rethinking the causes of Alzheimer’s disease – Quanta
Scientists finally know why people get more colds and flu in winter – CNN
New obesity breakthrough drugs – Ground Truths
The NHS cafes that save lives – Prospect
Hearing aids slow cognitive decline, but we’re not sure why – New Atlas [h/t Abnormal Returns]
A dangerous stew of air is choking the United States – Nature
Off our beat
And what if you can’t tell? – Seth Godin
How Putin’s technocrats saved the economy to fight a war they opposed [Search result] – FT
This psychologist spent five years studying penalty shootouts – Wall Street Journal via Mint
Why competitive advantages die – Morgan Housel
The middle class is dead. Long live the long tail class – Dror Poleg
TSMC: semiconductors and the borders of light – The Generalist
How to keep going when life gets hard – Darius Foroux
52 Snippets from 2022 – Snippet
“Like Warren Buffett and Charlie Munger, Mohnish Pabrai spends most of the day reading…”
– William Green, Richer, Wiser, Happier
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