mardi 8 novembre 2022

A part of the cure

I'm going to explore another country this week. I'm going to Mexico. 

I'm not sure that it's the kind of country that appeals to me, but I'll give it a try. At least, it's gonna be much warmer there than in Quebec and I'll be able to practice a bit of spanish. 

Another thing: I may get kidnapped there or I might be victim of police corruption or something like that. It doesn't excite me, but I think that you have to be exposed to threats or difficulties once in a while to consider your own problems in a different way. 

For instance, if you live a crisis with one of your kids, go to Iran with them. Live a dangerous experience: survival mode will help you to get closer. As ridiculous as it may seem to some people, I think that it would be a good cure to some problems. 

Also, dying while living an experience is probably the best death. I'd rather die at 43 while traveling than living up to 80 and only watching TV. 


 

lundi 7 novembre 2022

How do you sleep?

I feel that I have to find a meaning about life. It's been a very tough year so far for me. Life hurting me not directly, but by the sides. 

I need to create a philosophy that will keep me sane and avoid me to fall into depression. I've never thought that much about suicide because I think that it arranges nothing and leaves a big black cloud behind and probably generates cancer to people exposed to it. Your death is not a tragedy for yourself but it is for people around you. Also, there's probably a couple nice chapters left in my book even if I sometimes feel that the story will only be darker and harder as time goes by. 

I've always been worried a bit about the future but now, I'm very worried and I feel alone. Part of that feeling comes from my disdain of most people and from the fact that there are some specific and rare people I would like to be surrounded by. Who are these people? I don't know because there's very little people that I've really liked in my life. I also miss very few people that I've lost touch with over the years. 

It's like dead-end. You are what you are and you can't be different than that. It satisfies you most of the time but makes you very unsatisfied once in a while. 

I wake up most nights at 2 or 3 AM and can't sleep. Is it my worries? Is it my age that comes with perturbations of sleeping? Is it the feeling that I'm in a big hole? I don't know. 

I have to do something. I don't know what. I can't save my kids from all their problems but I have to stay sane and think a little bit more about myself. 

The answer must come from myself. Nobody can help me because nobody knows how I feel and nobody could probably give me the advice I'm looking for. 

jeudi 27 octobre 2022

A bad day for techno

Since I own Meta, Microsoft and Alphabet shares, yesterday wasn’t a good day at all. They all had a bad day. Very bad in the case of Meta.

Even if these stock’s valuation wasn’t exxagerated at all (actually, we could almost say that they were cheap), they all went lower/much lower (Meta).  

I don’t understand why so many owners of these shares seem to panic. Of course, Meta’s last results were no good (EPS dropped by almost 50% versus last year). But not any of these companies is going bankrupt or will face tough times in the coming years (like lots of debt and little money on hand).

In the case of Meta, it looks like this :

* 14B$ cash on hand (about 50B$ if we add marketable securities and accounts receivable);

* Margins and ROE over 20 in the recent years (which is not that common on the stock market);

* 10B$ debt;

* 300B$ company, so that debt is not that high.

So, what should be the value of a company with lots of cash on hand, a small debt, high margins, high ROE, a company that offers services used by more than 3.5 billion people (which is a also a kind of monopoly). I’m not saying that it’s the best company in the world, but is a PE of 8-10 really rational for that kind of company? When you analyze 100 companies from the stock market, you see that such a PE ratio is usually applied to a very random company. Like an oil and gas company that produces something like 50 other companies. Or a company without growth for the last 10 years.

I don’t think that any company with high margins, high ROE, low debt and used/known by billions of people should be sold for a PE under 15. Because a PE of 15 is the historical mean of the market, which means that it’s also the usual mean of stocks. Which means that 15 is the PE of an average stock.

Meta, Alphabet and Microsoft are not average stocks.

jeudi 13 octobre 2022

Portfolio review (october 13th, 2022)

It's been almost 7 months since the last portfolio review. I guess it shows how much importance I've put on investing over the last months. 

Even if investing is not that important for me these days, I wish I had more money to invest. If I had 50 000$ right now, I would probably invest all of it in a few of my stocks. But it's not the case. I've had too many expenses this year to be able to invest a big percentage of my earnings. And I mostly want to reimburse my margin, because interests are higher and higher. 

The year has probably been tough on most of investors. It's been a bit tough for me too, but after almost 15 years of investing, I'm not that sensible anymore to market swings. 

I'm much more sensible to specific stock swing. Like a Valeant swing in 2015, for instance.

So, here's a few numbers: 


Number of stocks: 20

Average ROE: 42

Average FWD PE: 20

Top 2 positions: 25% of the portfolio

Performance YTD: -25%

S&P500 Performance YTD: -21%


How's it been for you?

mardi 4 octobre 2022

The dangers of margin

Since the last 3 or 4 years, I've been a great fan of margin. In an environment of very low interest rates, why not borrowing lots of money and investing on the stock market with an almost guaranteed return of 9-10% every year (when you invest in the S&P500 on the long run). 

It looked so simple and easy. 

But a lot of us tended to forget that the PE of market was high these last years and interest rates where very low. Two abnormal situations at the same time. 

Recently, interest rates went up quite a lot and the PE of the market went down quite a lot. It was the perfect recipe for a financial suicide or a real suicide for those who were all in on margin. 

Imagine that scenario:

Your portfolio has a value of one million dollars. The PE of your portfolio is about 25. About 50% of your portfolio includes stocks bought with margin. The interest rate of your margin is 3%. 

A few months later, the PE of the market goes to 18 (28% reduction). Interest rates go to 6% (100% increase). Normally, you won't experience a margin call but it always depends on the kind of stocks you own. At the same time, you have to pay much higher interest rate on your margin (which is a debt). That's a substantial financial stress. Plus the stress of a potential margin call. 

If you owned a lot of super expensive stocks, the contraction of the PE was probably much worse. For instance, if you own Block (Square), the value of a current share is about 25% of what it was at the beginning of 2022. 

A lot of gamblers and bitcoin lovers may find current times very difficult. 

The lesson is that margin may be interesting but only for a small percentage of your portfolio. In my opinion,  a margin over 10% for a large portfolio may be dangerous. 

My margin represents about 3% of my total portfolio and I feel that interest rates are much less pleasing to pay now than they were 6 months ago. 

Try to remember that during the next bull market. 

mardi 13 septembre 2022

Why paying for a firm?

If you're ignorant and want to stay ignorant about how the stock market works, just buy an index fund (Warren Buffett said that numerous times) and leave your money there. 

If you want to know how the stock market works, read a few good books, start to analyze as much stocks as you can (at least one hundred stocks), then, find the 5-10% that are the best (high margins, growth, ROE, low debt) and invest money on these 5-10% of stocks. Focus on these ones and forget the rest. If Bitcoin is up 75% over the last 6 months, remind that, when things go up quickly, they usually go down, one day or another. 

Try to resist to the idea of giving your money to some small or large firm. Because they're not very good even if they dress well. Here's two good examples: 

Performance from january 1st to august 31th 2022: 

Donville Kent: -46%

Barrage: -36%

S&P500: -18%

Barrage doing twice as bad as the market and Donville Kent doing twice and a half as bad. Do you realize that some people are paying these guys to manage their money? You're paying people that generate twice as much loses as an index that anybody could buy? If you had given 1 million dollars to Donville Kent on january 1st, you would own 540 000$ now. If you had bought a S&P500 index, you would own 820 000$ now. 

There are probably some money managers that did well or not so bad this year. But these two examples remind me that I'll never give my money to anybody. Because most firms simply suck, may they have a lot of employees with an MBA or whatever the fuck. 

mercredi 31 août 2022

Deux sur deux

Dans la vingtaine, je répétais régulièrement que la vie c'était de la marde. Que l'existence était dépourvue de signification. Par-dessus le marché, je m'attendais constamment à ce que la vie me réserve de mauvaises surprises. 

Je m'attendais à un cancer précoce ou la mort d'un de mes parents ou une quelconque autre tragédie.

Rien de tout ça n'est arrivé. J'ai eu quelques problèmes, mais rien de grave, rien de dramatique.

La vie avait simplement attendu que j'aie des enfants pour me frapper un grand coup de poing dans le ventre. 

Mes deux enfants ont chacun une condition particulière. Aujourd'hui, j'apprenais officiellement que l'un d'eux allait connaitre un déclin progressif de sa vision, jusqu'à la cécité, autour de 40 ans, si on se fie à la moyenne des gens qui ont cette maladie. Peut-être un peu plus tôt, peut-être un peu plus tard. 

Pas dramatique comme un alzheimer précoce ou le suicide d'un proche dans un garde-robe. Mais ce sont mes enfants, sacrement. J'ai pleinement pris conscience de ce que tout le monde dit: ce qui arrive de grave à nos enfants est la pire chose qui puisse nous arriver. 

Deux enfants sur deux avec un problème sérieux. Essayez de battre ça. Mais non, vous serez pas capable. Essayez de battre le marché à la place.