An Update On My Personal Portfolio

Tyler LinstenInvesting, Personal Finance, Sarcasm

We’re beginning to wind down the year so I figured it would be fun to give a you a look “behind the curtain” of all the transactions I’ve made within my own portfolio in 2017. A lot of times clients probably wonder what I do with my own money so here’s a transparent look at the moves I’ve made…

 

Short-Term Trades Inspired By Over-Caffeinated Options Pit Trader Featured on CNBC:

 

 

 

 

Volatility ETF Short Sales:

 

 

 

 

Speculative Cryptocurrency Moonshot Bets:

 

 

 

 

Day Trades:

 

 

 

 

Night Trades:

 

 

 

 

Mid-Afternoon Trades:

 

 

 

 

Reactionary Put Option Buys in Response to Political Skullduggery:

 

 

 

 

3x Leveraged ETF Buys:

 

 

 

 

Late-to-the-Party Amazon Investments:

 

 

 

 

Trendy Tesla Short-Sales:

 

 

 

 

Complete Account Liquidations in Response to Kim Jong-un Threats:

 

 

 

 

Trades Made on My Smartphone:

 

 

 

 

Trades Made on My Smartwatch:

 

 

 

 

Trades Made on My Smart Day of the Week, Thursdays:

 

 

 

 

Days, Year-to-Date, I’ve Done Absolutely Nothing:

  • 319, as of 11/15/2017

 

Q3 Client Letter

Tyler LinstenClient Letters, Investing

Wherein I leave a Bitcoin Easter egg.

[gview file=”https://aldercovecapital.com/wp-content/uploads/2017/10/Q3-2017-Client-Letter.pdf”]

Jerry Seinfeld’s Perfect Investing Analogy

Tyler LinstenInvesting, Personal Finance

Although, he (probably) didn’t realize it. 

Screenshot via YouTube

Netflix is out with a new Jerry Seinfeld stand-up special. I loved it. Is there anyone else is the world who can pull off “clean” comedy like Jerry? I don’t think so.

Little did he know, Seinfeld made a wonderful investing analogy for the “active vs. passive” debate where investors battle over whether it’s best to own index funds or to try to pick winning individual stocks. When talking about his own anxiety at the prospect of making small talk with random members of the audience, or the public at large, he states:

“I can talk to all of you, but I can’t talk to any of you.”

Do you see the parallel? Applied to the decision of active or passive, Seinfeld’s analogy works like this: “I can invest in all of the stocks, but I can’t invest in any of them.” It’s such a clean statement that, frankly, I’m steamed to have not thought of myself.

It’s incredibly hard to pick winning individual stocks, just as it’s hard to begin a conversation with a single stranger. So much can go wrong. What’s easy, though, for Jerry and for most investors, is addressing the individuals as a group (whether they’re people or stocks). When you have a the microphone and an audience, just as an investor has a single basket of thousands of stocks, it’s much easier to control the narrative and keep your emotions in check.

Trying to get a single person to laugh on the street is a volatile situation. How many times in a row could you bomb before realizing comedy wasn’t the right profession, and quitting altogether? Maybe you actually had what it takes for a promising career, but hit some bad luck on the street. Put in front of an audience, however, just one person of the group not laughing won’t sink a career. And, you guessed it, when you own an index fund, one company going bankrupt won’t ruin your portfolio. How many times could you make a bad stock pick before exiting the market while potentially missing out on a lifetime of gains? The downside is staggering.

Be like Jerry: Succeed by talking to (and investing in) all of them. Who knows, you may end up amassing more Porsches than him someday.

Find the Time

Tyler LinstenPersonal Finance

Considering we have the 4th of July holiday coming up, you might find yourself with some free time. Maybe it’s an hour or an entire day. Either way, there are certain “financial hygiene” tasks only you can tackle and you should do them at least yearly. I wanted to find a way to write a similar post for a while now, but The New York Times beat me to it. It’s so good — simple, actionable, and quick to digest.

(I’ll add that checking your Social Security estimates and verifying your earnings history at ssa.gov is another very quick task that should be completed yearly)

This will motivate me to write my own version, but Ron Lieber at NYT has presented a great take on a topic of which most people struggle to find a starting point.

Find the time!

Fine, Let’s Talk About Trump

Tyler LinstenInvesting

The embargo ends.

I’ve avoided him on this blog for the most part, but Donald J. Trump is the 800-pound gorilla in the room universe right now. There’s no sense in being “apolitical” if politics are at the forefront of what’s making markets and to a certain extent, humanity, move right now (whether forward or backward). Thankfully, my point you’ll discover here is one of optimism so no matter who you support I believe the conclusion is something to think about.

*** INFLAMMATORY POLITICAL MUDSLINGING TO FOLLOW ***

Let me be crystal clear: I believe Trump as President is a negative development for mankind. I see no reason to believe anything Donald Trump has said or done is going to be materially helpful at moving America (or the world) forward, let alone your investment portfolio.

Fact: The reason any investment portfolio has steadily grown over past years/decades/centuries is that the world continued to move forward economically and socially. Long-term investors count on the slow churn of higher GDP, increased standards of living and extended longevity, which allow the noise of news and behavioral impulses to be ignored because asset prices continue to increase. Free trade and immigration, among other institutions — key drivers of economic growth — are currently under attack, bringing into question the sustainability of the economic tailwind we’ve enjoyed for centuries. That’s pretty bad.  

*** END OF INFLAMMATORY POLITICAL MUDSLINGING ***

The good news: There’s a silver lining.

Put the “fate of humanity” topic aside – the big question in the financial world has been, “if Trump is so bad, why have markets gone up and not imploded?” The answer is two-pronged.

First, checks and balances have provided a baseline stability. It may be that the Constitution was handed down by an alien existence far more advanced than we are, because it’s so perfect. The power of the Presidency is held in check and no single branch of government can easily tank the country. No matter how sinister a single President’s gameplan, or how evil his alleged foreign captors may be, the Constitution provides for a way out. Has there ever been a more important document ever drafted? I don’t think so.

Second, the big reason markets haven’t imploded: Discounted cash flows. Yes, I heard you say “WTF?” from here. Seriously, though, we only need to go to Finance 101 to come to this conclusion. Hang with me on this one. The key takeaway: Markets steadily rising after Election Day make sense when using second-level thinking instead of the “Trump bad, market go down” first-level (shallow) reaction.

Markets are collectively smarter than you or I, and their wisdom is usually realized after the fact. Sometimes they slowly digest and gradually adjust to news and developments within the economy. The simple conclusion I have reached is that markets are pricing in the fact, realized on November 8th, 2016, that somebody other than a bought-and-paid-for, lifelong politician can ascend to the Presidency, which far outweighs the near-term negativity from Trump’s reign as President. The better-than-previously-expected future is more than offsetting the present downside, or, put differently: Markets think this “More Future Outsiders as President” factor is more valuable than whatever damage is expected to be caused in the next four years of Trump.

The bedrock formula in investing says that the price of a security (or stock market) is simply the sum of the present value of future cash flows. This means that the primary driver of today’s prices is the future. Cash flows coming in the near future are valuable to pricing the current value of a security, but the vast majority of what moves the needle is all of the things expected to happen in the medium- to long-term. This is why individual stocks are so concerned with updated earnings outlooks and future growth. For instance, Tesla Inc. has no profits today, but its shares have massive value because expectations for the future are very high.

Apply this concept to the economy as a whole and you’ll see my point. It’s not Donald Trump, per se, that moved the market higher, it was the adjustment required to price in the fact that the status quo had been changed: Our President doesn’t have to rise to power from the cesspool that is modern politics. The cash flows of the future economy (and thus stock market) are now expected to be higher because there is the heightened probability of a competent outsider being elected, one who presumably changes the status quo.

It’s important to state this is only my theory. I simply believe when it comes to future economic growth, money cannot control elections and public policy forever and any development suggesting an increased probability this might be reversed will see positive reactions. I believe we’re seeing this right now. The candidate pool for President just got a whole lot larger, which is a net positive to you, me and our portfolios.

There you have it. In conclusion: Trump — bad. Outsider Presidents in the future — very good.