Our net worth rose in February 3.36% to $94,974/€78,039.
The main positive factors were a relatively high savings rate, decent but not great stock market performance, and a large refund from a January purchase. Negative factors were negatvie stock performance at the end of the month and reduced income due to the pandemic.
Our incomes remain depressed due to the pandemic. Due to lockdown measures in Germany, my wife's ability to work has been severely limited. While many of her customers are happy to work via Zoom or Skype, many aren't and are happy to delay their purchases until the day they can meet in person. Meanwhile, I earn a salary, but the extra work that often served to goose our incomes has completely dried up.
Simultaneously though, we are essentially forced to save money. The restaurants are closed. The shops are closed. I need to buy new clothes, but nowhere is open to facilitate the purchase. When I last tried, back in October, I wasn't allowed to use the changing rooms, so I bought a pair of pants, hoping they'd fit. Unfortunately, they didn't, so upon the return, I decided I'd wait until the dressing rooms re-opened. Joke's on me!
Naturally, there's always the internet for purchases, but eventually, you do run out of things to buy, unless you're willing to also buy clothes over the internet. My wife has become very adept at buying clothes online, while I lack the patience. It requires a willingness to try on and send back repeatedly. But ultimately, I might have to bend on this.
Stock Jitters
It's pretty easy to get spooked about the stock market. Valuations are high. The CAPE is high. When I look at the charts in FASTGraphs, I see just how extended some of my own positions are. Meanwhile, you have people like Michael Burry calling for Weimar-style inflation and Jeremy Grantham saying we're in an enormous bubble.
It's easy to write these folks off since doom and gloom predictions have been so wrong for so long. But at the same time, there's clear bubble behavior. I'll refrain from naming specific areas, but I'll leave you this passage from William Bernstein's latest book The Delusions of Crowds:
Financial manias can be thought of as a tragedy, like Hamlet or Macbeth, with sharply defined characters, a familiar narrative arc, and well-rehearsed lines. Four dramatis personae control the narrative: the talented yet unscrupulous promoters of schemes, the gullible public who buys into them, the press that breathlessly fans the excitement, and, last, the politicians who simultaneously thrust their hands into the till and avert their eyes from the flaming pyre of corruption.
The promoters follow a classical Shakespearean tragic path and are consequently the most fascinating of the actors. Most begin as brilliant hard-working visionaries, who intuit before others the riches that a new technology will bestow upon society. In the process of bringing their visions to fruition, they grow rich and powerful and in a capitalist society that judges men by their wealth, become their nation's lions. When the speculation runs its course and bursts, they wind up disgraced and bankrupt and usually but not always narrowly escape the jailor.
The public proves easy pickings for the blandishments of the heroic charismatic promoters. Competent investing requires a rare combination of mathematical ability, technological expertise, and, most critically, a working knowledge of economic history. Alas, people greatly prefer stories to data and facts. When faced with such a daunting task, humans default into narrative mode and perhaps the most pleasing story of all is one that involves the effortless wealth to be had from buying into a new technology.
The press falls prey to the promoters in the same way as the public. Few things corrode journalistic excellence as the ease of writing about the revolutionary ventures of brilliant businessmen, who with alarming frequency grace magazine covers first as heroes then as accused felons.
Finally, financial manias sweep into their ambit politicians whose reputations and popularity are enhanced by the economic prosperity that temporarily results from speculative excess and who not infrequently get caught raiding the cookie jar.
