Our net worth increased 10.75% in USD and 8.07% in EUR to $101,894 and €84,336 respectively. That's a year over year change of 78.77% in dollars and 60.24% in euros.
And what a year it's been. We're still masking up to go to grocery stores. My wife still isn't allowed to meet with people face to face and works from our home office entirely. Our incomes are still depressed. Our restaurant budget is still nothing. I still can't go to the gym.
But if you were long risk assets this past year, you've probably had a very good year financially. In fact, it's been such a good year, that I think a lot of assets have become overvalued and therefore risky.
April Contributors: Stocks and Stimulus
The factors that affected our numbers this month were primarily the strong performance of the stock market and a stimulus payment my wife got from the Germans because of the impact this whole mess has had on her business. That money went straight into an account for earmarked funds.
Germany has had various stimulus programs, but they've been pretty complex to use. Unlike the US, they haven't just shuttled money out to the citizens in waves of checks. The programs have been highly targeted, dependent on the state (Bundesland) to implement them, and you need to meet very specific criteria. For example, my wife missed out on one early stimulus payment because the timing of a vacation she took in 2019, which made the year over year comparison look better than it really was. But that meant zero help despite her income dropping to very low levels.
Additionally, because of these criteria, it requires the use of a tax preparer, whose fee reduces the impact of the stimulus. We love our Steuerberaterin, but we're sending her a lot of money in a very short time.
That's all to say, it's all a bit convoluted and over-engineered, which is kind of the German way.
Selling Stocks
I sold out of my positions in two companies yesterday:
Square (SQ)
And Cloudflare (NET)
Both had run up so much that I couldn't make sense of the valuation anymore. It's entirely possible that I'll regret this at some point in the future if/when they pop upwards, but such a pop would only further divorce them from their fundamentals, and their fundamentals suggest upwards of a decade before their valuations align.
Naturally, if they crash, I'll happily buy them again. And some other companies might also be on the chopping block once I figure out the tax implications.
However, selling is hard, and I often get it wrong. I sold Equinor (EQNR) and Ternium (TX) in the last few months, and both quickly climbed above my sale price. Much to my chagrin, I sold Foot Locker (FL) and Simon Property Group (SPG) a year ago at low prices and ate a huge loss, and both have recovered very well indeed.
My buying instincts appear solid, but my selling instincts need refinement.
Speculative Excess
Nevertheless, I can't help but feel like we're living in a moment of speculative excess, and that makes me more cautious. Speculative excess doesn't just affect the prices of assets, but it affects the way people talk about those assets and the way the press reports on them. It's self reinforcing and full of confirmation bias.
It's one reason I sold: I saw the confirmation bias in myself. I was looking for the angle that could justify my continuing to hold both of those companies, and seeing that in myself made me realize how flawed my own judgment was. The valuations don't make sense, and I was trying to make myself see that the valuations actually did make sense.
Beyond pure speculative insanity, we've seen several major blowups this year already from traders using too much leverage:
Regarding crypto, whatever merits there are to cryptocurrencies, the proponents of crypto are behaving in the way you'd expect bubble proponents to behave: they are often dismissive and full of bile towards anyone who questions the basis for their belief (Disclosure: I have a tiny amount of Bitcoin and Ethereum).
Likewise, despite John Templeton's admonition that, "The four most dangerous words in investing are 'This time is different'", I've seen lots of arguing that this time really is different! It's hilarious. I've heard it in podcasts, seen it online, and heard it from friends who believe we've entered a new era in some way. They might be right, but it sure sounds like the same sort of rationalization that accompanied previous bubbles.
So what else is there we don't know about? How about fraud? It's likely lurking somewhere, since crypto doesn't solve people behaving like people.
Anyway, I'm feeling cautious.
Over $100,000
As mentioned in my last post, we crossed the $100,000 mark for the first time. I figured it would happen this year, but I didn't expect it to happen quite so fast. And I didn't expect the sudden difference in my mindset. It's not as if I'm going to quit my job to become a full time speculator, but I have a greater sense of autonomy and more emotional detachment from my job.
The Virus Rages On
But financials obviously aren't the only thing, and this past year has been very hard on just about everybody. Thankfully the vaccine rollout is happening faster in Germany, and there's some light at the end of the tunnel here. In fact, we have our appointment for our first shots in a week and a half.
However, the virus continues to hurt people around the world, and I continue experience cognitive dissonance about the relative ease of my life.
May Expectations
Nothing special will happen with our incomes this month. We won't be able to save much because of some fees around my wife renewing her work permit. Because she's self-employed, they require a special document prepared by our tax preparer for yet another fee to that preparer, plus the fee for doing the renewal.
Meanwhile, we're still waiting on our 2019 tax refund. Hopefully that will land soon. And one day we'll get those last two stimulus payments from the US government, but I won't hold my breath.
I'll leave you with this:
Guilty as charged. Until next time.
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