February 2022 Update: War, Trend, Hobbies

On February 28, 2022, our net worth stood at $121,069 and €107,904, which represents a -0.09% decline and 0.09% rise in USD and EUR respectively.

Basically, we were flat month over month. However, we were net savers in February, which means that our savings were offset by losses elsewhere. Those losses were in the stock market, where prices bounced around from fear of high valuations, rising interest rates, and war in Ukraine.

Ukraine

I'm not going to expound on the politics of the war beyond my support for the Ukrainians and hope for a swift and just end to the violence. However, since Ukraine is just a long day's drive away from us, the war is felt very keenly here. I have Russian and Ukrainian colleagues, not to mention the many eastern European colleagues who remember Soviet occupation or hegemony. There is panic in the air.

The Ukrainian colleagues are bearing their burdens well, however, their pain is showing. One has family hunkered down in shelters in Kyiv. A Russian colleague made a point of hugging him last week. On the first day of the war, several Russian colleagues called in sick. Who can blame them? Generally, they've been quiet about the war.

A friend's spouse is Russian, and she's very stressed. Her sister is in jail after protesting in Moscow, and they're not sure how they will get the money to get her out, especially now that money transfers are impossible. At the same time, she's losing business from her local Russian customers; their wealth is in rubles, and they both can't transfer it, and the value has crashed.

There is fear of nuclear war. There was one day where, upon reading the news, I became afraid of spiraling escalation and considered dropping everything, grabbing my wife, getting on a plane, and flying someplace remote in the American midwest. Of course, in the case of nuclear war, that probably wouldn't be enough.

My mother is worried about us. I've tried to downplay the risk, but events have proven me wrong.

Trend Following

I've decided to implement a simple trend following strategy in my tax-deferred IRAs. The basic rule is this: if above the 10 month moving average, buy or hold. If below that line, then sell. The "buy" is for a broad based index fund like the Vanguard All World Stock fund.

I got this strategy from Meb Faber, and its major advantage is that it saves an investor from long draw downs. Yes, it will sometimes whip you in and out of positions, but when it saves you from a 2000 or 2008 type crash, it makes up for those mild inefficiencies.

The one challenge is that my account with Vanguard is still based around mutual funds. Their rules prevent me from buying shares within one month of selling them. That means there's a minimum one month wait to rejoin the market, or else I have to choose a different fund.

As of now, I'm not doing this in my taxable account. I may ultimately regret that choice, but I can't decide how I'd logically implement it when some stocks are doing very well (ABBV, BRK.B, ENB), and others are in big drawdowns. I'm not interested in trend following each name individually. So I guess I'll have periods where I just go down with the ship and am forced to watch.

At least I'll have this Charlie Munger clip to keep me company in my bag holding:

Hobbies and the Value of Stuff

I have a few expensive hobbies. Namely, I'm into photography, which is a high cost hobby no matter which way you look at it. Recently, I've decided to switch camera systems due to having a new interest in video, which does demand more cutting edge gear.

This has meant trying to sell my older stuff, which reveals the value - or lack thereof - laden in the object. However, there's always a challenge in doing it with high end stuff, because there might be a lag time, especially if you try to bypass a site like eBay. Perhaps no one in my city needs that specific wide angle lens for that particular camera system.

In any case, I'm sitting on gear that's not valued as part of my net worth, which I'm hoping to transform into cash at some point soon. At the same time, the new gear I bought has most certainly knocked down our net worth. I did manage to sell the camera, but lenses can have a longer lead time before they're purchased.

I will likely have to use eBay in the end with all the risks inherent in that choice.

Forecast

I'm not particularly hopeful right now regarding the economy. Commodity prices are spiking as Russian and Ukrainian exports are closed out of the market. Europe is in a vulnerable spot with their energy supplies. There's risk of not enough food to feed the world.

So far, March has been another difficult month in the stock market, which is where most of my wealth resides. I'm trying to look at it with equanimity, but it's hard. I'm also trying to see market prices declines as an opportunity rather than as a curse to avoid at all costs. Since I'm in a lucky position, I can continue to accumulate cash and/or buy attractively priced shares. Though I'm all spent at this point in the month.

A family emergency has arisen in the US with the health of a family member. It will likely mean a trip to the US by my wife sometime in the near future. This will be a real cost, but there are more important things than money.