“Investing wise, 2021 couldn’t have gone much better, at least for me. The bull market rages on and markets closed at or near all time highs.” I actually wrote these exact words just nine short months ago. When you put your thoughts out in public, you have to be able to laugh at yourself. I could not have gotten the anticipatory pulse of the situation more wrong. In the time it takes to grow a baby, the investing world has flipped completely on its head. The bear has struck and it looks particularly grizzly. Market sentiment appears to be on the brink of collapse and investor confidence is holding on by a thread.
I am no market prognosticator, if I was, my results would surely be much better. I have no idea which way the market will move from here. Inflation could dampen and markets could come roaring back, wouldn’t that be nice. Just as likely however is that inflation continues to soar, forcing the Fed to continue raising interest rates, which will further compress asset values. I don’t like to sit around forecasting doom and gloom, but it is pretty easy to come up with some spine tingling scenarios we must all be prepared for.
Most probably do not know this, but in my spare time I enjoy reading fantasy books. My favorite author is Brandon Sanderson, a man well known for writing incredibly long stories with intricate well thought out magic systems. His tome of a novel Rhythm of War, book four of his magnum opus, The Stormlight Archive, contained a scene that helps illuminate the feelings that help me deal with these kinds of periods.
The protagonist, Kaladin, suffers from a long bitter battle with depression. After suffering yet another crushing blow, Kaladin finds himself on the brink of giving in to his hate. At his lowest moment, a character named Wit comes to him in a vision. Wit is a mysterious character, known for mocking all those around him, but occasionally he lets his callous façade drop and shares his otherworldly wisdom. Kaladin, unsure whether he has the strength to deal with the immense challenges placed upon his shoulders, asks Wit for a story.
Wit shares the parable of The Dog and The Dragon. It is the tale of a small farm dog who wishes to become a mighty dragon after seeing one soar overhead. Of course in his various attempts to do so, he comes up woefully short. One day however a young child falls into a well. The dog springs into action and as the only one able to fit into the well, he is able to bring a bucket and rope to the child, thereby saving the child’s life.
Wit stood and stepped over, then put his hand on Kaladin’s back and leaned in. “That night,” he said, “the little dog snuggled into a warm bed beside the fire, hugged by the farmer’s children, his belly full. And as he did, the dog thought to himself “I doubt any dragon ever had it so good anyway.”
He smiled and met Kaldin’s eyes.
‘It won’t be like that for me,’ Kaladin said. ‘You told me it would get worse.’
‘It will,’ Wit said, ‘but then it will get better. Then it will get worse again. Then better. This is life, and I will not lie by saying every day will be sunshine. But there will be sunshine again, and that is a very different thing to say. That is truth. I promise you, Kaladin: You will be warm again.’
Rhythm of War pages 920-921
Q3 Performance
As of 10/1/2022, my 10K portfolio is worth $13,431.85. When I started on 8/19/18, the SPY had a price of $285.06 and my account started with $10,000. As of 10/1/2022 the SPY had a price of $357.18. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculation
| 10K Return(1) | SPY Return(2) | Difference(1-2) | |
| 2018(8/19-12/31) | (13.95) | (13.71) | (.24) |
| 2019 | 37.33 | 32.6 | 4.73 |
| 2020 | 21.22 | 17.59 | 3.63 |
| 2021 | 38.55 | 28.43 | 11.52 |
| 2022(1/1-9/30) | (32.32) | (23.93) | (8.39) |
| Since Inception(8/19/18) | 34.32 | 34.42 | (.10) |
| CAGR | 7.43 | 7.46 | (.03) |
Somehow after running this portfolio for a bit over four years now, my performance almost matches the S&P 500 exactly. We are neck and neck, with one leading the other depending on the day you check. Of course on the day I make the tabulation, I am down by .1%. Yes, I’m salty about it. Statistically I’m not even sure this should be possible, but here we are.
Transactions
During the third quarter, I actually didn’t make a single transaction. I kept up my DRIP, so picked up some more tiny fractional shares, but made zero changes to the portfolio. Given how great the market selloff has been, I am starting to see some real opportunities. Don’t be surprised to see a few changes in the 4th quarter update.
As always, I would like to thank you for taking the time to give this a read! Feel free to leave some comments or questions. Best way to reach me is on Twitter, follow me @TheGarpInvestor.
The GARP Investor 