Saturday, October 31, 2020

October 2020 update ($575,421 -$7,906 or -%1.4)

Financial independence savings for last month $2,000
Emerging Markets Stock Index Fund is up by $3,588 or +2.7%
GBP is slightly up to USD by 0.8% or $412 for my portfolio
Grand total additions: $6,028 USD
Eurozone Stock Index Fund is down by $6,540 or -5.6%
US 500 Stock Index Fund is down by $3966 or -2.7%
Fidelity Growth Fund is down by $1322 or -2.4%
EUR is down to USD by 0.9% or $2,105 for my portfolio
Grand total losses: $13,934
Financial Independence October 2020 update

The readers of my financial independence blog have probably noticed that I am quite concerned with my EUR investments, and specifically into EU zone. This investment for the past 40 months has been down by 6% in EUR and 0% in USD (this is due to the currency differences). While it is reflecting state of the economy in European Union, it drags down my financial independence day.  If 40 months ago I went all into S&P500 I would have $593K today, vs. $502K in my funds. I read recently that asset diversification should make one uncomfortable, otherwise it is not really a diversification.

 My view, is that The USA government is deliberately undermining strength and unique position of the US dollar. This is done in three ways:
#1 Overall domestic account deficit is below zero. In the last 60 years it only happened once in 2010. With the additional stimulus the net deficit will go further down below of the current minus 1.2 percent (as a share of the national income).
#2 Budget deficit is 16 percent in 2020 and will be 8.6 in 2021. This is without considering the additional stimulus.
#3 Interest rates are near zero and remain that way until 2025 or beyond. 

 This is first time in the long time, when without borrowing surplus saving from abroad, growth becomes impossible. Hence the only reasonable way forward is the exchange rate adjustment.

The dollar index fell 33 per cent in real terms both in the 1970s and the mid-1980s, and another 28 per cent from 2002 to 2011. During those three periods, the net domestic saving rate averaged 4.9 per cent (versus -1.2 per cent today) and the current account deficit was -2.5 per cent of gross domestic product (versus -3.5 percent today). A crash is looming.

 Fun fact:  Schlumberger, an oil and gas service company whose share price is down 60 per cent since the beginning of the year, said it replaced an earnings-per-share metric with an adjusted Ebitda metric for the second half of 2020 as a factor in determining executives bonuses. In July Schlumberger, which is the world’s biggest oilfield services company, said it would cut 21,000 jobs, or about a fifth of its workforce.  My humble view is that If the chief administrators don’t perform well, then they shouldn’t be getting bonus payouts.

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