Thursday, May 5, 2022

April 2022 update ($776,929 -$61,670 or -7.9%)

↓ Emerging Markets Stock Index Fund is down by $1,073 or -0.8%
↓ Eurozone Stock Index Fund is down by $2,799 or -2.1%
↓ US 500 Stock Index Fund is down by $29,025 or -14.5%
↓ Global Small Cap Index is down by $12,297 or -8.0%
↓ Growth fund is down by 1,043 or -1.5%
↓ EUR is down to USD by 4.5%, so for my portfolio its $12,722
↓ GBP is down to USD by 3.8%, so for my portfolio its $2,710
Grand total losses: $61,670 USD

April 2022 financial independence update


Even my $120 K top up investment in S&P500 back in March lost $1K already.  All investments wiped out previous 12 months gains in the nominal terms.  If you add 10% inflation on top of it, the losses in the past twelve months are -8%.

Source of recession and Inflation in 2022.

 Original forecasts were that by end of 2022 the USA, BRICS to return to pre COVID19 pandemic.  EU would be lagging behind but also rather rapid growth (by EU metric) was expected, slowly getting back to normal.  This was all changed by the politicians, rather than business people or bureaucrats, have made the decisions that if not reversed, could have profound implications for the world economy in the long and short term.

 Share of older workers planning to keep on working in the retirement age nearly doubled in the past two years, as the cost of living was raising, in spite of the official “low inflation” statistics.

 With the current low unemployment and high inflation in the previous one hundred years there were eight periods like that. In all eight a recession followed within two years. Recession is defined of two consecutive quarters of economic contraction. Inflation in the UK is 30 years high - 8% and in the USA – 10%.  The real income will contract at the fastest rate since 1950s.

 The response to high energy prices for USA and EU is different. The USA responded by enabling more drilling, negotiating with Venezuela, Iran and Saudi Arabia.  The EU wants to climb the Pyrrhic victory on the back of its poorest citizens, by curbing the consumption.  For example, to drop temperature in German households by three degrees.  Currently average German home maintains about 19C (66F), the advisers suggest to drop it to 16C (61F). Of course, this only goes to the poor people, who can not afford the heating now, thank you to the politicians.

 There are two possible solutions. One is being widely pushed by the economists is to “reduce employment”, this would lead to curb consumption and reduction in the inflation.  Sounds good, if you accept that millions of people will be in the poverty.  Second solution is to remove source of the inflation - reduce the oil & gas price, return back to the free trade. This requires some humility and ability to care for people.


Wider market performance.

The S&P500 companies average year on year earnings grew 5.2% vs. 32% in Q4 2022. This is the most sluggish pace since the Q4 2020.  The revenues are project to raise 11%, led by oil & gas, materials and real estate.  Commodities lead the way. However, profit margins will contract.

 First quarter of 2022 was the only quarter in the last 30 years with contracting net margins. While you have double-digit sales growth. There have been two exceptions to this – 2008 and fourth quarter 0f 2011.

 While financial analysts are focusing on the commodities, which weathering well during the high inflation – oil & gas, raw materials and real estate.  This explains why my “Growth fund” lost only 1.5% last month, vs. S&P – 14.5%. 10% of the “Growth fund” are in real estate and 8% are in Emerging markets aka BRICS.

 One of the more under reported areas are weapons manufacturers share price vs S&P500:



Share price cost, USD

USA weapons manufacturer




Lockheed Martin Corp




Northrop Grumman Corp.




Huntington Ingalls Industries Inc.




General Dynamics Corp.




Raytheon Technologies Corp




L3Harris Technologies








 The US weapons manufacturers (aka defense contractors) share prices went between 28% to 13% in first four months of 2022, while S&P 500 lost 10%. This trend will only accelerate as EU will send more weapons to fuel the war, which they cannot manufacture themselves. It will lead to EU putting more order for US companies.

 Historical fact:  Arab spring (series of protest in Bahrain, Egypt, Libya, Syria, Tunisia and Yemen) started when the wheat prices increased in 2010, because of the drought in the world granaries (Russia and Ukraine).  The rising food prices helped to manipulate and provoke political tensions, leading to the civil wars, poverty and destruction.

No comments:

Post a Comment