2021 Returns Thread

[gary17]

37 minutes ago, Longnose said:

EDIT: in spirit of the overall thread 

Overall 2021 return ~32%

 

 

I strongly agree with @rkbabang's statement of " I do think that anyone who doesn't have at least a percent or three of their portfolio in BTC is going to be sorry someday. "

 

If you have not taken a look down the crypto rabbit hole, you should. Just taking the time to learn about what BTC  & ETH really are and how they WILL impact the future will open your eyes. My personal opinion is that BTC will likely be the future of finance and very well could become a widely accepted form of currency. It may take 50+ years or longer to get there but I can picture a world where this happens. I think ETH and a few other projects will lay the foundation for smart contracts built on blockchains. I believe business transactions may start migrating this direction. We may see businesses in the future that have built themselves on blockchains based on ETH and other layer 1 projects that will allow them to eliminate substantial costs that current business today carry. By reducing that OPEX they these future businesses could have substantially better margins than their competitors. In short the underlying technologies coming from these technologies will radically change the future. 

 

@gary17 it is hard to assign a value to them but they are assets and they are not going away. My original thesis was I will spread 1% of my portfolio across about a dozen top crypto projects. This led me to want to learn more about what I owned. The more I looked the more I added. Since thanksgiving I have increased my exposure from 1% to 10% in personal accounts. 

 

Also, DEFI stuff is really amazing. In my fantasy world I would love to see the NYSE transformed into crypto tokens representing the ownership of my shares. Then I use a decentralized exchange to do my trades. The world is a hell of a long way off from doing that. But I can dream. Maybe ill see it before I die, who knows....

 

Thanks both for the insight.  Yes i owned some BTC & ETH 3 years ago to understand.  Rkbabang actually helped me with a bit of just understanding some basic concepts; i even bought a Ledger USB key... (I think that is as close to a physical wallet?).     i made my new year resolution to understand blockchain.  I am interested in NFT and how that could apply to engineering work,etc.

[SharperDingaan]

2 hours ago, KJP said:

 

How do you solve the problem that most business transactions involve physical world activity?  How can a blockchain-based smart contract deal with that?  I don't see how oracles get you there.  Or am I misunderstanding the types of business transactions you're talking about?

 

 

You don't - and that is the major limitation of blockchain.

The blockchain is just an incomplete digital record 'purporting' to represent a real asset - it generally just tracks the 'box', not what is in the box. We get around the problem by issuing an assignable blockchain proof to accompany the physical product. A 1oz gold wafer produced entirely with 'ethical' gold, generates a 1oz proof. Thereafter, any 1oz gold wafer plus that 1oz proof, represents an ethically sourced 1oz wafer. Buy a gold ring for your significant other, and you buy both the ring and the certificate - otherwise accept that some of the ring is blood gold.

 

SD

Edited January 6, 2022 by SharperDingaan

[Longnose]

38 minutes ago, KJP said:

 

How do you solve the problem that most business transactions involve physical world activity?  How can a blockchain-based smart contract deal with that?  I don't see how oracles get you there.  Or am I misunderstanding the types of business transactions you're talking about?

 

 

 

I agree with SD that the physical world activity doesnt get changed or at least not easily. I think where things will get interesting is where blockchains can solve ledger related business issues. Entire industries exist to validate transactions. But when ledgers / accounts / data can be validated against private blockchain nodes held by various stake holders within a network and all members of the network want to share that data and maintain its privacy and accuracy. BlockChains can facilitate this. 

 

Theoretical example: medical records: These records are very sensitive and need to be accurate the amount of manual work and things that go on to pass these records between businesses is big and the amount of people touching it is big. But if medical records were held on a blockchain tied to an individual then the hospital sees the same thing as your private practitioner, your pharmacist, your insurance provider, etc. Each industry could hold its own node so that the insurance provider can validate that the records from the pharmacy and the private practice doctor are correct.  This is a pretty astronomical example but i would not be surprised to see the world moving that direction. It will happen little bit by little bit. Until only a few noticed that it did. But the amount of OPEX each of those industry's will save by moving that stuff to blockchains will be substantial. 

 

BTC uses Proof of Work (PoW) to validate transactions which is one of the reasons I think BTC is more suited for a finance future as it is harder to validate and has a finite amount of tokens that can ever exist. 

 

ETH uses Proof of Stake (PoS) this proof of stake to validate the network makes it more suitable for smart contract usage. Essentially all the stakeholders need to align to validate the transaction. Then when the transaction is validated it can reward the nodes that are validating it. This is much more sustainable and easier to implement across various entities. Also could facilitate the "private" block chain as I don't want my medical records held publicly.

 

Anyway. There are lots of business transactions that are transacting intangible items not tied to a physical action or product. Think real estate, title ownership, title insurance, and all the other bullshit that requires 10 people to touch your real estate purchase. 

 

None of this is happening overnight and is easily 20-50+ years out. Crypto to me is like looking at the internet in the 80's. We are still in diapers and who is the winner??? no idea... But I wouldn't not want to be exposed. 

[KJP]

19 minutes ago, Longnose said:

 

Theoretical example: medical records: These records are very sensitive and need to be accurate the amount of manual work and things that go on to pass these records between businesses is big and the amount of people touching it is big. But if medical records were held on a blockchain tied to an individual then the hospital sees the same thing as your private practitioner, your pharmacist, your insurance provider, etc.

 

 

Medical records, collectively, represent a very large amount of data (I assume).  Is all of that data a candidate for storage on a blockchain?  If so, how could that much data ever be stored on something like Ethereum?

[KJP]

58 minutes ago, SharperDingaan said:

You don't - and that is the major limitation of blockchain.

The blockchain is just an incomplete digital record 'purporting' to represent a real asset - it generally just tracks the 'box', not what is in the box. We get around the problem by issuing an assignable blockchain proof to accompany the physical product. A 1oz gold wafer produced entirely with 'ethical' gold, generates a 1oz proof. Thereafter, any 1oz gold wafer plus that 1oz proof, represents an ethically sourced 1oz wafer. Buy a gold ring for your significant other, and you buy both the ring and the certificate - otherwise accept that some of the ring is blood gold.

 

SD

 

But this example requires some off-chain authority to assert/decide that "ethical" gold was used to make the wafer.  Who is doing that?  Isn't that antithetical to the entire notion of decentralization?

[SharperDingaan]

Validation is essentially the same process as in any food processing plant - how do you actually know' that what is in the box,  is what the label says it is? There is a validation process and you are trusting the validators/vendor selling it to you - a blockchain just gives greater transparency.

 

The individual medical record is just stored on a genesis block, and called up as needed. Every procedure, prescription, etc. thereafter - just chained onto the block. Medics (anywhere in the world) simply access it via an injected dog tag referencing the genesis block - whether you're dead or alive. If you're found wandering, or dead in a ditch somewhere, you are identifiable and your family can retrieve you.    

 

SD

 

Edited January 6, 2022 by SharperDingaan

[TwoCitiesCapital]

41 minutes ago, KJP said:

 

But this example requires some off-chain authority to assert/decide that "ethical" gold was used to make the wafer.  Who is doing that?  Isn't that antithetical to the entire notion of decentralization? 

This is the Oracle problem. Companies like Chainlink are working on decentralized validators that can inform on prices, weather events, source materials for a good wafer, etc. 

 

But this convo should really be taking place in the crypto thread y'all. 

Edited January 6, 2022 by TwoCitiesCapital

[ValueArb]

2 hours ago, Longnose said:

EDIT: in spirit of the overall thread 

Overall 2021 return ~32%

 

 

I strongly agree with @rkbabang's statement of " I do think that anyone who doesn't have at least a percent or three of their portfolio in BTC is going to be sorry someday. "

 

If you have not taken a look down the crypto rabbit hole, you should. Just taking the time to learn about what BTC  & ETH really are and how they WILL impact the future will open your eyes. My personal opinion is that BTC will likely be the future of finance and very well could become a widely accepted form of currency. It may take 50+ years or longer to get there but I can picture a world where this happens. I think ETH and a few other projects will lay the foundation for smart contracts built on blockchains. I believe business transactions may start migrating this direction. We may see businesses in the future that have built themselves on blockchains based on ETH and other layer 1 projects that will allow them to eliminate substantial costs that current business today carry. By reducing that OPEX they these future businesses could have substantially better margins than their competitors. In short the underlying technologies coming from these technologies will radically change the future. 

 

@gary17 it is hard to assign a value to them but they are assets and they are not going away. My original thesis was I will spread 1% of my portfolio across about a dozen top crypto projects. This led me to want to learn more about what I owned. The more I looked the more I added. Since thanksgiving I have increased my exposure from 1% to 10% in personal accounts. 

 

Also, DEFI stuff is really amazing. In my fantasy world I would love to see the NYSE transformed into crypto tokens representing the ownership of my shares. Then I use a decentralized exchange to do my trades. The world is a hell of a long way off from doing that. But I can dream. Maybe ill see it before I die, who knows....

 

Even if I put 3% in crypto, what difference would it make? I'm expecting to generate high returns from my portfolio because I've consistently been able to do so. Crypto returns would have to be insane to make any significant results in my results. If it doubled my stock returns that's only adding another 3% a  year. I doubt I'd lose sleep over it.

 

If you really believe in Crypto outperforming your other investment by multiples, you should have a lot more than 3% in it. I simply don't have that faith, especially as stimulus slowly winds down and deflates the balloon.

 

And while the concept of business transactions on the block chain and smart contracts are really cool intellectual concepts, i can't put money into them until I see people actually using them for real products and services, instead of just more ways to grift off speculators.

[Gregmal]

2 minutes ago, ValueArb said:

 

Even if I put 3% in crypto, what difference would it make? I'm expecting to generate high returns from my portfolio because I've consistently been able to do so. Crypto returns would have to be insane to make any significant results in my results. If it doubled my stock returns that's only adding another 3% a  year. I doubt I'd lose sleep over it.

 

If you really believe in Crypto outperforming your other investment by multiples, you should have a lot more than 3% in it. I simply don't have that faith, especially as stimulus slowly winds down and deflates the balloon.

 

And while the concept of business transactions on the block chain and smart contracts are really cool intellectual concepts, i can't put money into them until I see people actually using them for real products and services, instead of just more ways to grift off speculators.

This is one way to approach it and I can’t say I disagree with your logic. However I think his sentiment is pointed towards people with a different mindset. There’s plenty of people out there who don’t compound at high rates, hold lots of cash, and act like they need to conserve and protect 1-5% positions with the goal of compounding them at 10-15% a year….if nothing else, you use small positions to take big shots down field. There also should kind of be an inverse relationship between the size of the position and the expected return. Everyone likes to pretend that you wait for the fat pitch and then put 30% in it, but 95% of investors can’t capitalize on those because they get scared by the perceived risk. So generally if you have a 10-20% position, you can get by compounding at a more conservative rate. But I don’t want to waste my time waiting 5-7 years for a 1% position to turn into……a 2% position! So that’s where you take a few hacks at something disruptive and speculative and a 5-10 bagger can move the needle a little.

[rkbabang]

18 minutes ago, ValueArb said:

 

Even if I put 3% in crypto, what difference would it make? I'm expecting to generate high returns from my portfolio because I've consistently been able to do so. Crypto returns would have to be insane to make any significant results in my results. If it doubled my stock returns that's only adding another 3% a  year. I doubt I'd lose sleep over it.

 

If you really believe in Crypto outperforming your other investment by multiples, you should have a lot more than 3% in it. I simply don't have that faith, especially as stimulus slowly winds down and deflates the balloon.

 

And while the concept of business transactions on the block chain and smart contracts are really cool intellectual concepts, i can't put money into them until I see people actually using them for real products and services, instead of just more ways to grift off speculators.

 

 

I personally have over 20% in crypto even after selling almost half last May, but I wouldn't feel comfortable telling other people to do that.   My cost basis is almost nothing (less than 1%) so I'm comfortable holding and seeing where it goes.    I think bitcoin returning 20-60X in the next 10 years is not out of the question, so even a 3% position could move the needle if I am correct.  And it wouldn't be much of a drag if I am wrong.

 

[aws]

When I click on the thread because of 20 new posts, and they all end up being about crypto

[rkbabang]

45 minutes ago, TwoCitiesCapital said:

But this convo should really be taking place in the crypto thread y'all. 

 

1 minute ago, aws said:

When I click on the thread because of 20 new posts, and they all end up being about crypto

 

 

Yeah

[ValueArb]

38 minutes ago, rkbabang said:

 

 

I personally have over 20% in crypto even after selling almost half last May, but I wouldn't feel comfortable telling other people to do that.   My cost basis is almost nothing (less than 1%) so I'm comfortable holding and seeing where it goes.    I think bitcoin returning 20-60X in the next 10 years is not out of the question, so even a 3% position could move the needle if I am correct.  And it wouldn't be much of a drag if I am wrong.

 

 

A 60x BTC return in the next 10 years would give it a market cap of roughly $50 trillion dollars. In todays real terms, that would be about double the US GDP, and half of World GDP.

 

Even 20x would put it close to US GDP.

[snowball82]

On 1/5/2022 at 3:40 PM, ourkid8 said:

2021:  Grew my portfolio 68% YoY

 

Biggest winner:  Blackberry - Thank you Reddit and Trisura

Biggest loser:  BABA

 

Congrats for the great results. Happy to see Trisura had been a good contributor too. Have a great year to you ourkid8 and yourkids

[Monsieur_dee]

Up 10% this year. Sucks but I'd also take that return every year. Since 2017 low 20's irr. 

Baba and wix have been big detractors. Sized them up decently. 

 

[Paarslaars]

2013	8%
2014	25%
2015	-20%
2016	40%
2017	-26%
2018	-17%
2019	20%
2020	-5%
2021	47%

 

Overall 5% CAGR. Well at least I'm not losing money?  

 

In 2019 I changed up my portfolio to be +/- 50% BRK and stopped taking risks, especially with less time for due diligence.  I do keep my eyes open for some 'obvious' bargains like fairfax this year. Unfortunately due to construction on the house, had little extra cash available to take advantage of the bargains in 2020.

 

2021 went well for me, couple of 60% stocks (FFH, ING) with good solid performance of BRK and an additional tailwind from currency (USD vs EUR). Also the (surviving) oil stocks that resulted in the horrible performance of 2017/2018 rallied this year... which is nice, even if they were only small positions in the end.

[backtothebeach]

4 hours ago, Paarslaars said:

 

2013	8%
2014	25%
2015	-20%
2016	40%
2017	-26%
2018	-17%
2019	20%
2020	-5%
2021	47%

 

Overall 5% CAGR. Well at least I'm not losing money?  

 

In 2019 I changed up my portfolio to be +/- 50% BRK and stopped taking risks, especially with less time for due diligence.  I do keep my eyes open for some 'obvious' bargains like fairfax this year. Unfortunately due to construction on the house, had little extra cash available to take advantage of the bargains in 2020.

 

2021 went well for me, couple of 60% stocks (FFH, ING) with good solid performance of BRK and an additional tailwind from currency (USD vs EUR). Also the (surviving) oil stocks that resulted in the horrible performance of 2017/2018 rallied this year... which is nice, even if they were only small positions in the end.

 

Congrats on the strategy change from 2019. The Christmas crash in 2018 must have been a wake up call (it was for me).

[ERICOPOLY]

On 1/6/2022 at 3:11 PM, Gregmal said:

Everyone likes to pretend that you wait for the fat pitch and then put 30% in it, but 95% of investors can’t capitalize on those because they get scared by the perceived risk. 

 

It's why buying ATM calls on 30% notional portfolio value make sense, funded by writing puts on 30% total portfolio notional across 100 other names if your risk tolerance is such that 0.3% position sizing in any one name is as large as you can tolerate.

 

Sigh...

[IceCreamMan]

3 hours ago, ERICOPOLY said:

 

It's why buying ATM calls on 30% notional portfolio value make sense, funded by writing puts on 30% total portfolio notional across 100 other names if your risk tolerance is such that 0.3% position sizing in any one name is as large as you can tolerate.

 

Sigh...

 

You mean on top of 100% long portfolio, right? i.e. 100% long + 30% notional long calls funded by 30% notional short puts = 130% effective exposure?

[ERICOPOLY]

1 hour ago, IceCreamMan said:

 

You mean on top of 100% long portfolio, right? i.e. 100% long + 30% notional long calls funded by 30% notional short puts = 130% effective exposure?

 

I didn't say that.

 

It can be 100% total exposure.  For example, 70% long diversified common stock portfolio in addition to the 30% notional position in the calls, and the 100 name collection of written puts with 0.3% notional exposure each..

 

Derivatives were made to swap risk.  So you can use them for what they were made for.

Edited January 10, 2022 by ERICOPOLY

[Gamecock-YT]

19.9%, which kind of disappointing considering I was up a good bit on the index all the way until the end of August. The sell-off in Liberty Broadband, which is my 2nd largest position contributed to the decline along with the increase in the S&P in October which didn't trickle down to the portfolio. Made a large add-on investment to Altria ($MO) at the same price of my investment last year which is now my largest position. The quarterly dividend is great but been struggling to find places to put it to work. Guess there's worse problems lol! 2nd half of the year bought half a position in Liberty SiriusXM ($LSXMA). Opportunistically adding to the position on any declines. Sold out of a bag holder position in $AMR for a marginal gain.

 

Big winners: GENGF, MO, ATUSF

Big loser: AWDR

 

2021: 19.9%

2020: 12.0%

2019: 33.0%

2018: -15.5%

2017: 35.0%

2016: 17.3%

 

Portfolio should be in good shape if we get a run on inflation, other than that not doing much else now except buying Ibonds. Thanks everyone for another year on the board, I continue to keep learning more every day!

[IceCreamMan]

23 hours ago, ERICOPOLY said:

 

I didn't say that.

 

It can be 100% total exposure.  For example, 70% long diversified common stock portfolio in addition to the 30% notional position in the calls, and the 100 name collection of written puts with 0.3% notional exposure each..

 

Derivatives were made to swap risk.  So you can use them for what they were made for.

 

And your portfolio would still be 30% cash.

[ERICOPOLY]

1 hour ago, IceCreamMan said:

 

And your portfolio would still be 30% cash.

 

Yes, to cover the liability from the short put positions.

[GrahamKlarman]

My deep value picks. 

[rayfinkle]

On 1/9/2022 at 2:54 PM, ERICOPOLY said:

 

It's why buying ATM calls on 30% notional portfolio value make sense, funded by writing puts on 30% total portfolio notional across 100 other names if your risk tolerance is such that 0.3% position sizing in any one name is as large as you can tolerate.

 

Sigh...

 

Hey Eric- hoping to clarify what you mean here. Can you let me know  if this is what you mean?

 

30% notional exposure in ATM calls....

- ...gives you the same exposure as if you'd invested in the underlying with 30% of total dollars, but puts less $ at risk

- ...Therefore ppl may be more likely to actually make a concentrated bet

- ...the downside is that you are time-bound and will have to roll the calls (increasing your basis) to keep the trade alive past expiry

 

30% writing puts...

- ...Funds the premium for the above calls

- ...Is equivalent to "limit orders" on a diversified basket of names at the strike

-... to clarify, are you contemplating these as ITM / ATM / OTM? 

 

When combined...

- ... buying the calls, funded by puts, means you have 30% of the portfolio "reserved" in case the puts are exercised. In this sense the trade is leveraged to the upside but not to the downside

- ...you get "free" upside in the sense that if you were going to buy the positions that you wrote puts on anyway, you now get similar exposure to those names PLUS a rider on the call options

- ...you lose on the puts in two possible ways: 1) is if the underlying puts (assuming they are OTM) are never struck, so you never get the long exposure, and then those stocks go up. you'd therefore lose the upside, 2) if the puts are exercised and the stocks go down. (1) leaves you worse off than just getting a position in the underlying; (2) is equivalent to owning the underlying

- ...the calls main drawback is the duration. If you have to roll them to keep your exposure you suffer some frictional costs in maintaining the exposure. Over time this could erode returns

 

Did I get this right?