2023: the year of cash and t-bills

[John Hjorth]

28 minutes ago, KJP said:

 

Cash only has fully stable value relative to itself ($1 is stable relative to $1), as opposed to relative to another asset, e.g., cash does not have stable value relative to BTC or Berkshire shares.  But every asset has the characteristic.  Once to get beyond stable relative to itself, then you need to introduce some other comparator and assess one thing's stability relative to the other.

 

Cash has the benefit of less short-term volatility relative to most people's short-term obligations, e.g., the cost of food or your mortgage payment, and it's currently necessary for nearly all transactions, including paying your taxes, so it provides a necessary liquidity function. 

 

What do you think will be more stable relative to the value of your house over 20 years, cash or SPY?

 

@KJP,

 

That was very well said.

 

When we hit February 1^st 2024, that's one month from now -, - if nothing seuriously really starts to break somewhere before that date, we will have have had and experienced one the longest bull markets - 15 years! - in economic history, - if not the longest ever, with only short periods over those 15 years where cash in clear hindsight was to be preferred over the stock market.

[JRM]

Looks like ~3% in my self-directed account after being down most of the year and watching the MAG7 rip.  Most of the return came at the end of year, so hopefully that means I'm set up well for 2024.

[hillfronter83]

about 37% across several accounts.

[Libs]

<I’ve never understood the institutionally inspired obsession with fretting or fearing volatility. You should only be investing money you don’t need. And if you don’t need it who cares about what’s literally just one of the features of the stock market? I can’t think of anything that probably costs investors more money over the course of a lifetime than trying to avoid volatility. >

 

Very true, Greg, and this point isn't made enough.  I have a real-life example. I manage some 'scraps' for a few members of a family, each worth $100MM+. They have the vast majority of their money with a fund-of-funds guy charging 1% and putting them in a bunch of 2 + 20 type stuff. He's successfully smoothed out their returns; in the big down years they see only minor impairment. But over 20+ years, they've made their smooth 5% while I've made them 12% just opportunistically buying individual stocks like Berkshire and COST and the other stuff we talk about here. Common sense, coffee-can stocks.

 

It's funny how they see it...... every once in a while - after a good year like 2023- they'll say, geez 'libs' is doing so great, why are we putting so much with funds-of-funds guy instead of him?" 

 

And the answer is "because in 2008 'libs' was down 35% and FOF guy was down 4%." And they say, "oh yeah, that's right."

 

I'm not saying they're being stupid- some people just can't handle the swings. I'm not even criticizing the approach; the FOF guy is very smart and a friend of mine now. It's just the way people are, especially if they are already rich.

 

But if you add up the numbers, after 20 years the difference is staggering. In essence they are paying me 60BP's, with no underlying costs, to make 12%; and they are paying FOF guy untold multiples of that to make 5%. 

 

Maybe we should just consider ourselves lucky we're wired differently than most, and let it go at that.

[SharperDingaan]

On 12/31/2023 at 5:28 PM, james22 said:

BTC has had a drawdown of 93% (2011), FFH 88% (2003), and BRK 54% (2009).

If they are cash, what isn't?

 

A brief comment to end this, and not derail the thread.

 

A FFH, BRK, UBS, etc. is marginable. You need cash; you borrow against the security and deduct the interest against taxes, you aren't selling and taking a realised loss as well. You hold quality so that you can borrow, at all times; you hold cash equivalents (T-Bills, Commercial Paper), so that if you have to sell .. you have a liquid security that can be sold at generally no worse than 90c in the dollar.

 

You control your risk and return. If you insist on minimal adverse change in stored value, welcome to conventional cash equivalents, and the world of real returns < 1%. However, if you allow stored value to change (up, or down) you can hold the high quality BTC, FFH, BRK, UBS, etc. You own these 'cause you expect the stored value to rise, and can mitigate the downside by maintaining continuous liquidity (margin, cash equivalents). 

 

To control against a 1929 crash tomorrow;  most would apply a 50% haircut to a high quality portfolio, as well as a 50%+ haircut to the margin capacity (70% to 30%), to determine maximum debt; excluding 12-18 months of living expenses held in T-Bills. If you use a commodities portfolio; it will keep you alive to fight another day.

 

The accounting world recognises T-Bills, commercial paper, bankers acceptances, letters of credit, etc. as cash equivalents 'cause they are liquid in most all economic conditions. BTC is not a cash equivalent 'cause it is not an asset (no contractual benefits that can be present valued). The CP, BA, LoC backed by a GSIB (UBS) is a cash equivalent - but not the common stock itself. The investment industry uses the accounting definition of cash/cash equivalents (standard), so that all public portfolios are comparable. Obsolescence isn't going to stop continued use!

 

Accept BRK as a modern cash equivalent (liquid in most all economic conditions, option market); and a portfolio of 100% BRK, T-Bills, and commercial paper is a 'safe' entirely cash, cash equivalent portfolio with a higher return. Extremely disruptive to industry economics, compensation, and employment levels; not in the industry interest.

 

Private portfolios are not constrained by industry convention, and self managed portfolio's are less influenced by industry fees. When the PM's have broadly similar skill sets and experience, the private PM's are at an advantage. We just choose to use it.

 

One can argue the choices (BTC, UBS, etc.), but it's really about risk tolerance and will vary across different people. We just have a higher tolerance than most, primarily 'cause we're also good at risk mitigation; learnt the hard way.

 

Disclosure: Updated/modified Jan 02,2024.

 

SD

Edited January 2 by SharperDingaan

[james22]

32 minutes ago, SharperDingaan said:

One can argue the choices (BTC, UBS, etc.), but it's really about risk tolerance and will vary across different people.

 

Exactly why it's preferable to use the common definition of cash rather than one's own.

[Malmqky]

18.8% according to Fidelity...which I believe is calculating special dividends/spinoffs incorrectly. So I imagine closer to 20%. Either way, not a terrible year.

Edited January 1 by Malmqky

[Xerxes]

On 12/29/2023 at 12:50 AM, Xerxes said:

This is a day early. Year has not ended yet. 

 

Now that I had chance to run the numbers:

 

2023 => 24.81%
2022 => -11.48%
2021 => 20.09%
2020 => 11.36%

 

I should add that the numbers are artificially high because of the low base from which we started 2023. The seasonal bounce was fully captured. 

 

I don’t remove funds just add to it. These numbers are net of the additions. But not net of the market return of interim additions.
 

Example: 

 

start of year       $5

end of the year.  $10

contribution.       $2

 

therefore, ($10 minus $5 minus $2) divided by $5 is my return. 

not perfect as I treat an interim in Jan same as Dec 

[Xerxes]

This goes without saying:  

 

I couldn’t not have done that without you guys.
 

Not that I am trading in or out or anything. I barely bought 3 times this whole year. And with no sell. 
 

But i am capturing a lot of value through this forum that eventually becomes seeds for future growth. The seeds of 2023 were placed several years ago as I was reviewing this forum during Covid time. 
 

 

 

 

 

Edited January 1 by Xerxes

[backtothebeach]

74% in USD. Last year when I was looking at my port value, every other day I was thinking “this is insane”. Holding a large percentage of FFH and buying more on dips was the biggest driver, but I also sold tons of OTM and ITM puts on ATVI, OXY, CLF, STLC, CVE, OBE, BRKB and others, did some diagonal option spreads and some arb trades. All in all being imprudently leveraged with over 200% long if you add up long and notionally long through short puts.

 

That said, “you only need to win the game once“, so after 10 years of investing/trading like a madman with a 19.9% CAGR (was it worth it?), I am looking forward to being more passive.

Biggest challenge is going to be to get over my market addiction. I don’t use social media, so clicking back-and-forth between watchlists on IB and checking COBF for new posts has been my dopamine source for quite a while. I may start a new thread about this.

[Luke]

19 minutes ago, backtothebeach said:

Biggest challenge is going to be to get over my market addiction. I don’t use social media, so clicking back-and-forth between watchlists on IB and checking COBF for new posts has been my dopamine source for quite a while. I may start a new thread about this.

Lol, me too...its one of the few things i open early in the morning, checking at lunch, then after dinner...so much good input and knowledge base. Then all the fintwit, listening to financial news online, reading financial news...it doesnt stop

[rkbabang]

A quick check on my account performance:

 

Taxable: 38%

IRA: 39%

Wife’s IRA(I manage): 42%

401K: 28%

Crypto was well over 100%, but still below the high water mark in 2021.

Glad I didn’t go all in cash and T-Bills. I use a Fidelity cash management account as my main checking account. Fidelity lists the performance on that account as 4.79% for the year.

[thepupil]

More comprehensive writeup: 

 

So this was a year in which I had little conviction, decreased equity exposure significantly as bonds became more relatively attractive IMO (got as low as 70% long stocks, 30%-40% long bonds) and was generally not inclined to to aggressively average down or hold things on their way up. This means I impaired some capital in things like JBGS (swapped for ELME at the bottom, ELME rebounded less), aggressively took profits in JOE (began year at 9%, ended year at 3% despite outperforming holdings), sold a significant amount of Berkshire Hathaway given my belief its largest holding (AAPL) is overvalued and that its absolute / relative value is less clear than in past. I more or less feel the same about my portfolio as i did throughout 2023. I don't have super strong conviction in much of anything and am about 80% long stocks / 20% long bonds. I own a bit too much real estate and am way too invested in the US, but this has been the story of my entire investing journey. 

 

My consolidated IBKR accounts have returned: +319% from May 24th 2013 to December 29th 2023. SPY is about 249%. REITS +81%....Account = 14.5% / yr. SPY = 12.5% / yr. My consolidated Fidelity accounts have returned: +141% from August 12th 2016 to December 29th 2023. SPY is +148%. REITs +38%. Account =12.6%/yr, SPY =13.1%/yr. 

My 401K (not included in the above and a low % of NAV) returned 6.7% as it was mostly invested in the bond index. My wife's 401k (a very small % of NAV) is invested in stock indices. Good year professionally. Substantial savings/growth in NW, remodeled house, paid for expensive ass life. 

 

I've modestly outperformed over time. About half of my accounts is tax deferred which blunts the blow of decreased tax efficiency relative to index. I view my performance as okay. I could paint it as really good ( outperforming despite almost no direct tech, 50% ish on average in RE and destroying RE benchmark). Or I could paint it in a very negative light (higher effort and tax inefficiency relative to indx to no risk adjusted value add). 

 

Overall, since tracking consolidated all account performance (+14.9%/yr vs SPY +13.3%/yr)

2023: +18%

2022: +4.5%

2021: +55%

2020:  +2%

2019: +20%

2018: -2%

2017:  +15%

 

Ending Portfolio (I'll get rid of the stupid Norfolk short soon)

 

 

 

 

 

 

Quote

2022: +4.5%

 

 

Historical: 

 

All rough approximations, putting the old stuff from contributions to similar threads like this, it looks something like this

 

My consolidated IBKR accounts have returned: +248% from May 24th 2013 to December 30th 2022. SPY is about 178%. REITS +62%....Account = 13.9% / yr. SPY = 11.2% / yr 

 

My consolidated Fidelity accounts have returned +106% from August 12th 2016 to December 30th 2022. SPY is about 96%. REITS +23%. SPY: 11.2% /yr, Account = a bit better than that. 

 

My (slight) outperformance has come with much greater volatility and tax drag. 

 

 

2022: +4.5%

2021: +55%

2020:  +2%

2019: +20%

2018: -2%

2017:  +15%

 

 

 

[hasilp89]

27% pretax - not thrilled but not bummed.

largest +ve contributors - fairfax, expedia, vts, arch, gtx 

largest detractors - Ashford, docs, greenfirst

Plenty of errors of omission and commission

hopeful to continue improving this year

grateful to everyone on COBF who post and share their insights

Happy New Year!

 

 

[ValueArb]

Down -2.7% in 2023 over all accounts, since I restarted active investing June 1, 2021 up +32%.

 

I didn't return to full time investing until June of last year, and with new client accounts I had a lot of cash to deploy and I think rushed the process. Specifically I tried a new net-net approach that focused too much on balance sheet cheapness and too little on shareholder composition and motivation. Q3 was ok, about +5%, then the bottom dropped out in Q4. I finally pulled the plug on the new approach end of November, and accounts are up 7% since so despite the awful year I'm feeling pretty confident going into 2024.

 

Was my first negative year since 2008 and might be first active year I've trailed the market.

[UNF2007]

53% in 2023, due to a pretty hard rally into year end in my little concentrated portfolio. Best performer for the year by far was INTC. Have held it for 3 yrs so it has been a drag on prior years, have traded in and out for tax loss harvesting in prior years. Really surprised how long it took the market to come around to the value of the idea of not concentrating 80% of advanced fabs in politically/geographically unstable areas. Had a few risk arb things I piled into with everyone else, Activision acquisition being the biggest one that added a few %. C was added in the low 40s a share based in large part on the information shared on here/ deep value proposition so thanks everyone who provided insight on that one. My biggest mistake in years past has been getting uncomfortable and selling to soon and not allowing the momentum reversal that happens in these beat up names to fully play out as they go above my IV calculation, plan to work on that for 2024, and play around with letting stuff run 25-30% above IV before exit. Hope to add 1-2 ideas this year. Separately I'm finally getting off active duty this year and will be able to work as a surgeon in the civilian world which carries at least 3X the salary of what I'm used to in the Army and maybe more with ownership opportunities in a new surgery center that is being built by the group, so will see how that plays. Will give me more capital to play with in the taxable accounts for sure. 

 

PHIN 25%

C 25%

DIS 25%

INTC 50%

[CorpRaider]

Hmm maybe I should scale up on $AIV.  

Edited January 3 by CorpRaider

[fareastwarriors]

3 hours ago, CorpRaider said:

Hmm maybe I should scale up on $AIV.  

 

Is there some kind of catalyst?

[Gamecock-YT]

0.40%, You guys knocked it out of the park, this is probably the most i've underperformed the S&P since I started. Most my activity was in the bond market waiting for the drawdown that never came. Activity-wise sold out of MO at cost from around the pandemic and GENGF after the dividend cut. Only purchases came in December when WTI got below $70, bought a slug of GENGF back. 

 

"Big" winners: Ibonds, MO dividend

Big loser: LBRDK

 

2023: 0.40%

2022: -3.75%

2021: 19.9%

2020: 12.0%

2019: 33.0%

2018: -15.5%

2017: 35.0%

2016: 17.3%

[CorpRaider]

9 hours ago, fareastwarriors said:

 

Is there some kind of catalyst?

I'm not aware of a new one, just observing the weighting pupil has.

[gfp]

16 hours ago, ValueArb said:

I didn't return to full time investing until June of last year

 

If you don't mind sharing, what did you do before returning to full time investing?

[Castanza]

~40% currently across accounts (disclaimer though as the SAVE saga is still open....). Overall  really solid year for me....But I did  lot more trading than anticipating simply because of how the market was. So that's good and bad imo...I try to keep an open mind with investments and not get tied to anything I hold (outside of MSFT and RTX). I think it's important to take what the market gives you and not get caught up in diversification etc. Great thanks to all of you on here for the very solid DD and idea aggregation! BY FAR the best investment forum out there!

 

CORE

- MSFT

- RTX (added to in Oct)

- BRK.B (re-bought in Feb)

- AIV (doubled in Oct)

- ALCO (re-established a position on the dip back in Sept)

- FRPH (new this year)

- FFH (new this year thanks Viking)

- JOE

- BRO (new this year)

- WFG (doubled in Oct)

- GENGF (new this year)

- NTDOY

- CPRT (new this year)

- PARA (new this year)

- PFMT (new this year)

- BTC 

 

OPEN PLAYS

- SAVE (stock cost basis sub ~$11.20 and call options Jan 2025) still open....fingers crossed here

- BAC (options) bought 1/16/26 $40 calls at .94 sold half for ~3.20

- GLASF (some core some trade...overall small position)

 

SOLD

- GOOGL (bought last March sold in the 120's) <---- kind of regret this but had other things in my sights

- MSGE (no issues with the thesis, just had other things I liked better)

- SNCAF (solid gain on the year...decided it wasn't a company or industry I wanted to keep up with though and the position was not large enough to make holding worth it) 

- INTC (took a loss on this but nothing major...should have held lol)

- VTS (Solid 

- HQI (sold for ~13 sold high 16's)

- M (stock and options. Paid .11c for $20 Jan 19 2024 calls sold mid Dec for ~.55)

 

- CASH (buy under 45 sell over 50 rinse and repeat...)

- PCYO (I trade in and out of this at least once or twice a year....CEO gives shareholders zero reason to hold currently.)

- MANU (.....)

- TFC

- USB

- ATCO (forced out unfortunately...)

 

 

 

 

 

[BG2008]

On 1/1/2024 at 5:26 PM, backtothebeach said:

74% in USD. Last year when I was looking at my port value, every other day I was thinking “this is insane”. Holding a large percentage of FFH and buying more on dips was the biggest driver, but I also sold tons of OTM and ITM puts on ATVI, OXY, CLF, STLC, CVE, OBE, BRKB and others, did some diagonal option spreads and some arb trades. All in all being imprudently leveraged with over 200% long if you add up long and notionally long through short puts.

 

That said, “you only need to win the game once“, so after 10 years of investing/trading like a madman with a 19.9% CAGR (was it worth it?), I am looking forward to being more passive.

Biggest challenge is going to be to get over my market addiction. I don’t use social media, so clicking back-and-forth between watchlists on IB and checking COBF for new posts has been my dopamine source for quite a while. I may start a new thread about this.

 

Dude, you need to allocate to some private self storage and pay someone 2 and 20 to lock up that capital  

 

LOL 

[ValueArb]

2 hours ago, gfp said:

 

If you don't mind sharing, what did you do before returning to full time investing?

 

I did full time investing between 2001 and 2008, then went back to software development (mostly mobile). I was working for a tech unicorn in the wearables space the last few years while working to pick up a few clients and jump back in full time in June. 

[Eng12345]

I wish there was a good way to track performance/allocation across the various brokerages I have. 

 

I have made a few attempts at spreadsheets, but the manual process is cumbersome and tedious.