2014 Q1 Report

“The focus of most investors differs from that of value investors. Most investors are primarily oriented toward return, how much they can make and pay little attention to risk, how much they can lose.”  – Seth Klarman

money

(Photo: 401K)

This is not a recommendation to buy or sell any security; this is simply how I am managing my money and how I see the market. It is also a record to track my performance.
 All commentary is based on market levels at 03/31/2014. My market level valuations are based on historic PE ratios, profit margins and Q-Ratio among other criteria.


Current Market View:

Markets continue to defy gravity. We are indeed living through a very interesting time. The current evaluations (Shiller PE) we are seeing in US markets (especially small caps) have only happened a few times in the history. 1929, 2000, 2007. Needless to say, we all know how those events ended. Yet markets continue to go up, even as evaluations continue to show negative future returns.

The low return on cash has forced many investors to seek more and more risk. Eventually this party will come to an end and it most likely will be uglier than people anticipate, but for now I am paying a great price for being on the sidelines.


Things I am watching:

Russia is starting to look attractive, but besides that things are pretty expensive everywhere.


Current Market Valuations:

International Markets: International markets are overpriced by about 35% and need to drop about 50% to be a true bargain.

Emerging Markets: Emerging Markets need to drop about 18% to be fairly valued and need to drop about 35% to be a true bargain.

US Large Caps (S&P500):S&P500 is overpriced by about 50% to fair value.

US Small Caps (Russell 2000): US Small Caps continue to be tremendously overpriced and need to drop over 65% just to be fairly valued.


 Current Portfolio as of 03/31/2014:

Name

Symbol

% of Portfolio

Cash and (Cash like Instruments)

69.57%

Berkshire Hathaway

BRK.A

11.16%

ProShares Short Russell 2000

RWM

9.63%

Singapore Dollar

1.58%

Emerging Market

VWO

0.26%

ProShares Short Small Cap 600

SBB

0.22%

ProShares Short 20+ Year Treasury

TBF

0.45%


 My Current Positions:

Cash and cash like Instruments – 69.57 % – Cash, I sold off most of my Asian currency position and moved to cash. I continue to hold a very small position in the Singapore Dollar. I also trimmed some of my Berkshire Hathaway holdings.

Berkshire Hathaway – 11.16% – I sold off some of my Berkshire Hathaway holdings as I feel the markets are getting more and more dangerous.

Russell 2000 Short – 9.63% – I added a bit more to my short position over the last quarter.

Singapore Dollar – 1.58 % – I isolated my Asian currency holding to the Singapore Dollar.

SBB/VWO – .48% – I continue to hold a small long position in Emerging markets and a short position in US small caps. Over all I feel this trade provides the best risk / reward profile.

Long Treasury Short – .45% – Small insurance against a drop in treasuries.


 My Performance:

I consider myself a buy and hold investor and judge the success of my investing over a full market cycle. The performance over a quarter or even a year is pretty irrelevant in the long run. But I am including it just for reference and record keeping.

Portfolio

1Q 2014 Performance

1 Year Performance

Performance since tracking (1/1/2012)

My Portfolio

.61%

1.12%

3.15%*

S&P 500 (IVV)

1.34%

19.55%

49.36%

Total World Stock (VT)

.45%

14.14%

38.18%

     
       
       
       

* I have been making a mistake in my previous reports by listing my annualized returns not my total returns. This showed lower returns than I actually received. The problem has been corrected moving forward, but I left the previous reports uncorrected.

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