Twelfth pin stuck in the newspaper

The Monkey and Crayon stock portfolios project continues with the 12th stock pick for both.

The monkey portfolio picks a new stock randomly and the crayon portfolio follows.

Just to be clear these are paper portfolios, but Holland Park Capital London Ltd will have or start equity positions in both stock picks.

This is not financial advice. My investment journey is described for educational, informational and entertainment purposes.

Why are we even bothering to invest at all? What is the point?

The easiest explanation is people invest in order to increase purchasing power.

What the heck does that even mean?

Easy; if you invest $ 100 today you could have bought say ten hamburger lunches with that at current prices.

Investing is only worth it if you actually increase your purchasing power.

So when you sell your investment you require a result that lets you buy 11 hamburger lunches of more.

Inflation in the last five years has been out of control. Voters are extremely mad about that.

Compared to the start of 2020 prices in the US, UK and Euro zone are up about 30%.

A “normal” inflation of two percent a year would have decreased the purchasing power of Western fiat money by ten percent in this period.

Unelected policymakers have not been held accountable for creating banana republic levels of inflation.

So the geniuses that had a $ 100 investment in long term Western bonds are now waking up to the fact that the current value of that investment is now only around $ 70.

Even worse in terms of original purchasing power the investment is worth just about $ 50.

Admittedly these long term bonds paid out some interest as an offset, but not much, as yields were disastrously low five years ago.

Effectively long term bond investors have exchanged 10 hamburgers in 2020 for five hamburgers now.

Clearly this deserves a big round of applause.

All asset classes have been impacted by this wave of inflation.

That made increasing the purchasing power of your money by investing a lot more difficult than usual in this time period.

The talking heads keep saying stocks are too expansive but that is simply not true.

John Authers wrote “The asset of the millennium isn’t what you think” on Bloomberg.

Since December 1999 shiny yellow gold has managed to outperform both stocks and bonds.

Of course gold has been itself left in the dust by something, that didn’t even exist yet in December 1999, digital gold which is also known as Bitcoin.

Plenty of commentators still hate Bitcoin with a passion.

Apparently it is evil and useless, but gold is not that useful now either is it?

Perhaps Bitcoin is another tulip bubble and it goes down 100%.

If however it becomes a new asset class the upside is more than 100%.

Retail investors have already embraced Bitcoin as a valid asset class, but institutions and corporations are for the most part not invested yet.

Central banks have been buying gold again recently.

Yes that is the same gold that our geniuses at the central banks were selling around 2000.

Holland Park Capital London Ltd firmly believes central bank investments can be used as a contra-indicator.

After all these were the same chaps that loaded up on bonds for tiny yields five years ago.

The Germans have sold their holding of seized Bitcoins this summer.

According to the Daily Mail newspaper Gordon Brown’s decision in 1999 to sell halve of the UK’s gold holding has cost the country a cool £ 21 billion as of this May...

The German sale of Bitcoin might go down in history books the same way.

As a country if you have a fiat currency, that you constantly inflate away yearly by two percent or more, any real asset investments would be a great long term hedge against that kind of debasement.

As always the choice is yours dear reader, but keep in mind that asset allocation matters.

Gold has historically protected but not increased your purchasing power.

Gold’s purchasing power is like putting ten hamburgers in a safety deposit box and taking the same ten hamburgers out on average when you need them.

Bitcoin and equities are like putting ten hamburgers in a safety deposit box and taking out more than ten hamburgers on average when you need them.

Why not buy Bitcoin directly?

There is nothing wrong with buying Bitcoin directly and keeping it safe in your own cold storage.

There are storage costs however.

For example you might forget where you kept the passwords or your wife might have accidentally cleaned out you Bitcoin USB stick with the trash for the garbage belt.

Also when you are retired and have your investments in 100 different accounts it will not be easy for your descendants to figure out your financial labyrinth.

As long as your broker doesn’t go bankrupt there is something to say for keeping your investments centralized in one place where you can access your listed holdings with one push of the button.

This project started in May 2019 and the investments in stocks have been heavily impacted by inflation.

The key question therefore is this;

Has this investing project actually managed to increase the purchasing power of the money invested?

If not this experiment is a waste of time and money.

So here goes;

The Crayon portfolio is up over 50% now. Dividend income has been ignored.

Since a new position is added about once every six months the effective average holding period is only around three year.

So the purchasing power of the crayon portfolio has increased during the lifespan of this project.

Holland Park Capital London is happy to be a very small co-owner of those businesses for the long term.

The company doesn’t own the same amount of shares as the portfolios. Also the positions were not bought at the same time and were bought at different prices.

The crayon portfolio owns four stocks now that are up more than 100% so far.

Luck by default plays a huge role.

The Monkey portfolio was not so lucky. The Monkey portfolio is up over 24% now.

The purchasing power of the monkey portfolio has been protected by investing in stocks, but the hamburger purchasing power hasn’t increased enough yet.

To be fair if one would include dividends the purchasing power would have increased for the monkey portfolio as well.

The monkey portfolio looks more like a value stock portfolio and as a result has a higher dividend yield than the crayon portfolio.

Only Deutsche Telekom has doubled so far for the monkey portfolio.

The twelfth position will have a new position value of about $5000 according to the “no capital gain taxes growth investment plan” in the book ‘Beat the Stock Market Casino’.

Have you bought the book “Beat the Stock Market Casino” yet on Amazon?

The crayon portfolio follows where the monkey portfolio leads to keep things simple and comparable. 

It is a simple buy-and-hold strategy.

Holland Park Capital London Ltd’s stock selection skills are completely incompetent compared to famous investors.

Diversification, buy-and-hope with a long time horizon and asset allocation is the name of our game.

For the twelfth round an attempt is made to diversify with companies with primary stock exchange listings in the Euro zone and more specifically in Germany.

The orange marker landed closest to Fresenius Medical Care AG.

Remember the monkey doesn’t need any brains and picks the next holding randomly.

Above; Orange marker landed closest to investable option E.ON for the monkey stock pick of the twelfth round.

For this experiment we do need the stock picks to have somewhat liquid US listings as well as the portfolio trackers are US based.  

Fresenius Med has a US listing with code FMCQF which had the last trade on September the 19th.

This listing doesn’t have the required liquidity, so the next closest stock E.ON was examined.

E.ON SE has a liquid US OTC listing with code EONGY.

The day range on Tuesday the 26th of November 2024 for this listing was 12.61-12.83 in USD.

For the monkey portfolio a paper transaction was added to the paper portfolio of 389 shares at $12.83 the day’s high price.

That transaction had a value of about $4991.

So for the crayon portfolio a paper transaction was added as well.

The crayon paper portfolio chose the stock Bitcoin Group SE with code ADE in Germany.

The US listing BTGGF again isn’t the best and is very illiquid but just about will do for tracking purposes.

For buying purposes however for both new holdings the German line will be chosen in the real world.

This listing doesn’t even trade every day or week but long term will keep close enough to the value of the German primary listing.

The traded day range on Tuesday the 26th of November 2024 for the BTGGF listing was 63.22-63.52 in USD.

For the crayon paper portfolio 78 shares of BTGGF at $63.52 were added to the portfolio tracking websites.

That transaction value on paper was about $4955.

The Bitcoin Group SE owns about 3589 Bitcoins at the time of writing.

The value of this small company is most likely to go to zero.

If however this company somehow survives and manages to hold onto their Bitcoins and Bitcoin keeps on outperforming as a digital version of gold, this holding could add some diversification to the crayon portfolio.

The Bitcoin Group SE could turn out to be a Bitcoin proxy for people that are not allowed to buy Bitcoin ETFs by their lovely regulators.

Time will tell.

Prices are sometimes set by crazy buyers and crazy sellers so who knows what will happen...

This is not financial advice. Do your own research please.

This article is for information purposes and entertainment purposes only.

Both paper portfolios have 12 holdings now.

Slowly but surely the portfolios start looking a little like diversified portfolios.

May the force be with both paper portfolios. Thanks for reading this blog.

Holland Park Capital London hopes you enjoyed the information in the blog.

This is not a financial promotion.

Holland Park Capital London Ltd is not receiving any compensation from anyone to write this blog.

Holland Park Capital London is long the stocks in the crayon portfolio and the monkey portfolio. Holland Park Capital London Ltd just doesn’t have the same amount of shares per holding as the paper crayon and monkey portfolios. The purchase prices are also completely different. Holland Park Capital London Ltd is also long the S&P 500 index.

Holland Park Capital London has no business relationship with any company whose stock is mentioned in this blog. Holland Park Capital London expressed its own opinions. This is not financial advice. This blog is for information purposes only. Make your own decisions please. Do your own research. Please go and see an authorized financial advisor before making any investment decisions. What works for Holland Park Capital London may well not work for you and your personal situation is unknown to Holland Park Capital London.

Stocks go up as well as down and you may get back less than you invest. Your capital is at risk when you invest in stocks. In other words you can lose all your money by investing in stocks.

Any information in this blog should be considered general information and not relied on as a formal investment recommendation. This blog is for information purposes only and helps Holland Park Capital London expand on the books “Beat the Stock Market Casino” and “Stock Market Blah Blah” (both available on Amazon). This brings extra discipline in the investment process. Holland Park Capital London Ltd is not liable for any mistakes in this blog. This blog cannot be a substitute for comprehensive investment analysis. Any analysis presented in this blog is illustrative in nature, limited in scope, based on an incomplete set of information and has limitations to its accuracy. The information upon which this blog is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore the accuracy cannot be guaranteed. Any opinions are as of the date of publication and are subject to change without notice.