The Sunday Ride #1 – March’21 (Bitcoin)

The Sunday Ride - March'21 (BITCOIN)

the sunday ride

The Sunday Ride brings a collection of Investment Research and Financial Independence topics for Long Term Investors with the aim of providing you the best reads.

To be enjoyed with your Sunday post-ride coffee.

While rebalancing your portfolio, learn how the markets work and get the highest quality insights from Wall Street and Main Street.

Unlike the rest of Bankeronwheels.com, this series is provided without additional guidance. 

As usual, everything is to be used at your own risk. 

Market Dashboard

DASHBOARD - STATE OF PLAY

A quick glance at where we stand Year-to-Date when you rebalance. Compiled specifically taking a Long Term Investor view. Updated throughout the year. Long term historical risk and returns are here

Year-to-date Market Performance

The key development this quarter was the fear of rising interest rates. 

If you want to understand the trade-off between Bond ETFs and Cash have a look at my recent analysis

You can directly plug the yields above for EUR, GBP or CHF into the Bond ETF Calculator.

β - THE LONG GAME

This section is dedicated to what really matters (aka the 90% of your Portfolio) – achieving Financial Independence, Asset Allocation and Long Term Investing Research.

Black swan risks always exists. While some brokers may be safer than others, in some cases the whole system is endangered.

Interactive Brokers’ Chairman Thomas Peterffy says financial markets came “frighteningly close” to collapsing during the Reddit-driven turmoil.

Watch the whole video.

Read more about Broker safety (a Bankeronwheels.com classic)

If you think about changing your portfolio allocation due to apparent mis-representation of certain countries, think again. 

While there is nothing wrong in expressing (marginally) your views on a risk/reward spectrum (BoW analysis) we need to account for the hard facts.

MSCI came with an interesting analysis showing how global revenues are shaping companies’ bottom lines.

The Emerging Markets’ companies represent only 12% of the MSCI ACWI Index in terms of market cap, but the economies account for 42% of global revenues.

Once a year, Credit Suisse publishes a comprehensive summary of long term historical returns. 

It’s a great perspective on what can be reasonably expected in the long run. While I haven’t covered factor investing yet, also due to limited investment options available to Retail Investors, page 30 onwards gives a summary on how factors performed since the GFC in 2008 – not that it helps predicting the future!

Alpha Investing

α - PUNT RESPONSIBLY

If you decide to sin, then sin only a little. Active investing should be, at best, a tiny fraction of your portfolio (I tend not to exceed 10% of my portfolio). This section is dedicated to improving your knowledge about capital markets. 

While ARKs, Tesla and other Reddit favorites are showing signs of fragility, Bitcoin seems, so far, to be resilient.

How do professional investors approach Bitcoin?

The CFA Insitute, which is  the largest global organisation grouping professional Investors (I am a also charterholder), has produced a very comprehensive primer that highlights risks and opportunities in cryptospace. 

In their recent paper, Bridgewater Associates echoes wider market narrative that Bitcoin may become another option for potential store of wealth. 

But to Nicholas Taleb‘s point (BoW article) the Lindy effect indicates it has still some way to go.

Competition with Gold is here to stay, argues JP Morgan in their well-researched report but Bitcoin is a sideshow to the rise of Central Bank Digital Currencies. 

Not long ago, Jamie Dimon called Bitcoin a ‘fraud’ but now this same above research points to potential portfolio diversification benefits.

 “Why bother considering an unconventional and high-volatility hedge?” Three reasons: 

  • Equity and Credit valuations look record-rich for a very young business cycle;
  • Conventional hedges like DM Bonds barely serve as insurance when US 10Y rates are near 1%;
  • Some as-yet unseen shocks (materially higher inflation, economicallydebilitating cyberattacks or climate catastrophes) could favor an asset that operates outside conventional financial channels.

What drives Bitcoin price? In its research piece, Bank of America dives into the technical aspects and the supply / demand imbalance.

Reported Institutional holdings are still very low at ~5% (mainly Greyscale Bitcoin Trust – see page 4). While awaiting an ETF? The number of applications builds up. 

Bitcoin does have tail risks, though. On top of regulation, there is a threat of vulneratiblity in the age of quantum computing, writes Deloitte.

How good was active investing last year?

Well, S&P has updated their scorecards. While last year wasn’t the worst, 57% of US managers still lagged indices.

Active Investing - Orbituary

When you play with fire, you can get burned. This section is a stark reminder of what can happen when engaging in active investing, even as a professional.

We’re only a quarter into 2021, and already had a couple of spectacular failures. 

Archegos – There are three ways of making money in finance. Be first, be smarter or cheat. Bill Hwang used to cheat. 

He was banned for insider trading in 2012 (per SEC), but came back in 2018 trading Chinese Stocks. On margin. 

His firm just collapsed, triggering a fire-sale of $20 bn of assets. Goldman Sachs had Hwang on blacklist after he was charged, but at some point in the past two-and-a-half years, ‘changed its mind’. 

It left some of its rivals struggling, including Banks like Nomura and Credit Suisse which shares lost around 15% in one day. 

R.I.P. Archegos (you didn’t exactly show the way). The question remains, how many other shops could be doing similar, Reddit-style YOLO trades for their clients, without directly reporting their holdings (hiding behind big banks via Total Return Swaps)?

Melvin Capital – did survive the Gamestop saga, but lost 53% in January, WSJ (paywall) reported. Even if you make 20% in February, the math doesn’t really work if your favour, does it? 

 

European Stuff

EUROPEAN STUFF

This section is dedicated to UK and European Index Investing. It can also touch on other jurisdictions outside the Euro-zone.

As you may know, the ETF industry is concentrated around big US players like BlackRock (iShares ETFs), Vanguard or State Street (SPDR ETFs).

European DWS (xtrackers ETFs) is one of the leaders locally, but there could be a new giant soon.

Reuters reports that Société Générale is selling Lyxor and Amundi may end up being the buyer (otherwise it’s likely that State Street will get bigger in Europe) 

Cycling

LIFESTYLE

This section is dedicated to the FIRE Lifestyle Movement and Cycling Topics (bikepacking, touring and useful reviews)

Financial Independence & Early Retirement

I’m not deliberatly pursuing Early Retirement. Or at least, that’s not my main objective. While Financial Independence is key, I have so far enjoyed mini-retirements.

But Early Retirement, can be fulfilling. You just need to find a purpose and have your partner fully on-board. Health is another unknown. 

Here is a story from Livingafi, five  years after he retired. Few words of wisdom and a look at the bigger picture, if FIRE is your goal.

The Cycling Corner

Cycling has been on the rise, since the start of the pandemic. 

Guardian reports on what can happen when you buy a £5,000 bike from Poland post Brexit.

Supply stuck in the Suez Canal is one thing, but bike parts are missing throughout Europe. 

If you plan bikepacking this summer, think about shopping before everyone else does (I probably bought the last Garmin Varia currently available in France). 

CPI aside, bike inflation is a reality. 

Travelling locally will be priotitised. If you’re in Europe, don’t exclude Morocco. Close, safe and their handling of the pandemic has so far been exceptional.

They didn’t have the Asian pandemic experience, nor the US vaccine technology. But they followed common sense and had great wisdom, unlike a lot of European countries (the weather may have helped a bit).

GCN has a great video about bikepacking in the Atlas Mountain Range. I may stick around until then, so we may end up riding some parts together (if they do open borders). 

Here is my Instagram summary of some key considerations.

Napoleon’s definition of a military genius was “The man who can do the average thing when everyone else around him is losing his mind.”

INVESTING GUIDES

GROW YOUR PORTFOLIO
Market Dashboard
FINANCIAL MARKETS RESEARCH
CHOOSE THE BEST ETFs
PROTECT YOUR MONEY
UNDERSTAND BOND ETFs
INVESTING FAQ
READ ALL INVESTMENT INSIGHTS
CYCLE THE WORLD

DISCLAIMER

All information found here, including any ideas, opinions, views, predictions, forecasts, commentaries or suggestions expressed or implied herein, are for informational, entertainment or educational purposes only. The information provided on Bankeronwheels.com is general in nature only and does not constitute personal financial advice.

Before acting on any information contained on Bankeronwheels.com you should consider the appropriateness of the information having regard to your objectives, financial situation and needs, and seek professional advice where appropriate. Read the terms and conditions.


HAVE A QUESTION ABOUT INVESTING?

Drop it below or if you enjoyed my work and found it useful please do leave a comment or share it with someone that may benefit from it – I am grateful for your feedback

This website is non-revenue generating and I do pay for services and software to keep it running.

Good luck and keep’em* rolling!

(*Wheels & Dividends)

Raph

 

REACH FINANCIAL INDEPENDENCE SOONER

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Jack T
Jack T
5 months ago

Hi Raph,
Thanks for this, it’s been a while, but just wanted to drop by and congratulate you on a year of BoW.

Definitely a resource I still use, and reference, here’s to hoping for many more (informative) years to come!

Jack

Jack T
Jack T
5 months ago

Yeap, I may not interact a lot, but I still do read almost all your articles. My current interests lie more towards the dark side (active trading) hence pouring more of my resource in that to try to generate some extra alpha, so I do (respectfully) think the HFs you mentioned above are very specific cases and not representative of what retail active investors are capable of. In the time since, I’ve also actually produced an 8 part video series on investing (poor production quality as these are live webinars later uploaded to YouTube lol). Anyways, hope you’re doing well… Read more »

Jack T
Jack T
5 months ago

Sure, HFs going bust is all fun and games for me; but I tend to believe individual investors lie in two camps: 1) People who want nothing to do with finance and just want a decent nest egg at retirement/FIRE – invest in ETFs and let them be as is your recommendation 2) People who enjoy learning about financial instruments – look out more for what’s out there and actively try to manage a portfolio utilising not just stocks/ETFs, but also derivatives (I’m in this camp). By all means, 80% of my investments go into ‘safe’ passive ETFs [VWRL +… Read more »

Joao Jesus
Joao Jesus
5 months ago

Thank you very much for your insightful articles. They are a great help for us, less financial educated fire-wannabes. Please keep them rolling.

mr fu
mr fu
5 months ago

Congrats on a year of blogging.

I enjoy your posts and try to read each one.

cheers

Tania
Tania
5 months ago

Congratulations!!! One year old!

You have done such an amazing job Raph and I am forever gratefull that you decided to share your knowledge. I have learn so much with you, things that I have never learn at school!

I am european and your articles are true gems for me.
You really have a gift to express yourself about a theme that is so complex. It is simple to understand, funny and complete, with all the information that is needed to make a conscious decision.

Thank you so much and keep them rolling 😊

Tania

Tania
Tania
5 months ago

I didn’t want to increase the pressure at all. You are great and I just wanted to thank you.
I love the stories about your cycling jorneys, they are very inspiring!

Bryan
Bryan
5 months ago

Thanks for taking the time to post the links to articles of interest. I shall make a point of looking out for them each week. I’m not sure about reading them post cycling though, more likely to be having a snooze😂

Maciej
Maciej
5 months ago

Hi Raph,

When I realized that you were able to create this website in just 1 year I was truly amazed. Congratulations 🙂 What will be next…podcast/youtube?:)

Ps. I have noted that you not only reorganized the menu but you are also updating past posts 🙂 Maybe you can put in newsletter when/if posts are updated.

Regards, Maciej

Ferdi
Ferdi
5 months ago

Hi Raph,

I celebrate your first year, keep up the good work! Actually, discovering your blog was one of a few good things happened last year. I have been learning a lot from you and widening my horizon about FIRE/passive investing topics.

Believe it or not, I stopped buying a S&P 500 EFT and switched to VWRA after reading your post about golden retriever portfolio, which just made sense to me.

Greetings
Ferdi