Summer vacation for AVI family this year was unsurprisingly rather different. To avoid crowds and popular tourist destinations, AVI family decided to go camping instead. To further minimize contact, we thought it was a smart idea to avoid a weekend getaway.  Mr AVI took advantage of one of the few perks of a salaried man, Personal Time Off (PTO, as it is often referred to in corporate jargon), and AVI family embarked on camping vacation on a weekday! Our destination, Leavenworth KOA, nestled at the base of Cascades along the Wenatchee river near the rustic bavarian town of Leavenworth.

Details of our trip will be a blog post for a later date, for now here are some photos from the trip…

Getting back to networth update, here are the numbers as of July 31st 2020.

• Net Worth (as a fraction of FI number): 69.48
• Liquid Assets/ Debt Ratio: 1.753
• Cash balance/ Two Year Living Expense: 0.9675

NW Distribution Table:

Synopsis:

• Retirement portfolio saw a nice bump up, primarily due to a rather significant rally in Gold price, at one point reaching as high as $2000 an ounce. As I noted in my earlier post, I have already hit the limit for maximum retirement contributions I can make for 2020 and any gains in retirement portfolio will be purely from investment returns.
• Market rally also seems to defy gravity,  with both my 401K portfolio and non-retirement equity portfolio showing healthy gains (more on this below).
• Credit card expense saw a significant bump up >100 %. Two primary contributors, (a) I switched my auto insurer, from Geico to Progressive and made an upfront insurance payment for the next six months. For exactly the same coverage, my premium decreased by >40 %, never knew progressive is so much cost effective. (b) Family camping trip. We ended up purchasing quite a number of items in preparation for our camping trip (will get into details in a future blog post).
• Since I refinanced my mortgage and made a prepayment for the month of July as part of closing process, I had not payment due. As such there was no change in mortgage amount for the month.
• Finally, networth showed a healthy gain of close to 3 %. Looking at the chart of NW growth for the year, the recovery is looking more like a square-root recovery.

NW growth chart:

Market Musing– Smelling a bubble!

Earlier in the week, the CEOs of the big 4 tech firms, AAPL, GOOG, FB and AMZN were grilled at a congressional hearings amidst concerns for their market dominance and anti-trust concerns. Mark Zuckerberg faced some of the toughest as well as some quite ridiculous questions by law makers from both sides. The next day, FB announced earnings that blew past analyst estimates and the stock rose >8 % for the day.

It was a good day not only for FB but AAPL as well as AMZN, each handily beating analyst estimates and markets rewarding the firms handsomely with AMZN stock price increasing by >3 % and AAPL stock by >10 %.  

These 3 firms along with MSFT and GOOG now account for 21.65 % of the S&P 500. For some context, the top 5 stocks in S&P 500 during the tech bubble represented 18 % of S&P 500.  And just like at the peak of tech bubble in 2000, the five big tech stocks have clobbered the market over the past year. They are up 49 % for the year relative to S&P 500 which has been pretty much fkat for the year. The big difference wrt to the tech bubble, the economy was booming back then and now we are amidst a pandemic, with US suffering from the largest ever year-over-year drop in GDP in recorded history!

Brian Chingono of Verdad put out an interesting factoid on growth of $100 invested in global developed market in the past decade.

$100 invested in the most expensive, least profitable quartile of the market in July of 2010 would have grown to $321 in June of 2020, where as the more rationale strategy of investing in the cheapest most profitable quartile of the stocks, would have grown to $167, that is almost 200 % differential! What is stricking is that this differential has accelerated in the past year or so, most of it coming post the pandemic. Yet another sign of momentum rally gone too far!

Ben Carlson from A Wealth of Common Sense blog, put out a checklist of the ongoing bubble mania, which I am summarizing below (with reference)

• Tech stocks going crazy (see above)
• IPOs on fire, (for example, Lemonade; ZoomInfo)
• Retail day trading going bananas (for example, Kodak, Hertz, Tesla)
• Warrent Buffett getting mocked relentlessly (for example, here and here)
• Value stocks are getting absolutely crushed by growth stocks (see above)
• Small cap stocks are getting left in the dust by large cap stocks (see here)

All of above fit the bill of what transpired during the tech bubble of late 90s, early 2000s.

Evidence seems to be strongly in favor of a rally gone too far!   But then, the bull market rally has lasted for more than a decade and in this low interest, fed stimulus induced environment there is no saying how much longer will the the stock market rally continue!

Video/Book/Article/Audio for the Week

• Rational Reminder Podcast on understanding the Fed’s money printer
• Blog Article: Berkshire Hathaway’s great transformation
• Blog Article: Scott Galloway musing on the congressional hearing of the CEOs of the 4 big tech firms