December 2019, Chicken Little Portfolio Performance

December 2019 was a great month for investors ending an annus mirabilis - Latin for a miraculous, remarkable, and auspicious year. Every risky investment paid off in 2019, ranging from bitcoin, gold, treasury bonds to emerging market stocks. Paraphrasing War Games, the only way to lose, was not to play in 2019.

2019 Free Money for Investors

December 2019 performance

The Chicken Little Portfolio lost -0.41% in December while the Dow Jones Industrial Average gained 1.75%.  

Dec 20192019
Chicken Little-0.41%9.03%
Dow Jones Industrials1.75%24.82%

December was a very strong month for investments. The only losers in December were US Long-Term Treasury bonds and a slight slip in the price of Bitcoin. 

AssetSymbolDec 20192019
Dow Jones IndustrialsDIA1.75%24.82%
Non-US StocksEFA2.93%21.80%
Emerging Market StocksEEM7.61%18.05%
US Long-Term BondsTLT-3.14%13.83%

2019: Free money for all

2019 was a year like 2017, where every investment had great returns. The worst investment tracked by Chicken Little in 2019 was US T-Bonds and they returned a whopping 13.83%. Bitcoin essentially doubled in 2019. If you feel bad about your 2019 returns read about the Donnie Brasco investing environment (click for article). 

Dow Jones IndustrialsDIA27.72%24.82%
Non-US StocksEFA24.92%21.80%
Emerging Market StocksEEM37.13%18.05%
US Long-Term BondsTLT9.08%13.83%

Chicken Little had a great 2019 earning just over 9% from owning Treasury bonds (sold more than half the long-bond position in 2019), owning bitcoin, and shorting Tesla.  

True to his moniker, Chicken Little remains pessimistic about the economy. The investment gains are based on federal government deficit spending and Federal Reserve printing money, not a path that is likely to end well. As further proof of the artificial source of stock market gains, consider that overall US corporate profits are essentially unchanged since 2012. 

US Corporate Profits unchanged since 2012

Why has the stock market soared while corporate profits are flat? The answer is some combination of investing mania and low interest rates. Some people buy stocks because bonds pay very little. Furthermore, company profits have benefitted from low interest rates because companies pay less to borrow. 

So low interest rates have propped up corporate results, which presumably would be falling if the cost to borrow were higher. And stocks look better to some people when the alternative investment of bonds pay very little. 

January 2020 portfolio positions

Emotionally, Chicken Little can not buy stocks when they are supported by deficit spending, loose money, and no profit growth. So the Chicken Little portfolio continues to avoid stocks and other risky assets, patiently waiting for the day (or decade) that presents better opportunity. 

The Chicken Little Portfolio remains prepared for a depression, probably deflationary, but possibly inflationary. The Chicken Little portfolio starts the new decade exactly where it ended the previous decade - hiding under a rock invested in almost nothing. 

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Chicken LittleDow Jones Industrials
2015 (April through Dec)-2.49%-0.27%
since inception (3/31/15)10.43%77.86%

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