January 2021, Chicken Little Portfolio Performance

The lurking great white shark for financial markets is rising interest rates. Chicken Little believes that the bond market will (eventually) raise the cost for borrowing, and thus end the rally in stocks and other risky assets. Interest rates are still low, but have been rising for some months. 

Higher interest rates may be coming

January 2021 performance

The Dow Jones Industrial Average lost 1.91% in January 2021 while the Chicken Little portfolio gained 0.41

Jan '21YTD
Chicken Little0.41%0.41%
Dow Jones Industrials-1.91%-1.91%

2021 started off with modest losses across almost all major asset categories tracked by Chicken little.  The 'safe havens' of gold and long-term Treasury bonds were the biggest losers. Crypto's amazing 2020 gains continued into January 2021 with a gain of 18% in bitcoin for the month (roughly 15 years worth of returns for US Treasuries). 

AssetSymbolJan '21YTD
Dow Jones IndustrialsDIA-1.91%-1.91%
Non-US StocksEFA-0.78%-0.78%
Emerging Market StocksEEM3.17%3.17%
US Long-Term BondsTLT-3.63%-3.63%
When will the bull market in stocks end? During my brief summer internship at Goldman Sachs, the head of government bonds asked for my market views. Being well-trained in finance theory, I replied, "Have you heard of the efficient markets hypothesis? No one can predict future prices moves." 

Chicken Little working at Goldman Sachs in 1987

The multi-millionaire 36-year old Goldman partner stated, "bonds are not going down." I asked, "What time period is covered by your prediction?" and got the reply, "long enough for me to get out." -- well said Paul J.

Does Chicken Little have a similar insight into the stock market? 


Having turned "not bearish" in November 2020, when the Dow was at 29K, Chicken Little remains not bearish at Dow 31K. The best I can hope for is to recognize the end of the bull market not long after it ends. 

February 2021 portfolio positions.

Chicken Little is still mainly hiding in cash --  82% of the portfolio is invested in cash and short-term US Treasuries. 4% is investing in longer-term US Treasuries. 14% of the portfolio is in crypto. 

Chicken Little's risk capital is all in one crypto basket

Chicken little has moved all the risk capital (equites, gold, crypto) into crypto. If the speculative juices in the market ebb, crypto is likely to get hurt along with stocks. However, the US Federal Reserve is likely to respond to any market decline with even more printing of money. More money printing could support crypto even in a bear market for risky assets.  


Chicken LittleDow Jones Industrials
2021 (through January)0.41%-1.91%
2015 (April through Dec)-2.49%-0.27%
since inception (3/31/15)19.79%90.62%

No comments :

Post a Comment