Financial Freedom Sloth

achieving financial freedom one lazy step at a time

The stash: the 2017 overview

In December 2016 I mentionned in this post that on the 30th December 2016 the stash stood at 244.000 euro. This after an impressive gain of 68.000 euro or 39% in 2016. This gain was due to the fact that Berkshire Hathaway had a brilliant performance, my first ever leveraged construction worked out great and the USD got stronger compared to the EUR (as I am mainly invested in USD).

So how did I do in 2017?

On December 30th my stash stands at a somewhat dissapointing 286.000 euro. A gain of 42.000 euro or 17,21%. Add in the 1 750 EUR I withdrew this year and I stand at a gain of 17,93%. Not bad, and for the second year in a row the stash grew more than what I have spend in the year. Which technically makes me financial independent.

But still, looking at those numbers I am somewhat diappointed. Let me explain. I am almost 100% invested in Berkshire hathaway. On 30th December 2016 it stood at 162,98 USD and it closed the year at 198,22 USD or a gain of 21,6%

I had my leveraged construction working out fine and giving me around 20 000 USD in profits.

I wrote several puts that all were profitable.

And I made 7 500 USD in daytrading profits.

So how the hell did I underperform Berkshire Hathaway? The reason is simple, almost all of it was in USD and the USD got a lot weaker against the EUR in 2017. I had strong currency head winds. EUR USD was 1,0522 at the start of the year and ended the year at 1,2016. And I was fully invested and leveraged in USD: ouch. Had the currency rate remained the same my stash would have been worth 326 600 euro  or a 33,85% gain!!

So all my effort, and then some, was wiped out by the lower USD. It didn’t really off course. Everything is all there. I started out the year with almost no cash and am now able to plow 33 500 USD in UVXY puts. It’s just when you report it in EUR, the ‘loss’ appears.

While it is no fun, I rather have the USD drop while both Berkshire Hathaway and my leveraged construction work out fine than have everything at once work against me. At least I still made a decent profit.

It also proves that when you are an active investor you shouldn’t really be bother by currency fluctuations. Despite the falling USD and being fully invested in USD, I still made more money (in EURO’s) off my stash than my annual spending! It would only be when I need to exchange USD for EUR that the lower exchange rate would hurt me. But I didn’t need to this. My 1 750 EUR withdrawal from the stash did not come form converting dollars but came from puts I sold in euro’s!

Since my new leverage construction is in euro’s (more because of the lower intrest rates then low confidence in the strength of the USD). In 2018 I should at least have a 20 000 euro cashflow generated by a portfolio almost completely in USD. As an active investor, forget about the currency and just go where the investments are the most attractive (with the possible exception of places like Zimbabwe or Venezuela).

6 Comments

  1. Haha I agree with your outlook on somewhere like Venezuela. I’d never invest there, no matter how “cheap” valuations are. For all you know the government will nationalize your property tomorrow, and you’ll be left with $0

    • finan112_wp

      January 2, 2018 at 5:18 am

      I don’t even touch equities in Belgium where the government is a large shareholder. Like Proximus: well run telecom with nice dividend pay out but I do not touch it on the sole reason the Belgian government owns 51% of the shares.

  2. For us it was the other way around, our net worth in CAD and USD exploded this year due the majority of our investment being in EURO. That being said, our dividend portfolio increase was limited as these are now all in CAD and the Euro increased in value. Ah well, so be it, not touching it for quite some time anyways. Think you did rather well this year (understatement!)

    • finan112_wp

      January 3, 2018 at 6:13 pm

      I am pretty happy with the result. Everything worked out, so there is that.
      I mainly mentioned the EUR – USD rate because the EUR amount doesn’t correctly reflect all the effort I put in my portfolio this year. And also to demonstrate that as an active investor you can ignore currency. The dollar dropped A LOT this year and I still generated enough cash to cover all my expenses. As I mentioned in the comments on your blog, I also generated that cash while being fully invested in non dividend paying stocks (mainly Berkshire). A little bit of inventiveness and there is a solution for everything …

  3. TheCyclingInvestor

    January 7, 2018 at 9:20 am

    17,21% YTD is very good! Congratulations!!!. You are right about currency fluctuations. In 2016 you made profit from it, in 2017 the EURUSD was against you… I think in the long run it doesn’t make much difference… Remember also that US stock markets in the long run generate higher profits then European markets. Due to the better “climate” for entrepreneurs, taxation, etc…So dollars must be in a good portfolio. Do you trust so much in Warren Buffet? I am surprised…I don’t have this trust. Don’t bet on one horse. Most belgian holdings do better then Buffet. Brederode for example has a 3yrs annual return of 20,83% vs 10,7% for Berkshire. This return is even without the dividend of Brederode! Also Sofina and Ackermans are beating him easily. Greetings and wish you good luck in 2018!!

    • finan112_wp

      January 7, 2018 at 9:55 am

      Yep, currency fluctuations are just that, fluctuations. I looked at it for this end of year report but otherwise I just ignored it!
      For Berkshire, I use a 30 year time frame as I am lazy and do not want to buy or sell too many shares. Not now, not in the coming 30 to 40 years. It also serves as collateral for my leveraged plays. Stability is a big part there. I actually do not want dividend paying shares because of the taxes on dividends. Option premiums and capital gains in leveraged bets are tax free. The rock stead foundation of Berkshire permits me to make the extra money in these option and leveraged bets. So from that viewpoint, Berkshire is really the way to go…

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