To Separately Managed Account Clients of Vailshire Capital Management
The intense August heat is already a distant memory here in Colorado Springs. Much to their chagrin, our kids have been back in school for several weeks already… Autumn is just around the corner!
I hope each of you is doing well.
Current Market Conditions
The Covid virus is officially endemic, with surging cases of the infamous Delta variant in the US and around the world. However, despite intermittent waves of the disease, the markets and underlying businesses are learning to adapt.
As mentioned in my prior months’ Updates, inflation continues to be front page news. While it is no longer accelerating at rates seen over the past 9-12 months, it has now stabilized at persistently high levels. I liken it to a driving a car–accelerating up to highway speeds (inflation acceleration over the past 9-12 months), then setting the cruise control at a stable high speed (current inflation rate).
Persistently high inflation is also coupled with minimally decelerating GDP here in the US. And the GDP looks to stay stable or even slightly accelerate in 4Q 2021.
Closely monitoring the combination of inflation and GDP allows us to anticipate the next moves of the Federal Reserve, and often dictates the movement of US Treasuries, and many related financial assets… giving us and our Vailshire portfolios an edge on the markets.
As you can see from the above graph, which compares the returns of the S&P 500 with a typical Vailshire “moderate-to-aggressive” client portfolio over the past year, our systematic investment is trouncing the underlying markets by over 50% (85% to 31%)!
Strategies for Vailshire’s Separately Managed Accounts
Despite stock, bond, and real estate markets trading at our near record high valuations (not a good thing), my research shows that there may be more upside to come in the ensuing months. Because of this, we continue to maintain fairly aggressive (“risk on”) positions within our portfolios.
Bitcoin, for its part, has already increased by approximately 74% from its sub-$29k lows on June 22nd. At that time, many people were calling for prices to go to $20k, $15k, $10k… and even $0! Thankfully, we knew better and used the general market panic to load up on bitcoin on the cheap. Our patience and steadfastness has already been rewarded and I believe there is much more upside to come in our portfolios.
Depending on your financial objectives and individual account investment privileges, Vailshire’s separately managed accounts are currently allocated in the following manner:
- 23-40% US stocks (large, mid, and small caps, including technology and industrial stocks)
- 10% emerging market stocks
- 10% real estate equities
- 2-5% cash
- 30-49%% bitcoin, ethereum and/or related proxies (based on personal preference and trading permissions)
- 5% commodity-based equities
If you are a Vailshire Client, feel free to log into your Vailshire-managed account(s) at Interactive Brokers and see how your own portfolios are positioned. (It’s a good idea to log into your accounts at least quarterly, just to make sure your settings and demographics are up to date.)
Vailshire in the News!
July and August were busy months for me in terms of podcasts and YouTube interviews. Feel free to use the links below to watch/listen!
Featured on Where is Bitcoin Going? (released on August 26, 2021).
Featured on Zero to Coin podcast (released on August 21, 2021).
Special guest on Simply Bitcoin (YouTube, released on August 20, 2021).
Featured on DWealth Muse podcast (released August 15, 2021).
Featured on Why Are We Bullish? (YouTube, streamed live on July 23, 2021).
Conclusion
Despite relatively over-valued stocks, bonds, and real estate, the underlying market conditions point to surprisingly robust returns for many asset classes over the coming months.
Even better, bitcoin and related assets should generate substantial alpha (outperformance) in the near-term, following their huge drawdown from mid-May through mid-July. Given the generous weighting of such assets within our Vailshire accounts, I expect continued market-trouncing performances.
If you have a friend or family member who could use a more-informed and innovative approach to investing, I would be honored by the referral!