September/October 2020 Update

Dear client or friend of Vailshire Capital Management,

Greetings from Colorado Springs!

Current Market Conditions

After a tumultuous month of September, I was hoping to sound a more optimistic note for October and the upcoming election. However, the most recent economic data–mixed with rising geopolitical tensions–has tilted my indicators more bearish.

In other words, we need to expect more volatility in the markets and within our portfolios in the short-term.

As Warren Buffett famously said, wise investors are “fearful when others are greedy, and greedy when others are fearful.” Learning to calmly buy–rather than panic and sell–when you see red numbers in your portfolio is a key to compounding your wealth over the years and decades.

The months of September and October are notoriously volatile and difficult for stocks during election years and, so far, 2020 has not deviated from this trend. I want to strongly encourage you to hold fast and–better yet–consider putting new money to work in the coming weeks.

The encouraging news is that, once the presidential election results are officially determined, stocks and bitcoin historically perform even better than average… making October the perfect time to increase our investment exposure!

Strategies for Vailshire’s Separately Managed Accounts

I have recently rebalanced all Vailshire portfolios in anticipation of a volatile 5-6 weeks in the markets. While many underlying economic and inflation indicators are flashing red, the markets may be surprised to the upside with any “stimulus package” or “quantitative easing” announcements by our government or Federal Reserve.

Technology stocks are a bit of a wild card, and so I have significantly reduced our direct exposure via ETFs.

Depending on your investment objectives and individual account investment privileges, Vailshire’s separately managed accounts are allocated in the following manner:

  • 30% US Stocks (large, mid, and small caps)
  • 10% Emerging market stocks
  • 10% Real Estate
  • 2-10% Cash
  • 20% Gold and Gold Streamers/Royalties/Miners
  • 15-23% Bitcoin/Ethereum/Cryptocurrency proxies (based on personal preference and trading permissions)
  • 5% Commodities

If you are a Vailshire Client, feel free to log into your Vailshire-managed account(s) at Interactive Brokers and notice 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.)

A Quick Note on Bitcoin Exposure

News of institutional and (importantly) government acceptance of bitcoin as a legitimate, regulated asset class comes across my desk on a daily basis, which is a very bullish sign for bitcoin specifically, and cryptocurrencies (such as Ethereum), broadly.

As I have discussed in prior emails, Bitcoin’s stock-to-flow cross asset model suggests markedly higher prices in the coming 15-18 months. Based on my research, I expect the price of bitcoin to increase 5x to 27x by the end of 2021 from the current price of approximately $10,500. While this is not a guarantee, its potential price action offers the best risk/reward setup of any current asset class over the next two years… by far.

So, while our bitcoin and ethereum positions have dragged down our portfolio returns a bit over the past 6-8 weeks, I expect that we will be handsomely rewarded for our patience in the coming 15-18 months.


While the coming month or two may be volatile–both geopolitically and within our portfolios–I want to strongly encourage you to trust in our systematic investment process.

Any short term dips will provide meaningful opportunities to strategically invest in assets that should perform exceedingly well in the coming years. Instead of being surprised by their arrival, let’s take advantage of them as they come.

Personally, I am very excited by the opportunities on the horizon, and am thankful to be invested alongside you!

Investing wisely with you,