Monthly Update #18 – February

After the New Year Blues, the scene was set for a gloriously positive February right?…… Well, not quite. Coronavirus found its latest victim in the stock market; it rained so much in England I considered kayaking to work and the price of hand sanitizer gel has eclipsed that of a Telsa Model 3. Okay, that last part might be a lie, but the rest was sadly the reality of the current situation (minus the kayak). Time for another monthly update and a roundup of February 2020!

Pursue FIRE Monthly Update 18
At the Cliff Edge

Personal Life – What’s Been Happening?

Boston

As I briefly touched upon in writing last month’s update, I jetted off to Boston in early February for a week of work in our main U.S. office. As is always the case when I’m visiting colleagues abroad it was an action-packed week. The main purpose of being there was for our annual Relationship Management Conference – an offsite gathering of around 100 of my colleagues across portfolio management, sales and client relations. It’s always a great 2-day event, packed from start to finish with great presentations and debates from various individuals and teams from across the firm on what is driving investment markets, themes, risks and opportunities in 2020.

Coronavirus was clearly a big topic and it was super interesting to see and hear the views and insights from different teams and how they see the impact on economic growth around the world and, of course, what might be expected from different asset classes in terms of future returns.

In early February (when I was there), the general market optimism was seemingly quite positive and that the worst might actually be over. However, the clear message from our portfolio managers was that the risks were being severely understated. Writing this update now, almost a month later, I think that cautionary stance was proven correct. Markets are whipsawing as the newsflow on the growth and reach of the virus across Europe and beyond is front and centre on our news feeds. Interesting times indeed!

Aside from the conference, there were plenty of fun meals out – Boston has a great restaurant scene. I’ve been going there a few times a year for nearly 8 years now and we always find new and fun places to try. Needless to say, there were lots of laughs and giggles with my team, several of which were also out from the London office for the week.

Snooping

In February I was invited to be a beta-tester for a new money-saving app called Snoop. Via open banking, Snoop (a cute little robot) connects to your accounts and analyses your spending, where and with which vendors or merchants you spend that money and then actively seeks out money-saving tips with those merchants or suggests alternatives. It does the usual account aggregation and budgeting stuff that other apps do (e.g. Yolt, Emma to name a few), but the personalised money-saving tips (known as snoops) are quite unique.

Snoop – the money-saving Robot

While still currently in beta mode, it’s pretty slick and is differentiated in my opinion. So many other such services are quite generic and not tailored to your exact activity. It’s got some serious backing with many of the folks who built Virgin Banking leading the team.

In addition to using the app and giving feedback, I also spent a morning at their HQ with a few other beta users to do some more in-depth user testing. It was great to meet a few other people and interesting to find that there were pretty all much FIRE devotees. We ended up having a coffee afterwards, but sadly as it was a workday, it was back to the day jobs 🙁

It should be launching in the next month or two and you can still request early access via their website. Worth checking out.

Net Worth Snapshot

Time for the usual numbers. Here, as always, is a snapshot as things stood at the end of February. I break down my current financial assets as at the end of the month and compare these to the previous month (January 2020) and then also relative to 1-year ago (February 2019) to see how I’m doing.

So, despite what was a highly volatile month on the markets, my total net worth actually increased to a new record of £665,324 – an increase of 0.7% for February. Excluding property, that translated into a gain of 0.6% to £365,907.

The headlines continue to be dominated by the spread of the coronavirus and its potential to hit global economic growth in the coming quarters. Markets have been highly jittery, veering from falling off a cliff to recording single day biggest gains in early March, only to then fall violently again as news continues to flow in.

To somehow come through the month in a positive position feels great, although I have my annual performance bonus to thank for that.

Market Fear

Some of you may be familiar with the VIX Index – a closely watched measure of market sentiment. Created by the Chicago Board Options Exchange (CBOE), the Volatility Index or ‘VIX’ (the ticker symbol on Bloomberg) is a real-time market index that represents the market’s expectations of 30-day forward-looking volatility. Derived from option prices, it’s essentially a measure of market risk and investor sentiment. The simple way to interpret it is that, when it’s high, it’s a bad sign – people are fearful and are likely net sellers of equities. It’s ‘normal’ level is around 20.0 over the long-term, so readings as high as 40-50 are quite extreme and can be associated with prior market crises.

It’s not necessarily a bearish signal (although a rise in the VIX is usually mirrored by a fall in equity markets) but rather a measure of perceived expected volatility in the next 30-days in either direction.

Here is the VIX over the past year. Pretty sanguine until mid-February. So even though coronavirus was already headlining the news in January, the fear was not being seen in markets until just a few weeks ago when it went from a low of 13.68 on the 11th of February to a high of 49.48 by the 27th February – an increase of 193.2%. Remember, it’s a forward-looking measure of expected volatility on the stock market, and we have now certainly seen that unfold in early March, with huge up and down days so far.

VIX over the past year – as of 4th March 2020

And a longer look back through history. No surprises in guessing what the previous peaks represented (Tech Bubble, 9/11, Sub-prime crisis to name a few) and how markets behaved in those periods.

VIX over the long-term – as of 4th March 2020

In terms of my numbers, this was felt sharpest in my pension, with it being the largest pot of money. Here my portfolio value dropped by 5.7% – around £18,700. My other investments also collectively got side-swiped by 6% – a drop of £2,871.

So, overall my total equity market exposure dropped over £21k for the month! Some pretty big numbers there, but I’m sure they will be recouped in time. How long is anyone’s guess?

Bye Bye Debt

On the positive side, I cleared my last bit of unsecured debt in February through a combination of side-hustle earnings and part of my annual performance bonus. I wrote about this in a previous post and it feels great to be completely debt-free other than for outstanding mortgage debt. This was a very inexpensive debt (sub 1.5% interest rate), and I could have cleared it earlier, but I had been making regular overpayments, preferring to direct money into my investments rather than clearing the debt – opportunity cost and all that jazz 🙂

While the timing of this was repayment was complete luck, I’m glad, in retrospect, that I made this decision to pay off this debt in one lump sum, rather than drop that money into the stock market. This alternative choice would have seen me put a sizeable sum into the market just days before the big rout at month-end.

So, after all that moving and shaking and administrative moves, I still have about £10k leftover from my bonus. Not that I advocate market timing, but I will probably put that to work in the coming days into my ISAs to take advantage of these lower market valuations.

So how does this impact the longer-term picture? Compared to a year prior, my total net worth now stands 26.1% higher (+£137,888) and, excluding property, that’s an overall increase of 23.7% (+£70,171). Keep it up fella 😉

Other updates

Betting & Trading

Tennis trading took a bit of a back-seat during February as I poured all my energy into refining and tracking my Elo-based model for unearthing value picks for straight, pre-match betting.

Whereas in January I was using the tool to find multiples bets in a similar vein to the multiples betting strategy I wrote about previously, February was all about finding out if just simply taking every possible ‘value’ pick was a good strategy.

While I had been having reasonable success at the multiples approach, some people I was sharing my sheet with were having more mixed results as it all came down to self-selection of the actual picks – I was simply presenting the dozen or so picks per day and then it’s really down to each person to determine the combinations they want to make. Obviously, the possible variations and combinations are endless and no two people would yield the same outcome. So, by showing what every single pick would have done as a single selection, I hoped to demonstrate that the tool had an edge, even if it were small.

A peek inside…

February was a particularly good month to test this out as it was a super busy month on the calendar. There were no less than 5 WTA tour events (Acapulco; Doha; Dubai; Hua Hin and St. Petersberg) and 12 ATP events (Acapulco; Buenos Aires; Cordoba; Delray Beach; Dubai; Marseille; Montpellier; New York; Pune; Rio; Rotterdam and Santiago). Overall, the tool spat out more than 340 value selections – a combination of high probability favourites, all the way to value underdogs, all passing through certain value thresholds I have in place.

I’m still busy analysing the results and will write a post on that in due course. In all honestly, taking every pick looks to be a mixed strategy (at least based on one full month’s worth of data). But, more data is needed to judge it over the context of a full season, which is 11 months, not just 1.

In March, I’ll not be placing any value pre-match bets. Instead, I’ll be trading in-play using a variety of strategies I’ve picked up over the years. March, in contrast to February, is much quieter and there are some European-based tournaments which are in my time-zone which makes them more trading friendly than many of the overnight tournaments that occurred in February in far-flung places such as Chile and Mexico.

I really enjoy the challenge of trading in-play. Having dabbled on and off for more than 8 years in tennis-trading, I’m no beginner, but there is always room to improve and finding consistency is always the hardest part.

Well, I’ll finish there. I hope February was not too brutal in terms of the potential hit to portfolios and FI dates. While I’d like to think March will be better, I have a feeling things will likely have to get worse before they can improve.

Stay safe!

Dan

This Post Has One Comment

  1. cgc

    Dan I too have had mixed results from ELO-based value picks. Analysing the data of a few weeks suggests that identifying and backing strong favourites gives a ROI of around 18% for multiples and 10% for singles. I’ve yet to identify a system for the value dogs though so am looking forward to your next post on this topic to hear your own ideas of how to use this data.

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Hello and welcome to Pursue FIRE. My name is Dan and I am the owner and author of all content on this site. I am passionate about personal finance and look forward to engaging with you.
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