Performance Tracking October 2017

For calculation methodology see this post.

Contrary to many top-callers, October was once again a great month for stocks, in fact it was the second best this year after February. $SPY picked up 2.36% for the month. Bond yields shot up after John Taylor was rumored to be Trump’s pick for the next Fed Chair. Both the rumor and yields settled down, leaving $AGG 0.1% higher for the month, and the 60/40 up a more than respectable 1.45%. Great as those numbers were, my portfolio performed even better. The total portfolio and the active accounts gained 3.8% and 6.04% respectively. Both were a record since blog inception.

Breaking down individual components: PMs were a drag for about a quarter of a point for the month in passive accounts. YTD passive w/o PMs returned 11.65% vs. 11.18% with PMs at much higher volatility. The absolute return was on part with 60/40 at 11.14%. Individual stocks gained 3.56% vs. 2.36% for $SPY, thanks predominantly to tech. CEFs had a down month. The taxable multi-strategy CEFs are recovering from the hit piece on SeekingAlpha while their NAVs continue to mover higher. The loss in muni CEFs had a more rational basis but I believe the distribution is safe and I’m ready to buy more if valuation becomes more attractive. Cryptos were a big contributor as bitcoin roared above $6400, but the real heroes were the options which were responsible for half of the gains.

End of Month Portfolio Composition

PMs were at 10.1%, equities 57.8%, fixed income 23%, cash 4.3% and other 4.9%. The “Other” category was composed of cryptos 2.6%, 3X ETF 0.8%, and (market value of) options 1.5%. Option delta times the underlying gave an equivalent value equal to 60% of the total portfolio, or a leverage ratio of 40X. Note that as I moved up the strike of the short put leg, the market value was reduced and the leverage ratio increased.

Potential Transactions before Year-End

Purchase gold bullion coins, TLH individual stocks, add to CEFs, and continue to manage option positions.

Comparisons

AllocateSmartly tracks over 40 different tactical asset allocation strategies. In October my total return of 3.8% would have led the pack whose highest return was 3.3%. YTD the first and second ranked strategies are at 23.42% and 16.86% respectively, vs. 19.18% and 26.85% for my total portfolio and active accounts. While my portfolio is currently at 120% long equities, knowing when to use leverage is part of art of the portfolio management. I expect to open up further distance with these strategies as well as the benchmark for the rest of this year.