Weekend reading

Good reads from around the Web.

I have a soft spot for Hetty Green, and a bit of sympathy. There’s no doubt this super-investor of a century ago was a craven asset accumulator who put amassing a fortune above all else, but then so has been Warren Buffett for most of his life.

Yet whereas “Uncle” Warren is lovingly known as the Sage of Omaha, Hetty Green has gone down in history as “The Witch of Wall Street”.

Her black dress and hat didn’t help, but I think it was her ruthless and successful market raids in times of strife that got up people’s backs (or let’s face it: men’s backs).

Like Buffett, Green was greedy when others were fearful, amassing vast quantities of assets during downturns and then selling them at her leisure when the good times rolled.

This was back when cartels of wealthy speculators really did gang up to break each other and Green stared down more than her fair share.

She ended up insanely wealthy.

The only way is not up

I’ve been thinking about Hetty Green because for the first time since 2009 I’ve been a net withdrawer of money from the market this month.

Only a per cent or two here and there. Nevertheless it feels odd.

This year I’m not only doing it to defuse capital gains tax. I’m selecting the option to “transfer money back out to your nominated bank account”. In metaphorical Lord of the Rings terms, this is a dusty, cobwebbed path that has only been whispered about in myths and legends in my house.

I’m obviously not calling a top, nor claiming an ability to. As it happens I don’t share the doomy prognosis that this whole rally is built on phantasmagorical easy money. And for what it’s worth, I think the market is far more likely to be 100% higher than 25% down in five years time.

But there’s no denying these are “good times”. In contrast I remember ransacking my loft for semi-valuable junk that I could flog on eBay to keep buying even more shares during the darkest days of 2009.

I was lucky, but I might not have been rewarded so quickly for my boldness. The fact is I became massively overweight in equities, and I was very conscious of this when I welcomed my more level-headed co-blogger The Accumulator to the Monevator fold the following year.

My Colonel Kurtz style expedition to the limit of stock market exposure was not what I’d created this blog to be about. The Accumulator practices what he preaches.

Back to reality

That was then and this is now. Things turned out okay, and it’s just as important to be fearful when others are greedy as the more oft-cited opposite.

Having run with far higher equity exposure than is prudent for anyone who still hopes (/needs) to use a fair slug to buy a house, I’ve started dialling it back. I’ve been withdrawing cash, and also shifting some money into safer stocks and preference shares.1

Hopefully I’ll finally buy a house or flat soon (I really do want that big, cheap mortgage). But if I don’t buy then cash is an amazing asset over the short-term, even at a time of diabolically low rates, thanks to its great optionality.

Moody blues

As of Friday I’ve pretty much tripled my net worth since those 2009 lows (not entirely due my investments rising, but they did most of the heavy lifting) and if I’m honest I feel myself getting impatient if my portfolio doesn’t end the day or the week higher.

I’m taking for granted daily moves in my net worth that surpass my monthly earnings. A terrible sign!

This is a dangerous mood, and I’ve known it before — from before the crisis of course. Yet I probably wouldn’t be taking out anything if I already had the house. I would probably just tune the active portion of my portfolio to a more passive auto-pilot setting and take the summer off to refresh.

As it is I will definitely need some of this money within the next five years (perhaps the next few months) so I’ve returned to Personal Finance 101.

Or as The Accumulator might call it, sanity!

Hetty Green became super wealthy. Colonel Kurtz developed a death wish and got hacked to death in the jungle.

I hope to end up somewhere in between.

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

Other articles

Product of the week: The Nuffield Health Bond is paying 6%, but there are tax complications. The Guardian wonders if it’s worth the risk.

Mainstream media money

Note: Some links are to Google search results – these enable you to click through to read the piece without you being a paid subscriber of the site.

Passive investing

  • There is no global bond index tracking fund2Index Universe
  • New US ETF to target total ‘shareholder yield’ – ETF Trends

Active investing

  • Nick Train: Valuing quality shares [Search result]FT
  • Hedge funds set to reach for mass market cash – Guardian
  • Preference shares for income – Money Observer (via iii)
  • Cambridge-based hedge fund tries cheaper approach – Dealbook

Other stuff worth reading

  • A different way to invest in life – Wall Street Journal
  • Markets and memory banks – Wall Street Journal
  • Could self-building go mainstream? [Search result]FT
  • The art market has gone bananas – FT
  • Retirement is bad for your health – BBC
  • Demand for fixed rate mortgages hits record high – Telegraph
  • The future of capitalism: The Chicago Mercantile Exchange – Economist

Book of the week: I recently met one of the 12 investors profile in Free Capitaland he was just as enthusiastic about investing in real-life. Please note: This one is for active investors only!

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  1. Note I say “some”. I’m one of those nutters who owns a handful of Tesla shares, for example!
  2. The Investor notes: Good thing too IMHO, you don’t want to track debt by market weighting!

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