Yes, but this is a thread about how to evaluate investment performance in the most meaningful ways
No, it is not. Taking a trading profit and assigning it to an investment and saying that investment returns are higher doesn’t really add up either in real world or even looking at the performance of an investment.
These are mental models to cheat oneself. We all indulge in that. I am guilty of it too. I am owning Intel (a very small position) for many years. The stock performance is nothing to write about. However, I do covered call, sometimes opportunistically trade, etc. So in my mental ledger Intel is a decent profitable position. But that is not because Intel as the company has executed well, or the stock has done well, but I was lucky with my trading.
Making trading profits doesn’t make your original investment price low. Period. One can argue, I am leveraging my knowledge of the company I own to trade on the name while retaining the core position. But that is something most investors do all the time.
Really nothing to see here.
2 Likes
Hey Jim, like many I do enjoy your spreadsheets being a fan of a trusty.xlsx also myself every now and again. On your latest trade system…
Since 1998 this would have resulted in the following trades:
Add leverage 2000-01-31 at price 51200 and P/B 1.341
Remove leverage 2000-04-20 at price 59700 and P/B 1.563
Add leverage 2008-10-27 at price 105126 and P/B 1.348
Remove leverage 2014-12-02 at price 224805 and P/B 1.555
Add leverage 2015-08-21 at price 201330 and P/B 1.345
Remove leverage 2017-02-22 at price 254415 and P/B 1.553
Add leverage 2018-05-29 at price 284805 and P/B 1.345
Remove leverage 2022-03-24 at price 528555 and P/B 1.555
Add leverage 2022-05-12 at price 462090 and P/B 1.338
Holding leverage 2022-07-29 at price 450900 and P/B 1.305
…I noticed there was no ADD during the mid-March 2020 pandemic BRK smack-down. Why not?
Thanks, L
…I noticed there was no ADD during the mid-March 2020 pandemic BRK smack-down. Why not?
It was already (still) in the leveraged state, having started May 2018.
Basically, there was no “full” valuation at any time between then and the 2020 bottom using the somewhat arbitrary cutoff in the suggested system, 1.55.
It got up to 1.542 in October 2018, but not 1.55 : )
Jim
3 Likes