Poor Man's Investment Journal

0.78%	2.03%	5.25%	7.5%
Apr-May	YTD	1 Year	Fund Flow

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This is the first edition of my investment journal, the journal is not meant to influence anyone else’s investment or a commentary or anyone else’s strategy in general. To preface I neither hold a Quant or finance/investment background, this ledgering is simply to keep track of my own investment strategies, mistakes and honestly kind of a time-box for me to go back and reflect upon. You will be able to find all the future & past editions of the monthly report on the index page.

The name “Poor Man’s investment journal“ is derived from S&P’s P and also because I have had a deep fear of losing money since I was a kid. Growing up in a poor household teaches you to be prudent with your savings and to ensure you keep building it up for rainy days. I have realized that (albeit very late) piling up money in a savings/checking account is the worst decision anyone can ever make, my reasoning behind that is the same as others: Value of money decreases by the rate of inflation. Even if you know it or not you are slowly losing the purchasing power of your savings every day.

If your salary increase is 3% YoY then too you will never be able to “build a decent wealth”, and by the word “decent” I didn’t mean to be a millionaire. If you take out your tax rate and the rate of inflation increase from your 3% raise, in reality it is 0% even negative if you look at the last 3 years. This reality of negative savings is evident from personal savings charts for the US households in the last 4 years.

Personal savings less CPI

Dollar Purchasing Power

With the slowing of the core demand and increase in unemployment in the recent quarter, I think it will cause another round of negative personal income growth for the US households in the coming months or if not a flatline one. One should remember consumer prices for some of the daily items have increased by 50% since COVID however neither mine or anyone else’s salary has increased by the same rate, what it means is that I have been paying 50% more for some of the daily needs items while only having 12% of compounded earning increase(assuming 3% YoY increase since 2020), hence the building of this portfolio.

No changes were done to allocation rules. Below are the allocation rules the portfolio followed in this cycle:

1. >90% exposure to 0-3 month T-Bill in ladder
2. 3-5% exposure to Muni Bond exempt from federal and/or state taxes
3. 3-5% of equities and hedge funds
4. 0-1% exposure allowed for individual stocks
5. < 3 % combined exposure of any individual stock or bond CUSIP (except T Bill) across all the investments
6. Keep 5-10% of additional funds for black swan or market down events to average down position cost basis

Because the current T-Bill rates remain lucrative the high exposure is justifiable, the reduction in T-Bill exposure over time once the rate cuts start will be filled up mostly by Muni bond funds and if reasonably priced then other tax aware investments. In the above list by large purchase I meant not buying 100, 200 stocks of a fund but rather 5-10 at a time and slowly build the position as and when the funds discount price is favorable, two exception to the rule would be minimum investment amount for some mutual funds which would violate the rule but it’s only a one time happenstance and the second would be a black swan event which crushes the price of a valued investment.

No change to Leverage/Hedging rules were done. A less than <0.5% value is set aside for the whole year for condors and spreads as and when mental capacity allows me to handle such positions.

Past month has been a roller coaster for equities all across the board, with inflation expectations ticking higher and the labor market seems to be holding up just fine despite the tighter monetary policy. This outlook improved by the end of April and early May when CPI and Labor market data came weaker fueling a new bull run in the market backed by the expectations that Fed will start cutting rates as early as September. The modest amount of dip that took place during mid April till the last week of April provided sound opportunities as I pivoted the portfolio away from being 100% conservative towards the new allocation rules.

The portfolio has been 100% invested in short term T-Bill since last year up until last week of April as that was the easiest thing to do for me also because I did not have much time to read up literature and perform my research. Now that the worst is probably behind us it’s a good time to pivot. I have now added multiple equities to the portfolio while still keeping the large allocation to be in Treasuries.

I still believe the expectation of market in terms of rate cuts is not feasible and I would like to see 2-3 more months of data to make my mind that the fight against inflation is over and that the labor market has weakened to a reasonable level, which of course will also entail we are in the peak cycle of recession. Having said that, I am not going to fight the market either.

I added several positions to my portfolio in the following categories to achieve the allocation targets:

1. Alternative
2. Income
3. Capital Appreciation
4. Tax aware strategies

Since the pivot in the last week of April and addition of multiple new funds the overall performance of portfolio has improved slightly, below graphs shows the portfolio’s performance compared to 3 month Treasury index ^SPBDUB3T, the diversion throughout the year has been mainly caused by poor order fill provided by my broker. Since the pivot of the portfolio I have improved the performance by 6 basis points in the last 3 weeks. The portfolio did not have a single down day since the pivot majorly because of the rally in the market but also because of constant appreciation of short term T-Bills.

Portfolio vs SPBDUB3T

Portfolio vs CPI

Compared to CPI increase the portfolio has been doing better since last year because inflation rate slowed down in comparison to the T-Bill rate, the dip since January shows reacceleration of inflation. Both the graphs are cumulative graphs for the past one year.

Below are the top 10 holdings in the portfolio

Name	Category	% portfolio
US Treasury 5/23/2024	Government Bond	14.31
US Treasury 6/27/2024	Government Bond	60.75
US Treasury 7/25/2024	Government Bond	18.03
AQR Style Premia Alternative N (QSPNX)	Alternative Multi Strategy	1.82
Nuveen Muni High Income (NMZ)	Muni Bond	0.42
Madison Covered Call & Eq (MCN)	Derivative Income	0.31
Nuveen CA Quality Muni Inc (NAC)	Muni Bond	0.30
Liberty All Star Equity (USA)	Large Blend	0.30
Blackrock ESG Capital Inc (ECAT)	Tactical Allocation	0.28
DNP Select Income (DNP)	Utilities	0.28

In terms of allocation target ~3% of the total portfolio still needs to move out from Treasury Bills to other investments. Below table shows the allocation breakdown and the exposure of the portfolio to various sectors.

In terms of individual stock intersection across all the fund based investments the largest one is Microsoft Corp with 1.15% exposure to the whole portfolio. The smallest one is Boston Scientific with 0.16% exposure.

Below are the top 10 performing positions since inception

Name	Category	% gain	% portfolio
AP Moller (AMKBY)	Shipping & Transport	11.43	0.07
Saba Closed end fund (CEFS)	Long-Short Credit	5.22	0.06
Rithm Capital (RITM)	REIT	4.23	0.02
Blackrock Enhanced Capital (CII)	Derivative Income	3.68	0.42
Nuveen Multi Asset Inc (NMAI)	Global Allocation	3.24	0.25
Nuveen S&P 500 Overwrite (SPXX)	Derivative Income	3.14	0.06
US Bancorp (USBPRH)	Banking	2.92	0.04
Madison Covered Call (MCN)	Derivative Income	2.81	0.31
Eaton Vance Tax Mngd (ETY)	Derivative Income	2.69	0.11
US Treasury 5/23/2024	Government Bond	1.72	14.31

Below are the bottom 10 positions

Name	Category	% loss	% portfolio
Goldman Sachs BDC (GSBD)	Financial Services	2.11	0.03
Ford Motor Note (FPRC)	Automobile	1.69	0.01
Nuveen Ca Muni Value (NCA)	Muni Bond	1.44	0.09
Nuveen Ca AMT Free (NKX)	Muni Bond	0.62	0.25
Bank of America Dep (BMLPRH)	Banking	0.36	0.05
Nuveen Muni High Inc (NMZ)	Muni Bond	0.24	0.42
AQR Future Strategy (AQMNX)	Systematic Trend	0	0.17
JP Morgan Hedged Equity 2 (JHDAX)	Options Trading	0	0.16
JP Morgan Hedge Equity A (JHQAX)	Options Trading	0	0.10
Morgan Stanley Pref (MSPRE)	Bank	0	0.02