Pillory for me, entertainment for thee

March -11%; YTD -12.7%

This is probably the least I have ever desired to write an update post. I feel annoyed and afraid after Q1 2025, having made a series of poor decisions that leave me in an awkward and uncomfortable position. I spent March nights lying awake a lot, and the days feeling irritated and miserable as I watched my portfolio disintegrate - mostly, but not only, due to my poor choice of layering on the leverage in January. This post is the equivalent of putting me into public pillory. I deserve the ridicule, the stones and the rotten tomatoes to the face, so have your swing.

I’ve been told by a friend that it’s a typical phenomenon: After a period of strong market performance, everyone thinks he’s a genius at the same time. Those with the greatest illusions of grandeur like me, decide it’s time to upgrade to big boy league and begin piling on the leverage. Making money seems so easy, so what’s so bad about 6-7% margin loan interest if you make 30% returns? Family, friends and acquaintances warned me (looking at you wifey, Mum & Dad, Playerofgames, and of course Martin) but greedy me thought he could get away with it…

Too many idiots like me thinking this at the same time is how tops form. At the beginning of the year, we had a richly-priced market in an uncertain macro environment. Basically a poorly built, frayed & late-game Jenga tower. To stay in the analogy, the market got quite wobbly for a period, which I interpreted in my January update as “the market just seems to not want to go down”. This of course was the completely wrong conclusion. The correct one would have been: “markets seem very skittish - something is up… maybe, just maybe this is not the time to take on additional risk.”

Of course, wobbly means there is also some upside volatility, which lured me in even deeper into the dangerous realm of higher and higher gross exposures. Some stuff still worked, so I got up to 13% YTD by mid February and took a false sense of security away from it. It also made me look at every skittish 1-2 day selloff in something I liked simply as an opportunity to add. And on margin, you can always add…

I should have known better, but I wanted (?) to believe that even if a broad market sell-off were to occur, it would be the Mag7 who get taken to the woodshed, not my mostly reasonably-priced, often event-based securities that should trade independently from the market. I ignored what I know, namely

1. that in a sell-off all correlations turn to 1, and things that stay strong for a bit, break down eventually, as people trade out of them to buy “bargains” that got destroyed (that’s why you have the cascading nature in a selloff). And

2. that bids in almost everything just disappear cause most people who manage serious money are smart enough to not move into a wobbly jenga tower in the moment it seems to be toppling over, especially as they know that selling pressure from overlevered market participants will probably be coming to the tape for weeks on end. And

3. Once sentiment shifts bearish, the desire to hold/buy any stocks, even reasonably priced ones, vanishes like pixie dust as more and more bearish newsflow creates ever more doubts that the “reasonable” valuations might not be so “reasonable” after all. A “reasonable” valuation quickly turns “unreasonable” if the economy enters a deep recession…

I knew all this, but I ignored it and did not reduce exposure. In fact, I added ever more, falsely interpreting price breakdowns as opportunities (a wrongly-conditioned mind and a greedy personality is a very dangerous combination). Another reason why I did not want to reduce exposure was because I was sitting on so many names that I had ridden down substantially already (DRX.TO. ACHV. MREO, RGS, etc … (names in wich I had accumulated a long-standing debt of misjudgements)). I felt like I had already gone through the effects of a potential market sell-off in these names, so selling them now in order to reduce exposure seemed silly at the time. Obviously a grave miscalculation, as we all know that things can always get cheaper and valuations do not have to make sense (neither to the up- nor to the downside).

Long story short, since Feb 18th, I took a massive PnL hit, with an average portfolio leverage of 1.4x, bringing my YTD performance to -12.7% at end of Q1. Now you may say “that’s not the end of the world”,… but having lived through it, I beg to differ, especially as emotionally it’s been much worse than what it looks. Since Feb 18th, the PnL has swung from +13% to -12.7% (and it was at -18% for a brief few hours mid March). There is no dancing around it: this is a terrible result, just extremely poor investing over all and has created immense doubt in me whether I can make sensible decisions. On the way down, I felt forced to puke several positions, e.g. my entire RGS at near the lows (for now) and I have been watching the market more or less non-stop in gut-wrenching fear. It was not a pleasant period.

The scary part is not the -12.7% YTD. In fact, that result seems to be in line with markets if you consider my leverage. Unlevered, my returns would have probably been -8.5% YTD. And of those -8.5%, actually -3% are a currency effect of USD/CAD losses (I am mostly invested in USD/CAD but those currencies have cratered vs the Euro in Q1) and -0.5% is interest charged to me for the loans.

No, the scary part is not the head line number, but that I managed to loose so much money in a matter of 3-4 weeks between mid Feb and mid March and that markets have barely fallen yet. This selloff could get 4x worse. The USD could/should(?) be falling much more, given Trump’s agenda. A recession is still not yet priced in. How much of the tariffs are priced in and where does this even end? I have no idea obviously but I know that it wouldn’t be surprising if what happened so far was just the first act of 3 or 4 steps down. And it scares me shitless because I still have not yet managed to cut the bulk of the leverage.

So that is my objective for April: Count my blessings and degross finally… Unfortunately, I know (and you know) we haven’t bottomed yet since I haven’t degrossed yet. In fact I almost anticipate someone to screenshot parts of this post and put it on twitter saying “retail noobs are still on margin, layer on more shorts”, and whoever does this is probably right to do so. Again, this is pillory and I deserve it.

Below is the portfolio for those of you who use me as a contra. After what you’ve just read, I certainly wouldn’t hold it against you :-)

Anxious regards,

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