19 May 2017: Gefundenes Fressen

To ‘regular’ stock investors, trading days like Wednesday are not something they look forward to. All those red numbers, graph lines heading South, the nervousness at the trade floor… To our investment models, days like these are really a feast. Especially our models Danny Daredevil and Adventurous Anny, and in the case of huge turmoil, Solid Suzy, are ready to step in once ‘the shit hits the fan’. They are like highway men (and women!), who are hiding in the bushes and waiting for a carriage full of volatility to pass by. Sometimes they will have to wait for many weeks or even months and they might suffer great losses (in the case of Danny) or periods of complete nothingness (in the case of Anny). But they know from experience that, on average, every six months this carriage will come by. That’s the nature of investors: after a period of calmness and contentment, some of them will become anxious and their nervousness will infect stock markets. It was not Donald Trump’s request to stop the Flynn investigation that brought markets down last Wednesday. That request was just what Germans call ‘gefundenes Fressen’, a pretext for the growing group of anxious investors to pull the plug.

white-chapel-logo-smallU.S. stocks closed higher Thursday, following Wednesday’s huge selloff. Positive data helped markets to find the way up again. The NASDAQ gained 0.73%, mainly helped by technology stocks. The Dow closed up 0.27% and the S&P 500 rose 0.37%. Not totally unexpected, volatility eased: the VIX dropped below 15 points and closed almost 9% lower. UVXY ETFs, which are currently held by none of our models, suffered a loss of more than 4.5%. XIV ETNs rose more than 2.2%.
Danny Daredevil sold his UVXY ETFs at yesterday’s opening with a small loss, which was compensated for by the rise in value of the XIV ETNs he bought during yesterday’s session. His RSS rose almost 1 percentage point to above 360%. Adventurous Anny, who used her cash to buy XIV ETNs at the beginning of the session, saw her RSS rise to almost 24%. Solid Suzy and Lazy Larry, who suffered a large loss Wednesday, saw a small rebound. Their RSS is at almost 4% now.
None of our models gave a trading signal at the end of yesterday’s session. All of our models are holding XIV ETNs.

Model Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil XIV 1 January 2016

360.82%

14.32%

-1.70%

202%

Adventurous Anny XIV 6 March 2017

23.93%

23.93%

1.76%

188%

Solid Suzy XIV 6 March 2017

3.84%

3.84%

-5.19%

20%

Lazy Larry
XIV 6 March 2017

3.84%

3.84%

-5.19%

20%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

RS_v05-smallRené’s Reflections @ Friday: Hans

“No one is irreplaceable.”
My old-time friend and companion Hans (the subject of yesterday’s blogpost) used to say these words from time to time. As far as I remember, I always begged to differ with him on this subject. According to me, some people simply had such unique properties, that they were impossible to replace. Everybody knows what happened to Apple from 1985 to 1998, when Steve Jobs was removed from the company. And nobody ever thought a Beatles reunion could be a serious possibility anymore, after 8 December 1980. Or that The Doors would have a future as a band, after 3 July 1971. And how many Elvis Presley impersonators would it take before the first one capable of replacing the real one, will stand up?
But according to Hans, these were the exceptions that confirm the rule.
Hans was a special character, a personality. In the listed international company he worked for, he was known as ‘that remarkable tall gentleman from the Netherlands’. And a personality he was. Everybody who knew him, liked him, the CEO and all members of the Board of Directors included. As a sales manager, responsible for the sales of medical IT solutions to hospitals and laboratories in the Netherlands and Belgium, he generated (much) more revenue than all other salesmen and -women together. His huge and loyal network, built up over the course of decades of doing trustworthy business, was one of the pillars he had built his success upon. The other was his informal business style, combined with his excellent oral expression skills, courtesy, total honesty and transparency, and unmatched wit and sense of humor.
Early in his career he made one smart move: in his employment contract he negotiated a low fixed salary, combined with a relatively high variable fee. That way, he made himself an entrepreneur of sorts – something he never regretted.
For decades, Hans and I used to have dinner together every two months on average. These were our moments to talk business, economy and politics, and to have lots of fun between the serious bits.
In March 2013, we met in a tapas restaurant. He came late and left early, saying he wasn’t feeling so well. It would be our last dinner together. A couple of weeks later, he called me up. He asked me: “Are you standing?” to which I replied: “Yes”. He then asked me to sit down, paused for a while, then continued telling me that he had undergone a full body scan in Germany and that the outcome was the worst imaginable.
“It’s so strange,” he told me later, during one of my last visits to him, at his sickbed. “Since I’m sick, no one of the company has contacted me. No phone calls, no emails, nothing. It is as if I’m dead already. Can you imagine?” I was flabbergasted and didn’t know what to say.
Since his work had always been his life, Hans continued working until his body gave up, that summer. He left four business contracts with hospitals in the Netherlands and Belgium, ready to be signed, for a total value of more than one and a half million euros in revenue.
His funeral was attended by hundreds of family members, friends, as well as business relatives. But of the board members of the company he worked for, not even a single one showed up that day. Later I heard from his relatives, that the company even refused to pay them the royalties over the orders Hans had helped realize shortly before his death. The reason for that being, that the orders were signed only after his death. Hans, as well as his relatives, were reduced to a cell in a spreadsheet, somewhere in a cold and nameless ivory tower where all that counts is money, and where human emotions have no place.
It seemed that not only was Hans right by what he had said about irreplaceability, but he was even understating the fact! Hans had given everything he had and was treated like a prince by the members of the board – but only as long as they could use him. His story has made me totally reconsider my view on company loyalty. It probably is not such a good idea to give yourself away to a company to the extent that Hans did. No matter what type of work you do, no matter what company you do it for, never forget to see yourself as the dominant factor in the equation. You may live to work, but take a moment to ask yourself what exactly remains of it, after it reveals itself to you in its true form.

Hans in the early 1970s, just before we met