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May 2024 Performance Review

June 5, 2024

The seesaw continued with most of what was weak in April rebounding in May. The economy and inflation seem to be cooling at a safe pace. Rising speculation in crypto and meme stocks didn’t seem to alarm investors even though it could mean the Fed is going to keep burning money a bit longer. Foreign markets are starting to participate more when US stocks go up, though in general, the economic situation in Europe isn’t impressive.

The S&P 500 is up about twice as much as foreign stocks this year with an over 11% return after May's rebound. Most of the world does not do 30-year fixed-rate mortgages, so it is likely rising rates will start dragging on other economies sooner than the US.

Our Conservative portfolio gained 2.83%, and our Aggressive portfolio gained 2.75%. Benchmark Vanguard funds for May 2024 were as follows: Vanguard 500 Index Fund (VFINX), up 4.95%; Vanguard Total Bond Index (VBMFX), up 1.70%; Vanguard Developed Mkts Index (VTMGX), up 4.76%; Vanguard Emerging Mkts Index (VEIEX), up 1.94%; and Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 3.43%.

Our best holding was Vanguard FTSE Europe (VGK) up 6.45%, followed by tech-heavy Vanguard Communication ETF (VOX) up 6.4%. Europe somehow beat the S&P 500 for the first time in quite a while during a strong month for stocks, helped by a tailwind of a rising Euro.

Falling oil boosted our oil short, but all other shorts were weak, notably our inverse Bitcoin stake as "stupid gold" cranked back up and gamblers dove back into meme stocks and other near-guaranteed long-term losers. Our long-short LeatherBack L/S Alt. Yld. (LBAY) performed well with a 2.68% return considering many junk stocks were on the move up and value stocks in general lagged growth. The fund may still have a larg(ish) short position in DoorDash [DASH] which slid pretty hard in May.

You have to wonder if Roaring Kitty—the GameStop manipulator and YOLO hero of the anti-hedge fund little guy who appears to have amassed some quarter billion dollars plus worth of his favorite dead-end stock—will single-handedly tip the scales in favor of 'higher for longer' rates as the Fed sees speculative bubbles that need addressing and could cause a global real estate collapse 2.0. The odds aren't zero. Maybe this time around he'll get his fans to actually buy more at GameStop locations (instead of downloading games) because merely buying the stock is only delaying the inevitable.

Brazil is having a rough year partially due to weakish commodity prices and more recently tragic flooding that will weigh on the economy. Franklin FTSE Brazil (FLBR) fell 4.01% last month, while China continued to rebound with a 4.48% jump for Franklin FTSE China (FLCH).

Bonds were strong but not strong enough to turn positive for the year. Vanguard Extended Duration Treasury (EDV) rebounded almost 4% last month compared to the total bond index return of 1.7%.

Inflation seems to be moderating, but there are many shifts going on that could maintain well above 2% inflation for longer than expected. Rising real estate prices both boost costs with rents as well as lead to wealth-effect spending by those with twin gains from stocks and their homes. Retired boomers are so far not spending down the equity as inflation fears and probably hits to bonds have scared many into more modest spending habits than the historical high levels of wealth would indicate.

Increasing tariffs on lower-priced goods from China while simultaneously subsidizing purchases, all while running recession-grade deficits, is ridiculous on multiple fronts. In addition, we're effectively cutting the federal gas tax every year as it doesn’t go up with inflation and is currently sitting at early 1990s levels of $0.18, which used to be almost 20% of the pump price when gas was around a dollar but is now around 5%. It would have been so much easier economically (though not politically) to reduce inflation and lead to EV car adoption by just scrapping the huge credits to buy pricey EVs and cranking up fuel taxes. This would also have reduced our yearly deficit. Moreover, the hit to global energy prices from such tax increases would have done more to slow Russia's financing of military adventures than half-baked sanctions and would be less risky than trying to figure out which of our weapons can be used by Ukraine against Russia without triggering Putin.

As we're not going to tighten any belts in America, no matter how high inflation or how important getting our finances in order for the next calamity is, it is possible we'll be back into energy funds again soon.

Stock Funds 1mo %
Vanguard FTSE Europe (VGK) 6.45%
Vanguard Communications ETF (VOX) 6.40%
UltraShort Bloom. Crude Oil (SCO) 6.00%
Franklin FTSE Germany (FLGR) 5.05%
[Benchmark] Vanguard 500 Index (VFINX) 4.95%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX) 4.76%
Vanguard FTSE Developed Mkts. (VEA) 4.66%
Vangaurd All-World Small-Cap (VSS) 4.56%
Franklin FTSE China (FLCH) 4.48%
VanEck Vectors Pharma. (PPH) 3.31%
Vanguard Value Index (VTV) 3.00%
LeatherBack L/S Alt. Yld. (LBAY) 2.68%
Franklin FTSE Japan ETF (FLJP) 2.42%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX) 1.94%
Homestead Value Fund (HOVLX) 1.88%
Invesco CurrencyShares Euro (FXE) 1.87%
Proshares Short High Yld (SJB) -0.58%
Franklin FTSE South Korea (FLKR) -1.03%
Franklin FTSE Brazil (FLBR) -4.01%
ProShares UltraShort QQQ (QID) -10.86%
ProShares Decline of Retail (EMTY) -11.94%
Proshares Short Bitcoin (BITI) -13.72%
Bond Funds 1mo %
Vanguard Extended Duration Treasury (EDV) 3.96%
Vanguard Long-Term Bond Index ETF (BLV) 2.97%
Vangaurd L/T Treasury (VGLT) 2.83%
iShares JP Morgan Em. Bond (LEMB) 1.89%
[Benchmark] Vanguard Total Bond Index (VBMFX) 1.70%
BondBloxx Six Month Treasury ETF (XHLF) 0.47%