Liquid Net Worth Update Q2 2022. -$138,000

Liquid net worth โ€“ April through June

Hey folks. Hope you all had a great financial quarter, unlike me. ๐Ÿ˜…

My household liquid net worth dropped $138,000. Oh man. That’s a bummer.

But it’s important to put things into perspective.
I’ve had 6 consecutive quarters of growth before this most recent downturn.

So I see these last 3 months as more of the exception than the rule.
Overall my net worth is still going in the right direction. ๐Ÿ™‚

 

 

What I did over the last 3 months

Buy more stocks

I don’t think it’s a surprise to anyone that I’ve been a net buyer of stocks lately. The market just keeps getting cheaper. Here are my new positions, all purchased due to my options being exercised, lol.

  • TFI International (TSE:TFII) x 100 @ $105.
  • Etsy (ETSY) x 100 @ $130.
  • Ford (F) x 300 @18.
  • Ginkgo Bioworks (DNA) x 200 @ $4.
  • Meta Platforms (META) x 100 @160.
  • PayPal (PYPL) x 100 @145.
  • Sea Limited (SE) x 100 $180.

In the short term I may have overpaid for some of these companies. But let’s see how things play out over the next 1 to 3 years. ๐Ÿ™‚

 

Rebalancing

I’ve also rebalanced a bit. I sold $20,000 of my mortgage fund (fixed income investment) and used the money to buy 100 Meta shares at US $160 per share, which comes out to be roughly $20,000 CAD.

The mortgage fund I sold was Antrim MIC, which I’ve held for 8 years now. Each year it distributes 6% to 7% interest to unit holders. The reason I decided to sell a portion of my holdings is because I believe there are better opportunities to make money elsewhere. For example, I expect $META will be worth at least US $200/share one year from now. That’s a 25% ROI compared to single digit for a mortgage investment corporation.

 

Options earnings

I made $8,456 in net premiums from trading options in Q2. This is actually lower than the previous quarter because I had to take some losses in May. Overall I expect to earn around $10,000 per quarter trading options moving forward. Making $3k to $4K a month selling covered calls and naked puts appears to be a sustainable level of income. I’ve tried making $8K a month before with options, but that was a perilous endeavor and I just ended up losing money the next month. It’s important to find the right balance between risk and reward.

 

Almost got a margin call

Lastly, I transferred another $40,000 from my HELOC to my IB margin account over the course of the last 3 months. I got a warning in May that my margin requirements was running low. Had I not deposited extra money into my brokerage account, IB would start to automatically liquidate my holdings if my portfolio fell another 10%, which could definietely happen in today’s high volatility environment. ๐Ÿ™‚

Email I received from IBKR:

 

Portfolio breakdown

Here is how my liquid portfolio stands on June 30, 2022.

Liquid Assets:
Cash = $12,000 (-$2,000)
Canadian stocks & bonds = $386,000 (-38,000)
US stocks & bonds = $266,000 (+10,000)
Retirement = $259,000 (-9,000)
P2P lending = $20,000 (-1,000)
Mortgage funds = $24,000 (-22,000)
Total = $967,000

Liquid Liabilities:
Margin loan = $123,000 (+31,000)
HELOC = $60,000 (+50,000)
RRSP loan = $0 (-5,000)
Total = $183,000

Liquid Net Worth = $784,000 (-$138,000) -15%

All numbers are rounded to the nearest $1,000 and in $CDN at 0.80/USD

 

Commentary:

To put $138,000 into context it’s about 15% of my liquid net worth. It’s also about 7% of my overall net worth which includes the equity of my real estate holdings. This is certainly going to leave a dent in my overall finances. But I’m curious to see how things play out next quarter.

First it was meme stocks that fell. Then the fast growing technology sector was hit. After that it was the broad S&P 500. And finally now, even energy and commodity stocks have began to fall in the last month. This bear market has been relentless.

And no wonder.

The reason asset prices across the board are falling is because the cost of money is more expensive. For example, mortgage interest rates doubled literally in months.

 

My plan for the next 3 months

If you’ve been watching my YouTube videos recently you probably saw that I shorted the Nasdaq 100 by selling 100 units of QQQ. This is a temporary hedge that I’ve put in place to protect myself in case the stock market continues to fall. I plan to remove this hedge when the QQQ rises back up above its 10 week moving average.

Other than that I plan to keep an eye out for signs of the market bottom. The first half of this year was pretty bad for stocks. However, with the worst part behind us, I believe the second half will be much better so I want to be prepared with cash on hand and not miss the opportunity. Fortunes are made in bear markets because that’s where you can find the best value for your money. ๐Ÿ™‚

 

______________________________________
Random Useless Fact:

The Tesla Model S is often considered one of the best cars ever made.

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Sridhar
Sridhar
07/12/2022 6:22 am

Good to see you have a strategy to pick stock at attractive levels using options strategy. In my view the recent market downturn has affected all portfolios and values would have declined slightly, moderately or significantly depending on the composition of stocks and how much they went down. I recently had some cash from stock sold couple of months ago, but neither I have confidence nor sufficient funds to go and buy some. Sale was to get rid of stock and for personal need for funds. Secondary reason is due to recent downturn and fear I’m trying to shift focus away from markets or investments and give attention to personal finance aspects, career and other aspects of life. That gives me a break and strengthen overall finances rather than worrying about portfolio value. I’m still following markets but not doing any transactions as such. While I’m not doing it myself I believe there are great opportunities for good stock picks at reasonable prices if one has some extra savings and long-term view (atleast 2-3 years). This can be a challenging phase for people who work in certain industries or sectors such as hospitality, airlines, food and beverage, etc. Although the… Read more ยป

Mario
Mario
07/12/2022 6:58 am

What if you do all these transactions and takes all these uncompensated risks but end up no better than someone who just buys VEQT?

I would not be okay with that but YMMV.

Best of luck.

Arshia
Arshia
07/12/2022 11:48 am

Hey Liquid what was your ExLiq when you got that email about margin call from IBKR?

Moe (Moementum Finance)
07/13/2022 5:27 am

Thanks for sharing Liquid. Although your buys in the past 3 months look overpriced in hindsight, we don’t have a magic ball and I agree with your thought process that these are some amazing companies with promising long term potential. When you mention “I want to be prepared with cash on hand and not miss the opportunity“, are you referring to your ~ 12K or are you planning to deploy more funds into market if you feel that the market has bottomed?

Tim
Tim
07/13/2022 4:35 pm

I have been in a similar situation as I was pretty over sold on cash secure puts. I did roll sever forward about 3-6 months and doubled down along with increasing contract size. I’m on the hook for more risk as I bit off more contracts. But there is a good chance some of these end up expiring or I get in lower since I was able to reduce my strike quite a bit on all of them. I still like the long term thesis and his is just a normal market cycle.

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DreamingOfDividends
07/17/2022 2:05 pm

I guess I’m in good company then ๐Ÿ˜‚. I’m down about the same percentage since the start of the year.