Newsletter end of December 2021

The month of December 2021 closed with a huge year-end rally. Altogether, the Enhanced Permanent Portfolio reference account added +3.77% while the ACWI added +3.12% and Europe +5.12%. Defensive Treasuries were down by -2.01% and Gold up +3.3%. The Bitcoins was down by -18% but because we installed this small position by writing one month ATM put options and even hedged this position partially by writing ATM covered calls, the huge premium decay of more than 10% of these options did offset any losses of this position.

All together the portfolio performed well in 2021 with a very low volatility or risk. The option based premium income could completely offset the bad -4.2% performance of Gold and the -4.6% performance of Treasuries. So even if we do not think these positions will post big gains in 2022, these positions are still very important to reduce the overall volatility of the portfolio to our 7% goal which is 2-3x less than the volatility of a pure equity portfolio. Another way to reduce the risk of our portfolio are permanent staggered stop loss orders using the highly liquid nearly 24h traded S&P500 ES Futures. These stop loss orders can reduce huge losses of a sudden market crash to less than 5-10%. Such a market crash could for example happen if China attacks Taiwan or if Terrorists attack a major city using chemical, biological or atomic weapons. These stop loss orders already worked well during the first Covid market crash in March 2020.

We all wish you and your families a very good year 2022!

Your Rational Invest Team
Walter Baumann / Frank Grossmann / Thomas Ritter
Tel +41 79 306 11 60 / Email