Quarterly Letter

“I am still making order out of chaos by reinvention.”
– John le Carre

The 4th quarter of 2020 began with tremendous anxiety and divisiveness around the Presidential election. Investment markets reflected that anxiety. The S&P 500 was down 2.8% in October, following a 3.9% decline in September. Implied volatility climbed as everyone seemed willing to pay up for market crash insurance.

When November 3rd arrived, global stock market anxiety was in the rearview mirror. Election Day passed and a pressure relief valve seemed to open. Divisiveness be damned! Stocks decided to party like it was 1999. The S&P 500 climbed 10.8% in November and finished the quarter up 11.7%. However, other major asset classes were not invited to the party. For the quarter, Gold and the Barclays Aggregate Bond Index both finished barely up (roughly 0.7% each). Interest rates moved higher: the yield on 10-year treasuries rose from 66 to 93 basis points. This precipitated a decline in long term bonds of 2.7%.

The Grey Owl “all-weather” portfolio was up 4.8% for the quarter. We entered Q4 with stock related exposure at 37%. Since then, we have aggressively added stock related exposure which currently stands at 63%. Fixed Income exposure is currently 23%, three-quarters of which is in short-term and inflation protected bonds. We cut our position in Gold from 10% to 3%.