5-Bullet Sunday #53

I hope that you all had a great New Year’s eve and still had the chance to spend it with your family and maybe even with some close friends. #covid19sucks

For most investors this week was all about reflections on our portfolio’s and goal setting for the upcoming year. I haven’t done my goal setting yet, because I still want to reserve some time for it this week. To be honest, I need some deeper thinking so that I can execute on my plan throughout the year with limited doubts and course-corrections. Sticking to the plan has so far been most successful to me.

I did however publish my own Annual Report yesterday so that you can read about my performance in 2020. I hope you found that useful.

Having said that, I’m very curious to hear what your plans are for 2021 in case you have defined them already. Would you mind sharing them with me in the comment section below?

Enjoy today’s 5-Bullet Sunday!

Content published this week:

5-Bullet Sunday is a weekly blog post with 5 topics that were on my mind this week related to Financial Independence and Dividend Growth Investing or something that just fed my curiosity. An overview of earlier posts can be found here

πŸ₯‚ Happy New Year

Happy new year everybody!

I wish you all lot’s of health, great family time and lot’s of positive stock market returns for 2021 ✨

And to stimulate your curiosity, hereby some interesting facts about New Years Day:

  • March was the start of a new Year around from 2000 BC to around 153 BC, in line with the Babylonian and early Roman calendars (the start of spring). From that point onwards the Romans started to adopt the Gregorian and Julius Calendar which started the new year in January.
  • In Russia and Ukraine they celebrate New Year on January the 14th.
  • In Ethiopia they have a short 13th month and they typically celebrate new year on 11 September. Not sure how Microsoft Windows shows the time and date in Ethiopia.
  • The Emancipation Proclamation was made by Abraham Lincoln in 1863. Which meant that it freed all the slaves back then
  • Henry Ford handed over his CEO role to his son in 1919. He also introduced a minimum wage of 6 USD per day.
  • the United Kingdom joined the EEC on January 1st 1973, bringing the total membership up to 9
  • the United Kingdom didn’t leave the EU on January 1st 2020, but on January 31, 2020

πŸ₯‚ 2020 S&P 500 performance

It has been truly a remarkable way when looking at 2020 and the S&P 500 performance. Covid-19 led to one of the most steep market crashes ever seen, but also it’s recovery was one of the most fastest ever.

Just look at the chart of the S&P 500 below:

What I would like to show you now is also the Cyclically Adjusted Price to Earnings ratio (CAPE) also known as the Shiller PE:

As you can see, it followed a very similar pattern. What this tells me is that the market has mainly recovered based on the stock price, not yet on the earnings. Many investors argue that the stock market is looking 2 years ahead and that it justifies a higher PE if earnings are currently being surpressed.

But is this really the case? Was this the same case at the start of last year when we weren’t foreseeing world-wide lockdowns yet? Does it also justify the Shiller P/E to be at 32 right now?

historical Shiller PE as an indicator for stock market returns

Also be aware that 20% of the S&P500 is being driven by share price action from just 5 companies: Apple, Microsoft, Amazon, Facebook and Tesla:

We all know that most of them doubled or even quadrupled in price last year. Some were in my opinion justified, but others not. I mean, Apple grew way more on multiple expansion than earnings. Is this justified? I have my doubts πŸ™„ (discl: I own $AAPL)

Anyway, as you can notice, something tells me that the market is very highly valued right now. Hence, I will remain cautious with the money that I invest. I will keep investing my monthly savings, but I will not pull anything from my war chest right now. I’m sure that some better moments will be on the horizon this year.

πŸ₯‚ Chart of the week

I always find it really interesting to learn about the behavior of my fellow Europeans that are living in other countries.

Hence, I wanted to share the below chart with you now that we have the holidays behind us. Based on this I can also imagine why dry January should be a “thing” in some countries more than in others πŸ₯‚

PS: my alcohol spending habits shifted towards the trend of the below graph after moving from the Netherlands to Poland. Not sure if that’s a good thing!

πŸ₯‚ Recommended Reads

Many bloggers have been looking back at their 2020 / December performance, so this week’s recommended reads is an overview from 3 of my favorite articles that I’ve read. Two of them are in their native language, but I have found that Google Translate works very well. So no need to miss out on interesting content thanks to Google πŸ’ͺ

EloySnowball wrote a nice reflection on 2020 (in Spanish). I’m impressed by his chart that shows his dividend income growth over the last 10 years.

Tony One Million Journey shared his December 2020 Portfolio & Savings update. I find his report always refreshing to read. It’s extensive and I like how he shares his journey and especially how he’s using the cash to invest that he saves from quitting smoking.

Divantis wrote a very nice and extensive post about his 2020 year evaluation as well (in German). I like that he has quite some European stocks in his portfolio, so it’s always nice to fellow investor being interested in similar stocks.

πŸ₯‚ Recommended Video

I just wanted to share the below video where Peter Lynch is talking about investing at All-time High stock markets. I hope it gives you a bit of a sane voice compared to all the noise out there by the pundits who are often influenced by the price action on a given day.

That’s it for the this week! I hope that you enjoyed this week’s 5-Bullet Sunday πŸ™

As always, have a lovely week ahead!

Yours Truly,

European Dividend Growth Investor

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I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m a person who believes and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment that I get from being financially competent and being conscious managing my personal money. The contents on this blog are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my blog is appropriate for you or anyone else. By reading this blog, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided on this blog.

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European DGI

It's my desire to retire early via Dividend Growth Investing as a passive income stream. This is not easy and especially when living in Europe. That's why I started this blog and share my journey: to give you a European perspective.
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Dividend Diplomats
9 months ago

Love the bullet points and the insight. It is scary how the market continues to climb, climb, and climb. The fact that the P/E ratio is above 35 is absolutely insane. There is a lot of cash in the system right now that is propping up stock prices. Who knows whether this is a bubble, or if the governments will continue pumping cash in at the first sign of weakness. Clearly the markets were anticipating the stimuls. I wonder if it thinks more will be needed eventually.


9 months ago

Another great read! Regarding the Shiller PE, I have an interesting look at the statistic. I always look at the Total Return CAPE, which he publishes on his own website. The Total Return CAPE is reported to be 36.6 as of December 2020. However, Q4 earnings are not yet taken into account in 2020. Monthly (real TR scaled) earnings peaked in December 2019, and have now come back down to levels not seen since February 2017. The S&P was at around 2330 back then (even lower than the crash in March). When looking at this Total Return CAPE of 36.6,… Read more »

9 months ago

Cool picture showing alcohol expenses πŸ™‚ Nevertheless I expected Poland among first three positions;) So also clear why one of few regular dividend stock in PL is Ambra (15 years, since 10 regularly increases) WSE: AMB

Ivan Minkov
Ivan Minkov
Reply to  Piotr
9 months ago

If only Eurostat knew that every other bulgarian brew himself 200 litres of rakia per year!