Jones Fund Update - 2020 Q3
Hello!

This is the fund’s second update now that we are 6-months in. Although it might feel like a long time, we’re still in the early days of the fund. I will start off with the performance.

Results

Q3 results





June 30th
Sep 30th
$ change
% change
Jones Fund
$225,575.33
$236,654.98
+$11,079.65
+4.9%
S&P500
$3,100.29
$3,363.00
+262.71
+8.4%








Difference
-3.5%










Total results





April 1st
Sep 30th
$ change
% change
Jones Fund
$200,000
$236,654.98
+$36,654.98
+18.32%
S&P500
$2,470.50
$3,363.00
+892.5
+36.1%








Difference
-17.78%

As can be seen, S&P 500 is still doing quite a bit better. As mentioned before, a good part of this has to do with my decision to keep a significant portion of the fund in cash. That amount is still around $119,000, or just over 50% of total capital.

I’ve also been, unfortunately, true to my word that we do closer to “average” in upswings in the market. The performance is also quite volatile in the short term (two weeks ago you would have seen a 6.5% increase this quarter). In regards to cash, I’ll leave you a few words from Mr. Buffett:

  • “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.”
  • - Warren Buffett

“Washtubs” are referring to stockpiles of cash for purchasing cheap companies. 

If you were to believe the markets, you would believe the world has returned to normal and we can expect the bull market to continue. I, however, believe we have dark clouds ahead.

Dark clouds

While I commented on the Buffett Indicator and Shiller P/E ratio last time, which are still at historic highs, there are a number of other indicators I am watching.

  1. The US National Debt is set to exceed the GDP next year, and to reach 98% this year. This is the highest the ratio has been since World War II [1].

  1. We have roughly 37% more money available in the US than we did in February, which is a strong indicator of inflation [2]. This can be seen in the $10T relief effort, and we’re currently looking at another $2.4T to print into existence [3].

  1. The second quarter saw a 31.4% drop in GDP compared to 2019 Q2. The GDP for 2020, as a whole, is estimated to land around 4% lower than 2019, the first annual decline since 2009. [4]

  1. While unemployment claims have reduced from April levels, unemployment still remains very high at around 12.5 million Americans. [5]

In addition to the four items mentioned above, it’s now become relatively normal to see “record losses” from some of the largest companies in both the US and the world at large. In the next three months we will go through one of the most divisive elections in our lifetimes. I think the washtub will serve us well.

Twiddling thumbs

It might seem like I am twiddling my thumbs. The hardest time to hold onto one’s money is when everyone else seems to be doing very well. 

  • “It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.”
  • - Charlie Munger