Corona keeps on spreading and insanely large stimulus packages are being created. Don’t get me wrong, I absolutely believe that situation requires massive public spending. The problem is that there has been plenty of unsustainable public spending for a decade or so already. This keeps the door open for inflation and interest rate problems in the future though there’s a solid case for deflation as well. This is the reason for my debt re-structuring during the last six months or so as risk mitigation. Running very low debt to equity ratio makes it much more easy to face this kind of turmoil both in stock market and in the underlying economy. So far the impact on portfolio has been easily manageable even thought REIT heavy allocation hit the portfolio hard. Even though the main portfolio carries some debt (which is offset with cash & equivalents elsewhere for liquidity and counter party risk offset purposes), lowest interest rate level was maintained in portfolio during the last drop.
It’s really hard to say where stock will go in short term. I wouldn’t be surprised if we will see a major correction in either way during the next three to six months. Therefore I’ll maintain disciplined approach and buy through this cycle while maintaining the low debt to equity ratio. Eventually all this stimulus money will go somewhere even in Europe. Germany being involved, I believe Uniper (of which Fortum owns a majority share of) will be in good position to either benefit from the stimulus with energy transformation focus or to behave as as more stable and defensive play in extreme bear scenario. Having this in mind, I made small Fortum purchase with 20 shares bought for 13,455 EUR per share.