It was not the easiest year in terms of maintaining and increasing one’s own capital, both in Ukraine and around the world. But I sincerely hope that most of us still endured, persevered, and retained enough optimism and hope to victoriously achieve everything that has not been possible to this day next year.
If I were asked very briefly, in a nutshell, to define what happened this year in the investment markets, then I would say that this was the year of the Great Redistribution – from trusted and naive retail investors to professionals: investment fund managers, bankers, corporate bosses, financial advisers, various adventurers, and other wizards of the world of finance. And to make sure, let's see together how money was redistributed in the world and Ukraine this year.
Let's start with Ukraine... Unfortunately, because of the war, Ukrainians lost the opportunity to legally invest money abroad, and this significantly limited the set of investment instruments within the country, leaving a choice: the Ukrainian real estate market, government bonds, and cryptocurrencies. Sparse, uninteresting, and unprofitable, but not for everyone.
Redistribution No. 1. The story of Ukrainian government bonds as usual ended in a loss of money for gullible investors.
Anyone who at one time believed in the slogans about the reliability of securities issued by our government may have managed to maintain faith, but they had to say goodbye to their money. They were redistributed in favor of the state and those who helped the state to sell. In fact, the state is repaying hryvnia-denominated debts, but at a completely different rate, which is important, because we usually count investment capital in dollars or euros.
Redistribution No. 2. Real estate is a similar story. There was your money, and now it has become the property of clever builders. You are left with unfinished boxes of glass and concrete. And even if they are completed, then their current price is not at all what you would like.
Redistribution No. 3. This year, the world of cryptocurrencies has finally shown its real “opportunities." It turns out that in this (as crypto enthusiasts would tell you) super-technological, super-reliable, and super-protected environment secured from envious eyes and unclean hands, stealing is easier than anywhere else. Sam Bankman-Fried, the founder and owner of one of the world's largest crypto exchanges, FTX, demonstrated this confidently by wasting his clients' money and bringing the exchange to bankruptcy. As it turned out, the organization did not have a single control, the accounting of a multi-billion dollar company was carried out in a primitive free application from the AppStore, and stealing and then wasting billions of dollars was tremendously easy, which, in fact, Bankman-Fried and his girlfriend did. Now both are waiting for punishment, although the girl turned out to be smarter – she began to cooperate with the investigation and was the first to give up her partner, who now faces a very long, if not life, sentence.
Redistribution No. 4. Who would have thought that the world of high technologies is so favorable to redistribution and growing rich. Katie Wood, founder and CEO of investment fund ARK Invest, lost about $30 billion in a year that belonged to gullible investors and ordinary people who were greedy for quick money. Her boundless faith in technological progress and extraordinary zeal in defending her views built an ideal mechanism for redistributing money from investors to the managers of her fund family and the companies in which these funds invest. In just a year, ARK Invest has lost 80% of its value, but Wood is not stopping, and promises to prove to the world that she is on the right track.
Fortunately, this track is running out of road, as only 20% of the capital that she had a year ago remains for her to burn, and I think that Ms. Wood will manage to achieve this next year.
Redistribution No. 5. Furthermore, the king of sales and genius of manipulation Elon Musk impoverished his flock by $800 billion. I must admit that this time not only retail investors suffered, but also professional investors who were charmed by Musk. But after all, the king is the king, to rule not only over the weak and uneducated, but also to decide the fate of the strong and experienced. A year ago, people were investing in Tesla, counting on a breakthrough in the creation of the latest automotive technology, and in the end it was not they who made money, but the shareholders of the money-losing Twitter, which Mr. Musk paid five times the value of their shares in order to fuel his own ego. The result: a 65% drop in the value of Tesla shares since the beginning of the year, unexpected earnings for Twitter shareholders and, hopefully, the comforted pride of a man who was once the richest on the planet.
Redistribution No. 6,7,8... Unfortunately, there is no time to list all the heroes of the “Robin Hoods,"about which we wrote a lot in the spring, but which, towards the end of the year, turned from noble and monied robbers into miserable tramp-beggars whom no one remembers anymore. Everything is as always: money fled from Sherwood Forest into the pockets of the Nottingham Sheriff, who now has an office on Wall Street.
But not everything is as bad as you think. Everything, in my opinion, is very fair. “What is fair in the fact that money from the pockets of ordinary citizens flows into the pockets of the rich?” you object. Before I answer and give one example, let me ask: what do you think is common among all those whose money was "redistributed" in the cases I have listed? Think, and I'll wait before I give an answer.
"Dazzling with glitter, faith in empty promises and the desire to make quick money:" this, in my opinion, is what led to the redistribution of funds. It may not always be fair from the point of view of the victims, but it is absolutely natural. And after twelve years of continuous growth, when everyone you meet has already begun to consider himself an investment genius, this is a good lesson that I hope many will learn.
I would not want to end the year with despondency in my heart, so in the end, a little something positive. This year, not everyone lost money, although on average, the stock and bond markets lost 12-35%. Those who were not in a hurry to make quick money and entrusted their money to Warren Buffett, Terry Smith, and the like – long-term sensible investors who gained credibility not with loud statements, self-promotion and promises to change the world, but with many years of hard work and systematic approaches – were able to earn some money even this year. And this once again teaches us not to neglect the fundamental principles of investing.
And now of course a wish for the New Year, as this is my last column in this difficult year of the Great Redistribution. Of course, Merry Christmas and Happy New Year! May we defeat the enemy as soon as possible and build a new Ukraine, where redistribution will no longer be as arrogant and uneducated as it is now. As for personal finance, next year, when you decide to invest, put out of your mind the stories that the financial industry was created so that the retail investor could easily make money, and all these bankers, fund managers and financial advisers are only thinking of how to increase your capital. No, they really think about your wealth, but in a different context – suiting it to their needs. After all, as everyone knows, the whole point of finance is to redistribute funds. Don't forget about that next year.