The year 2022 was a dramatic one for the markets, with many indicators reaching levels not seen since the Great Depression. Volatility remained elevated throughout the year. Interest rates were at their highest levels in nearly two decades, concerns about nuclear war in Europe, and double-digit inflation in many Western countries. All these factors combined to make 2022 one of the worst years for the economy and financial markets since 1928
Ubique and Willow Oak Advisory had a challenging first three quarters of the year, similar to the global situation. However, our macro-strategy had previously identified these risks and we had moved out of market forward positions and into gold. Despite this precaution, the global sell-off of all assets and the strong demand for the US dollar caused gold prices to fall as the value of the dollar rose. This put pressure on gold and other commodities linked to the US dollar. In October, Ubique experienced an all-time low watermark to mark us down -45%. This outcome was within the range of possibilities that we had identified through testing and risk management modelling ahead of time, given our position sizing and the overall level of risk that Ubique is willing to take. Though this was difficult, it was within what we consider to be normal. Particularly to 2022, October marked our draw down at -40% since the start of the year. Indeed, the lions share of the difficulty was in 2022. The only silver lining to this, is that the S&P 500, which is what we benchmark ourselves against, made its worst draw down for the year marking -27% in October as well. Considering that we use on average two times the leverage of the S&P500, to be only 13 points behind the benchmark, shows the strength of the Ubique risk management. On the flip side of this, when we start to see more conducive market conditions that additional leverage will hopefully aid in a quicker recovery than the market and put us in a better position in the long term. Over 2022, we also saw a range of developments, improvements and iterations of strategies being used by Ubique. Some were to recalibrate the extremes we saw in certain indicators and market information which had not been seen in many decades, others were to bring new, smarter information to the table, and to utilise that information in proprietary ways to develop our edge. All told, Willow Oak and Ubique are better off for it, and truth be told, some of these adjustments and strengthening conditions we have on our strategy wouldn’t have been discovered if it wasn’t for this ginormous bear market we are currently in; every cloud… This year we saw the rise of the Dollar Index pressure the financial markets significantly. This is a symptom of economic troubles across the world, however, towards the end of the year we saw the Dollar Index begin to weaken and so relieve some of the pressure on gold. Importantly, this impact tends to be more significant on gold rather than the market. As the power of the Dollar falls, gold tends to rise since it is denominated in dollars. This contributed to a return of 6.7% Q4. In addition, and maybe even more importantly, throughout most of the year we saw that the markets and gold behaved similarly; when the markets fell or rose so did gold. However, Q3 saw a decoupling of these two sectors, and while this typically occurs early in a bear market, what makes this market unique is the scale and time. Q3 also saw us launch a new strategy we have been working on for most the year. As of the time of writing, this is only being traded at a small percentage of its normal range on our accounts only to ensure any last minute issues are worked at a cost to us only. We are scaling this up to 100% by 10% each trade and once we see several trades at 100% which perform exactly as expected, we will have the confidence in its arithmetic viability and will introduce this to all investor accounts. More details will follow once we are closer to launch. In conclusion, it meant that for 2022 we ended down 30.7% against the market ending down 19.4%. With the rollover of the drawdown we experienced towards the end of 2021, means that Ubique is currently sitting at -36.8% below its high watermark. Our overriding aim is to be back in the black, and with our new strategy slowly coming online and with gold starting to demonstrate its strength in this bear market, we feel that this is achievable. Of course, the majority of economic indicators point to 2023 being fiscally tough for the markets and economies as a whole, if we see a bullish run on gold as investors look for safe havens for their capital once again, we could see 2023 being a lot more prosperous than 2022 was. On a side note, through the rebate we have negotiated with our Broker, that being $5 back for every $100,000 traded, we were in a position to make a modest donation to our charity partner, ETCO, who help educate and feed children in Kibera; the worlds largest slum located in Kenya. This donation was enough to feed close to 500 children. Hopefully, at the end of 2023, we will have made a profit on Ubqiue and will be in a position to make a more sizeable donation to them, as per our business statement, of giving 10% of all profits generated from the fund to charity. Finally, we would like to thank everyone who has been with us on this ride on 2022. We didn’t lose a single investor and that belief in us means a lot. As always, we strive to be very open and honest about every aspect of what we are doing here at Willow Oak, and like you, hope that the end of the drought is near. Thankfully, as we are 100% technical and not fundamental, we will continue to plug away at it, without the emotion that can come from fundamental and gut investing when starting from losing position which can end up causing more damage than good. Of course, if you have any questions, queries or comments, you know where to find us; our door is always open. All the best,
Kemble & Tim
If you have any questions or would like to know more about anything mentioned above, feel free to get in contact with us, and we'll happily have a chat with you about it.
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