Saturday, January 31, 2009

Moominmama January 2009 Performance

Moominmama lost 1.39% in January. That's not bad considering the MSCI World Index lost 8.51% for the month. This is the portfolio breakdown:

And here is a new view in terms of asset classes:

Portfolio diversification worked pretty well this month (for a change).

When You Have $60 billion, Losing $4 Bllion isn't so Bad!

The Future Fund reported its results for the last quarter of 2008

Friday, January 30, 2009

Levitt on Credit Cards

Following up on my post about EFTPOS policies Steven Levitt is commenting on credit cards. Nothing much new there, but one of the commenters makes the very good point that taking cash payments also has costs to the retailer - having cash, making change, risking robbery, and spending time taking the cash to the bank and depositing it. But I guess, unless they banned cash payments altogether there is little marginal cost in taking a cash payment - as they have to do all those things already apart from give change.

Wednesday, January 28, 2009


Now that I am going to have a job I'm setting up a regular savings plan of $A500 a month from my salary to match the plan we already have going for Snork Maiden which is also now $A500 per month. I'm going to invest it in the CFS Diversified Fund in an account inside of my margin account at CommSec. I'm not going to be adding borrowed money to this investment but rather it will help reduce the loan to value ratio on my loan over time. If my job contract includes required salary sacrifice into superannuation (i.e. employee contributions to a retirement fund on top of the employer contributions) I plan to also set up salary sacrificing for Snork Maiden. Her employer currently contributes 15.4% on top of her salary to superannuation (the legal minimum is 9% in Australia).

Bank Santander Compensates Clients Hit by Madoff

Any chance Man Financial will do this for its clients who suffered losses (if relatively small) in RMF?

Friday, January 23, 2009

Second Round Interview

This morning I met my colleague who helped me with the grant application and began to work out the details. It'll take a little while to push everything through the notorious university bureaucracy. We don't even know yet exactly which program I'll be in though the overall school/college is determined. My flight is already booked to a conference in February and my colleague will see if he can get me onto the workshop schedule to give a short presentation about my planned project.

This evening I just received a message from the chairman of the department where I interviewed yesterday. he says he thinks I'm a good fit in his program and wants to do a second round interview including a seminar presentation. Either in early February or early March. I'd prefer March to give me more time and they have plenty of other people coming to give presentations in the meantime. Unless that looks like I'm not enthusiastic? I wouldn't be starting in their program till July.

I feel a bit nervous and sad for some reason and don't know why.

Thursday, January 22, 2009


At least I was dressed smarter than my interviewers. I had my shirt tucked in :) Not sure how well it went, I should hear early next week if they want to pursue it further.

It felt like they treated the research funding I got almost as a negative as it would delay my potential start date with them. They were still talking about starting immediately though I couldn't start till after a second interview and seminar presentation and teaching starts on 22nd February and I need to prepare to teach a course at a new institution. At first the chairman said, well maybe we'll get you to give a seminar in our regular schedule some time in the year, I don't want to keep the position open for a year and maybe some other opportunity would come along for you in the meantime anyway. So I asked when he'd expect any of his U.S. based candidates to start. July (the start of the second semester here). So maybe I could start in July if we negotiate some arrangement with the other program? OK - maybe we'll ask you to give a seminar in March when we're finished interviewing the other more junior candidates.

I got across all the points I wanted to make. But I felt like I wasn't very articulate when talking about my research. I kept searching for the right words to use...

Tomorrow, Friday, I have a meeting to iron out the details of the research position.

Rear View Mirror Retirement Allocation Advice

Christopher Joye in an article in the Business Spectator today performs a retirement portfolio optimization using historical Australian data for 1982-2008 much like I did in in this post. But while I was asking what portfolio would have performed best in the past he is using the results to recommend the portfolio that superannuation (retirement) funds should adopt in the future. His conclusion - allocate heavily to residential property (a property class that no institutions in Australia invest in apparently for tax reasons) - government bonds, and cash. These asset classes have had the best risk adjusted performance in the past. If we know anything about investment theory it is that mean reversion is likely and that equities and commercial property will probably perform better in the next decade than in the last, while government bonds and Australian residential property perform worse.

Tuesday, January 20, 2009

Research Proposal Approved

I just heard that my research proposal was approved. We haven't got any details yet but we proposed that I work on the project for one year at either 3 or 4 days a week - i.e. I will get paid the same as a post-doc (about $A61k per year) but have a more senior position - "Fellow" - equivalent to a senior lecturer in the Australian system or an Associate Professor in the U.S.

On Thursday I have my long-delayed preliminary interview for the continuing position as senior lecturer.

EFTPOS Miminum Payments: A Silly Policy

On our way back from the Ford dealer where we put in an order for the missing bit of silver trim, we stopped off in the suburb of Dickson to have lunch at the Asian Noodle House. This is a great restaurant with good food at good prices, but when it came time to pay they told me there was a $30 minimum on EFTPOS cards, which are an Australian version of debit cards. So I had to walk a few blocks to the bank where there is an ATM and then back to pay. I don't mind walking much, even if it is 34C today, but I'm sure some customers mind a lot more. It's hard to get any hard numbers on the EFTPOS fees charged by banks to merchants - it could be somewhere around 40 cents per transaction. Credit card fees are higher, which is why Aldi, for examples, charges a surcharge for using a credit card - but no extra charge for an EFTPOS card. Now I suppose someone could come into the restaurant and order a $3 coke and then try to pay with an EFTPOS card, but that's going to be rare. It makes sense for the restaurant to either build the expected value of EFTPOS fees into prices or charge a fee for transactions with EFTPOS and credit cards rather than forcing the customer who spends $24 but has no cash to walk to the bank and back. I guess the restaurant thinks it is so good that it can afford to do this.

Monday, January 19, 2009

Car Repairs: $550 or $1250

The back of our car got run into a stone wall - like most car accidents it happened close to home - in the driveway of our apartment building... The panel above the right rear wheel was dented in and lots of paint was now on the wall rather than on our car. We'd accumulated a couple of other holes in the paintwork on the rear bumper. One had happened on our wedding day when my brother was driving our car and backed it straight into the neighbors car in the underground car park.

Anyway, it needed repairing and we drove to a local industrial area where most of the crash repairers are located. One of the biggest who is approved by our insurer said it would cost $1200 to $1300 (all figures in Australian Dollars). He couldn't do the job until after the 29th of January and it would take a week. The excess on our insurance is $500 and then making a claim would reduce our 45% no claim bonus. Not sure whether this was a good plan we drove round to the guy who inspected our car prior to purchase (for free) and where we'd already got one service (as we promised in return for the free inspection). He had a "mate" in the neighboring town just over the state boundary who could do it in the shed in his backyard. We drove straight there. His estimate: $550, in cash and he could do it right away. At any reasonable discount rate this made sense. Given the damage was non-structural - just a gouge in the side of the car - and this "bloke" was recommended by our friendly mechanic I agreed to the repair - we left the car with him and took the bus the ten miles home on Friday lunchtime.

Sunday morning he phoned us up with the job complete apart from a cosmetic piece of silver trim we can get at the Ford dealer and stick on ourselves supposedly. The car looks great.

Sunday, January 18, 2009

Janus US Short-Term Bond Fund

This is the other bond fund in my Mom's portfolio. It has done very well in recent years, though it didn't do much just after we bought it in 2003. I am trying to get access to Janus World's website to get more info - they haven't yet sent me a password but I managed to get the charts above from UBS's website. If it is similar to the short-term bond fund marketed in the US then it is heavy in US government issues which explains its strong performance recently. I'm thinking of selling half and putting it in Man-AHL Diversified, a managed futures fund that we only have a small allocation to at the moment (2.2%). Such a move move would take the allocation to Man AHL up to 7.5% and to the Janus bond fund down to 5.3%. The overall bond allocation would go down to 23% from 27% and the alternatives allocation up from 19% to 24%. Maybe I'd leave a bit in cash...

The rationale is that US interest rates are very low and many people are talking about a US bond bubble. On the other hand I think we should retain some exposure to US bonds and this fund seems pretty good. On the other hand, it is a short-term bond fund and so should be relatively little impacted by a rise in interest rates. And would be impacted in a good way if new bonds they buy have higher yields in the future?

Saturday, January 17, 2009

Buy High, Sell Low

Investors in TFS Capital's Market Neutral Fund continued to buy high and sell low as a group in the four months ended October 31st, as I've documented for previous periods. The gap between average buying and average selling prices was greater that in the first six months of the year at 81 cents (vs. 41 cents). More than ten times as much was also received in early redemption fees (for shares held less than six months). The total shares in the fund continued to increase very significantly at 28.6 million vs. 17.4 million at the end of June. The fund now has twice as many shres as in mid 2007 even though the number of shares on issue declined significantly in the second half of 2007.

Friday, January 16, 2009


Here are the HFRI hedge fund indices for December and 2008 which differ quite a bit from the HFRX results I posted before. HFRI tracks around 2000 hedge funds while HFRX only tracks 55. The HFRI data go back to 1990, HFRX only to 2003. HFRX is available on a daily basis, HFRI monthly. HFRI indices are equal weighted rather than capitalization weighted, while HFRX is calculated by "representative optimization" - "Constituents are weighted according to HFRX Methodology in order to achieve representative performance of a larger universe of hedge funds."

Anyway, HFRI shows a positive performance overall for December and some of the subindices like convertible arbitrage didn't do as badly in 2008 as indicated by HFRX, though they still did badly.

Final Credit Suisse Indices for December and 2008 are also now available:

Thursday, January 15, 2009

Invesco Sterling Bond Fund

This is my Mom's largest single investment at 12.6% of the portfolio. It wasn't planned this way. I instructed Citibank to buy a given amount of this fund in US Dollars. They bought the same number in Sterling. Soon after that we ditched Citibank. The fund had been doing great when we bought it in November 2005:

But this year it severely underperformed its index. On top of that Sterling has declined against the USD so we lost more in USD terms but that's an unfair comparison as this money was likely to be kept in Sterling or Euro investments in any case. The reason for this year's poor performance is of course the corporate bond market which is 80% of the fund:

So, I guess we'll hold on and wait for corporate bonds to recover?

Man to Sue over Madoff

Man Investments will sue over its Madoff related losses. Don't know if it will do any good but that's better than nothing.

Wednesday, January 14, 2009


This is a graphic of this blog created using Wordle. I posted a couple of these created by Paul Kedrosky earlier.

Breaking the Buck was the Problem

A discussion of Bernanke's speech yesterday argues that it was the impact of the Lehman collapse on the Reserve Money Market Fund and the consequent run on all money market funds that caused the September-November collapse in financial markets and that the other impacts of the Lehman collapse were not significant.

Social Class and Choice

A comment I posted on "Graceful Retirement" as part of the ongoing discussion about Meg's blogposts:

"I'm not too sure about the correlation you make between being born poor and choices. Poorer parents might not have very high expectations for their children but those children's opportunities are often limited by going to bad schools and hanging out with an unambitious crowd of friends. Children who have money to back them up can do things like graduate degrees in non-professional fields, being an artist, working for NGOs etc. without worrying about increasing their net worth. So I think it cuts both ways. I grew up what I considered lower middle class in England - compared to most of my middle class friends we had a smaller house, car etc. My Mom had a degree in classics and training as a nurse (came from a working class background in Australia and studied on scholarship). My Dad came from a relatively wealthy family in Europe but was a refugee/prisoner/factory worker in the Second World War and then gradually built a career as an engineer without a formal degree. So I think we had higher social class attitudes than our actual income/wealth. My parents were definitely ambitious for us to get well educated and my Dad was somewhat concerned that we don't study something he considered useless but there wasn't big pressure to follow some particular type of career etc. I ended up as a professor - I studied geography which my Dad thought was "useless" and economics and just followed the do what you like and are good at route without worrying much about the money. My brother studied civil engineering and then later switched to computer programming."

Tuesday, January 13, 2009

Endowment Style Portfolios for December 2008

When I tried to optimize the performance of the asset mix used for the portfolios in my post about endowment style portfolios by maximizing the Sharpe ratio using historical data I ended up with a 100% allocation to the real estate fund. But this fund lost 7% in December. Now the optimal allocation is 9% managed futures, 4% hedge funds, 66% real estate, 20% bonds, and 1% gold. It has a beta of 0.03 to the MSCI stock index. No stocks of course as they have returned too little with too much volatility in the last 12 years. A portfolio with 1/7 in each of these assets plus Australian Dollars has about the same returns historically but double the volatility (but 1/3 the volatility of stocks still). It would have returned 2.7% in December in USD terms (it has a beta of 0.28 to the stock market)


Following the discussion in the comments I want to say that this isn't intended as a serious exercise in choosing a portfolio allocation but as a kind of thought experiment about what would have historically been the best portfolio with perfect hindsight. I'm pretty skeptical also about so-called "forward looking" portfolio optimizations too. They need to make some pretty strong assumptions. But all of this can be useful inputs into developing a portfolio allocation that works for you.

Preliminary Credit Suisse Indices for December 2008

Yesterday I reported on HFRI's indices for December 2008. Today Credit Suisse/Tremont released preliminary results for the month. Credit Suisse's indices are capitalization weighted while HFRIs are not (I think). Credit Suisse estimate their index rose 0.3% in December. They also include managed futures (which did well) and short bias funds (which did not). Their estimates for convertible arbitrage and distressed securities show less severe losses for December and the year. Of course, their equity market neutral category shows a big loss for the year, while HFRI does not. This is due to the Madoff funds that were included in the Credit Suisse Index.

Monday, January 12, 2009

Hedge Fund Indices for December

By comparison the MSCI All Country World Index rose 3.67% in December but lost 41.85% for 2008. Macro - the strategy made famous by the likes of George Soros - was the most successful both for the month and year - while convertible arbitrage has been significantly worse than being long stocks in 2008 and in December.

Sunday, January 11, 2009


Superfund is now offering a fund in Australia. This company, which originated in Austria, offers managed futures products to retail investors in many countries around the world.

The fund is invested 37.5% in managed futures, 37.5% in a market neutral stock trading program and 25% in Australian cash equivalents. They plan to hedge returns into the Australian Dollar. Minimum investment is $A10,000 which compares favorably to the Macquarie and Select Funds managed futures products. Fees are steeper than most hedge funds with a 3% management/administration fee and a 27% performance fee with no hurdle. The fund is not a FIF. It seems that they plan on paying all fund income out in order to avoid entity level taxation.

Comparing the Quadriga B managed futures fund that Superfund offers in the US to Man's AHL Diversified Fund we find that between November 2002 and November 2008, Quadriga returned 1.92% per month but had a monthly standard deviation of 11.4%. Man AHL returned 1.40% per month but with a much lower standard deviation of 4.9%. In other words, the Man fund is higher quality. Quadriga had a correlation of 0.06 to the MSCI World Index while Man had -0.10. The correlation between Quadriga and Man is high at 0.73. I don't have any data on their stock trading program.

Bottom line is I wouldn't recommend this fund at this stage except to someone who was very heavily into managed futures and wanted to diversify across managers to reduce risk.

Thursday, January 08, 2009

CALPERS Allocation

CALPERS (the California state retirement fund) provides detailed information on their asset allocation. CALPERS has much more of a traditional US allocation than the other portfolios I've examined. The top part of the table now shows Moom and Moominmama's allocations (updated for January) the Australian and Californian public retirement funds, the three Ivy Leagues, the average US university endowment and the Australian Future Fund. The lower part of the table shows the "distance" between the four selected portfolios at left and the the portfolios listed across the table. Moom is most dissimilar to CALPERS, Moominmama, and Yale and most similar to PSS(AP). Moominmama is most dissimilar to Moom and most similar to PSS(AP), CALPERS, and the typical US university endowment. PSS(AP) has a similar level of dissimilarity to all the portfolios but is most dissimilar to Princeton, Yale and CALPERS and most similar to Harvard and the Future Fund. CALPERS is most dissimilar to Moom and most like the average US university endowment.

If you'd like me to analyze any other portfolios or make any comparisons let me know.

Wednesday, January 07, 2009

Duration and Stock-Bond Allocation

Interesting discussion from John Hussman about changes in "duration" and the optimal allocation between stocks and bonds in a portfolio. Duration for bonds is the sensitivity of the bond price to a change in interest rates. Bonds with distant maturities are much more sensitive than short-term bonds and therefore more volatile. Hussman also talks about a duration for stocks which is the sensitivity of stock prices to changes in the discount rate applied by investors to company's cash flows. He argues that this is equal to the reciprocal of the dividend yield.

Anyway, the lower the duration of an asset the more an investor with a given time horizon can allocate to it. Given the increase in stock yields and the fall in US Treasury yields recently investors should allocate more to stocks and less to treasuries. This is an alternative argument for valuation based market timing.

BTW I checked the CREF Bond Market Fund's holdings and less than 10% is in long-term treasuries. So there is no reason to dump that fund based on the high prices of long-term U.S. bonds.

Moominmama December 2008 Performance

Moominmama gained 0.73% in USD terms for the month but individual investment results were all over the place partly due to big movements in currencies. As you can see, Sterling was down 9% and her local currency up 4%. Unfortunately, the biggest posiitve movers were some of the smallest positions.

Tuesday, January 06, 2009

SIPC Testimony on Madoff and Lehman Brothers

SIPC actions and testimony look like good news for small investors with Madoff. The SIPC sent out claim forms to 8000 Madoff investors. So they should get at least $500,000 back. More than that has been identified in assets of the brokerage firm that is being liquidated. This says nothing explicit at all about investors in the feeder funds. I suspect they (including my exposure of about $A50) get nothing?

Alternative View of December 2008 Performance

Turns out that it's pretty easy to compute the table above from my existing spreadsheets. Maybe this is a better way of presenting the contributions of investments to the monthly result than the position level approach I've used up till now.

Monday, January 05, 2009


Received the documentation and forms for the revised version of the planned EBI delisting today. I'm going to withdraw 6000 of my 8707 shares from EBI and apply for shares in the new unlisted EAIT. The number that I'll keep in EBI is exactly the number that I was going to withdraw from EBI in the previous delisting proposal. No redemption of EAIT units will be allowed till the end of this year. Keeping EBI shares allows for some liquidity and reduces my EAIT stake to 5% of net worth (at the NAV value). The plan is to gradually wind up EBI and distribute the proceeds. My impression is that a big chunk will be distributed this year and then the remainder over the next few years. There can still be some hitches in this process mainly concerning financing. Currently EBI holds $1.57 in assets for every $1 in equity. This is accomplished through a swap provided by Macquarie Bank. Macquarie still hasn't said whether this financing arrangement will be maintained for EBI once EAIT is delisted and Laxey Partners become the effective investment manager for EBI. Financing for EAIT is in place (subject to some conditions).

In the meantime, the share price of EBB the current manager of EBI has skyrocketed from a low of 3.5 cents on December 8th to 12 cents at today's close and an intraday maximum of 14 cents. In response to an ASX query EBB stated that there is no news that the market is unaware of and that they will be announcing a positive operating profit for the financial year that closed 31st December. Actual P&L will be a loss due to writing off of intangible assets. The real news is that the various companies controlled by Steve Eckowitz have been selling shares in EBB including sales by Harsit Holdings of 17.7 million shares on 17th December and 14.9 million shares on 31st December. In total they have sold a net 34.3 million shares of the 48.8 million that they held last December. Ecko Investments sold essentially all of its 3.8 million shares - most of them in December and Pointyen Pty sold all its 225 thousand shares on 31st December. This seems to be due to margin calls related to ANZ from what I can tell. I suppose that traders think that the (forced) selling must now be over. Wingate Group's purchase at 4 cents a share is now looking like a brilliant move. I hold 20,000 shares with 10,000 bought on 17th December for 6.1 cents.

What is the Fed Up To?

Paul Kedrovsky's blog pointed to this blog by Woodward and Hall which has a very interesting post about the changes in the Fed's balance sheet. I just wish they'd explain more about what are the changes in monetary policy that has occurred that mean we need to interpret the Fed's actions differently than in the past. I guess one is paying interest on bank reserves? That would explain the huge increase in that variable.

Sunday, January 04, 2009

December 2008 Report

Finally an up month, and a market beating one at that, in US Dollar terms at least. However, due to the rise in the Australian Dollar this month we lost in AUD terms and AUD net worth also declined.

Income and Expenditure

Expenditure was $5,181 ($A7,420). We bought a TV (Samsung 32", Full HD (1080), LCD, about $A,1400), some furniture (about $A400), a bike for Snork Maiden ($A750), and health insurance for her stepfather who will be visiting Australia (about $A350). Non-investment income of $6,465 due to the refund of Snork Maiden's China trip costs. Retirement contributions were $684. Before taking into account foreign exchange movements non-retirement accounts gained and retirement accounts lost money. They both gained in USD terms after taking into account the change in exchange rates.

Net Worth

Net worth rose by $10,158 to $205,660 or in Australian Dollar terms fell by $A4,202 to $294,558.

Investment Performance

USD returns were 4.12% vs. 3.67% or 1.06% for the MSCI and SPX respectively. In AUD terms we returned -2.41%.Using my preferred time series method, portfolio beta to the MSCI index was 1.36 with an annual alpha of 1.4%. Other methods now give a negative alpha. Individual investments made the following contributions to the result:

International and small cap Australian stocks made positive contributions. The top performer was the Challenger Infrastructure Fund which made an asset sale at carrying value during the month boosting confidence in its valuations. The fund is still trading at a massive discount to NAV. A similar positive valuation effect was seen for NDS following the European Union approving the buyout by News Corp and Permira. However, private equity funds MVC, 3i, and IPE all fell as did the TIAA Real Estate Fund and Everest Brown and Babcock despite the seeming resolution of the negative issues surrounding the fund.

Asset Allocation

At the end of October the allocation was 46% in "passive alpha", 60% in "beta", 1% was allocated to trading, 3% to industrial stocks, 5% to liquidity, 5% to other assets, and we were borrowing 20%. Due to the use of leveraged funds, our actual exposure to stocks was 104% of net worth. We regeared slightly. In November we were borrowing 17 cents for each dollar in equity; we are now borrowing 20 cents. When we take into borrowing by the leveraged funds we are invested in, borrowing per dollar of equity rose from 63 cents to 65 cents. Looking at asset classes:

Exposure to non-US foreign stocks rose due to market gains and purchases and exposure to hedge funds fell mainly due to the poor performance of EBI. We moved slightly towards our long-term asset allocation. The story of total assets (includes assets owned by leveraged funds) over the last few months is shown in this chart:

Our ownership of US stocks was particularly badly hit (13% of gross assets in August 4% now) due to market declines and subsequent margin calls.

Saturday, January 03, 2009

Economics Text Analysis

Interesting word clouds generated by Paul Kedrosky based on session and paper titles from the American Economic Association meeting. I've only been to this conference twice - the first time because I was getting interviewed for jobs and the second because I was interviewing candidates. I maybe went to one session. It really isn't very interesting to me at all. The AEA is very undemocratic and each year's conference program is designed by the current year's President. So it might not be very representative of economics as a whole. All papers must be submitted way way in advance. You have very little chance of getting your paper onto the program unless you are part of an organized session and preferably one invited in advance by the President. This is diametrically opposed to say the Association of American Geographers where every submitted paper is accepted. The majority of people at the AEA meeting are there for job markets reasons in my impression. As the AAG meeting takes place in April it is too late for the North American academic job market which is extremely cyclical. Most decisions for the following year are made by March or April.

Goals for 2009

Unlike previous years I'm not going to set any quantitative financial goals for this year as there is too much uncertainty. On the investment management side I would like to:

1. Improve alpha to return to positive numbers or a more positive number depending on which method you use to estimate it.

2. Continue to progress towards a long-term asset allocation that is more like an endowment fund approach as the markets permit.

The major goal though is to get a decent job (3). In any case, I want to (4) continue the progress I've made on getting my academic research back on track (I now have 3 papers I've submitted for review). At the end of the year some should be accepted for publication and I should have that number under review again. If I can (5) make some progress on the business front of trying to do something with my trading models that would be good too. And finally (6) I want to lose some weight. Trying to eat better and get more exercise via cycling etc. will be the methods.

Six goals is plenty I think :)

Thursday, January 01, 2009

2008 Summary

I will be doing a report for December, but after such a financially disastrous year, I'm not in the mood for a detailed analysis of the numbers for 2008 as a whole. In US Dollar Terms we lost more than half our net worth and in Australian Dollar terms more than 40%. These results were partly due to the general decline in the markets and partly due to me not understanding the scope of the crisis and re-equitizing when only part of the decline was complete. I thought the collapse of Bear Stearns was the peak of the crisis. I was very wrong on that score. If we'd kept the conservative stance we had at the beginning of the year through to October or November we would be in a pretty good situation now with maybe a 20-25% decline in net worth in USD terms I think. Maybe better. In Australian Dollar terms we might have been down just 10% or so.

Some of the damage is permanent in realized capital losses and some is hopefully temporary due to currently depressed asset values. We're looking at realized capital losses of $A71,000 so far this year, with about $A14,000 of realized capital gains partly offsetting that. At least we won't be paying any capital gains tax any time soon :)

I started the year trying to be a short-term trader using my quantitative models for predicting short-term market direction. While I am convinced the models have some validity I found it very difficult to trade on their basis both due to being based here in Australia with most of the market action occurring overnight in US markets and my general problems of discipline in trading. I may still look to work with someone else in implementing the models to run a managed futures fund. Though given the Madoff Scandal there is likely to be less interest in blackbox models now. I'll return to look at these again once I have a couple more academic papers submitted. If you are a fund manager and are interested in working with me on this let me know.

Now at the end of the year I've moved much more towards an asset allocation/rebalancing approach to investing with limited market timing. I'd still expect to reduce exposure as the market rises and more so if the yield curve inverts. But I'd re-equitize much slower in any future market slump and never get as leveraged as I did this time around.

The year ended somewhat positively with what seems to be a gain for the month in USD terms though at the moment it looks like we lost in AUD terms. There were some positive signs also on my career front with an upcoming screening interview at a university and I'm getting my research back on track and now have two papers under review at academic journals and more in progress. Having an active research "pipeline" is important in getting an academic job at a good university. The two personal highlights of the year were getting married and visiting China and Hong Kong for the first time. My mother and brother visited us in Australia - my mother's first visit back here since she left more than 45 years ago and my brother's first visit to the country of which he is a citizen. Another positive personal thing is that in the last couple of months I have gotten back to doing a bit of cycling. Hopefully I can lose some weight in the coming year. We also bought Snork Maiden a bicycle and we've been on a few short rides together.