Interview Preparation

I completed my presentation slides on Thursday and today went over to a colleague's house to run the presentation by him. I was meant to meet him on campus on Friday, but he didn't show up. He works at the college I'm applying to but not in the unit I am applying for. He wrote a reference letter for me. He recommended mainly organizational changes in my presentation to give people a bit better roadmap of where I'm going and emphasize more what is new or different in my work.

Meanwhile the Snorkparents are settling in. We took them to look at the view of the city and mountains from the Telstra Tower (in the backgroun in the picture above) and for some shopping in Dickson... Tomorrow we might go to the open day at Government House (in the foreground). I've never been inside the grounds.

Moominmama February 2009 Performance

Moominmama's portfolio saw another loss this month of 3.66% in USD terms. The MSCI World Index was down 9.73% and the S&P 500 close to 11%. Moominmama lost in all asset classes apart from US Dollars cash (this asset class must have a positive return in USD terms :)). On a preliminary basis Moominoid and Snork Maiden lost around 5%. So we both outperformed the markets for a second month running. But we're still losing money.

Hedge Fund Performance for January

While the HFRX index saw a gain for January, HFRI * had a loss of -.04%. That's still great compared to the equity markets. Credit Suisse/Tremont saw a gain of 1.09%.

* For a review of the difference between HFRI and HFRX see my post on that topic.

Abolishing Corporation Tax Makes More Sense

Apparently momentum is growing to abolish Australia's system of dividend imputation. In Australia companies pass on tax credits attached to their dividends to their Australian shareholders for Australian tax paid. As the corporation tax rate is 30% (note for Americans - much lower than US rates and we're worried it's too high!) a taxpayer in the 30% marginal tax bracket pays no tax on the dividend. Taxpayers in higher brackets pay 10 or 15% and taxpayers in lower brackets get a refund. Superannuation funds pay zero tax on these dividends instead of their 15% for ordinary income. If you claim expenses for holding your shares (like margin interest) you lower your effective tax rate further and boost your refund. Last year I got a nice refund due to this strategy.

Imputation is meant to avoid double taxation of dividends (the US has introduced "qualified dividends" with the same aim). The arguments against it in the article are valid. Another argument is that imputation discriminates against reinvestment in the business (or favors borrowing to invest) because credits can only be attached to dividends paid out. Australian taxpayers will favor dividends over capital gains.

Of course I would personally be disappointed by the elimination of imputation. I'd cut our allocation to Australian shares and boost our allocation to foreign shares dramatically as a result. I'm not sure that the comments in the article about this move boosting the Australian stock market are valid as most Australian shareholders would do likewise (while foreign investors would increase their allocation to Australia).

It'd make a lot more sense in my opinion to abolish corporation tax and simply tax dividends and capital gains equally in the hands of recipients. This includes foreign investors. Foreign investors currently face withholding taxes on dividends that don't have attached credits but not on so-called "franked dividends" and no tax on capital gains (though of course they may be taxed in their own country).

Career, Financial, and Family Update

Yesterday, I went to a meeting at the government department that is funding my research project. One person left early and the most relevant person substantively didn't show up but still there was some useful exchange between us and one guy who directs a section in the ministry. But overall they don't have a very focused idea of what they are looking for from us, which I guess is good because then I can more or less do what I want :) I'm told that there is now an office at the university with my name on the door (one of the perks of academia is not working in a "cubicle" or shared office) but I still don't have a contract. It's entangled in the bureaucracy. After a recent restructuring no-one knows who is responsible for what, making the usually cumbersome university bureaucracy all the more so.

At least CommSec finally deposited my money in my Colonial First State account and started up my $A500 a month automatic savings scheme. So a little progress on the financial front. I have a bunch of financial stuff that I should post on but have been busy working on the project/paper/presentation for my interview on 2nd March. The 2nd March deadline has just been a good excuse to complete this project or get it to the stage where I can present on it. I also submitted a version to a conference in Europe later this year and there are plenty of follow up stages that can be done. Sorry I can't post more details on this blog of what topic I'm working on. I also now have scheduled a presentation at another major University for 26th March.

We successfully reorganized our apartment over the weekend for the visit of the Snorkparents. It looks pretty good. I quite like my office in one end of the long living room where the doors to the balcony can be opened wide... They should be leaving China late tonight I think.

Yesterday was our first wedding anniversary. Among other things we went out to eat (Korean food) and then took the car through an automatic car wash for the first time (can't have a dirty car to pick up the Snorkparents), while eating ice cream. Snork Maiden said it was one of the best value entertainments in Australia :)

Bounce in the Baltic Dry Index

As is the case for non-US crude oil prices there's been a bit of a bounce in the Baltic Dry Index of shipping costs. Of course, it could just be a case of a technical bounce following overshooting to the downside.

Ordering Computer

Some progress on the job front. A computer is being ordered for me from the project funds and a meeting being set up with the funders to discuss feasible goals for the project. But the rest is still entangled in the bureaucracy.

LinkedIn

I just joined LinkedIn. I don't really understand how it works or whether it is useful, but figured it is yet another portal to channel people to my professional website. I wish I could post a link here, but sorry that would blow my cover completely :) I'd appreciate any tips on how to use the site more effectively.

BTW in the last month this blog got 14 times as many visits as my professional site. But then there are more than 900 posts for people to hit on the blog and maybe 10 pages on the professional site.

Cable TV

I went along to my local TransACT office to ask about changing our broadband/phone plan into one that includes cable TV. Snork Maiden's parents will be visiting from China very soon. As they don't speak a word of English we want to provide them with television in Chinese besides the daily news broadcast from SBS. Otherwise we have a pirated set of all the Ghibli movies in Chinese for them to watch on DVD :) We haven't quite figured out how to provide them with an internet connection yet as the broadband internet connection is in the room that we are planning on using as our bedroom while they're here (and the desktop computer is going to be moved out of there...) and Snork Maiden's old laptop doesn't seem to work with our wireless internet for whatever reason... Anyway, I'm getting sidetracked.

The guy in the office said: "We're upgrading our system so we can't sign on any new customers for the next six weeks!". I'd never heard anything like that before. Foxtel don't seem to have a Chinese channel - or anything in foreign languages - which I find rather odd. But he could give me a new mobile phone and number on the spot. So now we have two. Again, this is primarily for the Snorkparents so when they are stranded in this foreign landscape they can call up to be rescued :)

Credit Suisse Yearbook

Great report from Credit Suisse on global equity returns.

Why Petrol Has Gone Up in Price Though Crude Hasn't

I've noticed that petrol (gasoline) has gone up in price from a low of $A0.99 a litre ($US2.41 a gallon) to around $A1.25 a litre ($US3.04 a gallon) while the US crude oil futures contracts have gone nowhere and neither has the Australian Dollar. Even the Ford dealer tried to distract me by talking about the price of petrol when I complained about the price of Ford parts. Yahoo has an interesting article about the issue, explaining that the price of other varieties of crude oil has risen above that of West Texas Intermediate Crude, which remains depressed. Could this be a sign of economic recovery elsewhere in the world?

Commonwealth Securities Service Deteriorating

After ranting yesterday about Ford, today it's Commonwealth Securities turn. I don't like putting down companies but I feel that criticizing companies on blogs is one way consumers can pressure them to perform better. CommSec's service has shown a very sudden deterioration since the beginning of this calendar year. It's almost as bad as Citibank now:

1. I sent in a request to buy units in a Colonial First State fund (another subsidiary of the Commonwealth Bank) through CommSec. Nothing happened. I contacted CommSec and was told to contact CFS. I contacted CFS and was told to contact CommSec. They told me they had no record of my application and instructed me to send in a new application. Which I did. Two weeks later, I get a call from CommSec: "Mr Moom - the form you sent in to buy CFS funds had a different account number than that of the funds which are on your margin loan". "Um, yes, that was on purpose, I sent the application to you to avoid the 4% load I'd have to pay if I sent the form direct to CFS. But as I've already sent in another application please just cancel this one...".

2. Still nothing has happened with my second application I sent in around 2 weeks ago...

3. I requested to withdraw x thousand units of my total shareholding of y thousand EBI.AX to the new unlisted EAIT. I see online that all y thousand of my units have disappeared from my CommSec account. I phone them up and am reassured that that is just a formality and the y-x thousand units will appear back in my account after the deal closes. I just opened the letter from Everest Financial welcoming me as a new unitholder of y thousand shares in EAIT... I guess not such a big deal, except all that money is now locked up for one year...

How Much Does That Cost?!

We got the major part of our car repairs done cheaply. Today we finally picked up from the Ford dealer the silver trim that goes on the bumper. The price: $A193! ($US125) Unbelievable. I guess I should have asked the price before placing the order. I assumed it would be $A20-30 at the most...

So, I'm back in much colder Canberra. A lot to do in the next couple of weeks before my interview at the university. I want to do more work on a project that I will give them a presentation on. Also in this time frame Snork Maiden's parents will be arriving from China and maybe my one year job will actually get going and I'll be involved in getting my office set up, bureaucracy etc....

I did get some good ideas for the one year project (I'll have to come up with a better name) while at the conference and also someone at another major Australian University wants me to apply for one of a few senior jobs (Professor or Associate Professor) that they might be able to advertise later this year. Today, he expressed interest in me giving them a presentation. Snork Maiden happens to be going there for a meeting in late March so maybe we can work something out. We'll just have to "babysit" her parents - i.e bring them with us and find them stuff to do there. They don't speak a word of English and though they have travelled quite a lot outside China it was on an independent basis. Her stepfather though has visited his daughter in San Francisco. He does seem a bit more adventurous.

Kuranda Trip

I signed up for a trip to Kuranda - a small town or village about 30km from Cairns. They pick you up by bus and take you to the terminal of the "Skyrail" outside town. This is a cablecar that runs for 8km up the mountains over the rainforests to Kuranda. Then you make your own way back on the scenic railway which winds its way down along the river valley back to Cairns. The station is a few blocks from my hotel. Cost is $A89 ($US55) - the tickets individually are $A40 for each of the trips so the bus out to the terminal is $A9. This morning I was pitched a bus tour to Cape Tribulation and back for just $A10 more (much reduced) - all day including hiking, swimming, crocodile spotting (not in the same location as the swimming!) and lunch included. Cape Tribulation is at the end of the sealed road on Australia's East Coast - in other words the end of the "civilized world" and the edge of the Outback. I'd have loved to go on that trip but it departs at 7:30am and unfortunately I need to organize some things here at the hotel in the morning and can't leave that early. Hence the trip nearer to town.

Talking about good travel deals, this evening I saw a round the world ticket advertised at $A1599 ($US1000) and London roundtrip for $A1250 ($US800) at a travel agent here in Cairns. Granted that there are likely a bunch of taxes and stuff on top of that, but still those are amazing prices. My flight to Cairns was $A625.

Cairns

I'm on my first business trip of my new job at a conference in Cairns, which is on the coast of northern Queensland deep in the tropics. I haven't been in tropical Australia before though I have been in the tropics in Thailand, Malaysia, Singapore, and Hong Kong. Cairns is the central location for trips to the Great Barrier Reef and to the rainforest of the Wet Tropics World Heritage Area. The city is surrounded by rainforest clad mountain ranges and across the bay I can see from the hotel the extensive mangrove forests along the coast. I'm hoping to manage to sneak in a trip to see some rainforests if I can instead of attending all the conference sessions. I don't plan on going to the reef. I have seen a coral reef before. In fact the most northerly reef in the World at Eilat in Israel. And swimming in the hotel's swimming pool this morning was about what I can manage, I don't think I'm up to snorkelling. I've never been a good swimmer though I like being in the water.

Back home all the paperwork is still in process and I don't know for sure what department at the university I'll be based in. But that doesn't stop them from paying for my trip here. I already, gave my presentation this afternoon. My first in more than a year and a half and it seemed some people at least liked it. As well as lots of academics and PhD students there are heaps of "public servants" here at the meeting in Cairns as always at these Australasian conferences. You never see this in the United States.

January 2009 Report

In USD terms we pretty much matched the MSCI index this month. Of course, this was its worst January ever. In Australian Dollar terms performance was flat and net worth increased slightly.

Income and Expenditure



Expenditure was $3,036 ($A5,015). Car repairs cost $A550. We bought a barbeque ($A365) and there were about $A260 of medical expenses which were partly refunded by Medicare in February. And the car depreciated another $A500. Before taking into account foreign exchange movements non-retirement accounts gained and retirement accounts lost money. They both lost in USD terms after taking into account the change in exchange rates.

Net Worth

Net worth fell by $17,337 to $188,160 or in Australian Dollar terms rose by $A735 to $295,060.

Investment Performance

USD returns were -8.92% vs. -8.51% or -8.43% for the MSCI and SPX respectively. In AUD terms we returned -0.19%.



All asset classes lost apart from hedge funds, which gained massively mainly due to the delisting of EBI as EAIT. Returns for both EAIT and the Man managed futures fund are now going to be estimated at the time of writing these accounts reports and adjusted later in the month (mid-month and month's end respectively) after the actual returns are available.

Using my preferred time series method, portfolio beta to the MSCI index was 1.31 with an annual alpha of 1.9%. Other methods now give a negative alpha.

Asset Allocation

At the end of October the allocation was 51% in "passive alpha", 57% in "beta", 0% was allocated to trading, 4% to industrial stocks, 5% to liquidity, 4% to other assets, and we were borrowing 21%. Due to the use of leveraged funds, our actual exposure to stocks was 98% of net worth. When we take into account borrowing by the leveraged funds we are invested in, borrowing per dollar of equity was 60 cents. Looking at asset classes:



Shifts in the allocation are mainly due to relative performance this month. We moved further towards our long-term asset allocation, though not for a good reason, but mainly because Australian stocks underperformed and we are overweight in them.

I Won't Get a $950 Tax Bonus

According to an article in the Australian Financial Review today, I won't be eligible for the Australian government's $A950 stimulus payment. Only people who paid tax and earned less than $A80,000 will get the full payment - with reduced amounts for those earning between $A80 and $A100k. I paid negative tax in the 2007-8 tax year, so no bonus for me. There are a bunch of other special classes of bonus, but I don't qualify for any of them either.

The bottom line is that poor people who don't fall into a special category - for example students - won't be getting a payment from the government in either this stimulus package or the previous one. I don't understand the logic of this. It isn't as if the poor don't vote in Australia (unlike other countries such as the US), as we have compulsory voting.

At least Snork Maiden should get a payment.

A Little Normalcy Returns

While stock indices had their worst January in history, globally, hedge funds did fine. The return of uncorrelated returns :)

NDS Deal Closes

The deal to take NDS private finally passed its last hurdle today. I last bought back into the stock on 19th December at $49. The takeover price is $63. I plan to redeploy some of the funds freed up in my Interactive Brokers account. I've been holding NDS in my Ameritrade account.

"NDS Announces Receipt of Final Court Approval of Scheme
Last update: 2/4/2009 11:48:00 AM
NEW YORK & LONDON, Feb 04, 2009 (BUSINESS WIRE) -- NDS Group Limited ("NDS") announced that earlier today, the High Court of Justice in England and Wales approved the remaining elements of the scheme of arrangement pursuant to which News Corporation and two subsidiaries of funds advised by Permira Advisers LLP will take NDS private. The scheme is expected to become fully effective on February 5, 2009, upon the registration of a copy of the court order with the Registrar of Companies in England and Wales and the last day for trading in ADSs is expected to be February 4, 2009."

Venture Capital: 1992 vs 2000

Interesting comparison of the outcomes for venture capital invested in 1992 vs. in 2000. The 2000 vintage is only now beginning to pay off in terms of distributions, but still has lost money overall. As in 2007 venture capitalists invested heavily at the top of the market. On average they don't seem a lot smarter than anyone else. Though there is some evidence that the best are good.

Why $950?

The Australian government announced its second stimulus package today. Included is a bonus payment of "up to $A950" for every worker earning less than $A100k per year. What an odd number. But the exchange rate with the U.S. Dollar is currently 63 U.S. cents to an Australian Dollar, and if you haven't guessed already, $A950 is exactly $US600, which was the amount of the "stimulus payment" in the first U.S. stimulus package.

EBI Saga Finally Resolved

In the end 27% of shareholders (including 6000 of my own shares) opted to participate in the new unlisted hedge fund of funds EAIT. The remainder will stay in the listed EBI which will be managed by Laxey Partners - an Isle of Man based hedge fund. The plan is to wind up the fund and distribute the proceeds. Unless there is another complete collapse in global share markets this is a great investment - buy $2.38 worth of assets for just over a dollar and get the proceeds redistributed to you mostly in the next couple of years. I may in fact buy more units when I can. I'm bumping the value in my accounts of the unlisted fund to NAV. This will be the biggest positive contribution towards this month's results.