Endowments Update

Barrons' has updated the portfolio allocations for Yale, Princeton, and the average US educational endowment:



Compare these to a previous table they produced. Yale's allocation has shifted very little so maybe it isn't very up to date. Princeton and the average endowment has been forced to increase the allocation to private equity and real assets and reduce the allocation to stocks due to the moves in the markets.

Income Replacement Rates of Mandatory Retirement Schemes

The table is from a paper by Richard Disney presented at a conference on taxation held as part of the Australian tax policy inquiry. It shows the percentage of income replaced by mandatory retirement programs at different levels of average earnings. The Australian data includes both the means tested age pension and the 9% superannuation guarantee! The two together are estimated to replace only 52% of average earnings. Australia's outcomes are very similar to those of the US which only has one mandatory program: social security. With Australia's government worrying about the tax benefits provided to superannuation and raising the age of eligibility of the age pension to 67, you can see just how unsustainable the US program must be. I won't even talk about some of the European schemes :)

Bottom line: You probably need to save more than the 9% superannuation guarantee.

Couches

Today, after much searching, we finally bought a couple of couches - a two and a three seater. Yes, they are leather but not the ones in the picture - I couldn't find a picture of exactly the ones we got. Over the last month we've seen the price decline from a deal of about $A4,000, through $A3,500, to $A3,000 today for the two couches from the showroom floor. We could still have ordered some at $A3,500 but decided that these two suited us. They are some of the more comfortable couches we've tried. They won't actually fit in our apartment in a traditional L-shape configuration - not with room for other furniture or for people to get through, but we won't always live here and we've figured a couple of different set ups that will work. Up till now, we've only had the one futon sofa we brought with us from the U.S. It's quite nice but not so great for sitting on for extended periods and it'll be good to have more seating for guests.

We'll Call You (or Not)

I haven't heard back from the headhunter so I guess I wasn't shortlisted for an on-campus interview. The department I interviewed at before here just advertised four senior positions. I doubt it makes sense to apply after I was rejected for a more junior position but I guess that means the local hiring freeze is off.

George Friedman Thinks the Iranian Election was Fair!

My opinion of him and Stratfor sank even lower.

Conspicuous Blogging

An interesting article about changes in the ways people are signalling status - a switch from conspicuous consumption of material goods to online signalling through the number of Facebook friends say. I'm not sure quite how important this is as a trend in quantitative terms but there is certainly something in it. It fits in with similar news from Japan. Of course those of us in academia have long signalled our status through publication, citation, winning research grants etc. and the same has been true of other professions such as art or music. Conspicuous production rather than consumption. The paradox is I'd love to tell you right now about an article I wrote where I referred to this issue 12 years ago. But I can't without revealing my identity. An anonymous blog is very unconspicuous production in it's nature. Maybe I should go down the road of other non-anonymous academic bloggers :)

TFS Market Neutral Fund Closes to New Investors

The TFS Market Neutral Fund which I've often blogged about and am invested in, is closing to new investors. The fund's assets stand at around $US600 million. It's not a complete closure. Financial advisers and 401k, 403b plans etc. who have clients already in the fund will be allowed to open accounts for new clients. And, of course, existing investors will be allowed to add to their accounts. So the aim is to slow down the influx of capital. The fund has doubled in size in the last year I believe.

You have till 30th June to invest in the fund if you are not already invested.

HFRI Performance May 2009

HFRI came in with a 5.58% return for May - one and a half percentage points more than Credit Suisse's estimate - and positive returns for all sub-categories.

Face to Face Interview

So I went out to the airport today to meet the partner of the recruitment firm at the Qantas Club (=Lounge). I think the interview went well and that there is a good chance he'll put my name forward at the meeting with his client on Monday where the short-list of candidates to be interviewed on campus will be composed. The taxidriver on the way there told me he studied accounting but the economics part was hard. I told him I found it hard the first year or two as well, the concepts took a while to sink in.

Credit Suisse/Tremont Returns for May 2009

Credit Suisse/Tremont hedge fund indices have now reported for May. They are reporting a 4.06% gain for the month, which they say is the best month for hedge funds since some time in 2000:



HFRX reported somewhat lower returns. HFRI is still to report. Most strategies did well apart from short bias. Managed futures were rather mediocre.

By the way, I just realised that my last post about the suit was my 1000th!

Suit

I bought a suit for my interview today. Only the second suit I've ever bought. We went to Myer because there are sales on. But the suit department was a bunch of racks behind the escalators there and nothing appealed to either Snork Maiden or me and there was no salesperson in sight. So we headed to David Jones next where there was a salesperson in the much larger suit department. I liked all the lighter colours and Snork Maiden darker ones with stripes preferably. She soon despaired of the process. So I phoned a friend who lives nearby whose taste I trust and I know has bought lots of suits. He came over and his first piece of advice was: "There are only two colors: Charcoal and navy blue". "What about lighter greys?" I asked. "You won't be taken seriously". Pretty soon I was trying on a couple of suits by Anthony Squires (the only ones in my size - I'm 6' 3" (1.9m) and around 108kg (240lbs)). They were both comfortable and both were originally priced around the $A1200 mark. The first one I didn't like so much and only had 10% off. I preferred the second one and it was going for $649. That's the one we bought. Alterations which should be done by Monday afternoon will cost an extra $34. We went and had some coffee with my friend and invited him to dinner this evening. Preparation now under way...

Coldest Day in 43 Years

A couple of nights ago it hit -6C here in Canberra which is near the coldest I've seen here (-7C). The record low for Canberra is -10C. And then today was the coldest day in 43 years with the temperature reaching just 4.1C at Canberra Airport and only 2.6C in Tuggeranong. I felt like I was back in America today :) Though of course the bad days in Troy NY were when it wouldn't get above -18C which was once or twice (and that was the coldest night time temperature I remember from Boston where I lived in 1990-93 and 1995-96).

The Phone Interview

The phone interview with the headhunter went well. It started with me asking questions about what the job really is. He said that they basically just posted a standard description for a full professor though this job is somewhat different. It is a research chair and may include teaching in a masters program. The direction of research sounds a lot more applied than I would really be comfortable with. If we go to another level of interview I think I will tell them that they need a mix of basic and applied research if they want to have a good research profile in terms of publication and citation and getting grants from more prestigious sources. If that's not their goal it probably doesn't match me well. The job sounds less daunting than the description that was sent to me which sounded like it would solve all of their problems.

After that he went through my CV and got me to expand on each item. That included explaining what I did in 2008 and more about the nature of my current position. He seemed to be OK with my explanations. "So if you had stayed with your Australian employer of 1996-2002 you'd probably be a full professor now". I said yes either Associate or Full and if I'd stayed with my US employer I would be seeking promotion to full professor about now. So he said he sees merit in me as a candidate and he might be in town in the next couple of weeks and would like to meet for a chat then. I should also send him Snork Maiden's CV...

Now I need to go buy a suit. My current one doesn't fit any more. I bought it in 1996 for an interview at Ohio State University. I had it reduced in size in 1999 after I lost a lot of weight. But now I've put most of that weight back on... I could get it let out again I suppose, but having more than one can't hurt?

Preparing for Interview

I've been preparing for my phone interview with the headhunter tomorrow morning. I'm not sure what to expect as I've always been interviewing with the people I will actually be working with before. I did some searching on the web about how to deal with such interviewers and came up with more tips from headhunters about how to interview with employers. The little I gleaned suggested headhunters are more likely to throw off the wall psychological questions and ask what you would do in different situations. Makes sense, because they can't ask you anything technical. Academic interviews at research universities are mostly technical discussions of your research with a few questions thrown in about what you would like to teach. At least at more junior levels. Anyway, I've done a quick analysis of the research weaknesses and strengths of the department in question as I've been told this position is to some degree to be a research coach/mentor/coordinator. They've mostly been pretty busy publishing research but generally they publish it in low ranked journals and don't get cited a lot. Maybe this is a product of the Australian government's past policy of rewarding research quantity over quality. When I worked here before in 1996-2002 universities received base research funding according to a formula that awarded one point to a refereed journal article and half a point to a book chapter in an edited book. It didn't matter how prestigious the journal was (the rest of the funding was based on how many PhD students they could graduate). This is still the case for the smaller part (10%) of research funding based on publications. The largest portion (60%) is now allocated on the basis of competitive research grants won. My impression is that in the near future the system will shift towards assessing research on the basis of citations. This is a positive direction.

Government Job?

I heard yesterday about a position in a government department here doing more or less on the public policy side what I do in academic research now. They want someone immediately as an internal transfer in the public service or on a contract basis, so my guess it is to replace someone. I have my current position till the end of February... The e-mail said that they may be wanting to hire more permanent positions in the near future. So I'm thinking to e-mail the guy in charge of the section who sent the e-mail and whom I know reasonably well and say I may be interested in those positions and that he should keep me in mind? My first preference is for an academic research oriented position. This would be a second best from my perspective as a long-term situation but it could be interesting as a shorter-term thing. In which case I should apply for the current position. But I don't need a job now and am in a contract to deliver something to my current sponsor. This whole job timing thing is a dilemma....

May 2009 Monthly Moomin Valley Report

I finally worked out the fault in my accounts: a minus sign instead of a plus sign in front of the gain for Platinum Capital for the month! The following is based on the available data as a couple of funds as usual won't report till near the end of the month, when I'll give a final asset class performance report. As usual everything is in US Dollars unless otherwise stated.

The MSCI World Index rose 10.08% in USD terms and the SPX rose 5.59%. We gained 8.84% in USD terms (-0.34% in AUD terms zand 2.73% in currency neutral terms). The Australian Dollar again appreciated strongly against the USD from 73.17 US cents to 79.91 US cents.

Performance was strongest in Australian small cap and foreign stocks and weakest in real estate and private equity. Alpha measured against the USD MSCI was 2.1% with a beta of 1.11 currently. Though performance for the month was good in USD terms it was below par in risk adjusted terms. The fitted rate of return from the model was 11.4% while we only returned 8.8%.

We spent $3,570, which is surprisingly low given that we and the Snorkparents went to Queensland in May. Most of the Queensland expenditures had already been incurred up front though. In Australian Dollars we spent $A4,468. Since Snork Maiden and I have lived together there have only been six months with lower spending (14 with higher spending). So it really is near the low end:



Non-investment income was boosted above our regular salaries by a $A900 stimulus payment from the Australian government and $A1,200 in cash that the Snorkparents insisted on leaving with us rather than taking back to China to exchange...

Net worth reached $261k ($A327k). Asset allocation moved away from our target but there were no dramatic changes this month:



I plan on trimming the allocation to Australian large cap stocks if and when the stock market recovers further while increasing allocations to managed futures etc. In the meantime we are trying to rebuild our allocation to foreign stocks from the bear market devastation we suffered. Leverage again reduced a little mainly due to paying off $A2,000 of my CommSec margin loan as well as bit of reduction in credit card debt and positive investment performance.

Tianjin Eco-City

We also visited the area of the planned Tianjin Eco-City on our trip to China last year. We saw even less of the site than these guys did. We did see lots of non-specifically Green development in neighboring Tanggu. Snork Maiden's father knows a bunch of people in the planning department there.

Aurora Sandringham Income Trust

I just bought 5000 shares in AOD.AX at $A1.10 a share. This used about half my available margin. The fund is not marginable with CommSec. I've long wanted to invest in this fund and brought forward the investment due to the CommSec offer of free brokerage. Eventually, I plan to reduce my holdings of other listed funds like Clime and Platinum Capital and this move is aimed at increasing diversification.

I'm classifying this as a hedge fund investment as the fund hedges its stock market exposure. I'll provide more details about this investment soon.

The picture is of the Queen's palace at Sandringham in Norfolk, UK.

From Croesus to Sirius

The news is coming thick and fast this morning. Croesus Mining is to be renamed Sirius Resources and become a base metal explorer rather than a gold explorer which once was a gold miner. There will be a capital raising via private placement. I own 2666 shares which were valued at less than 2 cents each prior to this announcement. The placement is at 0.85 cents - about half price and will increase the shares on issue by 200%. At the same time Croesus is acquiring the nickel assets of a company called Apex Minerals. Apex will receive 67 million shares and 600 million options with an exercise price of 3 cents. Mark Creasy (self-styled (?) "prospector of the century")who currently owns 45% of Croesus and some fraction of Apex will receive 267 million shares. The management of Croesus is also being changed.

The image shows the binary system of Sirius. Sirius A is the brightest star in the sky as seen from Earth. Sirius B is a white dwarf which can be seen at lower left.

IPE Placement and Rights Issue

IPE, a private equity fund of funds listed on the Australian Stock Exchange placed around 6 million new shares with a fund manager for 19 cents each and announced a 1:1 rights issue at 17 cents. The current share price is around 30 cents while net tangible assets are supposedly 84 cents per share. I had been looking to double my position anyway in order to recycle the capital return that Allco Equity Partners will be paying out and rebalance my private equity portfolio. It's good I didn't buy more shares at a higher price... on the other hand this announcement seems to have pushed up the share price, so maybe I should have... I will participate in the rights issue.

The equity raising will be used to pay down existing debt. The fund has negotiated a new $20 million line of credit with National Australia Bank contingent on the equity raising (which is underwritten). The new loan will be used to meet future expected cash calls from the private equity funds that have already been invested in. I suppose, originally they expected to meet these using distributions from other funds, which in the current environment have dried up.

Hidden in the announcement though is a plan to eventually liquidate the portfolio. Of course this is subject to shareholder approval. This would be a pity. I'd prefer them to delist as EAIT has.

P.S. 10:52am
IPE's price is now down on the announcement.

CommSec Special Offer

Commonwealth Securities are offering up to $A500 of free buy trades on a CommSec margin loan if you make the purchases before 30th June. The offer is a little odd, in that you won't be reimbursed until August. I only found out by reading the letter they sent me announcing the new portfolio LVR. As I already knew about portfolio LVR, I'd ignored the letter until today. Seems that the offer applies to existing loans as well as new ones.

I'm having a hard time reconciling my accounts this month and have put them aside for the moment. I can't figure what is wrong but a residual amount (the difference between two ways of computing investment profit), which should equal net interest and other investment fees for the month is out by more than a thousand dollars. There are a couple of other discrepancies. I'll come back to it sometime and report then.

Headhunting Progress

So I spoke with the "senior associate" from the headhunting firm that contacted me yesterday. She tried to downplay the rather ambitious job description and selection criteria, which make it seem like they want someone to solve all their problems, some of which I thought would be the role of the department head. She confirmed what I thought that there really aren't any people in Australia that specifically match the field they are interested in hiring in who have a sufficient academic track record. There are plenty of people working in industry in this area. The courses I can find online tend not to be offered by economics departments. They're in engineering schools. So while stating one area of interest they are trying to recruit people in related areas like myself. The next step is speaking to one of the partners of the recruitment firm next Friday.

HFRX up 3.15% for May 2009

HFRX - Hedge Fund Research's daily hedge fund indices based on a small sample of funds - was up 3.15% for May. By comparison, MSCI World Index was up 10.08% and the S&P 500 5.59%. As you'd expect, therefore, equity related strategies performed well. Macro and diversified systematic (which seems to include managed futures) performed poorly. As usual, these are the first hedge fund results for the month - other indices may produce different figures.

Headhunter Calls

I got a call from a "headhunter" today. That's a first for me, I think. The position is a full professor at an Australian University. They seem to think my profile fits the position though they'd need a pretty wide definition of the position if I'm going to fit in it. Well, it can't hurt to get more information. There are other academic jobs out there being advertised but I'm either under or over qualified or the fields within the discipline they have a preference for do not include mine. At this stage I don't plan to apply for jobs unless they are a good fit or are here at this university (where there are none at the moment). It's the same conundrum I faced in trying to relocate in the US. I'm overqualified for lecturer/senior lecturer positions (= assistant to junior associate professor in the US) which are most commonly advertised. But I'm probably underqualfied for full professor positions where they involve a signficant leadership/management role. And I'm not keen on that role. And those are the second most likely to be advertised. There aren't usually many ads for "Associate Professor" (=senior associate prof to junior full prof in the US).

Another Review of Taleb

I wrote a very short review of "The Black Swan" a little while ago. Here is a good but very long review of Nicholas Nassim Taleb. A summary would be: "Taleb is unoriginal when right, otherwise wrong (especially about option pricing), and a dilettante/crank".

Unisuper & Civic Video

Another two weeks on and Unisuper still haven't transferred me to the defined contribution scheme. Will I need to send in the form again?

Yesterday, I managed to lose a DVD we'd borrowed from Civic Video. I tripped over in the street and it ended up flying out of my coat pocket and down a storm drain! I phoned the store immediately and they told me to go buy one at JB HiFi in the next two weeks and bring it to them, "because that will be cheaper". There is something weird there economically, that it is cheaper for me to buy one in a retail store than for them to replace it themselves and charge me?

Luckily my wallet and keys were inside zipped/velcroed pockets on my cargo pants :)

Most Expensive U.S. Suburbs by State

Business Week has a list of the most expensive U.S. suburbs in each state. What's stunning from an Australian perspective is that in many states the most expensive suburbs are far cheaper than the median prices in all major Australian metropolitan areas.