Sirius Resources: Unmarketable Parcels

Sirius Resources (SIR.AX) is going to automatically sell out all shareholders with less than $A500 worth of shares free of brokerage and send the proceeds to the shareholders. They have 11,000 such shareholders including me. You can opt out by sending in a form. My shares are stuck in a Computershare registry account. When they were delisted from the ASX they were removed from my CommSec account. The fee to sell the shares through ETrade using a "Visitor Trade" is $49.50. But this is more than the shares are worth. Fee to send a new holding statement in order to transfer the shares to CommSec is $33.30 which is also more than they are worth. So I haven't sold them.

Monthly performance figures for December and annual figures for 2009 are now in for the HFRX monthly indices:



The Global Hedge Fund Index rose 0.55% for December and 13.40% for 2009. The best performing index for the year was the Russia Index while, not surprisingly Short Bias did worst. As I've been noting throughout the year, Convertible Arbitrage was the best performing of the traditional hedge fund strategies.

The Cost of Success

Not long after I commented that the TFS Market Neutral Fund was at an all time high the fund has decided to institute a "hard close". The close is going into effect on 22nd January.

A soft close is where a fund only accepts new investments from existing investors. The Colonial First State Developing Companies and Future Leaders Funds (both small cap Aussie stocks) are soft-closed funds. Under a hard close the fund does not accept new investments from existing investors either. In this case dividend reinvestment and some other exceptions are allowed.

The reason funds close to new investment is that the managers decide that increasing the size of the fund further will have negative effects on performance. Funds with sustainable good performances often end up closing to new investment. It is an indicator that the managers care about performance. This is much more common in the hedge fund world than in the mutual fund world. It's usually small cap or other specialised funds that are likely to close due to limited investment capacity.

It's a pity though that I won't be able to put more money into this fund in future.

Annual Report 2009: Part IV

Following a breakdown of the sources of growth in net worth, we look at changes in asset allocation over the year:



This first chart tracks gross assets. Net worth is less because of borrowing both by fund managers and ourselves. The growth in the various categories of stocks is pretty clear though. Looking at percentage share chart:



we see that the percentage allocated to Australian large (41.6 to 48.7%) and small cap (8.6% to 10.1%) stocks has clearly increased. Hedge funds now constitute a smaller share than at the market bottom (from 17.7% to 11.9%), but their share is about unchanged from the beginning of the year. The shares of other asset classes have mostly declined a little over the year. At some point we will need to cut the allocation to Australian stocks but I'm not ready yet.

HFRX Daily Hedge Fund Index Performance for 2009

The Global Hedge Fund Index rose 0.55% in December and 13.40% for 2009. Performance over the last 3 or 4 years is negative. The MSCI All Country Gross World Index was up 35.41% this year, down 4.05% annually over the last three years and up 1.79% annually over the last 4 years. So its long run rate of return was higher but so was its volatility.

Signature Debit?

It's weird that "signature debit" dominates the US debit card market - at least according to the New York Times. I don't think there is such a thing here and I can't remember ever doing anything other than keying in a pin number in the US either in recent years... (I banked with HSBC, maybe that explains it). Here, PIN credit cards are increasingly common as are debit and credit cards with chips in them. Credit cards do cost merchants more in Australia than debit cards. From the article it seems that signature debit costs the merchant almost as much as a credit transaction in the US while PIN debit is cheaper. The NYT article has this interesting graphic of trends in US payment vehicles:



Britain has already decided to phase out personal checks by 2018. When will banknotes and coins eventually go too?

Annual Report 2009: Part III

This chart shows that the rebound from the lows in early 2009 in our net worth is due to a combination of new savings and investment gains. This is true for both retirement and non-retirement accounts. Adding the "profit" component and the "savings" component for each class of account should give the current total value. With regained the bulk of our profits in retirement accounts but still have net losses in non-retirement accounts, which were managed much more riskily. That is likely to be different in the future.

Annual Report 2009: Part II

Net worth rebounded very substantially from the beginning of the year and the low early in the year:



Medium term balance is the net of all non-retirement accounts and assets and superannuation is all retirement accounts (both US and Australian). The moves in US Dollars are larger percentwise due to the move in the Australian Dollar from a low of 63-64 US cents in January-February to 89-90 cents at the end of the year. You can see this also in this scary chart in USD terms:



And slightly less scary chart in AUD terms:



2009 was in many ways a lot like 2003 for us financially. Hopefully, the next few years will continue in the mode of 2004-2007 :)

Moxy Vote

Moxy Vote is a new website (got started in November) which aims to link individual investors and advocates in order to get more individual investors to participate in corporate democracy. Most small shareholders don't bother to vote in corporate elections because a lot of effort is needed to understand the issues and most resolutions pass overwhelming in the direction recommended by the board of management. There are, though, occasionally mergers and the like which get voted opposite to board recommendations.

The idea of Moxy Vote is to change this by enabling investors to align their investment accounts alongside advocates that have informed opinions on the proxy ballots. The retail investors will then have their shares automatically voted in parallel to the advocates' shares. The site will cater to investors who are concerned about social causes (such as animal rights, human rights, environmental concerns, etc) as well as those that are pro-shareholder and are concerned about such things are executive compensation, strategic business decisions, etc.  Moxy Vote will just be a neutral platform that retail investors can use to get involved in any way they see fit.

It still seems to be very early days for this site as some of the advocates have not posted opinions on any of the upcoming votes. It is an interesting idea though and I'll be interested to see if it succeeds.

Annual Report 2009: Part I

The first part of my 2009 annual report focuses on rate of return relative to benchmarks. Here are the annualized rates of return:



As the Australian Dollar rose against the US Dollar rates of return in Australian Dollars are much lower than in US dollars. Our rate of return in 2010 was almost double that of the MSCI All Country Gross World Index. The rate of return was also better over ten years and 3 years. It was better than the S&P 500 over all but the 2 year time frame. Performance was stronger in the early part of the year with outperformance of up to 35% relative to the index in periods since then but little outperformance in recent months:



After disastrous returns in September, October, and November 2008, only April, May, and November this year saw returns with negative residuals based on a regression of my returns against the MSCI index:



As you can see, over the last 3-4 years alpha has been about zero and beta greater than one (my returns are more volatile than the market). However, using a structural time series model for the 1996-2009 period, I estimate alpha to be as high as 6.5% and beta at 1.22. Despite, my mistakes over the last few years the portfolio is still doing better relative to the market than it did in the 1990s. There is plenty more stuff I could post but I think that is enough to get the basic message across.

December 2009 Monthly Report

There'll be an annual report coming up soon with lots of charts, but for now, let's look at December. As usual everything is in US Dollars unless otherwise stated. December again saw moderate gains in world stock markets while the US Dollar strengthened for a change. The MSCI World Index gained 2.10%. The Australian Dollar fell from USD 0.9157 to USD 0.8977. We gained 2.38% in USD terms (AUD: 4.43%; Currency neutral: 4.08%). Our retirement accounts hit a new high at AUD 250,578 (USD 224,944). The previous high was in May 2008. The gain is due to both a lot of contributions and the rebound in the financial markets since February this year. Other investments reaching new highs in terms of profits we have made are: TFS Market Neutral Fund, Unisuper, CFS Diversified Fund, Platinum Capital, Generation Global Sustainability Fund, and PSS(AP) Super Fund (Snork Maiden's retirement fund).

Our spending was the second lowest since we moved to Australia at AUD 3,486 (USD 3,130):



Retirement contributions were higher than normal due to receiving the government's co-contribution this month and retirement accounts gained twice as much as non-retirement accounts.

Net worth reached USD 418k (AUD 466k) an increase of $15k. Asset allocation changed relatively little on last month with a move away from our target due to gains in Australian large cap stocks, which constitute more than half the portfolio:



Other stocks also performed well. The following is estimated performances for this month (net of forex movements) by asset class:



Preliminary numbers for commodities show a 5% fall in December. Estimated alpha against the MSCI index was 6.6% and beta 1.22.

Update on "Emergency Fund"

As I've written before we don't have an "emergency fund" as such, but we do have plenty of savings outside of superannuation (i.e. retirement accounts). Today the total is around $A215k. At current rates of spending and an 8.5% investment return (10% return - 15% tax) we could survive 4 years without working. By cutting spending down to $A4,000 a month (i.e. double our rent of $A1,998) another year is possible. But if we hit a period like the GFC we'd last much less time. So 3-5 years is probably a good estimate. With just one of us working in a good job or both of us on minimum wage jobs we can live indefinitely.

Florida House Prices

Median house prices in Cape Coral-Fort Myers, Florida have fallen to USD 92k. Many metro areas across the state have medians around USD 150k or less. Even assuming that many of these locations will be under the sea in a century or two (most of Cape Coral is less than 2 metres above sea level) it's not bad for a century or so lease :)

Meanwhile in Australia, house prices continue to rise. Single family homes in Canberra have now reached a median of AUD 535k (USD 480k). Sydney is at AUD 550k and Melbourne 486k. The median apartment in Canberra is AUD 390k (Sydney 417k, Melbourne 402k).

Moominmama Report December 2009

The US Dollar rose this month depressing returns in USD terms for globally diversified portfolios. As a result Moominmama lost 0.95% this month. The MSCI World Index managed a 2.10% gain somehow though. Moominmama did gain in stocks across the board and especially in non-US stocks. Commodities did poorly:



For the year Moominmama saw a 25.06% gain against a 35.41% gain for the MSCI.