Moominmama Portfolio Performance July-October 2010

I haven't updated Moominmama's portfolio for a while due to my world travels. So this update covers the months of August, September, and October:



The rates of return are for the three months, and are not in "per month" terms. There have been nice gains in equities, bonds, and commodities over this period. Part of it is due to the fall in the USD. But gains in Sterling and other cash are much smaller, so a lot of the gain is real. Some of the funds we bought in 2008 are now finally above the prices we paid - the UBS Asia Ex-Japan Fund and the HSBC Indian Equity Fund. Man AHL has fluctuated above and below what we paid this whole period but is currently above ($46k vs. $40k). Funds from 2008 that are not yet above what we paid are: Aletheia, Thomas White, UBS A&Q Hedge Fund, UBS Agribusiness Certificate, and UBS Brazil Fund.

Investment Allocation

Following my new investment I thought I'd update our allocation to stocks and funds:



Where possible I have given the ticker code. But a lot of our investments are managed funds or retirement funds in Australia which don't have ticker codes and some US retirement funds that don't either.

Ass you can see we have a masssive allocation to the CFS Geared Share Fund which is a leveraged fund invested in large cap Australian stocks. I do want to bring that down to a more reasonable value over time, but both the leverage provided and franking credits (tax credits for Aus. corporate tax paid) are attractive. The next largest allocation is Snork Maiden's retirement fund which has to be in the one provided by her employer. Yes there is fund choice in Australia but they will only put 9% of salary in any other fund vs. 15.4% in this one. So there is no effective choice.

The only individual non-financial stocks we have are: Bekaert and Legend. EFG.AX is a fund management company and so is also an individual stock. 3i and Leucadia are basically listed private equity funds. Clime, AOD, IPE, CIF, OCP, CHN, and BTF are all closed end funds.

So we only have 1.1% of net assets in what I consider to be individual stocks.

New Investment

I have been a follower of Mebane Faber's blog World Beta for a while. Mebane is chief investment officer at Cambria Investment Management. Their main approach is an investment portfolio diversified across asset classes with timing in and out of these assets and cash. Mebane's paper on the basic model is one of the most downloaded papers from SSRN. Up till now you needed to have a lot of money to invest with them. But on Tuesday they launched a managed ETF with the ticker GTAA that implements a version of the strategy. I invested $US10k. Yeah, I got paid for my work trip to Sweden and chose to be paid in US Dollars due to the high current price of the Australian Dollar. I'll classify this fund as a diversified fund rather than a hedge fund as I only classify funds which have short positions as hedge funds. But it definitely falls in the category of "alpha investments".

TIAA-CREF Changes

Two of the TIAA-CREF funds I am invested in are being frozen which means that I can't transfer money into them in future. I am not clear whether this is a move by TIAA-CREF or just the university where I used to work at. The letter came from the latter.

In place of the CREF Bond Market Fund, they recommend PIMCO Total Return (PTRAX). In place of CREF Global Equities they recommend a 50/50 mix of American Funds EuroPacific Growth Fund (REREX) and Thornburg International Value (THVRX). These non TIAA-CREF funds are supposedly among an array that will be added at the market close on November 19th. I'm not sure that I'll actually be able to switch funds into them as a former employee. We will see. There is a limited range of other TIAA-CREF funds that I might be able to use.

So what do I think of these new non TIAA-CREF funds? I have heard, of course, of the PIMCO Total Return Fund and its manager Bill Gross. It has returned 8.09% p.a. over the last 5 years and 7.66% p.a. over the last 10 years. By comparison the CREF Bond Market Account has returned 4.65% and 5.97%. It's probably riskier than the CREF fund but it has good risk statistics. I would say that an immediate switch is justified here.

I've heard of Thornburg but have no idea if they are good or bad fund managers. The fund is a large cap, growth oriented fund according to Morningstar. Risk stats are good. It has a 5 year return of 6.3%. CREF Global Equities returned -0.05% and has pretty much a beta of 1 and alpha of zero relative to the MSCI World Index. On the other hand Thornburg exactly matched the MSCI's return in 2008 (-41.8%) and underperformed it in 2009. And in the most recent 12 months it maybe underperforms too. The manager paints a better picture than I am getting from Yahoo. So, I'm not sure about this one and won't be looking to switch in a hurry.

The final fund of the three has a good performance record and risk stats and is another large cap fund. It's assets are greater than $100 billion though. Capital Group has a good name. So I wonder if it can maintain the performance it's seen?

Actually the combination of these two funds is not an appropriate replacement for CREF Global Equities. The latter has 46% of assets in US stocks while these two new funds have no US exposure.

In sum these are all plausible to good funds it would seem. I'll look to get into Pimco soon, the others maybe later.

Why Don't Operating Systems Save a Buffer of Deleted Files?

After accidentally overwriting a file with an older version that was inside a newer version of a folder that I was backing up I wondered why don't operating systems simply create a buffer of recently deleted files that could be quickly accessed? I use "Data Rescue" software but it takes a couple of hours to search my disk for deleted files and to reconstruct them. If my computer had a record or copy of the most recently deleted files this process would be a lot quicker. Now that hard drives are so large I can't see why not.

Maps to Show Where You Have Been in the World

Revanche posted a link to a website where you can produce maps of the countries and states you have visited. Here is my world map:


visited 24 states (10.6%)
Create your own visited map of The World

The problem is that borders between countries are marked with white lines. This isn't a problem for the borders between the US, Canada, and Mexico. But it is a really big problem in Europe. So there looks like there is a white space in the middle of Europe on my map where there shouldn't be one as I've been to France, Belgium, Netherlands, Germany, Denmark, Switzerland, Austria, Italy etc. around that gap.

The map of US states turns out better:


visited 23 states (46%)
Create your own visited map of The United States

I excluded those states where I've only ever been at the airport (Texas, Missouri, Minnesota, Utah, Indiana, and maybe some others). Here's my map of Canada:


visited 1 states (7.69%)
Create your own visited map of Canada

I've only been to Quebec. As I haven't been to India and Brazil I couldn't do those ones. Why aren't there maps for Australia and China? That would be a good addition to the site.

Moom's Taxes 2009-2010

I'm going to give up waiting for a tax statement from EAIT. It's not like I've received the distribution itself either and my guess is that it is largely a capital return. I'll attribute any taxable amount to my 2010-11 taxes. So here is my income, deductions, taxes etc. according to the Australian Tax Office rules:



Salary was for 8 months of work which ended in February (it was a one year contract that started in the previous tax year - our tax years run 1st July to 30th of June in Australia). Australian dividends is pretty self-explanatory - but it doesn't include dividends earned through mutual fund (managed fund/unit trust) structures. These are included in the next item "distributions from trusts". That figure doesn't include foreign income or capital gains distributed by the funds. My net capital gain was zero. I now have an $A80k capital loss carry forward. So I'm not expecting on paying any capital gains tax any time soon. Assessable foreign source income included foreign dividends etc. and also money I earned from overseas as a consultant.

On the deduction side the biggest items in Australian dividend deductions is margin interest. But I also included computing costs etc. here. Supplement deductions are mostly foreign margin interest.

We then compute the gross tax liable using the standard tax rates. My marginal rate is formally 31.5%. But then I should be eligible for a $819 low income tax offset! After that the tax payable is $6,390.

This is offset by almost $2,000 of tax credits. These are mostly "franking" or "imputation" credits that account for the corporation tax paid by Australian companies who paid dividends to me. Australia is one of the few countries that still has this system of "see through" taxation. As a result my net tax liability was $4,405 according to my calculations or 10.4% of my taxable income of $42k.

But $8,565 was withheld from my salary. So I should get around $4,160 as a refund.

There are no state income taxes in Australia so that is my total income tax bill/refund.

For last year's numbers follow this link.

Career Update

I now have an interview lined up here for early next month. The original deadline for the job was early this year but they advertised for a whole bunch of positions and put together a very high powered interview team which would be very hard to get in one place together any time. And then I went travelling for almost 6 months. So it has taken 8 months to give me an interview in the end. They will be interviewing higher level positions for a while yet so I don't think my absence made much difference. We'll be doing plenty of prep for the interview closer to the date. The hardest question I think will be why I want to join this group when I have applied for jobs with other groups here and failed to be appointed. I don't need to give them a presentation. Presentations have been my weak point in recent job hiring processes. Not the interviews.

I am not actively looking for positions outside Australia but there is a constant flow of ads for jobs around the world that comes through the various networks. Now there is an ad for a job in the US in a highly desirable location geographically (in our opinion) where maybe Snork Maiden could also get hired on grant money as she has connections. It would put me back to the same point I was at in 2002 when I moved to the US from Australia and I am really not keen on making the move back to the US. But maybe it is something we should look at? The problem is though they are open to more senior candidates than many job ads are I wouldn't be offered tenure and Snork Maiden's position would also be very precarious and we would have no rights to live in work in the US until 5 years plus it would take to get a green card (given my previous experience). At least this time I could apply for a green card for Snork Maiden together with myself in one application. Last time around my application was already in progress before we met and we didn't marry until moving to Australia. If we stick things out another year here in Australia she can become a citizen here already. So there is an incentive to do that.

Thai Food

The main venues to eat out in Bangkok are in waitered restaurants, food courts in malls, and in the street. Upscale malls might have waiters in their food courts too and the food is mostly foreign. We went to a Korean restaurant in the Emporium Mall. The best Thai food we had was at a restaurant called Justharos which was near Siam Square. This restaurant caters mainly to Thais. This is their green curry:



Compared to the usual green curry you are served in western countries it is very much more like a soup. All the food we ordered there was really good. Another restaurant we went to is called "Cabbages and Condoms". This place caters mainly to foreigners and groups. The appetizer we ordered there was good:



Apparently it is a classic dish involving betel leaves wrapping some crunchy contents with a lemongrass flavor and a sweet sauce including sesame and coconut. You can also add chilis if you want. But there was plenty of chili in the papaya salad we ordered so we gave those a miss! The food we ordered at the food court at the Platinum Fashion Mall - a discount clothing mall was also pretty good and very cheap. Dishes typically were priced at 45 Baht ($1.50). At Justharos a dish was around 120 ($4) Baht and at Cabbages and Condoms about 200 ($7) was average. Even the latter is cheap by developed country standards of course. We also went to a Thai restaurant called "Royal Navy Club" near the Grand Palace where we thought the food was average to bad.

The only street food we bought was fruit. A guy has a handcart with a cabinet full of different peeled fruits - watermelon, rockmelon, pineapple etc. which he then chops up and puts in plastic bags for you. Each bag was 10 Baht. But street food also includes noodle soups, barbecue:



etc.

Israeli Food

Snork Maiden tells me she has more pictures of Israeli food. Maybe they will follow. There are a few main influences on Israeli food: Central and Eastern European food brought by Jewish immigrants from those countries and "Lebanese" food as well as food brought from other Middle Eastern and North African countries by Jews from those countries. And then there is the American influence. This must explain this:



Yes, a pita with falafel often comes stuffed with what Americans call French fries. But as they are called "Chipsim" in Hebrew maybe really it is a British influence. After all the British used to rule the country. Halva is a popular dessert. Here we see halva for sale at the Mahane Yehuda market in Jerusalem:



Or we could have more European style cakes:

Moom's Draft Australian Tax Return 2010

I've just completed drafting my tax return for this year. Our tax year ends on June 30. That's presumably because the agricultural year is out by 6 months in the Southern Hemisphere compared to the Northern Hemisphere.

I still don't have a tax statement from the EAIT fund of hedge funds. They claim they'll send one out this month. The deadline for the tax return is 31 October. If I don't get it soon, I'll just have to treat that as income for 2010-2001. But I'll wait a little longer before finalizing and sending in the return. Yes, I send in a paper return. I do all the calculations on a spreadsheet that I adapt each year to changes in the tax rules and my circumstances. Anyway, taxable income came in at roughly $A43k and I should owe about $A4,700 in taxes but $A8,565 was withheld. This is due to only being employed for 8 months of the year but having tax deducted as if I'd work for 12 months and about $A2,000 in franking credits and foreign tax paid. So I expect about a $A4,000 refund.

Last year, my taxable income was under $A10k due to lower income ($A25k vs. $A50k this year) and higher deductions ($A15k vs. $A7k). Mostly the increase in income was due to working 8 months vs. 4 months and the decrease in expenses to the derivative losses I suffered in the financial crisis.

I'll post the detailed spreadsheets when I finalize the return.

Moominvalley September 2010 Report

As usual, not all the final numbers are in but this is roughly what the accounts for September look like. Also, as usual, everything is in US Dollars unless stated otherwise:



Expenditure was pretty close to normal this month despite us being in Europe for the whole month. This was because either our hotel bill was being paid for us (in Sweden) or we were staying with family. "Other Income" is unusually high as Snork Maiden got 3 salary payments this month. Investment returns were high with about half the return in USD terms coming from the rise in the Australian Dollar towards a post-float record high (the Aussie was floated in the 1980s). USD returns were 11.65% vs. 9.60% for the MSCI World Index and 8.92% for the S&P 500 total return index. In Australian Dollar terms we had a 3.19% gain and in currency neutral terms 5.34%. The biggest gains in absolute terms were in Australian large cap stocks that represent now 52% of our gross asset exposure (yeah, way, way above target). Most other asset classes fell as shares of the portfolio but every class had positive returns. The highest percentage gains were in Australian small cap and US stocks. Net worth rose almost $50k to $440k though of course the rise in Aussie terms was "just" $A18k to $A457k.

Hedge Funds: Preliminary Performance for September 2010

Preliminary performance figures for HFRI show an overall gain of 3.37% for hedge funds in September, which is very strong:



There was strength across most styles apart from short bias, of course, as the MSCI World stock index rose 9.6% for the month. HFRX though shows quite different results, but it is based on a smaller sample of funds:



Overall gain was 1.72%. Macro and Systematic Diversified had negative performances according to HFRX but strongly positive performances according to HFRI.

August 2010 Report

I'm gradually digging out of the financial mess that awaited me here in Australia. The most worrisome thing is that the US IRS is still pursuing me over my US 2008 tax return. I explained to them in my last letter that I was no longer resident in the US since mid 2007 and anyway my income in 2008 was so low that I wasn't liable for any tax here in Australia even. But they again sent me a new letter while I was away and claim their records show I have sufficient income to owe tax. I'm writing back and telling them to prepare the tax return as they see it so I can at least understand what their claim is. I hope I don't have to end up wasting money on a lawyer on this issue.

Anyway, I have now completed the August accounts:



Of course, we spent a pile of money travelling in Europe. Investment returns were negative. In USD terms they were -2.63% vs. -3.46% for the MSCI World Index. As the Australian Dollar lost a little value AUD returns were -1.07% (-1.90% in currency neutral terms). High spending and negative returns meant that, of course, net worth fell - by USD 12k or AUD 7k. September was a much more positive month as you'll see soon.

Commonwealth Bank International ATM Fees are Extremely High

We found during our trip that Commonwealth Bank charges enormous fees for using ATM's overseas. Anything from AUD 6 to 14 depending on the amount of money withdrawn (5-12%). By contrast, using their Mastercard/Visa to make purchases results in a uniform 3% fee. So it makes sense to always use the latter when possible when travelling and only to withdraw large amounts of cash. To get down to 3% for ATM transactions you'd need to withdraw about AUD 500 in one go based on this.

Home

We're finally back from our "World Tour" and now into getting back up to speed mode here. Last stop was Bangkok. At some point Snork Maiden will provide more pictures of food including from Sweden, Israel, Denmark, and Thailand, hopefully. We are appreciating the nice weather and calm and orderly atmosphere here in Canberra. Israel and Bangkok and more exciting of course, but we prefer somewhere like Canberra as a home base. At least for the moment anyway. My next planned international trip is South Korea in May. A country I haven't been to before. I had been to all the countries on this trip except Hungary where we didn't leave the airport anyway. But I saw new stuff everywhere.

Now for lots of cleaning, sorting out mail, accounting, and my taxes for 2009-2010 still to do in the next week. Also our car wouldn't start. I think it is a "flat battery". And hopefully some more blogspots as things sort out.