Saturday, January 29, 2011

The Importance of Going to a Good University

If you think it is not important to go to a good university then read this first. Some PF Bloggers recommend to just go to a cheap school.

There are some caveats though. I commented recently on Enoughwealth's post on high schools saying that if you are going to go to university then mostly it doesn't make sense to pay a lot of money to go to the most prestigious high school. But you do need to go to a good one. One that could get you into University of Sydney or UNSW in the Australian case or into one of the top US universities (any of those mentioned in this article). If you definitely plan on going to grad school then it's not necessary to get into the top US universities as an undergrad if it means shelling out big fees. But you do want to go to a good school. Somewhere like UCLA or NYU or Boston University or even Ohio State (Columbus campus). If you do well in places like that you can have a shot at top grad schools. But if you get an undergrad degree from Southern Cross U. or UCQ in Australia say or Cal State U. or somewhere in the US it will be a struggle to get into a good grad school. Likely they will just toss your application unless there is some compelling evidence of your brilliance. And if you get a grad degree from some low ranked university it might not help your employment prospects much at all.

Of course, all this depends on how ambitious you are. I didn't really understand the game fully when I was a student. I knew you needed to go to good universities and went to three good universities. The first two were top-ranked in their country. The third one was good but not in the top-rank. Now I regret somewhat * not trying for the top-ranked place that one of my professors at school #2 suggested. I just thought there was no way they'd consider me or give me any funding. But I could have tried for $50 or whatever the application fee was back then.

I had a job interview on Friday. The head of the department said to me: "I don't know why anyone would come do a PhD here if they could go to that other university across town". I agree with him on that. In economics at least, the name of the school matters.

* Only somewhat because if I had gone there (in the picture) rather than across the river I doubt I would have ever met Snork Maiden. And after all I have done pretty well in my academic career so far.

Thursday, January 20, 2011

GTAA Lowers Fees

Cambria's GTAA ETF has raised $72 million so far and so is lowering the expense ratio to 0.99%.

In other news, hedge fund assets hit a new record:


CHICAGO, (January 19, 2011) – The hedge fund industry concluded 2010 with the largest quarterly increase in assets in its history, according to data released today by Hedge Fund Research (HFR). Total industry assets grew to $1.917 trillion, reflecting a quarterly increase of nearly $149 billion, topping the previous record increase of $140 billion in 2Q07.

The year-end figure approaches the historical asset peak of $1.93 trillion set in 2Q08 and represents an asset increase of 44 percent since 1Q09. Hedge funds as represented by the broad-based HFRI Fund Weighted Composite Index posted a gain of 10.5 percent, but full-year gains were concentrated into year end, with the HFRI gaining over 5.5 percent in 4Q10."

Monday, January 17, 2011

Street View vs. 3D View

Google Earth has now added 3D trees in some parts of the world, including San Francisco. Here is a random street in SF in 3D view:

And in Street View:

hmmm Were some trees removed or has Google added some random ones in? When's 3D cables coming? :P BTW, Street View is much improved on the previous version and really easy to navigate around in. You can see what high speed internet is really for! :) I've always been amazed by Google Earth and it keeps getting more amazing.

Weight Loss

When I cam back from Europe I found I was 2-3kg lighter at least than when I left and I decided to try to keep losing weight. I had been trying half-heartedly for a while. I've now been keeping a daily weight record for almost three months. The results look like this:

The scale is in kilograms (multiply by 2.2 or divided by 0.454 to get pounds). I'm 1.90m (6' 3") tall so that should explain why the number might look big to you if you're not so tall. As you can see, my initial enthusiasm wore off but I still seem to be losing weight. I've averaged a loss of 34 grams (just over an ounce) a day. Initially though it was about 67 grams a day. Mainly, I've tried to eat less at each meal, especially less bread and less rice and cut out calories for the sake of calories in the form of alcohol etc. And eat fewer and lower calories snacks. There is nothing I stopped eating completely though and I don't measure how much I eat. I just try to moderate as much as possible. This has worked before for me and it seems to be working now. It will take about another 9 months at this rate to get me down to my real target of about 90kg. I'm pretty happy to be approaching 100kg again though.

Downside is that neither of my two suits fits me now. One is too big and one too small. I don't want to get the big one adjusted to my current size though... I'm thinking anyway a suit will be too hot for my next interview and I'll just do the shirt and tie thing. This is academia and though it is part of a business school I noticed the pictures on the website of people are not wearing suits and ties.

Sunday, January 16, 2011

Career Update

I had a phone interview with one college in the US but I heard on Saturday that I'm not being invited to the on-campus interview unless they don't like any of the candidates they have invited. In other words, I'm a back up candidate again. Haven't heard from any other US jobs yet but I suspect we'll be staying in Australia for now. I scheduled my interview for a job in Sydney in less than 2 weeks time on Friday.

Monday, January 10, 2011

How Much Should I "Salary Sacrifice" into Superannuation?

I'm starting my new job and looking at the contract details. I was a bit surprised that my employer will only pay 9% of my salary (i.e. on top of my stated salary) into superannuation (retirement). That is because public sector employers in Australia normally pay more than that. But they can get away with this for a short-term contract. Usually, at this employer, when the employer pays 17% in, employees are required to pay in 8%. Snork Maiden's employer pays 15.4% and we salary sacrifice $225 every 2 weeks into her super account. The latter is about 7%. So what should I do here? There is a cap of $25,000 per year in super contributions of course, so I can't go beyond that. Should I go for:

1. Zero

2. The same % as Snork Maiden

3. The 8% level

4. Go to the maximum allowed level?

The downside of going to the max is of course that we can't then access those contributions for 14 years at least. The upside is the contributions face a lower rate of taxation - 15% going in instead of my marginal rate of 31.5% this financial year and possibly 38.5% next financial year. When in the fund, rates are also lower than I'd probably pay in the long term and when I retire I could get the money out tax free.

If I was 10 years older, I would for sure choose the maximum contribution level.


As noted in the comments, I might not be able to do salary sacrifice in this position anyway. I'll ask about it tomorrow. I'll also be increasing our automatic savings contributions to non-retirement accounts. I think from $500 per month each to $1,000 per month each.

Annual Report 2010 Part IV Investment Returns

The MSCI All Country World Gross Index gained 13.21% for the year while we only gained 9.78% in USD terms. But over the last two years we gained almost double the index. Over 10 years we also outperformed the index but over the last 3 or 5 years we underperformed. Relative investment performance matters a lot depending on the period measured. In Australian Dollar terms we have lost over all but the 2 year time frame and even in currency neutral terms the long-run return has been about zero. It hasn't been a good period for investing.

Sunday, January 09, 2011

HFRI Hedge Fund Index Performance December 2010

With the exception of short bias, all styles gained in December and for 2010 as a whole. Both the month and the year saw strong stock market performance globally in USD terms. The top performer for the year was funds that specialised in energy and basic materials. That's not too surprising.

Saturday, January 08, 2011

Annual Report 2010 Part III (AUD Version)

In contrast to the USD version investment returns were negative, even in currency adjusted terms.* Still, we did manage some gain in net worth in AUD terms. The breakdown of needs, wants and saving is based on a monthly spending of $A3,500 as being sufficient to cover needs and everything above that is a "want". Monthly spending is never below the $A3,500 level but sometimes reaches it when we are frugal. Our monthly rent is $2,042 at the moment, so that spending level is not that high. Of course, we could spend less on rent if we wanted to...

* As explained in the previous post, this is due to summing each month's results while exchange rates swung wildly from month to month. If very negative returns occur when the Australian Dollar is strong and positive returns occur when it is weak the annual currency adjusted result could be negative in AUD terms and positive in USD terms.

Friday, January 07, 2011

Annual Report 2010 Part II (USD Version)

Part I is here and last year's report here. This year was not as spectacular as last year financially but still pretty good. Expenditure was higher and income lower but we still spent less than we earned. We saved about a quarter of non-retirement non-investment income (which is what the spending 76% number indicates) and net worth rose by about 20% in USD terms to almost $1/2 million. There was about equal growth in retirement and non-retirement accounts. Non-retirement accounts made about $5,000 of real income adjusted for exchange rate moves, while retirement accounts lost about $1,000.* Soon, I'll present the results in Australian Dollar terms which will look a lot different.

* This is when income is adjusted for exchange rate moves each month and then summed for the year. To get the currency neutral income, each month we sum investment income for that month using the exchange rates at the end of the previous month to convert amounts in different currencies. If we summed all income for the year using the previous year's exchange rates the decomposition would be different.

Tuesday, January 04, 2011

Moominvalley December 2010 Report

As usual some data will lag for a month or more but here are the accounts based on the information I have at the moment. And as usual everything is in USD. The AUD rose strongly from 96 US cents to $1.02, which is a record level since the Australian Dollar was floated in 1983. This hit our returns in AUD terms and boosted them in USD terms.World stock markets gained strongly with the MSCI World Index gaining 7.35% for the month. Here is the summary account for December:

Non-investment income was more normal this month as it is just Snork Maiden's regular salary minus the check I sent to the IRS. Expenditure was pretty reasonable at $4,296. Investment returns in USD terms were very strong, but more than half the gain came from the rise in the Australian Dollar.

Net worth rose in USD terms by $43k (rose by $A13k in AUD terms) to $500k ($A488k). This is a record monthly close in US Dollar terms.

Actually we are about $100 short of the half million mark.

Allocation-wise the main change was a rise in the share of large cap Australian stocks due to the market and a reduction in the allocation to hedge funds due to my sale of Platinum Capital shares.

Investment return was a gain of 9.15% in USD terms. In AUD terms we gained 2.44% and in currency neutral terms 4.31%. All asset classes gained with foreign shares and private equity the best performers.

Monday, January 03, 2011

Long Run US Stock Market Returns

An update on the famous chart, that I first saw in Unexpected Returns:

Returns are measured relative to inflation. Here is the key:

For example, if you invested in 2000 and withdraw your money in any year since you would have made less money than inflation. Investing in 2008 and 2009 though has generated nice returns. Investing in any other year since the mid 1990s has resulted in negative to low positive returns. And that's the period I have been investing in...

Returns seem to move in waves, shown by the red and green patches on the chart. Maybe we are entering a new wave of positive returns? It would be nice to think so!

Sunday, January 02, 2011

Asset Returns for 2010

From Paul Kedrovsky:

Being long a bunch of commodities would have been a good idea. But Australian stocks fell. I'm assuming that that doesn't include dividends. Including dividends the return would have been positive. And measured in US Dollars very positive. It looks like our portfolio lost about 2% for the year in Australian Dollar terms but gained 10% in US Dollar terms.

Moominmama Portfolio Performance December 2010

This month, world stock markets performed strongly with the MSCI index rising 7.35%. Moominmama's portfolio only gained 2.81%:

Bonds, Sterling, and hedge funds all performed relatively weakly, though positively, which because they are each a large share of the portfolio brought down the overall return. The negative return on USD cash reflects investment management fees which are deducted from this asset. All equities as well as commodities performed strongly as did the local currency which is what "other cash" is and the real estate value moves with the local currency against the USD as well.

For the year the portfolio gained 5.52% compared with a 13.21% gain in the MSCI. Our own portfolio gained roughly 10% for the year. The portfolio is still in rebound from the GFC, though within the range of the previous highs:

The majority of individual funds are now showing a positive rate of return since we bought them. This includes half the funds we bought in 2008.