Monday, March 11, 2013

Money Burning a Hole in Your Pocket

Snork Maiden's stepfather died. He was 80 years old. Her mother is much younger. Snork Maiden has gone to China to be with her mother for a while. Her mother wants to visit Australia later this year, maybe starting in late October for a while and think about spending more time here in the future. She wants to transfer some money to our account here to help pay her expenses in Australia so that she can be more independent than when she and her husband visited last time. If we still are living in this apartment we could try to rent her a furnished unit somewhere nearby. We saw a couple of these last year when were looking for accommodation for a colleague (in the end they stayed on campus), but they weren't that near here.

But she wants to transfer the money today. One reason is so that Snork Maiden can help her with the transaction, which involves moving a "pile of cash" between two banks. Snork Maiden said as well that:

"She is in a hurry because she doesn't want to sit on a pile of money for long.  She got a fixed-term pile of money that is ready to be harvested today, and she wants to decrease the number of transactions as much as possible. I suggested we could put the money in her saving account for the time being, but she said that was too complex and she has never had that much money sitting in her account.    It was my stepfather who dealt with their money, so she has never touched so many cash before, and even the thought of having that much of money in her bank account somehow worries her. "

In the past I heard she would give money away to relatives rather than hold onto too much. It made me think of this story. A lot of people asked how it could be that a 68 year old full professor in a low cost of living location didn't have any savings. One answer is that some people just don't seem to be able to hold onto money for psychological reasons. Obviously, I don't have that problem. So, I'm going to look after her money for her.

Saturday, March 02, 2013


Our first auction where we were actually bidding. Some guy started the bidding at $700k and then it went up in increments of $25k. It stalled around $825k. Then I bid $830k. The next bid was $835k. But even $830k was above our predetermined limit. I only bid it because I knew the price was still below the reserve and if bidding really had dried up I wanted to be the top bidder to negotiate. But that seemed to unstick things and eventually the house sold for $877,500. Looks like the reserve was $875k. I was surprised that it actually sold at auction as the two previous houses that sold for $870k in that neighborhood would have standard valuations that would be higher. I guess the atmosphere on that block feels more like you are out in the bush and maybe that is what people wanted to pay for. It's what attracted us.

One of the agents would go around talking to bidders during the auction trying to get them to up their bids. When he asked me at around $875k I said: "That's the most we could possibly afford and it's way over the valuation we got, so no". He said: "They were wrong". I think it is highly likely that official land values for tax purposes will go up steeply in this neighborhood after these recent sales. But at the end of the auction, the agent shook my hand and said: "Congratulations". That was weird. Did he really think it wasn't worth $877.5k or did he know something else? A neighbor standing behind us then made some cryptic comments about the other neighbors. Snork Maiden thinks he was saying they were bad. I just couldn't understand what he was talking about.

Our attention now turns to a house in a neighborhood nearer us. It's land is valued $200k more than this one. It has a great view of the city and hills. The house is smaller and not in as good condition. Maybe a better chance to get a deal. There are lots of blocks in this value range that I really think are not worth paying for. This one maybe is.

A couple of colleagues came along to the auction. They hadn't been to a house auction before. One said: "These are like Santa Barbara prices". That's almost right.

Friday, March 01, 2013

Moominvalley February 2013 Report

Yet another in 8 months of positive investment returns in Australian Dollar terms (9th in USD terms). We yet again hit new net worth highs in both Australian and US Dollar terms of $A848k (+$A40k) and $US869k (+26k). The US Dollar rose strongly, particularly against the Pound but also against the Euro and Australian Dollar. Many of our investments are at all time high profit levels. In US Dollar terms, total profits hit a new high of $US254k vs. $US250k in October 2007. So in nominal terms we have recovered from the financial crisis. In Australian Dollars though profits are at $A143k vs. $A209k at the peak in August 2007. So there is still some way to go.

Our rate of return was 2.43% in USD terms versus 0.03% for the MSCI and 1.36% for the S&P500. In Australian Dollar terms we made 4.31%. Almost all asset classes had positive returns with 5% plus gains in AUD terms in large cap Australian stocks and private equity. The monthly accounts (in US Dollars) look like this:

Non-investment income was normal while spending was high. We spent $A550 on getting the house valued. Car rego and a plane ticket to China added another $A2.5k or so. Total investment returns were $20k with USD returns suffering from the rising US Dollar. Saving in the table is saving from non-investment income.We still saved almost $5k from our current salaries in a high spending month like this.


This afternoon I had the surreal experience of getting insurance on a house I don't own. We saw the lawyer this afternoon and she recommended that we get insurance already this afternoon rather than wait till Monday as we will still be liable to buy the house once we have a deposit down, even if it burns down or something between Saturday and Monday. This is called a "cover note". If we don't buy, we phone the insurer on Monday and cancel the policy. So we are all ready. The lawyer charged $220 for looking at the contract and going over things with us. No charge for looking at future contracts if we don't buy the house this time. Insurance for the house will be $966 per year.