Interactive Brokers Australia

Interactive Brokers have set up a subsidiary in Australia and are requiring all clients resident in Australia to move their account to the new broker. The only declared difference is that they won't hold cash in currencies apart from AUD and USD. A few years ago they told Australian clients that they couldn't borrow on margin any more. Maybe that was fixed in the meantime. In any case, the website indicates that you can borrow on margin. Formally, it doesn't change the obligation to pay US estate tax on US assets. These start at an estate of only USD60k for non-US citizens. But it would probably make it easier to avoid. I still have a US retirement account, which is a bit over the USD 60k limit and a US mutual fund worth USD 14k. I also have a bank account, but that isn't included in the estate tax liable assets. It seems though that the US-Australia estate tax treaty means that my estate wouldn't be required to pay US estate taxes.*

* This wasn't the case for my mother who lives in a country that doesn't have an estate tax treaty with the US.

Pay Offer

My employer announced the pay deal for the next 5 years. For the average academic it will be a 9.1% increase (less for me), which is less than inflation was over the last 5 years :( For the average non-academic it will be 10.6%, which matches inflation. It's the same deal for both groups but some years will have absolute pay increases and some proportional pay increases, so the more you are paid the less you will get. Also, the after tax gain will be even less, because additional pay is all taxed at your marginal rate of tax. Seems the union has agreed to this. A minority of employees belong to the union. In theory you can appoint your own representative if you don't belong to the union... but that doesn't really happen, I assume. When I went to check the local union branch's Twitter thread to see whether they had anything to say about the deal, it is all about same sex marriage and other political campaigns that they spend union fees on. Nothing on the deal the employer announced. No, I won't be joining the union...

10 Years in Australia

Today is the 10th anniversary of us arriving together in Australia. A lot has happened but in another way not much has happened. We live in the same city, though we moved suburb. Moominmama is still in the same job that we came here for her to start. But now we have a child. When we first came here, I was planning on quitting academia. That didn't work out, and I returned to academia and am now a full professor and also have had some heavy admin roles.

When we came here we had a net worth of about $A1/2 million and a relatively low income - Moominmama's (then Snork Maiden) salary and what I could make from trading. Now we are approaching $A2 million net worth and typically spend twice what she was earning then every month.

This is a snapshot of our net worth ($A) at the beginning of September 2007 and 2017:

It wasn't smooth upward sailing from 2007 to 2017. The financial crisis arrived soon and our net worth plummeted. It hit a minimum of $A284k in February 2009, though that was one month I didn't post a monthly account on this blog. Over the ten years retirement accounts grew much more than stocks in non-retirement accounts. This has been due to much better returns on retirement accounts, largely because of the huge negative effect of the financial crisis, and partly due to diversion of savings to buying a house and then stacking up money in our offset account. We saved more money in non-retirement accounts than in retirement contributions over the ten years. These are the sources of the change in net worth over the period:

Current profit is on non-retirement accounts and is pre-tax. Net tax is reflected in income and hence current savings. Of course, a big chunk of housing equity was once current savings, which we then contributed as a downpayment and since then we have been making mortgage principle payments. Only $37k is attributed to gain in house value.

Ron Brierley and IPE

 

Ron Brierly is a famous New Zealand investor, now based in Australia. He is chairman of MVT. This company is Gabriel Radzyminski and is supposedly a listed investment company, but one that has a habit of taking over other small companies. At Sandon Capital he also has an activist approach to investing.

They had a stake in IPE of less than 5%, but two days ago took their stake up to near 20% when they purchased a large block of shares from Wilson Asset Management. I infer that was who sold from the list of major shareholders in the IPE annual report. I did have 150,000 shares in IPE. Yesterday I bought another 250,000. Either MVT is planning a takeover of IPE, or they think that the remaining private equity assets are worth more than their carrying value. Given that the shares are trading at net asset value of 0.105 cents, they must think the latter either way. On the other hand, though Wilson Asset Management must have not seen additional value. Or perhaps a $2 million shareholding is no longer worth their attention when they are managing $2 billion and could find a willing buyer at NAV. The shares have fallen in value as the company has returned capital and dividends in a winding down strategy.

Anyway, I now own 0.3% of the company, which is a bit scary :)

August 2017 Report

It was a relatively quiet month financially. Here are our monthly accounts (in AUD):

"Current other income" was $14k which includes almost $2k of childcare subsidy from the government that we get paid quarterly and salaries (after tax). Spending (not counting mortgage) was a little higher than last month moderate at $6.7k. The electricity, water, and gas bills that totalled about $1,100 (we pay these quarterly here in Australia) partly explains the increase. After deducting the mortgage payment of $4.0k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $792 less than this), we saved $3.4k on the current account and added $2.0k in added housing equity. Retirement contributions were $2.8k. Net saving was, therefore, $8.3k across the board.

The Australian Dollar fell slightly from USD 0.7981 to USD 0.7922. The ASX 200 gained by 0.71%, the MSCI World Index gained 0.43%, and the S&P 500 0.31%. All these are total returns including dividends. We gained 1.13% in Australian Dollar terms and 0.38% in US Dollar terms. So, we outperformed the Australian market and the S&P500 index. The best performer in dollar terms was the Unisuper superannuation fund, gaining $3.5k. Clime Capital was the worst perfomer but only lost $0.6k. Australian small cap stocks were the best performing asset class in percentage terms. All other asset classes gained.

As a result of all this, net worth rose AUD 25k to $1.889 million (new high) or rose USD 8k to USD 1.496 million (also a new high).