Wednesday, January 02, 2019

December 2018 Report

You'll probably have heard that this was the worst December for US stocks since 1931. December is seasonally a positive month for stocks. Things weren't quite that bad in Australia and because the Australian Dollar fell, our returns for the month in AUD terms ended up being positive.
The Australian Dollar fell from USD 0.7302 to AUD 0.7049 The MSCI World Index fell 7.00% and the S&P 500 9.03%. The ASX 200 fell only 0.01%. All these are total returns including dividends. We gained 0.24% in Australian Dollar terms and lost 3.24% in US Dollar terms. So, we outperformed the Australian and international markets. This is not surprising given the weight of US Dollar cash in our portfolio. Our currency neutral rate of return was -1.74%.

Here again
is a detailed report on the performance of all investments:

The table also shows the shares of these investments in net worth. At the bottom of the table I also included the Australian Dollars return from foreign currency movements and other net investment gains and losses - net interest and fees.

Things that worked quite well this month:
  • US Dollars cash 
  • Gold
  • Property, including:
    • My jointly owned apartment with my brother. We got an offer for the apartment near the end of the month and I raised the carrying value in line with that.
    • TIAA (direct US investments) and Pendal (REITS) real estate funds.
    • On the other hand BlueSky lost a lot...
  • Our direct share holdings in Medibank and Yellowbrickroad.
  • Again, the PSS(AP) superannuation fund did relatively well (though losing) compared to Unisuper. But on the way up it gained just as much as Unisuper. It has both lower beta and higher alpha... At least based on the investment choices I have made within the fund.
These all show the value of diversification pretty nicely.

What really didn't work:
  • Cadence Capital, again fell sharply. It's performance in the last three months has been very bad. It's not surprising that they have cancelled their IPO of the Cadence Opportunities Fund. They received only AUD 8 million of subscriptions. It will still go ahead as an unlisted public company, whatever that is. Overall, we have lost money investing in Cadence.
  • BlueSky fell back too.  We still have made some money on this investment.
  • 3i, China Fund, Pershing Square, and CFS Geared Global Shares all fell in line with global stock markets. The latter would have benefited from the fall in the Australian Dollar, which for an investment denominated in Australian Dollars is included in the return on that investment, but is separated out for the investments denominated in foreign currency...
We moved towards the new long-run asset allocation:*

This is partly because I am classifying cash in trading accounts as "commodities". I started moving cash from my US bank account to Interactive Brokers. Another large part of the change was due to the fall in the Australian Dollar raising the value of our USD cash in AUD terms. From next month we should see a big increase in allocation to bonds instead.

We also invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Then there are distributions from funds and dividends. Other moves this month:
  • I bought 400 shares of the China Fund (CHN) early in the month. Not a good idea.
  • I bought 25,000 shares of Bluesky Alternatives in the middle of the month (BAF.AX). Another bad idea.
  • I bought 500 shares of Pershing Square Holdings (PSH.L) at the end of the month. So far, not a bad idea.
  • I received cash from UBS in my US bank account and started moving it to Interactive Brokers and from there to our Australian bank account. After this first transfer, most of this money will go into buying a US Treasury Bills ladder in the short run. Today, I discovered that I have to keep the cash at IB for 2 months before I can move it to another bank account. So I am looking to buy some Australian bonds (probably bank hybrid securities) in the interim.
* Total leverage includes borrowing inside leveraged (geared) mutual (managed) funds. The allocation is according to total assets including the true exposure in leveraged funds.

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