Monday, November 02, 2020

October 2020 Report

Stock markets fell and the US Dollar rose this month. The Australian Dollar fell from USD 0.7156 to 0.7036. The MSCI World Index fell 2.41% and the S&P 500 by 2.66%, but the ASX 200 rose 1.94%. All these are total returns including dividends. We gained 2.35% in Australian Dollar terms and 0.63% in US Dollar terms. The target portfolio gained 0.22% in Australian Dollar terms and the HFRI hedge fund index is expected to lose 0.22% in US Dollar terms. So, we outperformed all benchmarks. Here is a report on the performance of investments by asset class (currency neutral terms):
Hedge funds added the most to performance and gold detracted the most.
Things that worked well this month:
  • Regal Funds was the top performer, gaining AUD 20.8k. Hearts and Minds gained AUD 14.4k.
What really didn't work:
  • As well as gold (down AUD 1.8k), London listed stocks 3i (2.6k) and Pershing Square Holdings (1.9k) were the worst performers.
The investment performance statistics for the last five years are:
The first two rows are unadjusted numbers in US and Australian Dollar terms. The following four lines compare performance against each of the three indices. We have the desired asymmetric capture for all three indices now and positive alpha compared to all three of them.
We moved further towards our long-run asset allocation. Bonds are still the asset class that is furthest from their target allocation (11% of total assets too much) followed by real assets (8% too little):

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:
  • I invested USD 20k in two new paintings at Masterworks. I now have USD 40k invested.
  • I bought 278k Domacom shares (DCL.AX).
  • I bought 25,000 Bluesky Alternatives shares (WMA.AX). 
  • I borrowed AUD 100k from IB and used it to reduce our CommSec margin loan and increase our offset account balance.


Financial Independence said...

Hold on there. The US Dollar will fall soon enough.

My view, is that The USA government is deliberately undermining strength and unique position of the US dollar. This is done in three ways:
#1 Overall domestic account deficit is below zero. In the last 60 years it only happened once in 2010. With the additional stimulus the net deficit will go further down below of the current minus 1.2 percent (as a share of the national income).
#2 Budget deficit is 16 percent in 2020 and will be 8.6 in 2021. This is without considering the additional stimulus.
#3 Interest rates are near zero and remain that way until 2025 or beyond.

This is first time in the long time, when without borrowing surplus saving from abroad, growth becomes impossible. Hence the only reasonable way forward is the exchange rate adjustment.

mOOm said...

I'm not trying to predict exchange rate movements unless the Australian dollar is at extreme values like below USD 0.60. My general rule is to have 50% of assets AUD linked and 50% in foreign currency including USD and gold. I'm right at that point and so stopped buying more AUD.