Economists at ANU have used a simulation model and other data to update the Australian Bureau of Statistics household wealth distribution. The ABS haven't done a detailed survey since the pandemic.
I am surprised by the high estimate net worth to be in the top 5% of 25-29 year olds!
Recently, someone used our CBA credit card in California. Now, I got a message from MyGov that someone has been trying to sign into my account. I just learned that you can check the account history on the site, and someone has been making multiple attempts to try different passwords with my email address. I have now upgraded my security (I wasn't using my email address anyway) to use the government run MyID. It is important to take a separate second step to turn off access via password.
I guess the scammer was hoping to claim a benefit from Centrelink? Or just get more information on me for identity theft? They can't have been wanting to pay tax for me! 😅
Novig–one of our startup investments–raised a Series-B round at around a 5x markup on their previous price. It was already our most successful venture investment so far. Angellist have not updated the valuation yet. After the "carried interest" for the general partner who manages our investment, we might see a 4x markup on top of our current 9.5x markup. It would take our overall Angellist IRR to 24% and my own investments in syndicated startups (rather than through venture funds) to an IRR of 70%+.
Of course, these are all "paper profits". But it's kind of crazy to think that this markup and expected markups in their rolling fund are on the scale of the redundancy package I got last year, which was just over AUD 1/4 million, or more than a year's expenses. Hopefully, the capital gains tax comes back to some more sensible number when these investments are eventually realised.
After yesterday's post, you might think I just randomly change the target portfolio to follow what I want to do. Here is evidence that it has an effect on our performance:
This graph shows our portfolio returns each month with the target portfolio return deducted. There is a phase change in 2012. After 2012, our returns hug the target portfolio much more closely. Also, after 2012 we started to make money. I think this has come partly from allocating across asset classes to match a defined allocation. The trend line on the graph rises–we underperformed the target before 2012 and outperformed after–but I'll agree that it doesn't look too convincing. So, we can't say for sure whether this was due to mostly being in a bull market for stocks since 2012 or more disciplined investing.
I use a target portfolio as a performance benchmark and as a guide to where to invest. Now and then I make tweaks to bring it in line with what I want to do. I am increasing the allocation to futures and commodities and reducing the allocations to credit and real assets. Futures and commodities go from 5% to 10%, real assets from 12% to 10%, and credit from 10% to 7%.
This is related to wanting to do more trading. I am having more and more trade ideas. I think, like Karsten Jeske, I won't be satisfied to just sit and watch my portfolio. I want to do something active to generate income. He sells S&P 500 options. My latest idea–which I haven't implemented yet–is related to that. But I am also doing lots of different things which are different to just buying funds (or startups) and waiting:
1. Gold: I buy gold when the price falls and sell when it rises. Part of my gold exposure is now in a December futures contract (50 ounces).
2. Australian Dollar: I have Australian Dollar Futures as a currency hedge. Some day I will get rid of that hedge.
3. Individual stocks: Currently, I have ZIM, Treasury Wine Estates (TWE.AX), and Regal Partners (RPL.AX). These are all valuation stories.
4. Bitcoin: I am again accumulating bitcoin after selling out of it.
5. URF: This is a listed fund on the Australian stock market invested in US residential property. It is in its final stages of winding down, but still trading below net asset value.
6. Trading funds around NAV: I am prepared to trade almost anything that significantly deviates from net asset value. This includes paintings on Masterworks, properties on Assetora, and all the closed end listed funds I am invested in.
I like doing it, but also feel like I should be doing something to earn a living 😀 with our high level of spending relative to most retirees.
I got an email today about this new fund. It is an investment in a building hosting a Sonic Health Care lab.
At first glance, it sounds attractive. They are advertising a 13% projected rate of return. Before performance fees. Performance fees would only knock 0.5% off that, so still sounds attractive. But actually, the 13% target is based on the capitalization rate declining from 5.25% to 4.75%. 5.25% is already a lot below current office cap rates. If that change in cap rate doesn't happen, they expect a 9.4% IRR. Of course, if the cap rate rises, the return will be less than 9.4%. They project that the distribution rate will be 7.5% per year. Only half of that will come from net income. The rest will come from increasing the loan against the property as rent rises (it rises at CPI with a cap of 3.5% p.a.) and distributing some of the unrealised capital gains in that way. They do seem to have a very low interest rate on the mortgage. Don't know how. This is tax deferred income, but means most of the expected returns on this investment are capital gains, which will be subject to a 30% minimum tax rate going forward. The fund is locked up for 5 years, after which, if they decide to stay invested, some liquidity might be available. The tenant has a 20 year lease.
After all these considerations, this looks a lot less attractive to me. To lock money up I need to think there might be an above market gain. Like 13%. I am pretty doubtful of that outcome here. The minimum investment is $100k. So, I will probably pass on this one.
They used it at a Rite Aid in the Sacramento suburbs and at a gas station in Tracy, CA. Commonwealth Bank queried the transactions and now I have cancelled the card. Definitely, only use a credit card for online transactions. If this was a debit card, the charges wouldn't be reversed as they are immediately deducted from the account. But really the banks need to make the whole payments thing more secure as this seems to be a more and more frequent occurrence.
Probably, there is nothing stopping us from using credit cards for everything? Currently, we each have an account at HSBC with a debit card we use for most day to day spending. These accounts have little money in them. But HSBC is closing its retail banking in Australia.
Yes, that's the actual gas station they used it at in the picture.
The Australian Dollar rose from USD 0.6909 to USD 0.7024. So, our Australian Dollar returns are a lot lower than USD returns. World stockmarkets were flat, while the Australian market rose.
Here is the performance of our benchmarks (total returns including dividends):
US Dollar Indices
MSCI World Index (gross): 0.10%
S&P 500: -0.06%
HFRI Hedge Fund Index (forecast): 0.08%
Australian Dollar Benchmarks
ASX 200: 2.26%
Target Portfolio (forecast, depends on HFRI): -0.11%
Australian 60/40 benchmark: -0.23%
In Australian Dollar terms we gained 0.60% and in US Dollar terms 2.28%. We outperformed all benchmarks apart from the ASX200. The target portfolio has more or less flatlined since September last year as the Australian Dollar rose and more recently gold fell:
I've been through a bit of excess volatility, peaking in January. Until this month the ASX200 has also been going sideways:
The asset class returns are in currency neutral terms and gross asset terms and do not include investment expenses such as margin interest, and so the total differs from the Australian Dollar returns on net assets mentioned above. This month was the reverse of last month: private equity and futures led the way. Rest of world stocks had the worst rate of return and hedge funds detracted the most.
Things that worked well this month:
What really didn't work:
Our distance from our target allocation increased very slightly. Our actual allocation currently looks like this:
Moominmama receives employer superannuation contributions every two weeks. There will still be capital calls from Aura Venture Fund II and III. I am receiving monthly pension payments from both Unisuper and our SMSF, which going forward will total AUD 6,750 per month. I was very busy investing this month, making the following moves:
Here are the income and spending accounts * for this month ($ is Australian Dollar):
Other income includes Moominmama's salary and net employer superannuation contributions but also the tax paid by the SMSF. Spending was high this month–AUD 29k, the third highest ever in nominal terms–due to paying school fees, a big dollop of depreciation recorded on our old and new cars, and the stamp duty and insurance on buying the new car. I opted to again insure our car rather than just insure against damaging other cars. This number does not include our mortgage payments, which are regarded here as saving and investment costs and saving. Dissaving amounted to $23k, which is at the 4% rule limit of AUD 23k. We gained $41k investing. There was only $645 this month in tax credits and implicit tax on our employer super, which are included in pretax investment returns but have to be deducted to get to the change in net worth. But there was a big transfer to superannuation as I carried out the "restructure". Net of my pension payments it was around AUD 90k. As a result of all this, net worth rose by AUD 17k to AUD 8.261 million.
* Results are shown separately for retirement and non-retirement accounts as well as housing, which nowadays doesn't have much activity. The grey shaded rows are additional notes. Total investment income is split into investment income before exchange rate moves and the contribution of exchange rates. Current other income is non-investment income including salaries and net income tax returns, while on the retirement side it includes employer superannuation contributions minus superannuation contribution tax and all SMSF tax payments to the ATO. Investment income is shown pre-tax. Tax credits include franking credits on Australian dividends etc. in non-retirement accounts and the SMSF and imputed tax on industry superannuation returns. These are taken away from investment income to get changes in actual net worth. Inheritances include gifts from relatives. Saving is from non-investment income, transfers, and inheritances not investment income.
I bought 200 shares of Berkshire Hathaway B just after Warren Buffett announced that he would retire as CEO. This was around the time of the "Tariff Tantrum". My thesis was that the stock would rise as Greg Abel deployed the huge cash pile. He has made some moves, but the stock has gone sideways. In the meantime, I sold half the position and today the rest of it. I have better ideas for the money, namely ZIM. At least I think it is a better idea.
I guess I am just not patient enough to be a Berkshire shareholder. I have been in an out of the stock many times. Overall, my IRR is 7.4% and AUD 21k in profit, though this recent period lost AUD 4k.
Unless you are quite wealthy, not well organised or under 60, you shouldn't be paying any income tax in this phase of life. The following breakdown is based on my expected income and tax figures for the 2026-27 tax year.*
First, since transferring the maximum allowed into an "account based pension", I should get a tax-free pension of $81k per year. This is the minimum allowed distribution to maintain the tax-free status of my pension account. For my employer superannuation, that is as simple as just setting up a payment of $2,750 each month from the account. For our self-managed super fund (SMSF), I have to make sure I have enough cash in our Macquarie Cash Management Account to pay the $4,000 a month pension. Currently, I have around one year's worth of cash there. The SMSF will still be paying tax on Moominmama's account, my small remaining accumulation account, and concessional contributions. More on that later.
Then I expect to earn to around $100k net outside super, which would put me in the 32% tax bracket. This includes quite a lot of capital gains that I plan to take this year before the new CGT regime comes into effect. To reduce my tax liability, I will make the maximum allowed concessional superannuation contribution. I call this a no-brainer contribution, as being retired, I could take it out again the next year. The contribution will reduce my taxable income by $32,500.**
The contribution is taxed at 15% in the SMSF. But as that is less than 32%, it is a win, and that is not income tax.
On the remaining $67k, there might be about $13.5k in tax payable. But I expect to have around $20k in franking credits and early stage venture capital offsets. These more than wipe out my tax liability, resulting in a tax refund of $6.5k adding to my income. So, I will have negative income tax. I have then $165k in disposable income, which almost covers our expected expenses of about $180k. The remainder will be covered from Moominmama's earnings.***
In order to pay income tax, you would probably need to be at least in the 37% marginal tax bracket–more than $135k of income outside superannuation. This is assuming you have a supply of franking credits and do a little borrowing etc. to generate deductions.
If you are a retired couple, you can double all these figures for a household income.
* In Australia, the tax year runs from 1 July to 30 June. All numbers are Australian Dollars.
** You can make concessional contributions up to age 67 without a work test. But after age 65 the minimum required pension jumps to 5% of the account value. So, you might want to reduce capital gains realisations.
*** I won't exactly spend the capital gain, as the proceeds of those transactions will largely be reinvested. First of all, the part of the proceeds that is the original investment doesn't enter income, and only 50% of the gain is recorded as income under the current rules. But I could spend the $165k and only need $15k from Moominmama.
