Bitcoin Bull Market Confirmed

Didi is my top crypto guru. He has been very accurate.

Private Placement Life Insurance

I am continuing to restructure our finances in response to the changes in capital gains tax in Australia. When I made our venture capital investments, I assumed that the maximum capital gains tax rate was 23.5%. I put the investment in Moominmama's name, as at that time her marginal tax rate was lower than mine. Originally, I wanted to put these investments in our SMSF, but they didn't allow that. I still think that is crazy, when farmers can have their farms in their SMSFs. 

So what should we do with these investments under the new tax regime? There is a chance that we will get a big cash realization on one of the companies I invested in in a single year. That would push most of the gain into the 47% tax bracket. We would like to smooth the gain and ideally reduce the tax rate.

As an existing investor and shareholder of Aura Group, I learnt about a product called private placement life insurance or an offshore insurance bond that they have begun to market. You may be familiar with Australian insurance bonds. Little My has one containing the money he inherited from my mother. This is the same idea with three key differences:

1. The Australian bond is taxed at the company level at 30%. These are based in the Isle of Man and are not taxed inside the bond. If you withdraw the money after 10 years, the ATO has ruled that the payout is tax free the same as it is for the Australian bonds. You can receive distributions before 10 years if you pay tax on the profit component.

2. You can contribute existing assets including alternative investments and brokerage accounts into the bond. The downside is that you can no longer transact on these accounts, you have to go via the manager–Aura in this case.

3. At least one of the "insured" has to be a wholesale investor. 

So, this meets both our goals. There is still the question of whether they can take the Angellist investments. Without that there is no point. And I am a bit hesitant to cede control. And of course there will be a lot of fees. We would be including other investments beyond the Angellist ones to get the size up. 

Even if we don't end up doing this, this seems likely to be a great business for Aura.

If we don't do this, an alternative is to set up an Australian investment company that will convert capital gains into franked dividends. This will lower the tax rate from 47% to 32% by smoothing the payout over time.

The irony of Labor's tax changes is that the the young people they claimed to want to help will bear the brunt of the changes, while wealthy investors can exploit various tax shelters to reduce the impact.

Money Scripts

Ramit Sethi is always talking about "money scripts"–deeply embedded ideas that affect how you deal with finances. Now you can take a test (it doesn't take long) to see which ones you have. There are four main scripts: Money avoidance, money focus, money status, and money vigilance. I came out equally strongly on money focus and vigilance. So, I think money can solve problems and I am very vigilant about our money. This makes sense. I had low scores on money avoidance–that makes total sense–and money status–I don't spend money on showing off. Of course, I think I have a healthy combination. Too much focus on just one of the two scripts would probably not be good. How did you do on the test?

Upcoming Millionaire Interview

I did a "Millionaire Interview" for the ESI blog. It took a couple of days of work! Even though I keep accounts in both AUD and USD, quite a lot of things I hadn't done in USD before or needed updating. Also, I had never calculated our saving rate. I had focused on the dollar amount.

I think it will be a while till it appears on the site. Friday was the deadline to be in the draw for the 500th interview, but as you can see the latest interview is #479 and took place in March!

P.S.

It will be on 12th March 2027! Number 503. 

APSEC Update

Now and then, I check investments I got out of to see if my thinking was correct. In early 2024, I got out of the Atlantic Pacific Australian Equity Fund or APSEC. Until this June they haven't done well: 

So, that was a good decision.

Changed My Mind on AIX but Not on Charter-Hall

Given how bullish everything is and Anthropic is supposed to imminently file for its IPO, I decided to make a small allocation to AIX in the SMSF. I am investing the distribution from the Regal Investment Fund in it. In hindsight, I should have tried to participate in the SpaceX IPO and flipped the shares after a few days. Yesterday, I thought again about investing in the Charter-Hall fund investing in the Sonic Healthcare lab. It is attractive to get an almost certain 7.5% yield with the potential for upside. And I like direct real estate (as opposed to listed real estate). But I really don't want to lock up my money for five years, when there are so many other opportunities. After all, I get 6.5% implicit interest on the money in our offset account with 100% liquidity and the possibility of putting into trades if and when they show up. 

Regular Charitable Giving

Increasingly, we support charities through monthly payments rather than one off contributions. This means that I don't need to wonder how much I already gave to a charity this year when I get another request to contribute. Once a charity is on our list I ignore requests for additional contributions... Instead, I just look at what they have done with the money. I would consider a new charity. Here are the charities we are currently supporting:

Save the Children: This was Moominmama's pick a long time ago, before we had children ourselves. It is our longest running charity. We are giving $40 a month.

Opportunity International Australia: This funds microfinance lenders in South and Southeast Asia. I like the idea of helping people to improve their life through investing in their own business. We are giving $17 a month.

WIRES: How could you say no to helping injured koalas? We give $30 a month to this charity.

Bush Heritage Australia: They fund habitat conservation in Australia. This is our most recently added charity. We are giving $30 a month to this.

RSL Queensland: This one is a bit different as we support it through Dream Home Art Union. As most of the contributions go to prizes, it's not tax-deductible. Someone was selling the tickets outside our local supermarket and I just thought I had this intuition that I had to buy. Anyway, it's fun thinking I might win something. A very asymmetric bet. The charitable component goes to support veterans in Queensland. Also $30 a month.

All in, it's about 1% of spending. In the longer term, I would like to give more money to charity but would want to be more purposeful about it.

It's Good I Got Out of WAM Capital When I Did!

A little while ago, I switched from WAM Capital to WAM Active. After I switched, WAM Active (WAA.AX) reported a bad result for July and the stock fell. I was annoyed I had switched too early. But actually it was a good move because since then WAM Capital (WAM.AX) has announced about a halving of the dividend going forward and the stock has collapsed. The dividend was unsustainable. The fund had increased it in a period of very good returns, and maintained it until now, despite lower returns, including a loss last year. Here is WAM Capital's chart:

And here is WAM Active's chart:

 

August 2026 Report

We "crushed it" this month. It was our biggest monthly investment return in dollar terms so far.  The previous best month was November 2024. Stockmarkets rose while commodities like gold and bitcoin skyrocketed as the US government tried to suppress long-term interest rates. Gold, in particular, eased back at the end of the month after Kevin Warsh made a "hawkish" speech at Jackson Hole. The Australian Dollar rose from USD 0.7024 to USD 0.7164. So, our Australian Dollar returns are lower than our USD returns. 

Here is the performance of our benchmarks (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 2.70%

S&P 500: 2.72%

HFRI Hedge Fund Index: 1.69%

Australian Dollar Benchmarks

ASX 200: 1.73%

Target Portfolio: 2.83%

Australian 60/40 benchmark: 0.72%

I marked up our Angellist investments based on the news from the general partner, though these gains may end up getting reassigned to another month. In Australian Dollar terms we gained 5.93% and in US Dollar terms 8.04%. As a result we outperformed all benchmarks. The SMSF returned 2.67%, beating Unisuper and PSS(AP) which gained 1.78% and 1.21%, respectively. Here is a report on the performance of investments by asset class:    

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 analysis shows that even without the private equity gains, which made the greatest contribution to returns, we did very well for the month, beating all benchmarks, as USD returns are around 2% higher than these currency neutral returns. This is our fifth positive month in a row now, since our worst loss ever in dollar terms in March.

Things that worked well this month:

• We had eight investments that gained more than AUD 10k: Angellist Investments (206k), Tribeca Global Resources (TGF.AX, 52k), Gold (50k), L1 Gold Fund (32k), Bitcoin (23k), Unisuper (15k), L1 Global Long-Short Fund (GLS,AX, 14k), and Pershing Square Holdings (PSH.L, 13k).

What really didn't work:

• We had two investments that lost AUD 10k or more: WAM Active (WAA.AX, 10k) and URF (10k).

Our distance from our new target allocation decreased. Our actual allocation currently looks like this:

Around 70% of our portfolio is in what are often considered to be alternative assets: real estate, art, hedge funds, private equity and credit, gold, and futures. A lot of these are listed investments or investments with daily liquidity, so our portfolio is not as illiquid as you might think.

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, totalling AUD 6,770 per month. I made the following moves:

• I invested a total of USD 5,500 in two startups on Angellist. One is a biotech and the other is a follow on investment in Chowdeck, the Nigeria-based delivery app.
• I bought 8,500 shares in the Monochrome bitcoin ETF (IBTC.AX). We now have 1.6 bitcoins worth. I also bought 2,000 more shares of ProCap Financial (BRR), which is mostly a bitcoin treasury company, and 500 shares of an Ethereum ETF (QETH.AX) or around 3.5 ETH.
• I sold c. 17k shares of Hearts and Minds (HM1.AX) to fund buying bitcoin.
• I sold 35k shares of WAM Alternative Assets (WMA.AX) mainly to reduce our margin debt. Next month, we will be participating in the L1 Gold Fund rights issue.
• I sold our remaining Berkshire Hathaway position. 
•  I bought another 1/4 million URF.AX shares.
• I bought another 2,500 ZIM shares. 
• Our Treasury Wine Estates (TWE.AX) position was called away and afterwards I wrote puts to try to get paid to buy a new position. 

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 quite low this month at AUD 8.5k even though this includes almost AUD 2k of depreciation recorded on our new car and we paid all the quarterly utility bills and body corporate fees (condo association). This number does not include our mortgage payments, which are regarded here as saving and investment costs and saving. We gained $410k investing. Retirement net contributions (Other income retirement) were negative as Moominmama's contributions were outweighed by SMSF taxes. The transfer out of retirement is my pensions. Tax credits were only implicit tax paid by our employer super funds. AS we report superannuation investment returns on an estimated pre-tax basis, the implicit tax needs to be deducted to get to the change in net worth.

Dissaving amounted to $7k, which is well within the 4% rule limit of AUD 23k.  

As a result of all this, net worth rose by AUD 399k to AUD 8.687 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.