Gearing Up for Housebuying Again

So, this weekend we went to see several houses in different parts of the city. We are following up in more detail on the one in the picture. The location is convenient to public transport with a position on top of a hill looking out over trees to a mountain - you could almost be out in the bush, apart from the traffic noise at the back of the house. It is the most expensive block in this suburb though it has been subdivided in two in what is called here a dual occupancy. The remaining block is still just over 1000 square metres. The house looks best from the street side, as in the picture. Inside is another story and there may be some structural issues with foundations at the back. The house has been rented presumably to students at my university for the last 20 years. Current rent is $570 a week. But that is only one of the two apartments the property is divided into. The apartment is rented till early next year though the second apartment is unoccupied. I think the price has to be over $700k as the land value is at least $550k. Auction is at the end of the month.

I have a previous history with this house. Fifteen years ago my girlfriend lived there, though we weren't together very long and I didn't visit that many times as a result. It was strange to come back again now. Looks like they didn't do any renovation in all that time apart from redesigning the front garden.

Snork Maiden talked to a colleague to see if they can recommend a builder to assess the potential renovation. Turns out the people who live in the second house on the block are friends of her colleague whose children go to the same school as his children.

Monthly Spending

The graph shows our monthly spending each month since moving to Australia. I've taken out some business related expenditures that get refunded - so this is the same as the core expenditure I report in my monthly reports. You can see that the first year we were frugal and expenditure stuck around or just under the $A4,000 per month level. After that there are lots of spikes associated with travel and other larger expenditures and gradually the average has moved up to about $A6,000 a month currently. Note that $A2,150 a month is our rent. All the numbers are nominal, not adjusted for inflation.

Moominvalley July 2014 Report

Another monthly report... Much of this month was spent travelling and then catching up on work when I got back. I don't post here much because I don't do much trading or make many new investments nowadays. And I put most of my blogging effort into my professional blog. So there are mostly only these monthly reports, reports on tax returns, and occasional new investments etc. Of course we are investing plenty of money into funds and stocks we already own trying to keep in line with our diversified strategy.

The Australian Dollar fell a little this month to 93 US cents. The MSCI World Index fell 1.18%, the S&P 500 fell 1.37%, but the ASX200 rose 4.40%. We gained 1.74% in US Dollar terms and 3.15% in Australian Dollar terms. So we didn't beat the Australian stock market but did much better than the world markets. Net worth rose $A56k to $1.247 million or $US37k to $US1.160 million. The monthly accounts (in AUD) follow:

Other income is non-investment income. It was far above normal this month at $27.9k as we got three salary payments this month and there were refunds and rpepayments for business travel spending. Spending was $9.3k with $6.6k of that not refundable. That's not bad considering that both of us were traveling internationally for part of the month. We managed as a result to save $18.7k from non-investment income. We gained $37.5k on investments with $6.8k of that contributed by foreign exchange gains.

Moomin Valley Monthly Report June 2014

A belated monthly report. As June is the end of the financial year for tax purposes in Australia a lot of data only comes in a few weeks after the end of the month and so the June report is usually delayed. The Australian Dollar rose just over a US cent this month. The MSCI World Index rose 1.93%, the S&P 500, 2.07, and the ASX200 lost 2.22%. We gained 0.82% in US Dollar terms but lost 0.59% in Australian Dollar terms. So we beat the Australian stock market but not the world markets. Net worth rose $A7k to $1.189 million or $US22k to $US1.121 million. The monthly accounts (in AUD)follow:

Other income is non-investment income. It was above normal this month at $19.9k as refunds for business travel spending continued to come in. Spending was $7,593 with $6,345 of that not refundable. That's not bad considering that both of us were traveling internationally for part of the month. We managed as a result to save $12k from non-investment income after dis-saving last month. Spending so far this year is $54k in total compared to $49k last year. Core spending is actually down from $44k to $41k. I expect less spending in the second half of the year unless we finally buy a house or something like that.

We lost $7k on investments. Tax credits on non-retirement accounts (the main delayed item) were $2,396. This year's total tax credits are at a record level:

Despite this, my preliminary tax calculation for this year is showing me owing about $300 (after already pay $50k in taxes) and I suspect that Snork Maiden will also owe extra tax though I haven't calculated her tax return yet at all.

Moomin Valley Monthly Report May 2014

The Australian Dollar barely changed this month. The MSCI World Index rose 2.21%, the S&P 500, 2.35%, and the ASX200 0.68%. We gained 1.73% in US Dollar terms or 1.57% in Australian Dollar terms. So we beat the Australian stock market but not the world markets. Net worth rose $A19k to $1.182 million or $US19k to $US1.099 million. The monthly accounts (in AUD now) follow:

Other income is non-investment income. It was above normal this month at $18.3k as refunds for business travel spending began to come in. Starting in two weeks, I will be travelling around the world, first stop is New York City. Spending as a result was at a record level of $19.1k. But "only" $12.0k of that was "core expenditure". Refunds should cover the other $7k eventually. Last year core spending hit $14k in May. As a result we dissaved from regular income (-$0.8k).  We gained $18.2k on investments. The asset class that did best this month was hedge funds at 4.64%, followed by private equity at 2.9% and commodities at 2.11%. All asset classes gained. The worst was Australian small caps at 0.12%.

You can track our net worth gain and some asset class breakdown on NetWorthIQ. It's interesting to look back at the picture 10 years ago.

Man 3 Eclipse Update

Back in 2008 I invested in a capital guaranteed managed futures fund called Man 3 Eclipse. This didn't turn out to be a great investment but it wasn't that disastrous either. However, other investors it seems have not been impressed by the fund's underperformance and have redeemed their shares. As the fund got smaller, late last year the directors decided to stop investing in active investment strategies and switch to 100% deposits in Australian Dollars. The fund was issued for a fixed period  maturing on 29 April 2016. A feature of the fund was a ratchet that locked in profits under some conditions. Currently the value at maturity is guaranteed to be at least $1.0554 for every dollar invested. The actual net asset value per share is $1.0414.If we assume that the fund will earn 2% per annum from now on then the value at maturity will be about $1.08. But my understanding is that if you redeem shares early then you only get $1. So this is a guaranteed 4% rate of return per year assuming they can earn 2%. The main negative possibility is that fees chew up the interest yield. If they do then we still get back at least $1.0554. Based on that I will keep my money in the fund. It's only $8,000 anyway...

So far, my investment in the Winton Global Alpha fund is much more successful. It's up about 5% since I invested.

New Investment

A new investment - Cadence Capital Limited - another Australian listed investment company that basically runs a hedge fund in listed structure. They have long and short investments, potentially leverage or net cash, performance fees - all the standard hedge fund features. And it is exchange traded and pays franked dividends... They use a combination of fundamental and technical analysis. Currently the fund is selling for slightly less than net asset value but has performed very well in the past. It has strongly outperformed the Australian index even after fees. Initial position is 10,000 shares, but imagine that will increase over time. I estimate alpha relative to the ASX 200 of 9.43%, which is really high. Beta is 0.75.

Moomin Valley Monthly Report April 2014

I was just thinking this morning that we need to increase net worth by $3,000 each month now just to compensate for inflation. 

The Australian Dollar was pretty stable this month. The MSCI World Index rose 1.00%, the S&P 500, 0.74%, and the ASX200 1.77%. We gained 0.89% in US Dollar terms or 0.80% in Australian Dollar terms. So we beat the world markets but not the Australian stock market. Net worth rose $15k to $1.163 million in Australian Dollars or $US15k to $US1.080 million. The monthly accounts (in AUD now) follow:

Other income is income not from investments or retirement contributions. It was normal this month at $13.5k. Spending was very high this month at $9.8k but after adjustments it was an average $5.8k. We saved only $3.7k from regular income. 

We gained $9.2k on investments. The asset class that did best this month was real estate and the worst private equity.

Moominvalley March 2014 Report

I am wondering whether to continue this blog as the only thing I have posted recently are these monthly reports and now we are above US$1 million dollars in net worth and things seem to be mostly smooth sailing it is not so interesting. I originally started the blog partly to help me be more responsible with trading as I had to report monthly on what was happening. I haven't done much trading since the GFC. Also, it was a way for Snork Maiden to read about our financial situation, which she pretty much totally leaves up to me to take care of. It doesn't seem that Snork Maiden reads the blog much any more either. And I am guessing that at these levels of net worth and income it is not something that a lot of the people reading PF blogs will be able to relate to. Many of the bloggers who used to report detailed numbers dropped them after they became a success in PF terms and relatively wealthy. Anyway, I haven't quite given up yet and I see that the posts do get a few views still, so here is another monthly report.

The Australian Dollar increased further this month from $US0.8933 to $US0.9274. This depressed gains in net worth in Australian Dollar terms. Stock markets rose a little. The MSCI World Index rose 0.50%, the S&P 500, 0.84%, and the ASX200 0.29%. We gained 3.02% in US Dollar terms and lost 0.77% in Australian Dollar terms. So we beat the world markets but not the Australian stock market. Net worth rose $5k to $1.148 million in Australian Dollars and rose $US43k to $US1.065 million. The monthly accounts (in AUD now) follow:

Other income is income not from investments or retirement contributions. It was normal this month at $14.6k. Spending was low this month at $4.3k but after adjustments it was an average $5.5k. As a result, we saved $10.3k from regular income

We lost $8.8k on investments. $5.1k of the loss was due to the rise in the Australian Dollar. The asset class that did best this month was hedge funds, but that is because I did some trading in shares of Platinum Capital. Private equity was the only other asset class with a positive return.

Moominvalley February 2014 Report

The Australian Dollar rebounded this month from $US0.8742 to $US0.8933. This depressed gains in net worth in Australian Dollar terms. Stock markets rose strongly. The MSCI World Index rose 4.88%, the S&P 500, 4.57%, and the ASX200 4.97%. We gained 5.49% in US Dollar terms and 3.24% in Australian Dollar terms. So we beat the world markets but not the Australian stock market. Net worth rose $43k to $1.143 million in Australian Dollars and rose $US60k to $US1.021 million. So, we are finally a US Dollar millionaire household! The monthly accounts (in AUD now) follow:


Other income is income not from investments or retirement contributions. It was normal this month at $14.2k. Spending was high this month at $7.6k with $6.8k in core non-work related expenditure. In other words, not including stuff that we will get refunded. As a result, we saved $6.5k from regular income. Retirement contributions were on the high side as we both got a third retirement contribution this month. Pay and retirement contributions are paid here every two weeks in Australia, so some months have three salary payments or retirement contributions. They don't coincide as there is usually a delay with the retirement contributions being paid into the superannuation fund.

We gained $35k on investments. There was a loss due to the rise in the AUD of $2.6k. The main investment gains this month were in large cap Australian stocks, which gained 4.4%. Private equity is the only asset class where we had a loss. I also repurchased shares in Platinum Capital and early in month switch a little money into the CFS Geared Share Fund. Later in the month I rebalanced Snork Maiden's CFS account. So our allocation to large cap Australian stocks and hedge funds increased with the allocation to all other asset classes falling.

Moomin Valley January 2014 Report

As I said in the annual report, the data in these monthly reports will be by default in Australian Dollars from now on. The Australian Dollar is now worth quite a bit less than a US Dollar and I think about our finances mainly in Australian Dollars of course, so it makes sense to report in Australian Dollars. The Australian Dollar fell further this month from $US0.8928 to $US0.8742. This depressed gains in net worth in US Dollar terms. Net worth fell $1k to $1.099 million in Australian Dollars and fell $US21k to $US961k. The monthly accounts (in AUD now) follow:

Other income is income not from investments or retirement contributions. It was normal this month at $15.4k. Spending was about average this month at $6.0k with $5.3k in core non-work related expenditure. In other words, not including stuff that we will get refunded. As a result, we saved $9.4k from regular income. Retirement contributions were also at the typical monthly rate.

We lost $15k on investments. There was a gain due to the fall in the AUD of $2.8k. Most of the loss was in retirement accounts. The rate of return for the month was -1.36% in AUD terms or -3.41% in US Dollar terms. The MSCI lost 3.98%, the S&P500 3.46%, and the ASX 200 lost 3.03% - the first two indices are in USD terms and the latter in AUD. So, we beat the market. Actually, I am recently seeing better performance on market declines than has been the case in the past.

I sold some shares in Platinum Capital as they are overvalued and some international share fund units. I bought some shares of Clime Capital and other Aussie stock funds. Overall this resulted in a bit of de-leveraging as cash continued to pile up and I reduced debt. Total leverage fell from 32.9% to 30.1%. Looking a the returns on asset classes, large cap Australian shares lost 2.43% and large cap US stocks 2.3%. By contrast, hedge funds (mainly Platinum Capital) gained 3.21%.

Moomin Valley Annual Report 2013

This year was much like 2012 career- and personal life-wise. Financially, the main difference is that the Australian Dollar fell from $US 1.0392 to $US 0.8928. This means that though it was another strong year for underlying investment returns, net worth in USD grew much more slowly than last year and in AUD terms much faster. In AUD we went from $759k to $1.097 million. In USD terms from $789k to $980k.

These are the annual accounts that sum each of my monthly reports for the year in Australian Dollars:

 

Non-investment income was up partly because of pay rises but also because I got some extra pay for taking on additional responsibilities at work. My pay will actually fall in 2014 as that has now ended. Also, there was quite a bit of work related expenditure refunds (see below). Investment income was twice as much this year as last partly because the portfolio was growing and investment returns were 25.6% this year vs. 16.9% last. It is hard to imagine that they will be this good again in 2014. As a result comprehensive income came in at $444k. Remember that this is an after tax result (mostly - investment earnings are computed pre-tax), also that $162k is locked up in retirement accounts.

Spending was at a record level of $88k. About $11k of this was work related etc. spending that was refunded. We did a lot of travel and recently started private health insurance. I estimate that if we were maximally frugal we could have spent just $49k, which is the item marked "needs" above.

As a result, net worth rose $339k. Saving from regular income was $109k.

Moomin Valley December 2013 Report

The Australian Dollar fell further this month from $US0.9124 to $US0.8928. This depressed gains in net worth in US Dollar terms. Net worth increased $4k to $980k In Australian Dollars we reached $1.098 million, up $A29k on last month. The monthly accounts (in USD) follow:


Other income is income not from investments or retirement contributions. It was high this month at $18.8k because both of us got three pay checks this month. Spending was normal this month at $4.8k ($A5.3k). As a result, we saved $14k from regular income.

We lost money on investments - $11.6k - mainly due to the fall in the Australian Dollar and an underlying gain of only $6.5k. Rate of return for the month was -1.19% in USD terms or +0.98% in Australian Dollar terms. The MSCI gained 1.76%, the S&P500 2.53%, and the ASX 200 gained 0.79% - the first two indices are in USD terms and the latter in AUD.

This month I subscribed to the Platinum Capital rights issue for $A7.75k, this was the largest investment move of the month. Every month we automatically add $A1k to each of mine and Snork Maiden's Australian managed fund accounts and save around $3k in superannuation (retirement) with our employers funds. I also added $3k to Snork Maiden's managed fund account - added equal amounts to property securities and fixed interest funds to rebalance things. So then the remaining saving was in cash. Strong investment performers this month were Platinum Capital (PMC.AX) and IPE.AX. The worst performing investment was Qantas. The Winton managed futures fund had a second positive month. So far, so good. Private equity, foreign stocks, and hedge funds were the best performing asset classes, while Australian stocks were weak. Next year, I think I will report our monthly accounts primarily in Australian Dollars as that is how we think about them and it seems that the Australian and US Dollar will get further apart still. Coming soon: our annual review.

Managed Accounts Finally Above their Pre-GFC Investment Values

Two of my Mom's managed accounts - one in US stocks and one in international stocks are finally worth a bit more than the amounts we invested in 2007 and 2008 in what were retrospectively ill-timed moves and in one case with a manager who turned out to be have serious issues down the track. Like going out of business issues. This is why it has taken so long to get back above what was originally invested despite the strong performance of U.S. stock indices for a while now. Several funds in her main account are also still losing money. They are all the commodities/futures funds investments and several emerging markets funds (Brazil, India). But this month the portfolio hit a new high, though numbers aren't very accurate as I only update data on spending accounts once a year or so. Investment return this month was 1.25%.

2013 Outcome and 2014 Forecast

In Australian Dollar terms we came in above the top of 2013's predicted range for net worth of $A700k-$A1 million with a final net worth of $A1.098 million. In US Dollar terms the forecast was $500k-$1 million and we ended at $US980k, very close to the top of the range. For this year, my most optimistic forecast is $A1.4 million, which assumes that the Australian Dollar falls to 85 cents and the stock market does well again. The least optimistic forecast is $A1 million which assumes a significant fall in the market and the Australian Dollar at 75 cents. The corresponding US Dollar range is $US1.19 million to $US0.75 million.

Predicting Stock Market Returns

This correlation is pretty amazing. It is also pretty clear that there is causation here too or both variables are driven by the same other causal variables.