Investment Allocation

Following my new investment I thought I'd update our allocation to stocks and funds:



Where possible I have given the ticker code. But a lot of our investments are managed funds or retirement funds in Australia which don't have ticker codes and some US retirement funds that don't either.

Ass you can see we have a masssive allocation to the CFS Geared Share Fund which is a leveraged fund invested in large cap Australian stocks. I do want to bring that down to a more reasonable value over time, but both the leverage provided and franking credits (tax credits for Aus. corporate tax paid) are attractive. The next largest allocation is Snork Maiden's retirement fund which has to be in the one provided by her employer. Yes there is fund choice in Australia but they will only put 9% of salary in any other fund vs. 15.4% in this one. So there is no effective choice.

The only individual non-financial stocks we have are: Bekaert and Legend. EFG.AX is a fund management company and so is also an individual stock. 3i and Leucadia are basically listed private equity funds. Clime, AOD, IPE, CIF, OCP, CHN, and BTF are all closed end funds.

So we only have 1.1% of net assets in what I consider to be individual stocks.

New Investment

I have been a follower of Mebane Faber's blog World Beta for a while. Mebane is chief investment officer at Cambria Investment Management. Their main approach is an investment portfolio diversified across asset classes with timing in and out of these assets and cash. Mebane's paper on the basic model is one of the most downloaded papers from SSRN. Up till now you needed to have a lot of money to invest with them. But on Tuesday they launched a managed ETF with the ticker GTAA that implements a version of the strategy. I invested $US10k. Yeah, I got paid for my work trip to Sweden and chose to be paid in US Dollars due to the high current price of the Australian Dollar. I'll classify this fund as a diversified fund rather than a hedge fund as I only classify funds which have short positions as hedge funds. But it definitely falls in the category of "alpha investments".

TIAA-CREF Changes

Two of the TIAA-CREF funds I am invested in are being frozen which means that I can't transfer money into them in future. I am not clear whether this is a move by TIAA-CREF or just the university where I used to work at. The letter came from the latter.

In place of the CREF Bond Market Fund, they recommend PIMCO Total Return (PTRAX). In place of CREF Global Equities they recommend a 50/50 mix of American Funds EuroPacific Growth Fund (REREX) and Thornburg International Value (THVRX). These non TIAA-CREF funds are supposedly among an array that will be added at the market close on November 19th. I'm not sure that I'll actually be able to switch funds into them as a former employee. We will see. There is a limited range of other TIAA-CREF funds that I might be able to use.

So what do I think of these new non TIAA-CREF funds? I have heard, of course, of the PIMCO Total Return Fund and its manager Bill Gross. It has returned 8.09% p.a. over the last 5 years and 7.66% p.a. over the last 10 years. By comparison the CREF Bond Market Account has returned 4.65% and 5.97%. It's probably riskier than the CREF fund but it has good risk statistics. I would say that an immediate switch is justified here.

I've heard of Thornburg but have no idea if they are good or bad fund managers. The fund is a large cap, growth oriented fund according to Morningstar. Risk stats are good. It has a 5 year return of 6.3%. CREF Global Equities returned -0.05% and has pretty much a beta of 1 and alpha of zero relative to the MSCI World Index. On the other hand Thornburg exactly matched the MSCI's return in 2008 (-41.8%) and underperformed it in 2009. And in the most recent 12 months it maybe underperforms too. The manager paints a better picture than I am getting from Yahoo. So, I'm not sure about this one and won't be looking to switch in a hurry.

The final fund of the three has a good performance record and risk stats and is another large cap fund. It's assets are greater than $100 billion though. Capital Group has a good name. So I wonder if it can maintain the performance it's seen?

Actually the combination of these two funds is not an appropriate replacement for CREF Global Equities. The latter has 46% of assets in US stocks while these two new funds have no US exposure.

In sum these are all plausible to good funds it would seem. I'll look to get into Pimco soon, the others maybe later.

Why Don't Operating Systems Save a Buffer of Deleted Files?

After accidentally overwriting a file with an older version that was inside a newer version of a folder that I was backing up I wondered why don't operating systems simply create a buffer of recently deleted files that could be quickly accessed? I use "Data Rescue" software but it takes a couple of hours to search my disk for deleted files and to reconstruct them. If my computer had a record or copy of the most recently deleted files this process would be a lot quicker. Now that hard drives are so large I can't see why not.

Maps to Show Where You Have Been in the World

Revanche posted a link to a website where you can produce maps of the countries and states you have visited. Here is my world map:


visited 24 states (10.6%)
Create your own visited map of The World

The problem is that borders between countries are marked with white lines. This isn't a problem for the borders between the US, Canada, and Mexico. But it is a really big problem in Europe. So there looks like there is a white space in the middle of Europe on my map where there shouldn't be one as I've been to France, Belgium, Netherlands, Germany, Denmark, Switzerland, Austria, Italy etc. around that gap.

The map of US states turns out better:


visited 23 states (46%)
Create your own visited map of The United States

I excluded those states where I've only ever been at the airport (Texas, Missouri, Minnesota, Utah, Indiana, and maybe some others). Here's my map of Canada:


visited 1 states (7.69%)
Create your own visited map of Canada

I've only been to Quebec. As I haven't been to India and Brazil I couldn't do those ones. Why aren't there maps for Australia and China? That would be a good addition to the site.

Moom's Taxes 2009-2010

I'm going to give up waiting for a tax statement from EAIT. It's not like I've received the distribution itself either and my guess is that it is largely a capital return. I'll attribute any taxable amount to my 2010-11 taxes. So here is my income, deductions, taxes etc. according to the Australian Tax Office rules:



Salary was for 8 months of work which ended in February (it was a one year contract that started in the previous tax year - our tax years run 1st July to 30th of June in Australia). Australian dividends is pretty self-explanatory - but it doesn't include dividends earned through mutual fund (managed fund/unit trust) structures. These are included in the next item "distributions from trusts". That figure doesn't include foreign income or capital gains distributed by the funds. My net capital gain was zero. I now have an $A80k capital loss carry forward. So I'm not expecting on paying any capital gains tax any time soon. Assessable foreign source income included foreign dividends etc. and also money I earned from overseas as a consultant.

On the deduction side the biggest items in Australian dividend deductions is margin interest. But I also included computing costs etc. here. Supplement deductions are mostly foreign margin interest.

We then compute the gross tax liable using the standard tax rates. My marginal rate is formally 31.5%. But then I should be eligible for a $819 low income tax offset! After that the tax payable is $6,390.

This is offset by almost $2,000 of tax credits. These are mostly "franking" or "imputation" credits that account for the corporation tax paid by Australian companies who paid dividends to me. Australia is one of the few countries that still has this system of "see through" taxation. As a result my net tax liability was $4,405 according to my calculations or 10.4% of my taxable income of $42k.

But $8,565 was withheld from my salary. So I should get around $4,160 as a refund.

There are no state income taxes in Australia so that is my total income tax bill/refund.

For last year's numbers follow this link.

Career Update

I now have an interview lined up here for early next month. The original deadline for the job was early this year but they advertised for a whole bunch of positions and put together a very high powered interview team which would be very hard to get in one place together any time. And then I went travelling for almost 6 months. So it has taken 8 months to give me an interview in the end. They will be interviewing higher level positions for a while yet so I don't think my absence made much difference. We'll be doing plenty of prep for the interview closer to the date. The hardest question I think will be why I want to join this group when I have applied for jobs with other groups here and failed to be appointed. I don't need to give them a presentation. Presentations have been my weak point in recent job hiring processes. Not the interviews.

I am not actively looking for positions outside Australia but there is a constant flow of ads for jobs around the world that comes through the various networks. Now there is an ad for a job in the US in a highly desirable location geographically (in our opinion) where maybe Snork Maiden could also get hired on grant money as she has connections. It would put me back to the same point I was at in 2002 when I moved to the US from Australia and I am really not keen on making the move back to the US. But maybe it is something we should look at? The problem is though they are open to more senior candidates than many job ads are I wouldn't be offered tenure and Snork Maiden's position would also be very precarious and we would have no rights to live in work in the US until 5 years plus it would take to get a green card (given my previous experience). At least this time I could apply for a green card for Snork Maiden together with myself in one application. Last time around my application was already in progress before we met and we didn't marry until moving to Australia. If we stick things out another year here in Australia she can become a citizen here already. So there is an incentive to do that.

Thai Food

The main venues to eat out in Bangkok are in waitered restaurants, food courts in malls, and in the street. Upscale malls might have waiters in their food courts too and the food is mostly foreign. We went to a Korean restaurant in the Emporium Mall. The best Thai food we had was at a restaurant called Justharos which was near Siam Square. This restaurant caters mainly to Thais. This is their green curry:



Compared to the usual green curry you are served in western countries it is very much more like a soup. All the food we ordered there was really good. Another restaurant we went to is called "Cabbages and Condoms". This place caters mainly to foreigners and groups. The appetizer we ordered there was good:



Apparently it is a classic dish involving betel leaves wrapping some crunchy contents with a lemongrass flavor and a sweet sauce including sesame and coconut. You can also add chilis if you want. But there was plenty of chili in the papaya salad we ordered so we gave those a miss! The food we ordered at the food court at the Platinum Fashion Mall - a discount clothing mall was also pretty good and very cheap. Dishes typically were priced at 45 Baht ($1.50). At Justharos a dish was around 120 ($4) Baht and at Cabbages and Condoms about 200 ($7) was average. Even the latter is cheap by developed country standards of course. We also went to a Thai restaurant called "Royal Navy Club" near the Grand Palace where we thought the food was average to bad.

The only street food we bought was fruit. A guy has a handcart with a cabinet full of different peeled fruits - watermelon, rockmelon, pineapple etc. which he then chops up and puts in plastic bags for you. Each bag was 10 Baht. But street food also includes noodle soups, barbecue:



etc.

Israeli Food

Snork Maiden tells me she has more pictures of Israeli food. Maybe they will follow. There are a few main influences on Israeli food: Central and Eastern European food brought by Jewish immigrants from those countries and "Lebanese" food as well as food brought from other Middle Eastern and North African countries by Jews from those countries. And then there is the American influence. This must explain this:



Yes, a pita with falafel often comes stuffed with what Americans call French fries. But as they are called "Chipsim" in Hebrew maybe really it is a British influence. After all the British used to rule the country. Halva is a popular dessert. Here we see halva for sale at the Mahane Yehuda market in Jerusalem:



Or we could have more European style cakes:

Moom's Draft Australian Tax Return 2010

I've just completed drafting my tax return for this year. Our tax year ends on June 30. That's presumably because the agricultural year is out by 6 months in the Southern Hemisphere compared to the Northern Hemisphere.

I still don't have a tax statement from the EAIT fund of hedge funds. They claim they'll send one out this month. The deadline for the tax return is 31 October. If I don't get it soon, I'll just have to treat that as income for 2010-2001. But I'll wait a little longer before finalizing and sending in the return. Yes, I send in a paper return. I do all the calculations on a spreadsheet that I adapt each year to changes in the tax rules and my circumstances. Anyway, taxable income came in at roughly $A43k and I should owe about $A4,700 in taxes but $A8,565 was withheld. This is due to only being employed for 8 months of the year but having tax deducted as if I'd work for 12 months and about $A2,000 in franking credits and foreign tax paid. So I expect about a $A4,000 refund.

Last year, my taxable income was under $A10k due to lower income ($A25k vs. $A50k this year) and higher deductions ($A15k vs. $A7k). Mostly the increase in income was due to working 8 months vs. 4 months and the decrease in expenses to the derivative losses I suffered in the financial crisis.

I'll post the detailed spreadsheets when I finalize the return.

Moominvalley September 2010 Report

As usual, not all the final numbers are in but this is roughly what the accounts for September look like. Also, as usual, everything is in US Dollars unless stated otherwise:



Expenditure was pretty close to normal this month despite us being in Europe for the whole month. This was because either our hotel bill was being paid for us (in Sweden) or we were staying with family. "Other Income" is unusually high as Snork Maiden got 3 salary payments this month. Investment returns were high with about half the return in USD terms coming from the rise in the Australian Dollar towards a post-float record high (the Aussie was floated in the 1980s). USD returns were 11.65% vs. 9.60% for the MSCI World Index and 8.92% for the S&P 500 total return index. In Australian Dollar terms we had a 3.19% gain and in currency neutral terms 5.34%. The biggest gains in absolute terms were in Australian large cap stocks that represent now 52% of our gross asset exposure (yeah, way, way above target). Most other asset classes fell as shares of the portfolio but every class had positive returns. The highest percentage gains were in Australian small cap and US stocks. Net worth rose almost $50k to $440k though of course the rise in Aussie terms was "just" $A18k to $A457k.

Hedge Funds: Preliminary Performance for September 2010

Preliminary performance figures for HFRI show an overall gain of 3.37% for hedge funds in September, which is very strong:



There was strength across most styles apart from short bias, of course, as the MSCI World stock index rose 9.6% for the month. HFRX though shows quite different results, but it is based on a smaller sample of funds:



Overall gain was 1.72%. Macro and Systematic Diversified had negative performances according to HFRX but strongly positive performances according to HFRI.

August 2010 Report

I'm gradually digging out of the financial mess that awaited me here in Australia. The most worrisome thing is that the US IRS is still pursuing me over my US 2008 tax return. I explained to them in my last letter that I was no longer resident in the US since mid 2007 and anyway my income in 2008 was so low that I wasn't liable for any tax here in Australia even. But they again sent me a new letter while I was away and claim their records show I have sufficient income to owe tax. I'm writing back and telling them to prepare the tax return as they see it so I can at least understand what their claim is. I hope I don't have to end up wasting money on a lawyer on this issue.

Anyway, I have now completed the August accounts:



Of course, we spent a pile of money travelling in Europe. Investment returns were negative. In USD terms they were -2.63% vs. -3.46% for the MSCI World Index. As the Australian Dollar lost a little value AUD returns were -1.07% (-1.90% in currency neutral terms). High spending and negative returns meant that, of course, net worth fell - by USD 12k or AUD 7k. September was a much more positive month as you'll see soon.

Commonwealth Bank International ATM Fees are Extremely High

We found during our trip that Commonwealth Bank charges enormous fees for using ATM's overseas. Anything from AUD 6 to 14 depending on the amount of money withdrawn (5-12%). By contrast, using their Mastercard/Visa to make purchases results in a uniform 3% fee. So it makes sense to always use the latter when possible when travelling and only to withdraw large amounts of cash. To get down to 3% for ATM transactions you'd need to withdraw about AUD 500 in one go based on this.

Home

We're finally back from our "World Tour" and now into getting back up to speed mode here. Last stop was Bangkok. At some point Snork Maiden will provide more pictures of food including from Sweden, Israel, Denmark, and Thailand, hopefully. We are appreciating the nice weather and calm and orderly atmosphere here in Canberra. Israel and Bangkok and more exciting of course, but we prefer somewhere like Canberra as a home base. At least for the moment anyway. My next planned international trip is South Korea in May. A country I haven't been to before. I had been to all the countries on this trip except Hungary where we didn't leave the airport anyway. But I saw new stuff everywhere.

Now for lots of cleaning, sorting out mail, accounting, and my taxes for 2009-2010 still to do in the next week. Also our car wouldn't start. I think it is a "flat battery". And hopefully some more blogspots as things sort out.

German Food

The best food to be had in Germany, in my opinion, are the cakes and breads:



This is a cherry cake at a café on Marienplatz in München. On the other hand, savory dishes generally are not so good, in my opinion:



This was a Munich version of Rösti that was totally different to the Swiss version we tried. This was a latke-like potato pancake (but not as good). It was served with smoked salmon (good) and salad with some brown vinegar (not that good).

Swiss Food: Breads and Desserts

Chocolate for sale:



This bread is called "Zopf":



We bought a 700g loaf. I thought it might be a bit sweet like some hallah but it wasn't really at all. This is a rum flavored chocolate truffle in the form of a hedgehog at a cafe/bakery in Bern:

Swiss Food: Savory Dishes

The traditional Swiss dish, Rösti, at the Altestramdepot restaurant in Bern:



This is basically a lot of grated potato plus heaps of cheese. It was a lot better than spätzli, which we also ordered. After this encounter with the native food we decided to try Mexican food in the form of this cactus salad:



It was interesting. A bit reminiscent of some Chinese salads. At the Zurich railway station, Snork Maiden picked up this precisely wrapped pizza:



The wrapping is definitely better than the pizza.

French Food

Two salads ordered by Snork Maiden in Paris. This was called an "Italian Salad":



at a café near the Arc de Triomphe called "Le Comptoir de l'Arc". Yes, watermelon, and lots of Parmesan. And this one is duck and foie gras:



at a café near the Louvre.

Why is Canned Fish in the Fridge in Swedish Stores?

Well at least in the store next to the hotel I stayed in. Jars of pickled herring too. As well as the notorious fermented herring. By Australian standards, prices of food etc. mostly seem fairly reasonable in Sweden. And in Switzerland. I remember when I first went to Switzerland 24 years ago I was shocked by the high prices. Some things are cheaper than Australia and some more expensive. Beer in bars is expensive I'm told. But the price of wine in the System Bolaget store is very reasonable. Of course, by French standards it's expensive. It's the only place to buy wine, liquor, and beer stronger than 3.5% alcohol except in a bar and from 3pm on Saturday to Monday morning it's closed. The queues at 2:30pm on Saturday before they close at 3pm are nuts. They need a security guard to control the crowd queued up outside the store and winding all throughout it....

HFRX Performance for August 2009

HFRX results are in for August. The overall hedge fund index was only up 0.17%. Equity market neutral performed particularly poorly and systematic diversified very well. Other results are in the table:

Preliminary Report August 2010

The MSCI World Index lost 3.46%. We seem to have lost roughly 3% slightly ahead of the market.

Snork Maiden: ATO Refund

I expected that Snork Maiden would have to pay an extra $A13 in tax for the 2009-2010. In fact, she got a $A203 refund. So that's nice!

Credit Suisse/Dow Jones Hedge Fund Index Performance July 2010

Credit Suisse have now reported for July 2010:



They report an average return of 1.59%, a bit below HFRI's preliminary 1.82%.

Recommend Books on Investing in Australia for My Reader

A reader commented on my last post:

"Hi
I have a question for you. After 2 years of travelling I am coming back to Australia and I want to start investing my money wisely. I am completely new to the topic of investments and I was wondering if you could recommend a book I could read that would be a good starting point. There is lots of books on the market but I'm not sure how to choose. I'll appreciate you help. M"

Do any of you have recommendations on which books are worth reading. The only one I've bought recently was on superannuation. I'll have to check the author/title later on.

Please post your suggestions in the comments.

Hedge Fund Index Performance July 2010

Preliminary results for the HFRI index:


Overall, hedge funds gained 1.82% vs. a 8.17% gain in global equities. As a result of the latter, short bias funds performed worst. HFRX gained 1.23% for the month.

Moominvalley July 2010 Report

Everest Financial still hasn't reported fund results for May let alone June so the numbers are getting fuzzier... As usual everything is in US Dollars unless otherwise stated. This was a good month overall. The Australian Dollar rose around 6 US cents and the Pound and Euro also gained. Global stock markets rose sharply by 8.17% (MSCI World Index) and US markets 7.01% (S&P 500). In currency neutral terms we gained 5.70% and in Australian Dollar terms 3.89% in terms of investment returns, whereas investment gains in USD terms amounted to 10.94%.



Expenditure was a normal. Our car depreciated by $A600. Without that cost we spent near baseline levels. We spent more than $A500 on travel and so were otherwise really frugal. Net worth rose by $US40k to $US404k (or by $A17k to $A446k). The allocation to Australian large cap stocks rose by 2.1% of assets due to the strong market. All asset classes saw gains with the strongest gains in private equity, Australian large cap and US stocks. Total portfolio borrowing (including geared/leveraged funds) is 40 cents for each dollar of equity. Beta is around 1.2. Based on a rolling three year regression, alpha is just about zero against the MSCI World Index. Long-term I want to bring down the allocation to Australian large cap stocks and leverage to the market.

Moominmama Portfolio Performance July 2010

A nice portfolio performance this month but the MSCI World Index rose 8.2% in USD terms. European and Brazilian equities made gains in that range. Bonds also performed well due mainly to the rise in Sterling. As you'd expect the portfolio still hasn't caught up to pre-GFC levels:

Permanent Residency

Congratulations to Snork Maiden who got her her permanent residency in Australia today! We've been here just over 2.5 years. So in 1.5 years she can apply to become a citizen. You need to be in Australia for 4 years and be a permanent resident for one year to qualify. Compare this to the US where I was 4 years into the process and still hadn't got my green card and I would have to wait 5 years after getting that to become a citizen. One of the reasons we moved to Australia is that I didn't want Snork Maiden to have to go through all of that long process from scratch.

Snork Maiden's Taxes 2009-2010

It's tax time again down under. The tax year ends on 30th June here and the deadline for submission is 15th October. It will be a while before I can do my own taxes but I have got Snork Maiden's tax return out of the way. As it is pretty straightforward and I have a spreadsheet set up from last year as well as last year's return to refer to it took me less than an hour to do. See last year's figures for a comparison.



I estimate that she owes $13 in taxes which is much better than last year. Her salary actually increased a lot more than this over the past year (from $71,772 to $77,756) but this was our first full year of making salary sacrifice contributions of $A225 per fortnight into superannuation (i.e. pretax retirement contributions). This reduced her take home salary. Otherwise, there is not a lot of difference. Australian investment income was a little higher and foreign investment income a little lower.

Her average tax rate was 22.78%. Her marginal tax rate is 31.5%. This covers all taxes as there are no state income taxes in Australia.

The NYT follows up their recent article on how it is illegal to rent an apartment for less than a year in Paris with one about doing just that. We're paying about the same as the author paid for the studio apartment in Paris for a hotel room. But it won't be as nice and isn't around the corner from the Louvre.

Early View: HFRI and Credit Suisse Dow Jones

HFRI is reporting a -0.81% return for hedge funds in June while Credit Suisse Dow Jones is reporting -0.88% with 77% of assets reporting. This compares with a HFRX return of -0.94%. I will report more when the final numbers for the month are in.

Snork Maiden got her second visa today. Where to? There is a clue in the picture. So things should all go smoothly now :)

June 2010 Report

The true numbers for this month will be slower to arrive than ever. Everest Financial still hasn't reported fund results for May. So I might as well go ahead with the numbers as they stand at the moment. As usual everything is in US Dollars unless otherwise stated:



Non-investment income was fairly good this month as I earned a chunk of consulting income. This month exchange rates were relatively stable. Global stock markets were down another 2.95% (MSCI World Index) and US markets 5.23% (S&P 500). In currency neutral terms we lost 5.24% and in Australian Dollar terms 5.25% in terms of investment returns, whereas investment losses in USD terms amounted to 4.53%. So exchange rate movements improved USD returns relative to AUD returns. A loss of $17-20k either way you look at it though.

Expenditure was a little high as we continued with some travel expenses. But nothing like the massive spending of last month.

Net worth fell by $US13k to $US364k (or by $A18k to $A429k). The allocation to Australian large cap stocks fell by 1.5% of assets due to the bad market. Our "private equity" investments were also badly hit. A -22% rate of return. The only positive area was real estate, finally showing some gains.

In France it is Illegal to Rent an Apartment for Less than One Year!

This New York Times story stunned me with how stupid regulation can be. So the government prefers wealthy people to leave their apartments empty for much of the year instead of renting them out? I wonder what the hotel industry did to get that law passed? Seems there is so much inefficient regulation in the housing industry worldwide.

HFRX Indices June 2010 Performance Notes

The HFRX Global Hedge Fund Index declined by -0.94% for the month of June, bringing the YTD 2010 performance to -1.20%.

The weakest area of hedge fund industry performance was Equity Hedge strategies, with the HFRX Equity Hedge Index declining by -1.38% in June. All EH sub-strategies posted declines for June, with the most significant weakness in Fundamental Growth strategies, which declined by -2.85% for the month. Fundamental Value strategies posted more modest declines, with these posting a loss of -0.65%, while Equity Market Neutral declined by -0.77% in June, maintaining a gain of +1.93% for the 1H10.

Partially offsetting weakness in Equity Hedge, the HFRX Relative Value Arbitrage Index posted a gain of +0.29%, adding to the YTD gains to post a +1.29% gain for 1H10. Credit-focused Convertible Arbitrage and RV: Multi-Strategies were positioned for the financial market volatility and falling US yields which ensued in June, with both posting small gains in June to add to YTD gains; with each of these gaining +1.92% and +3.23% for 1H10, respectively.

The HFRX Macro Index posted a decline of -1.32%; as with the previous month, losses in fundamental, discretionary Macro strategies offset gains in Systematic trend following strategies. In total, Macro strategies have declined by -2.32% in 1H10 but the diversified, quantitative, systematic, trend-following funds gained +0.64 in June, with long positions in developed market fixed income offset weakness in currencies & commodities. Similar to the Financial Crisis of 2008, Systematic Macro strategies are the top areas of industry performance in 1H10, posting a gain of +4.53%.

The HFRX Event Driven Index posted a decline of -0.53% on corporate credit weakness, slowing M&A environment, increasing risk aversion and widening deal spreads, bringing 1H10 performance to -0.73%. The weakest area of ED performance was Distressed strategies, which declined by -3.73%, paring 1H10 gains to +0.38%. Merger Arbitrage and Special Situations funds posted declines of -0.58% and -0.48% in June to pare 1H10 performance in each of these to +0.13% and +0.03%, respectively.

Cambria Investments Plans GTAA ETF

I have long been a follower of Mebane Faber's blog World Beta. Quite a few of the ideas I have presented were influenced by my reading there. Up till now, investing with Faber's company has required a large investment. But now they are planning to introduce an ETF which will implement one of their key strategies. I think I might invest in that when it becomes available.

Moominmama Portfolio Performance June 2010

Moominmama's portfolio actually saw gains this month despite the 2.95% fall in the MSCI World Index in USD terms. As always I report Moominmama's performance in USD terms. The main reason for the gain was the rise in Sterling which helped both Sterling Cash and Bonds perform well this month. The fall in USD cash reflects management/safekeeping fees rather than actual negative returns on USD cash which is impossible if we are measuring things in US Dollars! Non-US equities also did OK.

Everest Financial to Wind Up Business

Following a strategic review, Everest Financial Group is to wind up the business, return capital to shareholders and transfer the funds under management to other firms. I have units in the EAIT and EDIF funds and am a shareholder in Everest Financial. This once seemed to be a successful business but the GFC hit it hard. Particularly damaging were the actions of activist hedge funds that resulted in reducing funds under management to far too small a scale for the company to go on. The book value of the shares exceeds the market value so hopefully we'll get something decent back and hopefully a decent manager will take over EAIT and EDIF.

"Dow Jones" Replaces "Tremont"

CREDIT SUISSE AND DOW JONES INDEXES JOIN FORCES ON HEDGE FUND INDEXES

Former Credit Suisse/Tremont Hedge Fund Indexes To Be Rebranded Dow Jones Credit Suisse Hedge Fund Indexes

New York (June 22, 2010) – Credit Suisse, one of the world's leading financial services providers, and Dow Jones Indexes, a leading global index provider, today signed an agreement which covers the calculation, licensing, branding and marketing of the hedge fund indexes formerly known as the Credit Suisse/Tremont Hedge Fund Indexes. Under this agreement, the indexes will be branded Dow Jones Credit Suisse Hedge Fund Indexes, and Dow Jones Indexes will calculate, distribute and market the indexes, while Credit Suisse affiliates will continue to manage the financial products linked to them. Credit Suisse and Dow Jones Indexes intend to keep the methodologies and rules for each of the existing indexes consistent with past practices.

Got Schengen Visa

Snork Maiden got her Schengen visa which allows travel to most European Union countries apart from Britain:



I thought that it was strange that we had to get it from the Norwegian embassy because Norway isn't part of the European Union. But it turns out that Norway is part of Schengen though it isn't part of the European Union. Switzerland is too. At least we got the visa for free due to Snork Maiden being married to a citizen of the European Union, me (I'm also an Australian citizen). She is a citizen of PR China and it will be about another two years till she'll be an Australian citizen and then travel arrangements will be a lot easier.

A PF Blog with a Difference

This guy lives in a van while doing a masters degree at Duke University. I read an article by him before but just discovered he now has a blog. He seems to annoy a lot of people.

Savings Impact of Trip & Laptop

We spent a lot last month in particular on flight tickets to Europe and a new laptop computer. At least half of those expenditures are business expenditures much of which will be refunded at some point. Anyway, they still had an impact on savings:



The blue line tracks savings in non-retirement accounts minus the effect of investment returns. You can see that last month's spending did have a noticeable impact, but it is much less than the savings we accumulated in the last year. Retirement savings continue to accumulate in the meantime (the pink line). To get total retirement wealth add the pink and green lines. To get non-retirement wealth add the blue and brown lines. All four together are equal to net worth. I find this breakdown to be very useful.

Moominvalley Report May 2010

This month's numbers are pretty terrible, especially in US Dollars:



But, as you can see once you take out the exchange rate losses of $36k they aren't quite so bad. In currency neutral terms we lost 6.98% and in Australian Dollar terms 6.09% in terms of investment returns, whereas investment losses in USD terms amounted to 15.10%. However, the MSCI World Index lost "only" 9.48%.

Expenditure totaled a very high $10k due to the new laptop and the trip to Europe. Other events include the transfer of $A1,000 to superannuation I did this month.

Net worth fell by $US71k to $US377k (or by "just" $A33k to $A448k). The allocation to Australian large cap stocks fell by 0.6% of assets despite my switching money back into the Colonial First State Geared Share Fund. But the allocation to bonds also fell by 1.13% of assets a a result of the switch. Allocation to foreign stocks and hedge funds rose.

Another Leg of Our Trip Organized

Just booked a couple more steps in our crazy trip. We will fly from Copenhagen via Billund in Jutland - the Danish Peninsula - to Paris. I'd never heard of the airline or Billund which is just a village. But turns, out it is the headquarters of Lego and the location of the original Legoland themepark. This flight had the best combination of cost and timing. Also I booked somewhere to stay in Paris, which you can see above. E62 per night. Apparently, Jean-Paul Sartre and Simone de Beauvoir lived there for a while in the 1930s and 1940s.


There are still some steps to complete the planning for this epic voyage to six countries :) Snork Maiden hasn't been to any of these countries before.

Hedge Fund Index Performance May 2010

Credit Suisse/Tremont have published preliminary results for hedge fund performance in May:



The index lost 2.73% which is very similar to the HFRX result. All strategies lost except for short bias. Surprisingly though, managed futures lost 4.42% and equity market neutral lost 3.87% whereas HFRX found that systematic diversified and equity market neutral gained in May. HFRI also have
a "flash update":



They show slightly lower overall losses. Like HFRX they show gains for equity market neutral but small losses for systematic diversified and quantitative directional.

Dell vs. Mac

Enough Wealth suggested on my last post that really I could have gotten a Dell laptop and saved money over buying a Mac. So, at least part of my Mac purchase was discretionary. Well, I would have had to buy all new Windows versions of my software including a stats package that costs about USD700 so that would wipe out any gains and after 20 years of using Macs I'm not planning on switching. But anyway, I thought I could check out what a comparable Dell would cost for the purposes of this post.

This seems to be the closest model I could find:



It has the same CPU, screen width, and RAM though a slightly larger hard drive (500GB vs. 320GB). Price is $1,150 vs. $2,199 for the Mac. Actually, you can get the larger drive on the Mac for $2,339. So the Dell is $1,189 cheaper.

Are these models really comparable? Which would you get?

Shuffling Money Around

Recently we booked a trip to Europe. The tickets came in at $A5,900. And we're not yet done with trip costs. On the other hand, the people I am going to work for in Sweden are going to pay about $A2,500 of that, but probably not till October. Also I bought a new laptop for $A2,199. I'll gradually get some of that back over time through depreciation deductions on my tax but only 15-30% over 3 years.

Both of these were initially paid for with a credit card. But we will have the credit card bill paid off by the end of this month. I immediately paid off $A2,000 of the credit card bill with cash we had in a cash management account at Adelaide Bank. My pay went into when I worked for the Uni here and all Australian dividends etc. which are not reinvested are paid into. OCP.AX will be paying $A1,200 of a capital return into this account in two days time, which will help pay this back. My rationale is that I want to have an immediate Australian credit line available for emergencies. The card limit is $A10,000. Now we have close to $A4,000 available.

Next move is to set up to borrow $A4,000 on my Australian margin loan for a couple of weeks time just before the credit card is due. With that and the cash in the Adelaide account we can pay off the credit card. We had about $A32k of borrowing power, so I feel safe using an eighth of that. Over time it will eventually be paid back. The interest rate is lower than that on the credit card so that makes sense.

I'm still waiting to be paid for the two consulting jobs I did recently. The money should be paid in US Dollars for those.

Daily HFRX Performance for May 2010

The Daily HFRX hedge fund indices show an overall loss of 2.64% for May. In comparison to the MSCI World Index's loss of 9.48% that's not too bad. All styles lost money with the exception of equity market neutral that gained 2.08% and systematic diversified which gained 1.03%. With reference to the latter, I know that Man-AHL lost only 0.1% for the month.

Moominmama Portfolio May 2010

This was a tough month in the markets. Stocks, and especially European stocks, and non-US currencies were hard hit. Alternative investments just fell less than other investments. The MSCI World Index fell 9.48%. Given the portfolio's estimated beta of 0.47 performance this month was not good in comparison to the index either.

New Laptop

Yesterday, I bought a new MacBook Pro. The old one was less than three years old but it was again malfunctioning, has an almost useless battery, and cracks in the metal on both sides of the screen. Just a new battery costs more than $A200 and I decided not to put any more money into it. The new computer cost $A2,199 which is less than the $US2,159 that the last one cost in 2007. Both are the base model 15" model. This one has a 5 core chip instead of a 2 core chip, 4GB of RAM instead of 2GB, and a 320GB hard-drive instead of a 160GB one. The clock-speed is 2.4GHz vs. 2GHz. It's interesting that for a long time computers competed on faster and faster clockspeeds but in the last 3 years there have not been very large gains at all on this dimension. I'll be deducting the remaining value of my old computer from my taxes and a big chunk of this one. If I'm in the 30% marginal tax bracket that reduces the cost by a nice amount.

Also yesterday we visited the Norwegian embassy to deal with Snork Maiden's visa for Europe. Even though Norway is not in the European Union they deal with European visas for people visiting Scandinavia here. They are really unclear about the rules applying to people who are spouses of European citizens. Maybe we don't need to pay for the visa. According to the French government she wouldn't need a visa at all. I'm also working on organizing our accommodation in Sweden. Finding something there at a decent price that meets our requirements for the duration of our stay seems pretty challenging.

Aurora Funds Management IPO

As I have shares in the Aurora Sandringham Dividend Income Trust, I just received a prospectus for the IPO of the manager. Investors in the funds get a $A5,000 "priority allocation" of shares in the IPO. They pay exactly the same price as all other investors though. So this is only an advantage if the IPO is oversubscribed. The company does not seem to think this is likely as they have specified a minimum offering of $A2 million and a maximum offering of $A5 million. Why list two limits if you were confident of raising the $A5 million?

The prospectus provides 2 1/2 years of accounts. In the 2007-2008 financial year they made $A400k in profit and in 2008-2009 they made $A1.3 million on a pro forma basis. However, in the first half of 2009-2010 they lost $A400k. Both management and performance fees were below those of previous years and costs were up. So it is hard to value the company. The IPO values the firm at $A20 million. So this is a P/E of about 20 based on the three years but the income volatility is huge.

In the 2008-2009 financial year the company paid shareholders $A590k in dividends which is entirely reasonable. But in the first half of 2009-2010 they paid out $A1.1 million despite actually losing money. This seems to be a case of the directors taking a last chance for fat dividends before going public.

The prospectus also claims that all the funds will be used for operations including product development, debt repayment, regulatory capital, and offer costs ($A340k if the offer only nets $A2 million which is big bite). But existing shareholders will receive $A750k in cash for shares they hold. The prospectus states that this will be paid out of pre-offer cash, but of course cash is fungible.

So at this point I'm leaning towards passing on this one. Any thoughts?

Accepted

Back in March I wrote that I was nominated by the Australian government for a UN scientific advisory body. I just heard today that the UN group accepted my nomination and so I will be participating for the next few years. Now if only I can convince someone here that this shows I should be worthy of getting a job! :) There are hundred of people involved in this effort but still there are not that many from any one country.

National Emergency?

Wow, if this is even somewhat accurate this is both outrageous and crazy. Using national emergency powers to campaign for the RSPT? If it is really political then the Labor Party or the Unions etc. should fund it. The opposition doesn't get to spend public money on this.

I haven't said much about the RSPT, but, yes, I am against it. I happen to think the royalties regime makes sense but I can see some of the arguments against it. I would accept some introduction of a tax along the lines of the PRRT (Petroleum Resource Rent Tax) at a high enough level to replace the state royalties and the reduction in corporation tax on mining companies with the funds going back to the states probably. IN theory though I think royalties that are then invested in a sovereign wealth fund are the best option.

Rebalancing

I just switched this back again. At least my average price is lower now...

Sign of the Times

HSBC (USA) is converting my checking account from "Interest Checking" to "Basic Checking" because the former product is being discontinued, which is no surprise given the level of US interest rates. It's good news for me as the fees on the new account are a quarter of what I was paying on the old account and will be waived for 6 months after the conversion...

Booked Europe Trip

Today we booked at paid for our flights to Europe and Israel. We'll also be staying in Thailand for a couple of nights. Hopefully, conditions will be more stable by the time we travel. It's our first trip overseas for a couple of years and is crazily long. Cost came in at just under $A6,000. That's just the flights. We should be able to recover at least half the costs - my trip to Europe will be refunded by the people I am going to work for in Sweden and maybe Snork Maiden can get something if her paper is accepted at a conference.

P.S.
We don't only need good luck in Thailand but also Iceland :)

Bought Some Shares...

I bought some shares in CHN last night. Price 25.13. It closed a little below that. Had been planning on that for a while and this seemed at least like an opportunity...

Snork Maiden's Funding Confirmed

Some good news. Snork Maiden heard that the funding her team got for the next two years is no longer contingent on them raising additional matching funding. On the other hand, they'll be able to employ one less person without getting more funding but her salary is funded by the confirmed money.

Hedge Fund Performance April 2010

The hedge fund performance figures for April from HFR and Credit Suisse/Tremont are in. Credit Suisse/Tremont reports that funds overall gained 1.24% in April. HFRI (preliminary) was at 1.29% and HFRX 0.80%. according to Credit Suisse/Tremont most strategies did well apart from short bias which lost 3.89%. Equity strategies that involved shorting performwed weakly. Equity market neutral made 0.43% and long-short equity 0.29%. HFRI reported similar results for strategies except that equity hedge came in at 1.37%. HFRX reports losses in macro and much more variability across strategies than the other two sources. It is based on a smaller sample of funds that report daily and seems to be less reliable.

Article on NetWorthIQ in NYT

Interesting article on NetWorthIQ in NYT. The article takes a negative angle on net worth tracking. Personally, I get a feeling of security to some degree from the net worth number when it is heading in the right direction and when it's not I know something needs to be done... I think it is essential to know how much you are saving and whether you can meet retirement and other financial goals. For these purposes, tracking net worth is necessary.

Indirectly Informed of Rejection

They just announced today who got the positions in my department. So, I find out that I won't get an offer (there was a chance of a second round offer). I haven't received formal notification of rejection yet. So it is annoying to find out this way. By not appointing me and instead appointing a more junior candidate they have been able to partially fund a couple more very junior positions... Now all my focus will be on my upcoming interview (date not specified yet) at another department here...

Rejection...

Today, I got the rejection e-mail for the job in Brisbane that I applied for. We didn't want to go to Brisbane anyway and I didn't want to do this job, particularly, anyway so no big deal. Still haven't heard the outcome for the job I most recently interviewed for here though.

Crazy Chinese Property Prices

As everyone knows by now property prices are crazy in many parts of China. When compared to incomes they are far far higher than in countries like Australia where property prices are already ridiculously high. My mother in law reported that in their neighborhood (picture above) prices have reached RMB 14,000 per square metre. This is the usual way of measuring prices in China. This price is AUD 2300 per square metre or USD 190 per square foot. A 100 square metre apartment is, therefore, about $200k. This would be cheap in Australia and a decent price in cheaper areas of the US. But incomes in China are much lower. She claims that her apartment is 170 square metres. So it would sell for USD 350k or AUD 390k. This is in the suburbs of Tianjin, which is one of the wealthier cities in China (after Shanghai, Beijing, and Shenzhen). But still. When they moved there in 2002 prices were RMB 3400 per square metre so the unit would have cost USD 85k. They didn't actually pay this. My stepfather's workplace gave them the apartment as part of a retirement package which involved them giving up their old apartment.

Dishlex

The motor on the Bosch dishwasher in our apartment died and we had to get a new dishwasher. As the landlord is in another country the local agent paid organized this. So far it seems to be that this new machine is total junk. The brand is "Dishlex" which I'd never heard of. It claims to be "made in Europe (Albania?)". Just feeling the door closing you know it is lower quality. The inside space appears much smaller though the outside of the machine takes up as much space. And several dishes are not cleaned properly each time. I've been using the regular setting. I'll try the "pots" setting - next time.