Gradually, I'm getting up to speed on Australian taxation, retirement etc. A combination of reading the Australian Financial Review (horrible website only read the paper version) and Sydney Morning Herald (great website, The Australian's website sucks too but not as bad as the AFR) and then going and checking out the ATO website (not such a great website).
So if you are a trader you can record your profit and loss as "business income". If you are a derivatives trader (options, futures, CFDs (but not warrants)) then your income is automatically business income. For share traders it is a question of how business-like you are. But then it is going to be difficult I think to claim an long-term CGT discounts. So I don't want to be thought of as a "share trader" but instead investor in shares and trader in derivatives. Then you can deduct all expenses as they occur against your income. Any items that cost above $1000 need to be depreciated over time - e.g. a laptop. You can also claim rent, electricity etc. in proportion to floor area if you maintain a home office (I do). Investors need to apportion these types of expenses when they sell shares unless they can show that they need to do this to earn dividends in which case they can deduct them in the year they occur. Anyway, I plan to claim all these type of expenses against derivatives profit and loss and claim margin interest against dividends (make sure some of the stocks in each of your margin accounts pay dividends P.S. Remember to claim the tax withheld on foreign dividends).
It seems a trader can get an "Australian Business Number" and register for the GST. The advantage of this is that you can then claim credits for GST paid on inputs even if you are not charging GST on your sales (because they are "financial supplies"). I used to run an Australian non-profit and we signed up for the GST for just this reason. If you are in the 30% tax bracket, for example, you'll get back 100% of the GST paid, rather than the 30% you get back by claiming a deduction against income tax. The downside is you must now submit quarterly business activity and GST statements. I'm thinking, that for me at the moment it is hardly worth it - maybe a $100 or so gain if I bought a new computer say. The amount of GST on internet access or my business share of the electricity we use makes this hassle not seem worth it. But maybe an ABN is worthwhile for credit purposes etc. If you fill in a form and say you are self-employed they ask for your ABN....
To contribute to superannuation, at least 10% of your income must come from employment or business. I'll have a business loss this year so I can't contribute. I don't want to contribute much at this stage anyway but if your income is below $28,980 the government will contribute $1500 for the first $1000 you contribute to superannuation (with after tax money). This seems well worth it. From $28,980 to $58,980 the co-contribution gradually phases out. Hopefully, this will be relevant to me for the 2008-9 tax year and not so relevant in future years as I earn more :)
Once I do my 2007-8 tax return I'll understand all this a lot better I hope.
Monday, May 26, 2008
Sunday, May 25, 2008
Listed vs. Unlisted Property
Listed property includes REITs and other companies mainly involved in property that are listed on stockmarkets such as Westfield. Unlisted property and mutual and funds that are not stock market listed. The performance of these two types of investments can differ radically. Returns of unlisted property closely match those of direct investments in property while the listed investments fluctuate with the stock market and sometimes fluctuate more than the stock market. So much so, that these are almost two separate asset classes. According to Mercer Australian unlisted property returned 19.5% in the year to 31st March 2008 and 2.3% in the March quarter. On the other hand, the index of Australian REITs (shown above and which is dominated by Westfield) returned -22.8% and -17.8% respectively! Over the last 10 years A-REITs returned 9.8% vs. 12.8% for unlisted property.
We have a mixture of listed and unlisted property. I have 5% of net worth in the TIAA Real Estate Fund in my 403b. Since September 2002 it's averaged 11.1% p.a. with a Sharpe ratio of 3.8! It's only had three marginally losing months. The (unlisted) fund is directly invested in all kinds of property mainly in the US (one property in the UK at Canary Wharf). 13.5% of Snork Maiden's superannuation (Public Sector Superannuation Accumulation Plan) is in unlisted direct property. Besides that we have listed property investments including NCT (a mortgage fund in fact), CIF.AX (UK and global infrastructure) and about 3% of our holding of the Colonial First State Conservative Fund. In total we have 8.2% of net worth in property. The listed investments have been very volatile and erratic.
An article in the Australian Financial Review yesterday highlighted how much A-REITs have fallen recently but still argued that they are overvalued. I started to think about putting some money into them, but after this analysis (and given we already have a little via the CFS Conservative Fund, I'm less sure but may begin to put some of our contributions to Snork Maiden's managed funds into a listed property fund.
Friday, May 23, 2008
How Does the American Economic Association Invest?
The American Economic Association (the World's top academic economics society) has an $18 million dollar potfolio. They're currently invested 85% in stocks and 15% in bonds. 55% of the total is in US equities and 30% in foreign equities. In April 2007 they reduced the bond percentage from 35% to 15%, which mirrors my more recent moves in my own and my Mom's account. But I made this move after the 2007-8 stock market correction not before it. Still their moves out of high-yield corporate bonds and the total bond market into investment grade bonds were well timed. As Mankiw notes it's surprising they don't have any real estate and I'd add any of the alternative assets such as private equity and hedge funds that the best performing university endowments have. Well, I guess they are a bit too strong believers in efficient markets to do anything like that...
Market Inefficiency
Challenger Infrastructure Fund is down 22% today currently. Yesterday they reported that they sold their holding of Arqiva and ceased takeover talks with Arkmile. The stock fell a few cents yesterday. As reaction was muted to the ending of the takeover talks and I liked the Arqiva sale, I increased my position by 50%. And then today the stock collapses.... There is no new news reported today. So I can only assume that this is a delayed reaction to yesterday's news. In which case, this is good evidence that prices do not respond instantaneously to the news. People had all day yesterday to sell. Are these retail investors who only heard the news after their working day yesterday who are selling? Or is there some new news that hasn't yet been released to the market? There are some larger blocks transacting including one for 50000 shares (which didn't move the price but sold near the lows so far today). Lack of big blocks is not evidence of anything though...
Trading is very volatile. The stock is now down 17% only as I complete my post. In case there is something I haven't heard about I am not going to add further to my position.
Trading is very volatile. The stock is now down 17% only as I complete my post. In case there is something I haven't heard about I am not going to add further to my position.
Thursday, May 22, 2008
City Index Seminar
I just got back from the City Index seminar. I was pretty impressed. The trading platform looks nice a lot of features similar to Interactive Brokers. The presenter used to be an FX trader at various investment banks and started a hedge fund of which he is now a limited partner. And they are giving seminar participants $250 for free if they open an account within a week of the seminar (obviously you needed to register for the seminar up front). I'll be opening an account tomorrow. If I can't make money trading with them I don't think I can make money short-term trading at all.
Challenger Infrastructure Fund Update
The Challenger Infrastructure Fund announced that it sold its interests in Arqiva - a British provider of broadcasting infrastructure - and as a result is now debt free. Distributions will be paid from cash flow, rather than partly from debt. The paying distributions from debt model disturbed me a couple of years back - I reduced my position at the time but was willing to give the fund some benefit of the doubt. Since then, I've come to realise that this has been a common strategy amongst these Australian infrastructure funds and CIF is one of the least egregrious examples. On the other hand, the takeover offer from Arkmile is off for the moment.
I'm going to increase my position by 50% to a 1.8% portfolio weight.
Are Financial Economists Seeing the Light on Technical Analysis?
Readers might be familiar with the following quotation from Burton Malkiel (A Random Walk Down Wall Street, 1996, p. 154):
“technical strategies are usually amusing, often comforting, but of no real value”
Proponents of "low cost index funds" typically believe this is true as do the majority of mainstream economists it would seem. The efficient market hypothesis argues that changes in market prices are purely random resulting from the arrival of previously unknown information to the market and that, therefore, there is no way to exploit past prices and volume data to predict changes in market prices. Then why do the majority of participants in foreign exchange markets as well as many in other markets use various variants of technical analysis to varying degrees? This question is addressed in the following paper:
Lukas Menkhoff and Mark P. Taylor, The obstinate passion of foreign exchange professionals: technical analysis, Journal of Economic Literature, Vol. XLV (December 2007), pp. 936–972.
The Journal of Economic Literature is one of the three or four most prestigious academic journals in economics and Mark Taylor is a top international macro-economist.
I'll leave it to the authors to explain, by drawing the following from their conclusion (pp966-967):
"A reading of the literature on the nature and use of technical analysis in the foreign exchange market allows us to draw up a set of stylized facts concerning its nature and use, and also to distinguish a number of arguments that have typically been adduced to explain its continued use.
Indeed, first and foremost among these stylized facts lies the continued and widespread use of technical analysis in the foreign exchange market. Research conducted in most of the major foreign exchange markets during the last decade or so reveals clearly that the use of technical analysis is an important and persistent phenomenon which is highly influential in the decision making of foreign exchange professionals. A similar situation emerges with respect to the profitability of technical analysis. It is beyond question that, for major flexible exchange rates and over longer time periods, the use of technical analysis may be used to provide very high returns. What is disputed, however, is whether the realization of these profits has to be bought at the cost of taking large risks and whether the profits can fully compensate for this additional risk.
A contribution that we have sought to make in this paper is in relating the available empirical evidence to several positions that have been developed in order to explain the continued use of technical analysis.
The first of these—interpreting the use of technical analysis as an indication of not-fully rational behavior—is difficult to reconcile with the fact that virtually all professionals in the market rely on this tool at least to a small degree. Moreover, there is no hard evidence showing that chartists are characterized by temporarily suboptimal behavior, or underestimate the risk involved or accept technical analysis as a marketing instrument.
The second position, relating profitability to foreign exchange interventions by the monetary authorities, is a little more satisfying in the sense that it suggests a more solid rationale for the use of technical analysis by rational agents. Also, some stylized facts concerning the profitability of technical analysis —namely that it tends to be more profitable during periods of official intervention —fit well with this position. There is, however, more recent evidence that suggests that it may be large exchange rate movements themselves that may be leading both intervention and technical analysis profitability or, equivalently, that the influence of technical analysis, by driving the exchange rate away from the level consistent with the fundamentals, may generate a rationale for official intervention, rather than vice versa, through the coordination channel of intervention effectiveness.
The third position, namely that technical analysis is simply an instrument in the processing and assimilation of market information, can also reconcile the importance of order flows and technical analysis to some degree. The main problem with this position, however, is that it does not explain the reason behind sluggish adjustment to news, preferences for round figures in order placement, etc.
Overall, therefore, perhaps the most satisfying explanation concerning the continued use of technical analysis seems to be position four, whereby technical analysis is seen as an instrument informing traders about nonfundamental price determinants. These forces are more important in the shorter-run, so for a full understanding of exchange rate dynamics, professionals need a combination of several tools, in particular both technical and fundamental analysis. This position also fits well with the stylized fact on the higher profitability of technical analysis in flexible exchange rate markets, as there is some indication that these markets may be characterized by a degree of volatility that is hard to explain by fundamentals alone (Robert P. Flood and Rose 1995).
This still leaves open, however, the question of risk-adjusted profitability. If technical analysis has some rationale in the sense of being able to generate profitable trading rules, why does the market process not assimilate or arbitrage these profit opportunities away? The answer may be the same as with fundamental analysis: in well functioning markets one would expect that profit opportunities will be exploited up to an extent where agents feel appropriately compensated for their risk. To take open positions is inherently risky, whether the decision is based on fundamental or technical considerations.
What is perhaps most striking from our reading of the literature, however, is that technical analysis remains a passionate obsession of many foreign exchange market professionals; it is clearly an intrinsic part of this market. For academic researchers, this means that technical analysis must be understood and integrated into economic reasoning at both the macroeconomic and the microstructural levels. For market practitioners, it means that technical trading strategies should be constantly evaluated as potentially important tools in the search for excess returns. "
In other words, technical analysis works and produces significant profits because market prices convey information that is not embodied in the known fundamentals, but it is an open question as to whether exploiting those profit opportunities means taking on more apparent risk, which the majority of market participants are unwilling to do. Even if the market is more or less efficient, someone has to move the market towards the equilibrium and many participants in the foreign exchange markets are actively trying to avoid risk by hedging away their foreign exchange liabilities rather than maximize their profitability.
“technical strategies are usually amusing, often comforting, but of no real value”
Proponents of "low cost index funds" typically believe this is true as do the majority of mainstream economists it would seem. The efficient market hypothesis argues that changes in market prices are purely random resulting from the arrival of previously unknown information to the market and that, therefore, there is no way to exploit past prices and volume data to predict changes in market prices. Then why do the majority of participants in foreign exchange markets as well as many in other markets use various variants of technical analysis to varying degrees? This question is addressed in the following paper:
Lukas Menkhoff and Mark P. Taylor, The obstinate passion of foreign exchange professionals: technical analysis, Journal of Economic Literature, Vol. XLV (December 2007), pp. 936–972.
The Journal of Economic Literature is one of the three or four most prestigious academic journals in economics and Mark Taylor is a top international macro-economist.
I'll leave it to the authors to explain, by drawing the following from their conclusion (pp966-967):
"A reading of the literature on the nature and use of technical analysis in the foreign exchange market allows us to draw up a set of stylized facts concerning its nature and use, and also to distinguish a number of arguments that have typically been adduced to explain its continued use.
Indeed, first and foremost among these stylized facts lies the continued and widespread use of technical analysis in the foreign exchange market. Research conducted in most of the major foreign exchange markets during the last decade or so reveals clearly that the use of technical analysis is an important and persistent phenomenon which is highly influential in the decision making of foreign exchange professionals. A similar situation emerges with respect to the profitability of technical analysis. It is beyond question that, for major flexible exchange rates and over longer time periods, the use of technical analysis may be used to provide very high returns. What is disputed, however, is whether the realization of these profits has to be bought at the cost of taking large risks and whether the profits can fully compensate for this additional risk.
A contribution that we have sought to make in this paper is in relating the available empirical evidence to several positions that have been developed in order to explain the continued use of technical analysis.
The first of these—interpreting the use of technical analysis as an indication of not-fully rational behavior—is difficult to reconcile with the fact that virtually all professionals in the market rely on this tool at least to a small degree. Moreover, there is no hard evidence showing that chartists are characterized by temporarily suboptimal behavior, or underestimate the risk involved or accept technical analysis as a marketing instrument.
The second position, relating profitability to foreign exchange interventions by the monetary authorities, is a little more satisfying in the sense that it suggests a more solid rationale for the use of technical analysis by rational agents. Also, some stylized facts concerning the profitability of technical analysis —namely that it tends to be more profitable during periods of official intervention —fit well with this position. There is, however, more recent evidence that suggests that it may be large exchange rate movements themselves that may be leading both intervention and technical analysis profitability or, equivalently, that the influence of technical analysis, by driving the exchange rate away from the level consistent with the fundamentals, may generate a rationale for official intervention, rather than vice versa, through the coordination channel of intervention effectiveness.
The third position, namely that technical analysis is simply an instrument in the processing and assimilation of market information, can also reconcile the importance of order flows and technical analysis to some degree. The main problem with this position, however, is that it does not explain the reason behind sluggish adjustment to news, preferences for round figures in order placement, etc.
Overall, therefore, perhaps the most satisfying explanation concerning the continued use of technical analysis seems to be position four, whereby technical analysis is seen as an instrument informing traders about nonfundamental price determinants. These forces are more important in the shorter-run, so for a full understanding of exchange rate dynamics, professionals need a combination of several tools, in particular both technical and fundamental analysis. This position also fits well with the stylized fact on the higher profitability of technical analysis in flexible exchange rate markets, as there is some indication that these markets may be characterized by a degree of volatility that is hard to explain by fundamentals alone (Robert P. Flood and Rose 1995).
This still leaves open, however, the question of risk-adjusted profitability. If technical analysis has some rationale in the sense of being able to generate profitable trading rules, why does the market process not assimilate or arbitrage these profit opportunities away? The answer may be the same as with fundamental analysis: in well functioning markets one would expect that profit opportunities will be exploited up to an extent where agents feel appropriately compensated for their risk. To take open positions is inherently risky, whether the decision is based on fundamental or technical considerations.
What is perhaps most striking from our reading of the literature, however, is that technical analysis remains a passionate obsession of many foreign exchange market professionals; it is clearly an intrinsic part of this market. For academic researchers, this means that technical analysis must be understood and integrated into economic reasoning at both the macroeconomic and the microstructural levels. For market practitioners, it means that technical trading strategies should be constantly evaluated as potentially important tools in the search for excess returns. "
In other words, technical analysis works and produces significant profits because market prices convey information that is not embodied in the known fundamentals, but it is an open question as to whether exploiting those profit opportunities means taking on more apparent risk, which the majority of market participants are unwilling to do. Even if the market is more or less efficient, someone has to move the market towards the equilibrium and many participants in the foreign exchange markets are actively trying to avoid risk by hedging away their foreign exchange liabilities rather than maximize their profitability.
Pullback in Progress
It's unusual to have more than two big down days in the US market recently without some sideways or slightly up action. So expect smaller falls or some rebound Thursday and Friday. The model is forecasting a new uptrend starting on Tuesday (after Memorial Day), though that depends on the stochastics staying above 20 which would require a little rebound in the next couple of days already and what non-US markets do on Monday and Tuesday. My most likely scenario is that an ABC wave is nearing completion which started a couple of days into the month and that what we'll see in coming weeks is more sideways action with three part waves up and down. But of course, anything could happen. The analogous correction in 1991 was very sharp with less down days punctuating the bigger down days:
Something like this is a definite possibility if there isn't much of a bounce in the next 2-3 days.
Wednesday, May 21, 2008
Bekaert
Bekaert has returned 35% since bought on 17 January. The price is close to analysts' targets and as I blogged earlier there may be some downside in the market in the near future (though my bet is that it won't be very significant. I now know why my friend thinks this is a good investment or trade. I'm skeptical about how important that factor can be for the company and how sustainable a source of profit it will be. On the other hand that doesn't mean I think the stock is overvalued. Sales recently increased more than expected.
So I sold 1/4 of my shares to return my position to a 1% share of net worth. We booked a €250 profit on that trade. We also received a €110 dividend today (tax was withheld, but I should be able to claim that back from the Australian tax authority). The two together just about paid for the chair :P
Sometimes it's Worth Paying for a Good Product
We just bought an office chair for use at home. A few months ago I ended up with an inflamed sciatic nerve from sitting on a poorly designed, but attractive, chair at my desk. I went eventually to a physical therapist who diagnosed the problem correctly, gave me some exercises to do and told me to get a new chair. In the meantime, I've been sitting on an exercise ball when working at my desk, but was beginning to tire of that.
The search started off at OfficeWorks - an Australian clone of Staples. They had a good value chair:
(it actually cost $195 in the store). I took Snork Maiden with me back to the store to have a look but she was a bit skeptical. The chair met all the criteria that the physical therapist set, but it felt a bit small and like many office chairs, when I sat on it my legs did not lie flat but tended to twist outwards.
Today we continued our search in the industrial suburb of Fyshwick, where most furniture stores are located. We started at a store called ErgonomicOffice where Snork Maiden got the chair that she is using at work. The chairs are very nice but very pricey. So we went to a few other stores along Barrier Street that offer new and used office furniture. Nothing used was any good. We almost bought a new chair for about $380 but after sitting on it for ten minutes or so I decided we wouldn't. It had amazingly high armrests and the cushioning really wasn't that good. So back to ErgonomicOffice and we bought a blue version of this chair:
We saved by skimping on the armrests ($75) - Snork Maiden has armrests on her chair and doesn't want them, so we'll take those off and attach them to this one. So $518 in all. Actually, we haven't paid anything yet. We have it on a trial basis. The salesman didn't even take my credit card for a deposit or ID. I am guessing he memorized our car's registration number when he came out to help us put the chair in the car. Otherwise, how does he know I didn't just give him a bunch of false information?
Or maybe I feel like I can afford $500 chairs when I've already "made" more than $30,000 this month?
The search started off at OfficeWorks - an Australian clone of Staples. They had a good value chair:
(it actually cost $195 in the store). I took Snork Maiden with me back to the store to have a look but she was a bit skeptical. The chair met all the criteria that the physical therapist set, but it felt a bit small and like many office chairs, when I sat on it my legs did not lie flat but tended to twist outwards.
Today we continued our search in the industrial suburb of Fyshwick, where most furniture stores are located. We started at a store called ErgonomicOffice where Snork Maiden got the chair that she is using at work. The chairs are very nice but very pricey. So we went to a few other stores along Barrier Street that offer new and used office furniture. Nothing used was any good. We almost bought a new chair for about $380 but after sitting on it for ten minutes or so I decided we wouldn't. It had amazingly high armrests and the cushioning really wasn't that good. So back to ErgonomicOffice and we bought a blue version of this chair:
We saved by skimping on the armrests ($75) - Snork Maiden has armrests on her chair and doesn't want them, so we'll take those off and attach them to this one. So $518 in all. Actually, we haven't paid anything yet. We have it on a trial basis. The salesman didn't even take my credit card for a deposit or ID. I am guessing he memorized our car's registration number when he came out to help us put the chair in the car. Otherwise, how does he know I didn't just give him a bunch of false information?
Or maybe I feel like I can afford $500 chairs when I've already "made" more than $30,000 this month?
Market Update
It's quite likely that the wave that started in the March lows is complete and we are now in a down wave. One reason that this might not be the case is that there seems to be a lot of consensus around the blogosphere etc. about that. Bears have been hoping for a new bear market leg down and are now acclaiming its arrival. Bearish sentiment seems to have risen again recently from my perusings. Seems too easy. So the downswing might not be that strong if there is a significant one at all. A good historical analogy is shown in the charts above. The best comparison would be with the early December 2002 peak which marked the end of wave 1 of the bull market. Wave 2 lasted into March 2003 and saw most of the advance retraced. However, the rally so far has been only around 14% or so while the rally from October to December 2002 was around 22%. Global stock valuations are better now, but the US economy is probably weaker as by late 2002 the US recession was clearly over. Other possibilities is that the current juncture is more like June 2003 (the pattern in the stochastics certainly looks like that), where there was a very mild pullback or August 2002 when the market made a marginally lower low in the pullback that ended in October. None of these is an armageddon scenario...
Most non-US markets such as Britain, Australia, Germany, and Japan made their bear market lows in March 2003. Most of those charts currently look much more bullish than they did in December 2002. Much more like the way they looked in June 2003.
The only defensive action I've taken so far is to sell $8000 worth of the CFS Geared Share Fund yesterday and about $2000 worth of the CREF Equity Index Fund a couple of days ago. I went to cash in my Australian non-retirement account and switched to CFS Conservative Fund in my superannuation account. I switched into CREF Bond Fund and TIAA Real Estate Fund in my 403b. This is just rebalancing after the rally we have seen. I guess I'm betting on the June 2003 scenario, especially for Australia. When I switched heavily to equities in March and early April, I assumed that the worst case scenario was that it was actually December 2002 in Australia or July 2002 in the US. So I'm prepared to take some set back without panicking. But there is no way to actually know what will happen.
Tuesday, May 20, 2008
Potential Changes (Yet Again) to Superannuation
Gottliebson has some interesting insights on the upcoming Australian tax review. I think it makes sense that "salary sacrificing" of superannuation contributions will be ended. What does this mean? At the moment contributions to super (=retirement account) are taxed at 15% up to a limit of $A50k per year. Above that you can make "undeducted contributions". Earnings in the fund are taxed at 15% (10% for capital gains). Payouts are tax free (and this is out of bounds for the review) and if you convert your account to a pension then the earnings of the fund from then on are tax free too. Eliminating the concessional rate of tax on contributions has two effects (apart from raising revenue for tax cuts elsewhere):
1. It makes the super system simpler by abolishing concessional and non-concessional contributions.
2. Currently people in the 15% tax band get no gain from this concession. Labor will eliminate another middle class welfare expenditure.
By carrying out this reform Australia will have gone from a system several years ago that gave concessions on contributions and superannuation earnings and taxed payouts heavily, to one that taxes payouts lightly if at all and gives no concessions on contributions and only some on earnings. In other words, from an approximation of a 401k to an approximation to a Roth IRA. The US Congress likes Roth IRAs because they bring tax revenue forward to the present. The Australian Treasury, whose head is heading the enquiry, likely feels the same way.
Even so, I'm not inclined to add any extra money to Snork Maiden's superannuation and lock it up for the next few decades!
1. It makes the super system simpler by abolishing concessional and non-concessional contributions.
2. Currently people in the 15% tax band get no gain from this concession. Labor will eliminate another middle class welfare expenditure.
By carrying out this reform Australia will have gone from a system several years ago that gave concessions on contributions and superannuation earnings and taxed payouts heavily, to one that taxes payouts lightly if at all and gives no concessions on contributions and only some on earnings. In other words, from an approximation of a 401k to an approximation to a Roth IRA. The US Congress likes Roth IRAs because they bring tax revenue forward to the present. The Australian Treasury, whose head is heading the enquiry, likely feels the same way.
Even so, I'm not inclined to add any extra money to Snork Maiden's superannuation and lock it up for the next few decades!
Funding a CFD Account
I haven't opened a CFD account yet but am thinking about where the money is going to come from. $2000 would be enough to get started with (City Index allow you to open an account with $100!) but I'd probably want to put in $5000 to comfortably trade a $25,000 position. The money could come from the following sources:
1. Cash: We have about $1500 available in our cash management trust (money market account) at Adelaide Bank. So that can get me started, but it will need to be replenished as we have quite a few big expenses coming up - Snork Maiden's immigration fee - $2060, a trip to China (only one plane ticket for me - Snork Maiden's expenses are covered), and some office equipment for me - a decent chair, a new desktop computer (I like to have two computers in case one fails and also I can run the same software on more than one, or keep my trading on one and other work on another - all things where multiple screens don't cut it). My desktop (iMac) is from 2002. Probably adding more memory would solve its problems but I already added memory to it.... oh yes and a printer/fax machine but that one is a luxury. We also have cash in the US, but I am thinking that the US Dollar will go up (maybe a forlorn hope) so I don't want to transfer any of that to Australia.
2. Borrowing: We can borrow on our CommSec margin loan at 10.35% up to $20,000 or so at the moment. I could borrow in the US too on a margin loan but, again, I don't want to sell U.S. Dollars. At the end of June we should get distributions from our Australian funds which will go into paying down our CommSec debt a little.
3. Selling Investments: Most likely candidate is Colonial First State Geared Share Fund which I hold in a non-margin account - I've made about $7000 (22%) on this since mid-March. I could sell other things (again I don't want to sell stuff in the US and transfer money here) but I don't really want to sell anything else at this point and this is the easiest to do.
Borrowing increases leverage while selling reduces portfolio beta (sensitivity to stock market moves) and keeps leverage constant. Debt has a certain effect while selling an investment has uncertain effects - we might miss out on investment returns or be happy we sold before losses occur. I'm thinking to sell and take down market risk a little rather than increasing leverage to invest in trading which would increase market risk. After all, I'll still have more in that managed fund account than I had in March.
BTW a CFD is effectively a swap derivative. You pay interest to the provider and they pay you the cash flows associated with the security in question (and vice versa for a short position).
Monday, May 19, 2008
Research on CFD Providers
Man Financial was voted the best CFD provider in Australia but only seems to offer CFDs on individual shares. So I can't use that. CMC Markets is the biggest in Australia - they require you to use downloaded software, which I suspect won't run on the Mac. I sent them an e-mail to ask. Otherwise their offering seems very similar in costs etc. to City Index. Commonwealth Securities charge 0.055% each way on index CFDs with a $14.95 minimum. So that is out of the question. It looks like City Index, which was the runner up in that contest will be the winner for me. More on Thursday after the seminar.
Sunday, May 18, 2008
City Index
Here's another idea in my ongoing quest to trade stock indices cheaply, in small size, and at times which are convenient for my time zone. City Index is a CFD - contracts for difference - provider. These are like futures contracts but there is no expiry date and interest and dividends are paid in cash over time rather than being paid up front in the contract price as in the case of futures. They're illegal in the US by the way - they are very much like the bucket shops described by Jesse Livermore. The attractions for trading the ASX 200 index through this provider:
1. Minimum trade is $1 times the index vs. $25 times the index for the SPI futures. I'm looking to trade $25,000 or so initially.
2. Commission is one point of spread - i.e. their bid ask spread is one point wider than the SPI futures. This is two and a half times what Interactive Brokers charge for trading the futures contract but much less than commissions on trading warrants through CommSec (and barrier warrants have a spread equivalent to 8 index points!) and for trading a futures option with a delta of 0.25 through IB the commission is effectively the same. Anyway, its a good deal for trades of the size I want to do.
3. Unlike using options (but in common with barrier warrants and futures) there is no time premium to erode.
4. Unlike any ASX listed products but in common with SPI futures the CFD can be traded out of market hours (as long as the futures market is open).
They have a seminar in Canberra on Thursday. I'm going along to find out more. Their commissions for trading stock CFDs begin to make daytrading Australian stocks a practical proposition too.
1. Minimum trade is $1 times the index vs. $25 times the index for the SPI futures. I'm looking to trade $25,000 or so initially.
2. Commission is one point of spread - i.e. their bid ask spread is one point wider than the SPI futures. This is two and a half times what Interactive Brokers charge for trading the futures contract but much less than commissions on trading warrants through CommSec (and barrier warrants have a spread equivalent to 8 index points!) and for trading a futures option with a delta of 0.25 through IB the commission is effectively the same. Anyway, its a good deal for trades of the size I want to do.
3. Unlike using options (but in common with barrier warrants and futures) there is no time premium to erode.
4. Unlike any ASX listed products but in common with SPI futures the CFD can be traded out of market hours (as long as the futures market is open).
They have a seminar in Canberra on Thursday. I'm going along to find out more. Their commissions for trading stock CFDs begin to make daytrading Australian stocks a practical proposition too.
Friday, May 16, 2008
Demi-Millionaire
On an intraday basis, we just went over a half million U.S. Dollars in net worth ($US503k or $A535k). Hopefully, we can hold onto it. We are also at an all time high in Australian Dollar terms, exceeding the previous peak, last August, of $A527k. We are still 1/2 a percent below the peak in terms of Australian Dollar investment returns. We're up about $US85k from mid March. After reaching another of our annual goals I'm going to only raise the goal to $US505k, which just assumes that we hold onto our gains and save the retirement contributions from Snork Maiden's employer that we will receive in the remainder of the year. I project that if everything goes to plan we'll reach $US550k, but I'm not going to make that an explicit goal, as everything might not go to plan.
Snork Maiden asked me why we are gaining so fast after months of going down hill or struggling. The main reason, is of course, that the stock market is now going up - i.e. luck. But there are also two important things that I did - switching most of our bond holdings to stocks in March and early April until we had an effective 125% exposure to the stock market - and buying or holding onto a bunch of listed funds that were and still are trading way below book value. Those funds are beginning to return to book value.
In other news, Beazer released their last two quarters of earnings. Though they again lost their entire market capitalization in those six months, the accounts are not quite as bad as I thought. They can still go for more than a year at this rate before wiping out all their book value. They have $277 million of cash at hand at the end of March and will receive cash from asset sales in the near future. And finally, they renegotiated terms with their lenders that means they will not be in violation of their covenants - they delayed the earnings until these negotiations were complete... In after hours trading the stock went up a few cents. If it doesn't go down on Friday I will sell my puts.
As mentioned above, the market continues to stun confused bears and trade up and up. I'm currently projecting a pullback starting on Monday or Tuesday, but I doubt it will be significant. In fact I suppose the market will just keep on going until the old highs from October 2007 are again reached.
Wednesday, May 14, 2008
Recovered from the Credit Crunch
As of today our total return index (US term) or accumulation index (Aus speak) hit a new all time high, at least when measured in US Dollars (dark green line on the chart). That means we recouped all the losses in percentage terms that we suffered since the previous peak in October 2007. We are still just over 2% below the peak in Australian Dollar terms (light green line). In net worth terms we're a couple of thousand Australian Dollars below our all time high. We're also ahead of the MSCI index again which means that we've slightly beaten the market from October 1996 onwards. In fact there's only one month (January 2005) where an investment into our total return index would have lagged the market from then till now.
It's certainly good to feel we are again making rapid progress though I feel a bit nervous about how long this can be sustained.
Traded My First Futures Option
Strange how there are still new instruments for me to try trading :) I traded my first futures option - deliberately throwing away $A22.50 to check that it works on Interactive Brokers. I bought a 6800 June SPI Call for 1 point ($25) and then sold it for 0.5 points ($A12.50). No problems - market orders don't work though, only limit orders, but IB appears not to present the market makers bids and asks, only their own customers on the TWS screen. Though spreads should be usually very tight like this it is a bit scary without seeing the quotes, and the SFE website is no help either. All it gives is the previous settlement price the same as IB does. If I can't see current quotes, it's hard to know what limits to put in...
I think I have a solution! The ASX has an options price calculator. And you can input any strike price and date you like! This is still a little tricky to use as you have to take the implied volatility from a recent options trade. I e-mailed IB to see if they can look into getting the bid-ask - but given that SFE's site doesn't have it, I'm not hopeful.
I think I have a solution! The ASX has an options price calculator. And you can input any strike price and date you like! This is still a little tricky to use as you have to take the implied volatility from a recent options trade. I e-mailed IB to see if they can look into getting the bid-ask - but given that SFE's site doesn't have it, I'm not hopeful.
Beazer & Budget
Beazer Homes finally released their earnings for September 2007... They still have two quarters to release. I bought some puts again. This time OTM. So far the stock price isn't doing much. This is a low risk and potentially high gain trade. But the probability is of course towards the smaller loss rather than the big gain, if the price of the options is rational.
I listened to Wayne Swan's budget speech tot he AUstralian parliament this evening. There wasn't much news in it as they had pretty comprehensively "leaked" everything that wasn't in their election manifesto anyway in the last few days. Bottom line is they will still increase real government spending, but slower than the Liberals were and the government surplus will rise further as a fraction of GDP. Seems everyone (unions, business, economists...) is happy with it apart from the Greens and Liberal parties...
I listened to Wayne Swan's budget speech tot he AUstralian parliament this evening. There wasn't much news in it as they had pretty comprehensively "leaked" everything that wasn't in their election manifesto anyway in the last few days. Bottom line is they will still increase real government spending, but slower than the Liberals were and the government surplus will rise further as a fraction of GDP. Seems everyone (unions, business, economists...) is happy with it apart from the Greens and Liberal parties...
Tuesday, May 13, 2008
Interactive Brokers "Improves" Trader Workstation
The latest version of Trader Workstation - Interactive Brokers trading software - has a new look - I don't really like it, but there seems to be an upgrade to the performance of the charts. A recurrent problem in recent versions of the charts was the appearance of "ghost candles" - bogus price bars or candles - that showed up overlapping the most recent candle. Refreshing the chart after counting to three usually fixed this problem in the most recent version, but that was a hassle. This problem seems to have been eliminated. The only problem I still have is that after creating a new chart, as soon as a new candle appears after 1, 2, 3, 5 etc. minutes the technical indicators do not update until that candle is complete and we move on to the next time period. On the previous version, clicking refresh did update the indicators. Now that doesn't help and only toggling between time periods will refresh the technical indicators before a time period is complete. If they could get indicators that update in real time, that would be an immense help.
Livermore and Niederhoffer
While on the topic of book reviews and risk, I recently read "The Education of a Speculator", Victor Niederhoffer's autobiography (up till 1996) and "Reminiscences of a Stock Operator", the story of Jesse Livermore (up till 1923). Both are, in my opinion, fascinating reading for those interested in the history of the financial markets and musings on how to trade and speculate. While trading is mostly about technicals - short-term supply and demand for securities - and investing is mostly about fundamentals in the long-term - speculation is about the combination of the two in the medium term. Both Niederhoffer and Livermore were very independent minded and both very successful for periods of time, punctuated by massive blowups. The problem is both cases was lack of risk control. Livermore traded individual stocks using 10% margin, which was allowed before the 1930s and tended to pyramid his positions up and up and then pile all the profits into another huge notional position. When eventually the markets turned against him he had his biggest position and especially as the markets were relatively illiquid at the best of times in the early 20th century selling quickly was hard and he suffered massive losses. Niederhoffer never used stops, used large positions and describes the familiar situation of praying that the market will vindicate you eventually as you lose more and more. He blew up one year after this book was published after a tremendously successful run. The problem: shorting large amounts of puts. As the article cited in the last sentence mentions, Berkshire Hathaway is also shorting puts. The difference, is that the amount is small relative to the net worth of Berkshire. Unless some catastrophe took Berkshire and the S&P down to less than 20% of their current value they won't be wiped out. The lesson is not to short more puts than you are happy to buy the stocks that you are obligating yourself to buy. Don't be too greedy.
MVC Capital
I added MVC Capital to the private equity category. Also added to Newcastle Investments after they released their earnings and again bought XLF, the financial ETF. I was planning on doing more stuff but didn't expect just how strong the market was going to be. So I was looking for a pullback to get positioned and it just didn't happen. Well, it happened soon after the US open and I missed it. Oh well, better to be out of the market wishing you were in, than in the market wishing you were out :)
Monday, May 12, 2008
Using Options to Reduce Leverage
Most people think of options as a way of increasing leverage. You can put down a small amount of money to control a large amount of stock. But, of course, per contract, an out of the money option moves less than the underlying instrument for any given move in the underlying instrument. The delta of the option expresses how much the option moves for a 1 point move in the underlying. An at the money option has a delta of 0.5 (for a call, -0.5 for a put) and the further out of the money the option is the lower the delta. In the case of individual stocks there is no point in taking advantage of this because you can just trade less than 100 (in Aus 500 or 1000) shares if you really want to have a smaller position. But this effect could be useful for small futures traders, where the size of the underlying contract can be quite large. For example, the SPI futures contract (Australian stock index) is currently worth around $A145k per contract. Using an at the money option instead will result in an effective half-size position of $A72k, which is about the size of an S&P 500 E-Mini contract. One of my problems in trying to trade the SPI futures has been that I don't want to lose much money, so I set a tight stop, which then often gets hit before the index moves in my desired direction. I've got better results trading under simulation, where I'm less worried about the money.
The reason to look at options on SPI futures rather than the many other available warrants and options traded on the ASX is to reduce commissions paid. Using Interactive Brokers I can pay less than a 1/6 of the commission I need to pay Commonwealth Securities to trade ASX listed warrants. IB has Australian stocks, futures, and futures options, but not ASX warrants and options.
The downside of trading out of the money options is time decay (theta). A June at the money option is decaying at about 2.2 index points a day. That's $A55 a day, which for an overnight trade negates the commission advantage.* So this is only worthwhile intraday. But a September option decaying at about half that rate and a December option at about a third of the rate of the June option. So the question is how easy is it really to trade these options in terms of liquidity and bid-ask spreads. This statement: "The presence of Official Market Makers for SFE SPI 200® Options ensure tight bid ask spreads." is encouraging, but I can't actually see any bids and asks quoted on their site. I've requested permission to trade them (don't know why I didn't do this when I signed up for futures) and will soon find out under simulation first.
There is another way around time decay - if you buy an OTM call, short an equally OTM put at the same time. The net premium paid is then zero, but your delta doubles. This, therefore, makes no sense for an ATM option as you may as well trade the futures contract as shorting the put increases your delta to one. The downside for more OTM options is that now you have to deal with two bid-ask spreads and commissions and, therefore, this will only makes sense for longer term trades.
* This comparison is valid because I usually trade deep in the money warrants or barrier warrants through CommSec, which have little to no time decay.
The reason to look at options on SPI futures rather than the many other available warrants and options traded on the ASX is to reduce commissions paid. Using Interactive Brokers I can pay less than a 1/6 of the commission I need to pay Commonwealth Securities to trade ASX listed warrants. IB has Australian stocks, futures, and futures options, but not ASX warrants and options.
The downside of trading out of the money options is time decay (theta). A June at the money option is decaying at about 2.2 index points a day. That's $A55 a day, which for an overnight trade negates the commission advantage.* So this is only worthwhile intraday. But a September option decaying at about half that rate and a December option at about a third of the rate of the June option. So the question is how easy is it really to trade these options in terms of liquidity and bid-ask spreads. This statement: "The presence of Official Market Makers for SFE SPI 200® Options ensure tight bid ask spreads." is encouraging, but I can't actually see any bids and asks quoted on their site. I've requested permission to trade them (don't know why I didn't do this when I signed up for futures) and will soon find out under simulation first.
There is another way around time decay - if you buy an OTM call, short an equally OTM put at the same time. The net premium paid is then zero, but your delta doubles. This, therefore, makes no sense for an ATM option as you may as well trade the futures contract as shorting the put increases your delta to one. The downside for more OTM options is that now you have to deal with two bid-ask spreads and commissions and, therefore, this will only makes sense for longer term trades.
* This comparison is valid because I usually trade deep in the money warrants or barrier warrants through CommSec, which have little to no time decay.
Sometimes it is "Different This Time"
I just read Peter Bernstein's Against the Gods: The Remarkable Story of Risk. It is an interesting read though I feel he often wanted to include everything he'd researched for the book, irrespective of relevance rather than explaining in more depth the ideas he covered. For example, he never really explained why and how his discussion of game theory was really relevant. I understood the discussions of stuff I was familiar with because I was familiar with those things. I only got the most superficial notion about the other topics I was less familiar with. Anyway, one key story that Bernstein repeated more than once stayed with me. This seems to have been a formative event in his own investing career. He quotes a Gilbert Burke that before 1958:
"It has been practically an article of faith in the U.S. that good stocks must yield more income than good bonds, and that when they do not, their prices must promptly fall"
Since 1958, stocks have yielded less than bonds, while from 1870 to 1958 there were only rare occasions when they did not yield more. In 1958, Bernstein's older colleagues waited for stock prices to fall. But they never did. The bull market continued into the 1960s. Today, I often read statements like "there has been no bear market so short, so this one must last longer" (what about 1990-1?). This is just one topic people like to pronounce on. There is no theory behind this statement and only a very small sample by statistical standards to support it empirically. Maybe this time, things are different. Before 1958 people assumed that as stocks are riskier than bonds they must yield more. Since 1958, more persistent inflation and increases in stock buybacks among other things have changed the behavior of both bond and stock yields. The lessons are to look for what might have changed and not to rely on small samples to make strong predictions in the absence of theory.
Sunday, May 11, 2008
Australian and U.S. Federal Budgets
There were some great charts on the growth of tax revenues and spending in the last few decades in Australia in Saturday's Australian Financial Review. Unfortunately, their website has high subscription fees and I couldn't find similar charts elsewhere on the web. The bottom line was that despite the Australian government's constant attempts to cut tax more and more tax revenue per person has kept piling in since the mid-1990s. Anyway, in response the government has spent more and more, while maintaining a small surplus. In honor of Tuesday's upcoming Australian Commonwealth (Federal) budget I present the following comparison of the breakdown of the US and Australian federal budgets:
Australia
United States
Two big differences are in: interest payments - Australia effectively pays none as it has little government debt any more and defence where the US spends 19% and Australia 8%. Interestingly, the US spends more of its budget on health - 23.1% in total than Australia does, 18% despite there being free public health care available for all without private coverage in Australia (around 35% or so have private health care). Australia though spends more on all social security and welfare, 41%, though Australia only spends about 13% on the "age pension" while the US spends 20% on social security (almost as much goes to "families with children" as to the old in Australia) . Education is much higher in the Australian budget, not surprisingly given the almost complete absence of private universities and more centralized education system.
Australia
United States
Two big differences are in: interest payments - Australia effectively pays none as it has little government debt any more and defence where the US spends 19% and Australia 8%. Interestingly, the US spends more of its budget on health - 23.1% in total than Australia does, 18% despite there being free public health care available for all without private coverage in Australia (around 35% or so have private health care). Australia though spends more on all social security and welfare, 41%, though Australia only spends about 13% on the "age pension" while the US spends 20% on social security (almost as much goes to "families with children" as to the old in Australia) . Education is much higher in the Australian budget, not surprisingly given the almost complete absence of private universities and more centralized education system.
Thursday, May 08, 2008
Qantas
A new investment in Qantas. It looks cheap despite high oil prices etc. The P/E ratio is 6.4 and the dividend yield is 11% (fully franked). CommSec analysts are very bullish on it. But the stock has kept on falling despite their high valuation. So just a small 1% of net worth position (1500 shares). Of course, buying an airline is also a bet against oil.
Croesus Mining Rises from the Dead
The stock will again be traded on the ASX from 9th May. My shares are likely worth only $20 or so. After the capital reconstruction I have 2666 shares and new shares have been issued at around 1 cent per share. Though I already wrote them down to zero in my accounts. When the company last traded in March 2006 they were worth upwards of $A11,000.
First task will be to make sure that Commonwealth Securities reinstates my shareholding correctly. I probably don't need the capital loss this year (my current taxable net gain is $A589) unless my Australian managed funds distribute significant capital gains on 30th June but I guess I might as well sell and then carry forward the excess capital loss to next year. Last year, though, my funds distributed $A12,000 in capital gains. But as most of that was long-term gains, only $A6,600 would have been taxable in Australia (I lived in the US at the time). After this year's negative share price performance I doubt distributed gains will be so high.
I'm expecting my Australian tax bill to be zero for 2007-8 (Australian tax years run from July 1st to June 30th the next year). My tax liability on dividends will be wiped out by interest deductions and franking credits (in Australia we get credits for corporation tax paid by the company paying the dividend to avoid double taxation, unlike C-corporations in the US). Snork Maiden will certainly get a refund as she didn't work till October 1st and if my bill is zero she should be able to claim me as a dependent. An additional advantage of a zero tax bill is that I won't have to pay quarterly estimated tax payments during 2008-9 (I think).
First task will be to make sure that Commonwealth Securities reinstates my shareholding correctly. I probably don't need the capital loss this year (my current taxable net gain is $A589) unless my Australian managed funds distribute significant capital gains on 30th June but I guess I might as well sell and then carry forward the excess capital loss to next year. Last year, though, my funds distributed $A12,000 in capital gains. But as most of that was long-term gains, only $A6,600 would have been taxable in Australia (I lived in the US at the time). After this year's negative share price performance I doubt distributed gains will be so high.
I'm expecting my Australian tax bill to be zero for 2007-8 (Australian tax years run from July 1st to June 30th the next year). My tax liability on dividends will be wiped out by interest deductions and franking credits (in Australia we get credits for corporation tax paid by the company paying the dividend to avoid double taxation, unlike C-corporations in the US). Snork Maiden will certainly get a refund as she didn't work till October 1st and if my bill is zero she should be able to claim me as a dependent. An additional advantage of a zero tax bill is that I won't have to pay quarterly estimated tax payments during 2008-9 (I think).
Wednesday, May 07, 2008
Monthly Report: April 2008
This month I'm trying out a new format, which focuses on how we are doing in meeting our annual goals. Other statistics appear towards the end of the report. All amounts are in U.S. Dollars unless otherwise stated.
1. Net Worth Goal: Reaching $500k We made progress on this goal as net worth again rose over $450k. Net worth rose by $US33,685 to $US466,625 and in Australian Dollars rose $A21,318 to $A495,461. The US dollar gain is my largest ever. USD results were strongly boosted by the rise in the Australian Dollar.
2. Alpha Goal: Alpha of 8.5% The point of this goal is to earn at least an average wage from risk-adjusted excess returns. Using a regression on the last 36 months of returns gives a beta of 0.71 to the MSCI or 0.58 to the SPX. Alphas are 5.26% and 10.32% respectively. A more sophisticated time-series method yields a beta of 0.91 and an alpha of 9.62% for the MSCI index, which meets our annual goal. The risk adjusted excess return for April based on the latter analysis was 2.58%. Multiplying this by net worth gives an income of $11,624. For the year so far the risk-adjusted excess return in dollar terms has been $21,952. Using the estimate of alpha the smoothed annual income is $43,300. In Australian Dollars terms returns are somewhat lower, while they are higher using the S&P 500 as a benchmark.
3. Increasing Non-Retirement Net Worth by More than the MSCI Index The point of this goal is to make sure that we only spend out of non-investment income and excess returns and don't use the normal market return on investments to fund spending. In other words, this makes sure we have positive saving. Non-retirement accounts rose by 10.07%, while the MSCI index rose by 5.65% So far this year these accounts have grown by 3.99% in excess of the MSCI return.
4. Achieving Break-Even on U.S. Taxable Accounts At the end of the month we were $559 from the breakeven point with a gain of $5,379 for the month. The rate of return on these accounts was 7.68%. Following the month's close we met this goal. The chart shows the remaining gap to reaching breakeven over the last year and a half:
5. Making More Money from Trading Than in 2008 Realised gains this month were $915 and so far this year $2,062. I've now had three positive months in a row. Futures trading though has not been going well, but I have been making money trading stocks and options. Last year I made $9,500 from active trading. Currently, I'm lagging behind last year's performance but I think the goal still may be achievable.
Background Statistics
Income and Expenditure
Expenditure was $3,996 in line with recent numbers. Spending included $334 of implicit car expenses - depreciation and interest. Snork Maiden was paid three times this month and Moom paid his New York State Taxes, which we treat as negative income :(
Non-retirement accounts gained $21,661 with the rise in the Australian Dollar contributing $6,201. Retirement accounts gained $11,911 but would have gained only $7,108 without the change in exchange rates.
Investment Performance
Investment return in US Dollars was 7.75% vs. a 5.65% gain in the MSCI (Gross) All Country World Index, which I use as my overall benchmark and a 4.87% in the S&P 500 total return index. Returns in Australian Dollars and currency neutral terms were 4.47% and 5.21% respectively. So far this year we have gained 2.58%, while the MSCI and S&P 500 have lost 4.04% and 5.03%, respectively.
The contributions of the different investments and trades are as follows:
The returns on all the individual investments are net of foreign exchange movements. There are no clear patterns this month in what gained and what lost. The biggest gain was in the CFS Geared Share Fund which is our biggest investment. Australian listed hedge funds such as Everest Brown and Babcock and Platinum Capital began to recover from steep discounts to book value.
Asset Allocation
I completed the switch from bonds to stocks this month and we are now as long stocks as I think we will ever be.
Allocation was 40% in "passive alpha", 71% in "beta", 3% allocated to trading, 5% to industrial stocks, 3% to liquidity, 3% to other assets and we were borrowing 25%. Our currency exposures were roughly 55% Australian Dollar, 23% US Dollar, and 22% Other. In terms of asset classes, the distribution was:
Due to the use of leveraged funds, our actual exposure to stocks was 113% of net worth.
1. Net Worth Goal: Reaching $500k We made progress on this goal as net worth again rose over $450k. Net worth rose by $US33,685 to $US466,625 and in Australian Dollars rose $A21,318 to $A495,461. The US dollar gain is my largest ever. USD results were strongly boosted by the rise in the Australian Dollar.
2. Alpha Goal: Alpha of 8.5% The point of this goal is to earn at least an average wage from risk-adjusted excess returns. Using a regression on the last 36 months of returns gives a beta of 0.71 to the MSCI or 0.58 to the SPX. Alphas are 5.26% and 10.32% respectively. A more sophisticated time-series method yields a beta of 0.91 and an alpha of 9.62% for the MSCI index, which meets our annual goal. The risk adjusted excess return for April based on the latter analysis was 2.58%. Multiplying this by net worth gives an income of $11,624. For the year so far the risk-adjusted excess return in dollar terms has been $21,952. Using the estimate of alpha the smoothed annual income is $43,300. In Australian Dollars terms returns are somewhat lower, while they are higher using the S&P 500 as a benchmark.
3. Increasing Non-Retirement Net Worth by More than the MSCI Index The point of this goal is to make sure that we only spend out of non-investment income and excess returns and don't use the normal market return on investments to fund spending. In other words, this makes sure we have positive saving. Non-retirement accounts rose by 10.07%, while the MSCI index rose by 5.65% So far this year these accounts have grown by 3.99% in excess of the MSCI return.
4. Achieving Break-Even on U.S. Taxable Accounts At the end of the month we were $559 from the breakeven point with a gain of $5,379 for the month. The rate of return on these accounts was 7.68%. Following the month's close we met this goal. The chart shows the remaining gap to reaching breakeven over the last year and a half:
5. Making More Money from Trading Than in 2008 Realised gains this month were $915 and so far this year $2,062. I've now had three positive months in a row. Futures trading though has not been going well, but I have been making money trading stocks and options. Last year I made $9,500 from active trading. Currently, I'm lagging behind last year's performance but I think the goal still may be achievable.
Background Statistics
Income and Expenditure
Expenditure was $3,996 in line with recent numbers. Spending included $334 of implicit car expenses - depreciation and interest. Snork Maiden was paid three times this month and Moom paid his New York State Taxes, which we treat as negative income :(
Non-retirement accounts gained $21,661 with the rise in the Australian Dollar contributing $6,201. Retirement accounts gained $11,911 but would have gained only $7,108 without the change in exchange rates.
Investment Performance
Investment return in US Dollars was 7.75% vs. a 5.65% gain in the MSCI (Gross) All Country World Index, which I use as my overall benchmark and a 4.87% in the S&P 500 total return index. Returns in Australian Dollars and currency neutral terms were 4.47% and 5.21% respectively. So far this year we have gained 2.58%, while the MSCI and S&P 500 have lost 4.04% and 5.03%, respectively.
The contributions of the different investments and trades are as follows:
The returns on all the individual investments are net of foreign exchange movements. There are no clear patterns this month in what gained and what lost. The biggest gain was in the CFS Geared Share Fund which is our biggest investment. Australian listed hedge funds such as Everest Brown and Babcock and Platinum Capital began to recover from steep discounts to book value.
Asset Allocation
I completed the switch from bonds to stocks this month and we are now as long stocks as I think we will ever be.
Allocation was 40% in "passive alpha", 71% in "beta", 3% allocated to trading, 5% to industrial stocks, 3% to liquidity, 3% to other assets and we were borrowing 25%. Our currency exposures were roughly 55% Australian Dollar, 23% US Dollar, and 22% Other. In terms of asset classes, the distribution was:
Due to the use of leveraged funds, our actual exposure to stocks was 113% of net worth.
Monday, May 05, 2008
How Well Do Leveraged ETFs Track Their Benchmarks?
There's been some debate on and off about how well various ETFs track their underlying benchmarks. Debate has focused on commodity, currency, and leveraged ETFs. For example, CNY - the recently issued ETN for the Renminbi - has gone down recently as the RMB continued to revalue relative to the USD. The reason is that the ETN is tracking the RMB futures traded on the Chicago Mercantile Exchange. Those futures also declined in value during the relevant period. People have also questioned whether QID, QLD, SSO and other leveraged ETFs track their underlying indices. For example, this discussion on Roger Nusbaum's blog about SSO, which attempts to return twice the S&P 500's return. I made some comments but I was getting confused and so I decided to do a statistical analysis to answer this question definitively.
I downloaded daily prices for SPY and and SSO from Yahoo Finance and computed the daily percentage returns since 21 June 2006 for both ETFs (N=469). I used Yahoo's adjusted prices, which account for distributions paid. I then regressed the daily returns for SSO on those for SPY. The results: the slope coefficient (equal to CAPM beta) = 1.99 and the intercept coefficient = -0.000225. Converting this daily intercept to an annual intercept results in a value of -5.4%. The R-squared in the regression is 0.98:
So in terms of reproducing two times the index, this fund is very good with a beta of 1.99. But why does it have an intercept of -5.4%? One factor is the higher expense ratio of SSO - 0.95% vs. 0.08% for SPY. The remaining intercept term is -4.53%. This appears to be because I didn't subtract a risk-free rate from the returns as is usually done for CAPM regressions and it represents the implicit borrowing costs of the fund. The basic CAPM equation is:
where r is the rate of return (of SSO in this case), f the risk free rate, and m the market rate of return (here SPY). Rearranging we get:
For SSO beta is 2 and, therefore, the intercept term in my regression is equal to the sum of the true CAPM alpha (here negative due to the higher expense ratio) and the negative of the risk free rate. 4.5% sounds about right for the average risk free rate over this period.
The bottom-line: SSO appears to track SPY leveraged two times as well as can be expected taking into account higher expenses and borrowing costs.
I downloaded daily prices for SPY and and SSO from Yahoo Finance and computed the daily percentage returns since 21 June 2006 for both ETFs (N=469). I used Yahoo's adjusted prices, which account for distributions paid. I then regressed the daily returns for SSO on those for SPY. The results: the slope coefficient (equal to CAPM beta) = 1.99 and the intercept coefficient = -0.000225. Converting this daily intercept to an annual intercept results in a value of -5.4%. The R-squared in the regression is 0.98:
So in terms of reproducing two times the index, this fund is very good with a beta of 1.99. But why does it have an intercept of -5.4%? One factor is the higher expense ratio of SSO - 0.95% vs. 0.08% for SPY. The remaining intercept term is -4.53%. This appears to be because I didn't subtract a risk-free rate from the returns as is usually done for CAPM regressions and it represents the implicit borrowing costs of the fund. The basic CAPM equation is:
where r is the rate of return (of SSO in this case), f the risk free rate, and m the market rate of return (here SPY). Rearranging we get:
For SSO beta is 2 and, therefore, the intercept term in my regression is equal to the sum of the true CAPM alpha (here negative due to the higher expense ratio) and the negative of the risk free rate. 4.5% sounds about right for the average risk free rate over this period.
The bottom-line: SSO appears to track SPY leveraged two times as well as can be expected taking into account higher expenses and borrowing costs.
Saturday, May 03, 2008
Achieved One Annual Goal
As you can see in the righthand column, I've achieved one of my five annual goals - that of reaching breakeven on my U.S. investment/trading accounts - trading accounts at Ameritrade and Interactive Brokers, my Roth IRA and my holding in the TFS capital mutual fund. I first began investing in the US back in 1997 and have kept a record of how much money has gone into those accounts - until now I have mostly been in deficit - i.e. I've suffered a net loss. Finally, I've recouped my investment - kind of like my tuition fees for learning about trading etc. Of course when compared with inflation or the returns on an index fund I'm still losing. To match the NASDAQ 100 index since August 1997 I'd need to show an 80% gain. Luckily, I've more than made up for this poor performance in retirement accounts and Australian trading accounts. Performance in the last 1 1/2 years has been pretty good (alpha = 25%):
The challenge now is to hold on to these gains in the next few months. My very short-term trading is still not going well. I had another bad loss on May 1st - though not as bad as the one on April 1st. Maybe I should just keep away from trading on the first day of the month!
On Friday we also made progress on Snork Maiden's immigration process. We need to get a police check from the FBI in the US and to do this we need to send them her fingerprints. Seems that the only people who can do that here are the police, but there is a two month waiting list in Canberra! Nearby locations in New South Wales refuse to do this for ACT residents. We finally got the Goulburn, NSW police to agree to do it and headed up there (about 85km away) on Friday afternoon to successfully accomplish the mission. Goulburn is also the home of the "Big Merino" (one of Australia's many "big things"), shown above while moving to its current location. There's a "wool museum" inside and a gift shop alongside of course.
Tuesday, April 29, 2008
How Popular are Various Option Strategies?
Lakonishok J., I. Lee, N. D. Pearson, and A. M. Poteshman (2007) Option market activity, The Review of Financial Studies 20(3): 813-857.
I've been searching for more papers on put trading but there only seem to be a few out there with more or less the same message. I came across the fascinating paper cited above in this process. The authors analyse CBOE data for the period from 1990 through the end of 2001 that is disaggregated according to type of investor: proprietary traders, full-service broker clients, discount broker clients, and other public clients (which includes foreigners, unassigned trades etc.). When you trade in the options market you are trading against a market maker - your trade does not have to be matched by another public client. So the public has unbalanced amounts of written and bought calls and options, which are balanced by market-maker positions. The most popular strategy in this period was writing calls, followed by buying calls, writing puts, and buying puts. Most trades were bets on direction of the market rather than hedging transactions. Also writing and buying of straddles and strangles, which are trades on volatility, was a very small part of total activity. So, surprisingly, contrary to popular wisdom, market makers are net buyers of options! Discount customers increased their purchases of calls over the period (one not surprising result) but also increased their put writing.
Given the lack of popularity of buying puts, the empirical high price of puts is all the more surprising.
I've been searching for more papers on put trading but there only seem to be a few out there with more or less the same message. I came across the fascinating paper cited above in this process. The authors analyse CBOE data for the period from 1990 through the end of 2001 that is disaggregated according to type of investor: proprietary traders, full-service broker clients, discount broker clients, and other public clients (which includes foreigners, unassigned trades etc.). When you trade in the options market you are trading against a market maker - your trade does not have to be matched by another public client. So the public has unbalanced amounts of written and bought calls and options, which are balanced by market-maker positions. The most popular strategy in this period was writing calls, followed by buying calls, writing puts, and buying puts. Most trades were bets on direction of the market rather than hedging transactions. Also writing and buying of straddles and strangles, which are trades on volatility, was a very small part of total activity. So, surprisingly, contrary to popular wisdom, market makers are net buyers of options! Discount customers increased their purchases of calls over the period (one not surprising result) but also increased their put writing.
Given the lack of popularity of buying puts, the empirical high price of puts is all the more surprising.
Sold Call Options on BWLD
Sold a couple of May covered call options on BWLD. From a realised gain perspective it's a certain win - I bought the stock at less than $25 and I received $2 per option. So if the stock is called I make a gain on the options and the stock and if the options expire worthless I just make a gain on the options. From a true economic perspective, though, I lose notionally if the stock expires above $27 or below $23. But even that isn't so clear cut, as maybe I would have sold anyway before the stock reached $27 if I hadn't sold the options (in the case where the stock is destined to keep rallying) and yesterday the stock was above $25 and I could have just sold then which will have been better than selling the option at expiration prices less than $2 below yesterday's price ($24 and below - assuming the stock is destined to fall). Sometimes, working out what the opportunity cost is is not so clear cut. Taken to the extreme, the opportunity cost of making any investment is not investing in the best performing asset available. But would you have really invested in that other asset?
The model is very unclear here about direction. I am guesstimating that a steeper downtrend will start around the FOMC announcement on Wednesday before the next leg of the rally gets underway. Towards the bottom of any downtrend I'll start implementing my put selling strategy.
The model is very unclear here about direction. I am guesstimating that a steeper downtrend will start around the FOMC announcement on Wednesday before the next leg of the rally gets underway. Towards the bottom of any downtrend I'll start implementing my put selling strategy.
Monday, April 28, 2008
White Swan Trading
A much simpler to understand study about the profitability of selling put options. I've sold options in the past - several years ago - and am thinking of doing so again in a small way. Selling a put credit spread - selling a put option and buying a more out of the money put - is safer as you buy insurance against a market crash while selling insurance against a small market dip. This reduces returns and increases the probability of losing money but eliminates the possibility of losing big. I'm thinking of entering these transactions in stages using my model to find optimal points to sell and buy. I'll sell some puts in order to acquire stocks and also sell index puts.
I was very interested in the iron condor strategy, but after research over the weekend it looks a lot less attractive. The iron condor involves selling a put credit spread as described above and also selling a call credit spread. A call credit spread means you sell a call option and buy one further out of the money in order to insure against a runaway market rally. (Selling a call option means giving someone the right to buy the stock from you - if you don't own the stock you need to go into the market and buy it at the current price. This is costly if the market rises a lot. From an economic perspective it actually doesn't matter whether you own the stock already or not as selling a stock at less than the market price to someone has an opportunity cost).
The interesting thing about the iron condor (I am assuming that both the sold put and call are at the same strike price) is that the maximum amount you can lose is less than the maximum you can lose from the put spread and the maximum profit is higher than the maximum profit from the put spread. This sounds like a "free lunch", which economics tells us does not exist :) The reason is that you keep the credit from both options transactions but only one of the sold options can end up in the money at expiry. With the put spread you only have one credit and so when you lose you lose bigger and when you win you win smaller. But, alas, there is no free lunch. The probability of a loss is now more than doubled! And the probability of getting the maximum profit has declined from more than 50% to near zero. In the case of the put spread you only lose if the market goes down. But with the iron condor you might lose if the market goes up or down. And in the long run the stock market tends to go up. Therefore, the probability of loss is more than doubled. And, in the case of the put spread as long as the market is above the sold put strike at expiry you make the maximum profit. Which happens more than 50% of the time (if you enter the market randomly). But in the case of the Iron Condor, you only get the maximum profit if the market is exactly at the strike price at expiry, which has a low probability.
The Iron Condor looks like a win-win to the naive observer, but deeper analysis shows that selling put spreads and naked puts has a higher expected return.
There is an interesting reference at the end of the article to Nassim Taleb's black swan strategy, which involves buying out of the money puts and suffering through many small losses in the hope of scoring the occasional big win on a market collapse. It's interesting that Taleb doesn't provide any evidence of his strategy's returns. The academic evidence on put selling involves selling near or at the money puts. Perhaps a buying strategy works if the puts involved are sufficiently out of the money? Michael Statsny argues that the black swan strategy doesn't work. By contrast, the white swan strategy involves collecting regular profits and occasionally taking a big hit. Famously, Victor Niederhoffer blew up from put selling. This can be avoided by not using too much leverage. You should never sell more puts than you'd be willing to buy stocks even if margin requirements allow you to. The same goes for futures trading and options buying.
Sunday, April 27, 2008
How Good Do You Have to Be to Make Money by Shorting?
I was reading this interesting paper on returns to option strategies (heavy econ paper) and was thinking about how good a trader needs to be to make money from shorting stocks. The expected return in the long run from buying stocks is something like 10%. Therefore, the expected return from shorting stocks is -10%. In order to make any money at all from shorting - i.e. beat a checking account - you need to have an alpha - an average excess return - of 10%! To beat the market by shorting you need to have an alpha of 20%! I raised a lot of skepticism when I suggested that my alpha was 9%. Buying puts has similar implications. Selling puts is, however, on average, a money-making strategy. The paper finds that buying puts loses money even more effectively than shorting stocks. The problem with selling puts is the risk of a crash - you need to have some very good risk control in place. Selling puts also is psychologically difficult -the downside maximum loss is potentially very large and uncertain with a limited and known upside, even though the mean return is positive.
By the way selling calls is also a losing strategy - selling covered calls doesn't "add income" - it reduces expected returns.
By the way selling calls is also a losing strategy - selling covered calls doesn't "add income" - it reduces expected returns.
Not Only Bloggers are More Open About Money
Contrast this with a boomer Australian friend that told me not to ask people what suburb (neighborhood) they live in, because that will tell you how well off they are.
Friday, April 25, 2008
Is the Market About to Break Through Resistance?
The market is very strong. Prices are going up while stochastics are falling:
The market is achieving this by pushing ahead to new highs intraday and then falling back. This means that the market closes lower relative to the now extended recent range and the stochastics which measure price relative to the recent range fall, though price itself is higher than the previous day. Everytime I sell to take profits, the stock seems to go higher (e.g. Apple). Going short is particularly hazardous. Yesterday I made a little money on some SPI puts but happy I closed the position.
SPX and many other indices are bumping up against a major resistance line that provided support last year:
Basic technical analysis says that if the line is breached we should go back to the old highs. With the market this strong, a breakthrough seems likely next week. Now probably the market will fall just to prove me wrong :)
The market is achieving this by pushing ahead to new highs intraday and then falling back. This means that the market closes lower relative to the now extended recent range and the stochastics which measure price relative to the recent range fall, though price itself is higher than the previous day. Everytime I sell to take profits, the stock seems to go higher (e.g. Apple). Going short is particularly hazardous. Yesterday I made a little money on some SPI puts but happy I closed the position.
SPX and many other indices are bumping up against a major resistance line that provided support last year:
Basic technical analysis says that if the line is breached we should go back to the old highs. With the market this strong, a breakthrough seems likely next week. Now probably the market will fall just to prove me wrong :)
Wednesday, April 23, 2008
Back to Square One in Futures Trading
Don't pass go and don't collect £200.
That was a phrase on one of the cards in the Monopoly Game we played when I was growing up. After a year and a half of futures trading I'm pretty much back to square one, moneywise, at less than $200 in profit. At one point I was up $9,000, though I was also down $2,000:
I've lost trading all contracts apart from the NQ E-Mini NASDAQ.
This month, though, I'm losing in them and doing OK on the other contracts. In the meantime, I've been doing OK trading stocks and options, which has turned around my trading performance in the last few months. I'm going to keep trying. I know what to do, but still am not quite doing it right. Most of this month's loss was in a single trade on 1st April where I completely lost control. I've been reading the story of Jesse Livermore. He blew up many times, early on (and apparently later), and kept coming back. I haven't blown up that bad, but I haven't been up in the way he was either, because I don't take those kind of risks.
That was a phrase on one of the cards in the Monopoly Game we played when I was growing up. After a year and a half of futures trading I'm pretty much back to square one, moneywise, at less than $200 in profit. At one point I was up $9,000, though I was also down $2,000:
I've lost trading all contracts apart from the NQ E-Mini NASDAQ.
This month, though, I'm losing in them and doing OK on the other contracts. In the meantime, I've been doing OK trading stocks and options, which has turned around my trading performance in the last few months. I'm going to keep trying. I know what to do, but still am not quite doing it right. Most of this month's loss was in a single trade on 1st April where I completely lost control. I've been reading the story of Jesse Livermore. He blew up many times, early on (and apparently later), and kept coming back. I haven't blown up that bad, but I haven't been up in the way he was either, because I don't take those kind of risks.
BHP
I realised that about 8% of our net worth is invested in one company: BHP Billiton. This is because we have 35% of net worth in the Colonial First State Geared Share Fund which has 11%+ (at the end of 2007) in this stock - and because the fund is levered, the actual exposure is near double the stated number. Then we also own shares in the CFS Global Resources Fund, which is also invested in BHP, and our other Australian funds undoubtedly also have exposure to BHP given its weight in the Australian stock market. This seems a lot to have in one company, given my guideline to have less than 2% in any individual company stock (except listed funds). You can try to diversify via mutual funds but then end up less diversified than you expect.
Is this a problem? Obviously, a big theme that has done well in recent years is investing in resources. And many would recommend investing in BHP. BHP is very diversified across resources and geographical locations so there is less concern than there might be in most cases in investing in a single company.
But, its price earnings ratio is 17 and free cash flow is only about half earnings. That seems very pricey. According to Yahoo, analysts are not forecasting much earnings growth going forward. That actually seems rather strange to me given the increases in iron ore and coal prices that are underway. So I checked up on Australian analysts' reports through my broker, CommSec.
These numbers are a lot more positive. Australian analysts are forecasting 36% profit growth for the 2008-9 financial year relative to 2007-8 and their forecasts have risen over the last three months. One analyst is forecasting 44% growth. That's reassuring. However, forecasts for the year ending 30th June 2008 are for only 4.6% growth over the previous year.
I guess if i was still worried about investing so much in BHP I could buy put options or short the stock to hedge my exposure. My feeling that that would be a losing trade, tells me that for the moment I am OK with this, I guess.
Monday, April 21, 2008
Reverse Adverse Selection
Interesting article in Freakonomics on "pay as you drive insurance". In the case of health insurance, those people who most need insurance are most likely to pay for it, while young healthy people are not. This adverse selection pushes up the price of insurance for those that have it (and is one advantage of a government mandated system or government provision). In this car insurance example, people who drive less would be given a discount, which will encourage low mileage drivers to sign up with the company who gives the discount, especially if they raised rates on high mileage drivers. Not all insurance risks are proportional to miles driven. The risk of the car being stolen for example only declines a little. Drivers who drive very little are likely to be more dangerous, but so are those that drive a lot if they are more likely to fall asleep etc on long distance journeys.
I wish we could pay less insurance for not driving much. Here third party damage insurance is paid through the government with our annual vehicle registration, though a private insurer covers the policy. Registration cost us $A760 or so for the year. We have separate insurance for loss or damage of our car, which cost a similar amount. It would be nice if the registration could be proportional to kilometres driven.
On other externalities discussed in our article, our car is not very fuel efficient. It has a 4 litre engine. As we don't drive much - Snork Maiden walks to work - I've joked that we are doing society a service by taking this large high carbon emissions vehicle off the road for most of the time :)
I wish we could pay less insurance for not driving much. Here third party damage insurance is paid through the government with our annual vehicle registration, though a private insurer covers the policy. Registration cost us $A760 or so for the year. We have separate insurance for loss or damage of our car, which cost a similar amount. It would be nice if the registration could be proportional to kilometres driven.
On other externalities discussed in our article, our car is not very fuel efficient. It has a 4 litre engine. As we don't drive much - Snork Maiden walks to work - I've joked that we are doing society a service by taking this large high carbon emissions vehicle off the road for most of the time :)
Friday, April 18, 2008
The Best Market-Timers are Bullish
The best market-timers are bullish on average and the worst are bearish on average currently. Yes, some market-timing gurus do beat the market. And those ones are currently bullish. However, they are fewer in number than all those bearish commentators out there who generally don't beat the market. So what does that tell you? :)
Today the Australian market was down. The only catalyst I could find was Brambles (BXB.AX) saying that Walmart might reduce its contract or something. Gold remained strong, oil remained strong. The Japanese and Hong Kong markets were up and U.S. futures, especially of the Q variety were strongly up following Google's earnings announcement, which I got up before 6am this morning Australian time to follow (just wish I had more GOOG :)). Given all this, I didn't see much risk in buying some SPI (ASX 200 Index) call warrants near the bottom today. I plan to sell them Monday either way. My model is pointing down for the Australian market but it looks like another double-peaked stochastic wave is taking shape, which has been pretty common lately. My position is only a fifth of the size of a SPI futures contract. So I feel very little fear trading this in comparison.
Today the Australian market was down. The only catalyst I could find was Brambles (BXB.AX) saying that Walmart might reduce its contract or something. Gold remained strong, oil remained strong. The Japanese and Hong Kong markets were up and U.S. futures, especially of the Q variety were strongly up following Google's earnings announcement, which I got up before 6am this morning Australian time to follow (just wish I had more GOOG :)). Given all this, I didn't see much risk in buying some SPI (ASX 200 Index) call warrants near the bottom today. I plan to sell them Monday either way. My model is pointing down for the Australian market but it looks like another double-peaked stochastic wave is taking shape, which has been pretty common lately. My position is only a fifth of the size of a SPI futures contract. So I feel very little fear trading this in comparison.
Wednesday, April 16, 2008
Great Article on the British Housing Market:
Great Article on the British Housing Market:. Click on the links. It's nuts that the average two bedroom apartment in inner Canberra costs about £185,000. But they are pretty nice compared to what you probably get for that "lowest price" property in East London mentioned in the article. One of the apartments in the building I grew up in in South London recently sold for £250,000. I remember my parents bought for £4,500 (1966) and sold for about £60,000 in 1995. That was an investment mistake. Would have been much better to rent it out (with an agent managing it).
And in Ireland a one bedroom apartment in a suburb of Dublin for $575,000 (£290,000 or $A620,000). Suddenly, Canberra looks cheap :)
Meanwhile in California:
On another note, Intel's earnings report has boosted the futures up. Maybe wave 3 from the March low is starting?
And in Ireland a one bedroom apartment in a suburb of Dublin for $575,000 (£290,000 or $A620,000). Suddenly, Canberra looks cheap :)
Meanwhile in California:
On another note, Intel's earnings report has boosted the futures up. Maybe wave 3 from the March low is starting?
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