Preliminary Report for March 2010

I might put some more numbers and charts up at the end of the month when all investments have reported, but here are numbers with some guesses included (in USD):



I still received just over two weeks salary in March and Snork Maiden got three salary payments. So current non-investment income (after tax) came in at $7,633. We spent $4,148 which is lower than last month but several hundred above our lowest spending months, when we can spend up to a thousand dollars less than this somehow or other :). Retirement accounts did better than non-retirement accounts but overall the rate of return in USD is estimated at 8.16% against 6.48% for the MSCI World Index and 6.03% for the S&P 500. Net worth reached $445k ($A485k). Our all time high was $482k, so we're getting back towards that range:

Moominmama Report March 2010

Moominmama had a positive month with good gains in stocks and commodities. The MSCI World Index rose 6.48% in March and the average equity return here about matched the index.

Income/Expenditure 2009: Australian Dollar Edition

I've produced a version of the annual accounts in Australian Dollars, which is what we are actually spending in and for the most part earning in:



Same format, different currency. We came in at over AUD 100k in after tax non-investment income - mostly salaries. This puts us near the top of the income distribution in Australia. Especially when we add in the retirement contributions and investment income. A large proportion of the latter is just bounce back in capital values though. This year will probably not look anything like that. The rising Aussie Dollar put a damper on the investment returns. Retirement contributions add 24% on top of the after tax salary due to the high contribution rates in public sector jobs in Australia and additional salary sacrifice contribtions we are making for Snork Maiden.

For non-Australian readers - the compulsory level of retirement contributions by employers is 9% on top of the pre-tax salary. But in the government sector the levels range from 15 to 17%. On top of that, at the universities, employees are required to contribute an additional 7% out of the salary for some reason.

The spending and saving percentages below the main table refer to saving from non-investment income and don't include stuff in the retirement column while the savings numbers in the main table include investment income.

Annual Report 2008: Final Episode

While I'm at it, here is finally the income, expenditure, savings report for 2008:



I didn't post it last year, as it was just so horrible. The crude savings rate from non-investment income was 9%. This compares to 41% in 2009 and a negative savings rate in 2007 when we moved to Australia. So I guess the trend is in the right direction. When I was single I managed the following savings rates: 2003, 34%; 2004, 48%; 2005, 43%; 2006, 58%. It's hard to imagine how I only spent $26k in 2006. But my rent was only $600 a month for a start.

Income/Expenditure Report 2009

I did an annual report for 2009 but skipped the actual income, spending, and saving accounts for the year. So here they are:



They follow the format of my monthly reports. All numbers are in USD though we mainly earn and spend in AUD. After tax salaries, tax refunds, etc. amounted to $82k. Out of that we spent $48k. So our crude savings rate there was 41%. Most of my salary, which we only had for a year, was saved. Retirement contributions from pre tax salary and the employer's contributions came to $21k (This number is also after the 15% Australian contributions tax). I also made a $732 contribution in after tax money in order to get the government co-contribution. Investment returns are pre-tax. Tax credits then adjust those returns so that we get the correct change in net worth. Our accounts saw a very strong rebound redressing a large part of the 2008 debacle. Net worth increased by $213k about half and half split between retirement and non-retirement accounts.

Obviously, our true savings rate was above 41%. But if we compare expenditure to the total income figure we had a negative savings rate in 2008... So maybe that's not very useful. Comparing these numbers with this post I'd say we spent 40% on needs, 20% on wants, and saved 40% roughly.

Risk Reduction

I switched $A13,750 from our holdings of Colonial First State Geared Share Fund to the CFS Conservative Fund in my CFS Superannuation account. This effectively sells the units I purchased in July and September 2008 for a small profit. Even so, the value of our holdings in this fund in this account has still gone up this month at this point. Our allocation to large cap Australian stocks will be about constant this month and still well overweight and leverage will be down by just over a percentage point. Still this is a small step towards risk reduction without going overboard in any way :)

P.S.
I'm actually going to let the risk allocation in Snork Maiden's accounts drift up going forward. I increased the allocation of future investments in superannuation account in the "sustainable" (=Australian shares) allocation to 20% from 10%. The actual current allocation is 11%. I'm also going to tweak the allocations in her non-superannuation Colonial First State account. But I'll blog about that more when I actually make a move there. My accounts have gotten overinvested in risk and hers under, so we'll move them towards each other.

Job Search Update

The chairman just wanted to update me on the state of the job search. It'll be another two weeks till they can make a decision... I did get a bit more insight into what's happening at least and what the thinking is. There's a good chance I get a job but not yet a certainty.

P.S.

Just as I finished this blogpost I got a call from another university in Australia who want to interview me on 14th April...

Moominvalley February 2010 Report

These reports are now going to come about a month after the close of the month, because only then do we have reports from all funds. As usual, everything is in USD unless otherwise stated. The monthly income/expenditure report follows:



Our spending was a bit above the low end at $4,262 due to car expenses (registration and depreciation - there has been no depreciation for a about a year). There were moderately positive - the rate of return in USD terms was 2.14% vs. 1.31% for the MSCI World Index and 3.10% for the S&P 500. In AUD terms it was 1.16% as the Aussie Dollar rose against the US Dollar. The only asset class that lost this month were hedge funds. There were no big shifts in allocation. Net worth reached USD 409k (AUD 457k) an increase of $12k.

Leverage continued to decline. Loans are only 8.5% of net worth now and total leverage including leverage embedded within investments fell to 36.7% relative to net worth. The peak levels we hit were 90% total leverage in August 2008 and 38% loans to net worth in July 2008.

One Project Close to Closure the Other in Limbo

I submitted the final report for the project I did over the past year today, though I'll need to edit down the paper a lot to submit it to an academic journal for formal publication. I'll wait a while and do other stuff (plenty of it) before coming back to it with a fresh eye. We have already submitted two other papers from the project, which are now at various stages in the review process. Some more people at the government ministry want to meet with me to discuss the results, so that's good.

As I noted in the comments, the chairman wants to meet with me next week subject unspecified. Presumably about the job. I found out that another candidate hasn't heard anything yet so based on the theory that you don't reject interviewed candidates before negotiating with your preferred candidates, I don't think he wants to tell me in person he is rejecting me. Either he wants to make me an offer (but then why not just phone me) or he wants to ask me more questions that he didn't have a chance to at the interview or he wants to negotiate with me about what rank I'd accept in order to know how many people he can hire on his budget. That's all my ideas so far. So who knows. Maybe he wants to talk to me about something else. For example, a course they need teaching I was already asked about. I wish he'd specify the reason. But trying to act cool I just booked a time with his secretary and didn't ask him what it was about.

How Much Does it Cost to Replace a Car Window?

This isn't our car, just the closest picture I could find on the web

Some time between Saturday afternoon and Sunday morning someone smashed the front passenger window on our car, which was in a supposedly secure underground car park underneath our apartment building (at least in Canberra, car parks under the building are the norm at apartment complexes (why not complices?)). That's all that happened. Either they were looking for the garage opening device that all of us have been warned not to leave in our cars or thought that an empty bag lying on the back floor might have had a laptop in it. We won't leave a bag in the car again.

The police said that the body corporate should install security cameras. The body corporate person told me that cameras are useless...

Anyway, so we needed to get quotes. These guys who advertise on TV wanted $A450 whether we went to them or they came to us to replace the glass. NRMA quoted $A350. Another guy wanted $A300. In the end we went with a semi-DIY approach. This morning we went to Queanbeyan, NSW about 10 miles away and bought a second hand window for $A75. Then Snork Maiden took it to another place in Canberra that cleaned and fitted it for $A88. You need to add some time and fuel costs into our real price but still it looks like there is a lot of price dispersion there.

Interview

The interview went OK. One of the committee told me I did well on the formal panel interview section. I didn't crash and burn or anything bad in the presentation. I got lots of questions which were to the point or good and some people seemed interested. Another candidate still needs to be interviewed but the selection committee chair said they hope to make a decision within a couple of days. I've been having a hard time sleeping coming up to the interview. I slept each night but not so many hours. And tonight it seems even worse, though there is nothing I can do now so logically I should relax.

Flood :)

I was commenting last time that when it rains it pours. Yeah, well the people who asked me to submit my details in order to maybe spend 40 hours reviewing a report want me to do it. Deadline 19th April. Snork Maiden says maybe she can help.

I'm pretty much saying no to the offer to teach a class in the second half of the year because we want to travel to Europe then. I thought of teaching the second half of it but the other guy - the course originator is the only person who could teach the first half and he wants to avoid teaching anything this year and it doesn't look like collaborating in this way would work because of the integrated structure of the course would mean I have to teach exactly according to his material. The alternative is to run it like an intensive MBA style course in the second half of the semester. But I don't think that would be good for the students who are mostly doing this part-time or for someone teaching it for the first time.

I got some more info on my interview on Monday which if correct means this is pretty much mine to lose rather than win if you know what I mean. So I really need to focus on preparing over this weekend.

When it Rains it Pours

It looks like this will happen following a meeting and e-mails today. It's nominally about AUD 20k in funding. As I'm fending off offers to teach a course later this year...

Interview

Another interview coming up on Monday. I just heard this evening. This one is pretty much my dream job. Hopefully, I don't screw it up like the last one.

Hedge Fund Returns for February 2010

Results are now in for both Credit Suisse/Tremont and HFRI. HFRI gained 0.52% (HFRX monthly 0.26%) and Credit Suisse/Tremont 0.68%. Managed futures, macro, long-short equity all did well according to CS and dedicated short bias and equity market neutral lost money. According to HFRI short bias also lost money and quantitative directional and systematic diversified gained 2.06% and 1.04% respectively but they find that equity market neutral gained moderately. Other styles moved less than 1% for both index providers.

Nominated

The Australian government is nominating me as a candidate for participation in an international research organization in my field. Of course, all the other UN countries get to make nominations too. And they didn't pick me out of the blue. I submitted my name to the government department here. Of course I was in the right network to hear about the opportunity in the first place. It's not a paid position (your expenses are covered) but it can't hurt my CV (I think) and maybe could have an influence on policy. So that's good. It's much easier to get involved in these opportunities here than it was in the US. I did have some interactions there with the policy sphere but not as frequent. Partly it is because this is a smaller country, population wise and I am nearer the centre - geographically and institutionally. It's much easier to get a position in a top institution here than it is in the US. There is trade off - being second tier in a top country or first tier in a second tier country...

Class Matters

Some insights about class. In attitudes and circumstances I think I am on the border between the middle class and owning class. I try to be a non-conformist, think outside the box, and do something different, but in the end fall back on being an employee out of neccessity and lack of ability I guess to do some of these other things. I think the class structure in this article is too broad. There are "middle class" business owners with employees who don't have a high net worth and so aren't in the owning class as well as professionals and managers. And there is a difference between a self-employed professional and an employed professional in attitudes about government, taxes, regulation etc.

Some of the people around me find my relaxed attitude to my current situation rather puzzling. I don't tell them of course that we have more than $A200k in liquidish assets. I do tell them that we can live OK on one salary and while we want to have two salaries in the long-term there is no emergency at the moment.

The deeper question is why we've saved so much money outside of retirement accounts and why we live frugally when we could spend more when many (most?) people expand their spending to match their income. I think it is largely a result of learned attitudes (at least on my part) that relate to these class issues. It isn't so easy to do these things that many personal finance gurus and bloggers promote without deeply embedding the right attitudes, so it's no longer a question of discipline in keeping spending under control.

This isn't the whole story on this complex issue of course. You can see more of my posts on class here.

HFRX Daily Hedge Fund Index Performance for February 2010

Always the first of the hedge fund indices to report, the HFRX daily index reports a gain of 0.26% for February. January saw a loss of 0.02%, so we're still pretty much flat for the year. There were no large moves for any of the strategies. Macro, Equity MArket Neutral, and Systematic Diverisifed saw gains of over 1%. No strategy lost more than 1%.

Secondment?

I gave a presentation at a government department today, which they seemed to like and then the possibility of me being "seconded" to that department was raised. I don't have a first job, but there is a budget we have that hasn't been spent for secondment...

Follow on funding here now looks a lot less likely due to a change of priorities, but my colleague wants to try to give that a shot too (a proposal needs to be submitted, but first we'll ask if it has any chance).

Moominvalley January 2010 Report

I finally got the accounts together for January (accounts in USD):



Our spending was again at the low end. February is going to come in around $A4,750 due to car expenses (registration and depreciation - there has been no depreciation for a about a year). As you can see from the accounts we lost lots of money in January - the rate of return in USD terms was -7.34% vs. -4.30% for the MSCI World Index and -3.60% for the S&P 500. In AUD terms it was -6.27%. The largest losses were in Australian stocks and the effect of the strengthening of the USD with the Aussie falling about one US cent over the month.

Moominmama Performance February 2010

Moominmama lost 1.82% in February, mainly due to the fall in Sterling against the US Dollar. The value of Sterling Cash fell 4.81%, while bonds returned -3.70% as the larger part of her holdings are in Sterling bonds. Not surprisingly, US equities were the top performer. The MSCI World Index returned 1.31% this month.

Moominmama has a UK Savings Certificate - a kind of government savings bond - that is still in the name of my father who died in 2002. My brother has started investigating how we can transfer it into her name. The authorities in the UK responded by demanding a list of all assets jointly owned by my parents in 2002. This will be hard to come up with and there is a danger that they'd then demand inheritance tax to be paid on the estate or something. My parents left Britain in 1995, but the British government has very strange tax rules. Being "domiciled" in Britain is what counts not being "resident" there. It looks like we might need a lawyer to deal with this. The savings certificate in question is worth about $US65,000.

Living on One Salary

As this period of receiving two salaries comes to a close, I'm reviewing how our saving vs. spending has been during the last year. Current savings shows savings from non-investment income into non-retirement accounts ("taxable accounts" in American jargon - I don't use the term because retirement accounts are taxable in Australia, just at a lower rate). Since I started getting a salary in March 2009 we have managed to save almost $A50,000 (see the blue line). That's more than I earned in fact. In the period from late 2007 till then when we were living together on one salary, savings was pretty much flat - in other words, we didn't save or dissave. In the last year we managed to save at about the same rate as or a bit higher than I did when I was single and living in the US from 2002 to 2007. Our retirement savings (pink line) accumulated rapidly - at about the rate I managed in the US when earning extra summer pay or when I started maxing out my 403b in 2007 (which brought my non-retirement savings rate down to almost zero).

This shows that we basically live on one salary whether we are earning one or two salaries. But in order to save we need two salaries.

The green and brown lines show that there has been some regain of investment losses. But there is still a long way to go till the losses are entirely recovered.

Career Update

My current contract ends today more or less, paywise. I still haven't actually completed what I agreed to do, but it will be done in the next week or two. There is some vague possibility of getting some follow up funding some time or other. In the meantime I get to keep my office, library access etc. for another six months. The university is prepared to make that investment in me at least, knowing I'm likely to produce stuff they can claim as output. It takes a while to publish things academically. So I published nothing last year. I have one paper now accepted for this year and more will follow. In the meantime my track record helps with their ranking etc. There's going to be no progress on the job I applied for in this department for another couple of weeks, at which point it will be 2 months after the submission deadline. They're not in a hurry it seems. I submitted an application today for a job in NZ, which I'm underqualified for I think and 2 positions in Australia earlier this week. In the end I couldn't submit the grant proposal, much as expected.

In the meantime, some consulting stuff is starting to trickle in. I reviewed a research proposal for a small fee, and just got asked if I'm interested in reviewing a report for a fee of USD 2800. They reckon it's about 40 hours work. They might not pick me, they wanted me to submit all my details to decide. I rejected reviewing a proposal from another country that wasn't in my area of expertise really and had no fee attached. Usually, academics review papers for journals for free. The basis for this is that if you submit a paper you also will get reviewed for free yourself (though a few journals charge submission fees), and as a way of helping shape research in your field by recommending the rejection of bad research and helping improving the better papers. But I have no incentive to review a research proposal from a country's funding agency where I am not eligible to submit a proposal. They need to pay.

Moomin Valley Nominated for Best Economics Blog

Moomin Valley is one of the finalists in the category of "Best Economics Blog" for the "Plutus Awards. Well, I don't think I stand much chance against "Seeking Alpha" and "The Big Picture" :) But please vote for me anyway! Voting starts on Wednesday. If you haven't visited here before, I've been very busy lately and haven't managed to post much. There are many more good posts on economics, investment theory, the housing market, and other topics back in 2009 and earlier years.

Today was the grant application deadline. Realistically, I knew I wasn't going to be able to come up with the matching funding I needed in the end to apply for a grant. So I couldn't submit an application in an attempt to create my own job. I'll have to be less of a non-conformist and get a regular academic job - I'm making several more applications this week. If I was younger or followed a more straightforward career path I might have been able to apply for the 100% funding level for a fellowship. There was some vaguely positive news today about follow-on funding for my current project - we might be able to ask for more money.

Climate Change?

I came into the office this morning after working at home yesterday and found that a ceiling fan had been installed. This building is 50 years old and no-one had thought that necessary up till now. I think it is a good idea as it can get hot in here either due to hot summer days or overheating in winter (and I can't figure how to turn the heating down). Strange thing is the fan won't work unless the light is turned on. That seems a really silly waste of electricity...

Credit Suisse/Tremont Returns for January 2010

Credit Suisse Tremont show a 0.17% gain for hedge funds in January. And in further contrast to HFRI's numbers they show Global Macro returning 1.07%. Managed futures lost 3.81% and long/short equity 1.50%. Fixed income, convertible arbitrage etc. did well.

Tenure

You've probably heard about Amy Bishop who shot three faculty members at the University of Albama in Huntsville after she was denied tenure. Turns out she shot her brother in 1986 in an incident that seems like was covered up as an accident but according to police who remember the event said was intentional - you don't shoot someone three times by accident with a non-automatic weapon. I maybe can see why she was denied tenure. She only published 6 papers in OK-ish journals since taking her current job. That's not much in biology. And her teaching evaluations are mostly not that good. Of course, there may be political reasons too. I've seen people with good teaching and research track records denied tenure because they didn't get on with the chairman of the department basically.

Anyway, it's amazing that someone would end up shooting people over this. I had tenure at a US university and gave it up and came back here to Australia. It was never something though that I wanted to get, though. The way the system worked I had to get it.

Hedge Fund Performance for January 2010

HFRI reports a 0.71% loss for hedge funds globally in January 2010 while HFRX reported a 0.02% loss. By contrast, stock indices were down by several percent. Macro, systematic trading, and equity hedge strategies all lost money. Most fixed income and arbitrage strategies made money. Credit Suisse Tremont hasn't reported yet.

Epic Grant Fail

After I put a lot of work into developing a grant application to try to create a position for myself (as well as applying for regular jobs) it turns out that I need someone at a university to guarantee a 50% contribution to the salary. If I got a job with them and got the grant then they might receive a 50% subsidy from the funding agency but if I don't get a job but get the grant they'd have to pay out. The expected value of this seems to be close to zero and given that I might get a job elsewhere instead (and take the application with me) the probabilities of either receiving a payout or having to make an equal contribution are quite low. But noone wants to risk it and I can understand them. The amount of money they might have to pay out is significant. It seems that the university as a whole would want to do this - maybe get an extra position half funded by a funding agency. As people leave all the time it's not neccessarily an increase in their outlays. But there is a tragedy of the commons problem here to some degree where each individual department would like to see it happen but doesn't want to put their own money up. I haven't completely given up and just sent out two "last ditch" e-mails.

The real problem here is that the grant application deadline is soon, before the jobs I am applying for will be decided

There is another fellowship I can apply for but I need to submit an "eligibility request" as a priori I'm not eligible. Apparently they make few or no exceptions. So I don't expect that will work either but we'll try.

The effort is not entirely wasted. It has helped me clarify my ideas, learn about this funding agency, and if I get a job I can make an application next year recycling the proposal I wrote this year.

Moominmama Performance January 2010

Moominmama suffered a loss of 0.96% in January following a similar loss in December. This month, though, the MSCI All Country Gross World Index fell 4.3% for the month in USD terms so that's not relatively so bad. Brazilian stocks (other equity) did particularly badly followed by European and US equities. Hedge funds, bonds, and stuff denominated in the local currency made positive contributions. Man-AHL continued to perform poorly contributing to the negative return in commodities.

I don't have much idea of the performance in Moomin Valley this month as yet. Don't expect a detailed report any time soon, as things are crazily busy here. I have an important career discussion/negotiation coming up this afternoon. Maybe when I know the outcome of that (it's not a job as yet) I'll post on where things are now standing career-wise. Also, because of comment spamming I'm turning on comment moderation on older posts.

Sirius Resources: Unmarketable Parcels

Sirius Resources (SIR.AX) is going to automatically sell out all shareholders with less than $A500 worth of shares free of brokerage and send the proceeds to the shareholders. They have 11,000 such shareholders including me. You can opt out by sending in a form. My shares are stuck in a Computershare registry account. When they were delisted from the ASX they were removed from my CommSec account. The fee to sell the shares through ETrade using a "Visitor Trade" is $49.50. But this is more than the shares are worth. Fee to send a new holding statement in order to transfer the shares to CommSec is $33.30 which is also more than they are worth. So I haven't sold them.

Monthly performance figures for December and annual figures for 2009 are now in for the HFRX monthly indices:



The Global Hedge Fund Index rose 0.55% for December and 13.40% for 2009. The best performing index for the year was the Russia Index while, not surprisingly Short Bias did worst. As I've been noting throughout the year, Convertible Arbitrage was the best performing of the traditional hedge fund strategies.

The Cost of Success

Not long after I commented that the TFS Market Neutral Fund was at an all time high the fund has decided to institute a "hard close". The close is going into effect on 22nd January.

A soft close is where a fund only accepts new investments from existing investors. The Colonial First State Developing Companies and Future Leaders Funds (both small cap Aussie stocks) are soft-closed funds. Under a hard close the fund does not accept new investments from existing investors either. In this case dividend reinvestment and some other exceptions are allowed.

The reason funds close to new investment is that the managers decide that increasing the size of the fund further will have negative effects on performance. Funds with sustainable good performances often end up closing to new investment. It is an indicator that the managers care about performance. This is much more common in the hedge fund world than in the mutual fund world. It's usually small cap or other specialised funds that are likely to close due to limited investment capacity.

It's a pity though that I won't be able to put more money into this fund in future.

Annual Report 2009: Part IV

Following a breakdown of the sources of growth in net worth, we look at changes in asset allocation over the year:



This first chart tracks gross assets. Net worth is less because of borrowing both by fund managers and ourselves. The growth in the various categories of stocks is pretty clear though. Looking at percentage share chart:



we see that the percentage allocated to Australian large (41.6 to 48.7%) and small cap (8.6% to 10.1%) stocks has clearly increased. Hedge funds now constitute a smaller share than at the market bottom (from 17.7% to 11.9%), but their share is about unchanged from the beginning of the year. The shares of other asset classes have mostly declined a little over the year. At some point we will need to cut the allocation to Australian stocks but I'm not ready yet.

HFRX Daily Hedge Fund Index Performance for 2009

The Global Hedge Fund Index rose 0.55% in December and 13.40% for 2009. Performance over the last 3 or 4 years is negative. The MSCI All Country Gross World Index was up 35.41% this year, down 4.05% annually over the last three years and up 1.79% annually over the last 4 years. So its long run rate of return was higher but so was its volatility.

Signature Debit?

It's weird that "signature debit" dominates the US debit card market - at least according to the New York Times. I don't think there is such a thing here and I can't remember ever doing anything other than keying in a pin number in the US either in recent years... (I banked with HSBC, maybe that explains it). Here, PIN credit cards are increasingly common as are debit and credit cards with chips in them. Credit cards do cost merchants more in Australia than debit cards. From the article it seems that signature debit costs the merchant almost as much as a credit transaction in the US while PIN debit is cheaper. The NYT article has this interesting graphic of trends in US payment vehicles:



Britain has already decided to phase out personal checks by 2018. When will banknotes and coins eventually go too?

Annual Report 2009: Part III

This chart shows that the rebound from the lows in early 2009 in our net worth is due to a combination of new savings and investment gains. This is true for both retirement and non-retirement accounts. Adding the "profit" component and the "savings" component for each class of account should give the current total value. With regained the bulk of our profits in retirement accounts but still have net losses in non-retirement accounts, which were managed much more riskily. That is likely to be different in the future.

Annual Report 2009: Part II

Net worth rebounded very substantially from the beginning of the year and the low early in the year:



Medium term balance is the net of all non-retirement accounts and assets and superannuation is all retirement accounts (both US and Australian). The moves in US Dollars are larger percentwise due to the move in the Australian Dollar from a low of 63-64 US cents in January-February to 89-90 cents at the end of the year. You can see this also in this scary chart in USD terms:



And slightly less scary chart in AUD terms:



2009 was in many ways a lot like 2003 for us financially. Hopefully, the next few years will continue in the mode of 2004-2007 :)

Moxy Vote

Moxy Vote is a new website (got started in November) which aims to link individual investors and advocates in order to get more individual investors to participate in corporate democracy. Most small shareholders don't bother to vote in corporate elections because a lot of effort is needed to understand the issues and most resolutions pass overwhelming in the direction recommended by the board of management. There are, though, occasionally mergers and the like which get voted opposite to board recommendations.

The idea of Moxy Vote is to change this by enabling investors to align their investment accounts alongside advocates that have informed opinions on the proxy ballots. The retail investors will then have their shares automatically voted in parallel to the advocates' shares. The site will cater to investors who are concerned about social causes (such as animal rights, human rights, environmental concerns, etc) as well as those that are pro-shareholder and are concerned about such things are executive compensation, strategic business decisions, etc.  Moxy Vote will just be a neutral platform that retail investors can use to get involved in any way they see fit.

It still seems to be very early days for this site as some of the advocates have not posted opinions on any of the upcoming votes. It is an interesting idea though and I'll be interested to see if it succeeds.

Annual Report 2009: Part I

The first part of my 2009 annual report focuses on rate of return relative to benchmarks. Here are the annualized rates of return:



As the Australian Dollar rose against the US Dollar rates of return in Australian Dollars are much lower than in US dollars. Our rate of return in 2010 was almost double that of the MSCI All Country Gross World Index. The rate of return was also better over ten years and 3 years. It was better than the S&P 500 over all but the 2 year time frame. Performance was stronger in the early part of the year with outperformance of up to 35% relative to the index in periods since then but little outperformance in recent months:



After disastrous returns in September, October, and November 2008, only April, May, and November this year saw returns with negative residuals based on a regression of my returns against the MSCI index:



As you can see, over the last 3-4 years alpha has been about zero and beta greater than one (my returns are more volatile than the market). However, using a structural time series model for the 1996-2009 period, I estimate alpha to be as high as 6.5% and beta at 1.22. Despite, my mistakes over the last few years the portfolio is still doing better relative to the market than it did in the 1990s. There is plenty more stuff I could post but I think that is enough to get the basic message across.

December 2009 Monthly Report

There'll be an annual report coming up soon with lots of charts, but for now, let's look at December. As usual everything is in US Dollars unless otherwise stated. December again saw moderate gains in world stock markets while the US Dollar strengthened for a change. The MSCI World Index gained 2.10%. The Australian Dollar fell from USD 0.9157 to USD 0.8977. We gained 2.38% in USD terms (AUD: 4.43%; Currency neutral: 4.08%). Our retirement accounts hit a new high at AUD 250,578 (USD 224,944). The previous high was in May 2008. The gain is due to both a lot of contributions and the rebound in the financial markets since February this year. Other investments reaching new highs in terms of profits we have made are: TFS Market Neutral Fund, Unisuper, CFS Diversified Fund, Platinum Capital, Generation Global Sustainability Fund, and PSS(AP) Super Fund (Snork Maiden's retirement fund).

Our spending was the second lowest since we moved to Australia at AUD 3,486 (USD 3,130):



Retirement contributions were higher than normal due to receiving the government's co-contribution this month and retirement accounts gained twice as much as non-retirement accounts.

Net worth reached USD 418k (AUD 466k) an increase of $15k. Asset allocation changed relatively little on last month with a move away from our target due to gains in Australian large cap stocks, which constitute more than half the portfolio:



Other stocks also performed well. The following is estimated performances for this month (net of forex movements) by asset class:



Preliminary numbers for commodities show a 5% fall in December. Estimated alpha against the MSCI index was 6.6% and beta 1.22.

Update on "Emergency Fund"

As I've written before we don't have an "emergency fund" as such, but we do have plenty of savings outside of superannuation (i.e. retirement accounts). Today the total is around $A215k. At current rates of spending and an 8.5% investment return (10% return - 15% tax) we could survive 4 years without working. By cutting spending down to $A4,000 a month (i.e. double our rent of $A1,998) another year is possible. But if we hit a period like the GFC we'd last much less time. So 3-5 years is probably a good estimate. With just one of us working in a good job or both of us on minimum wage jobs we can live indefinitely.

Florida House Prices

Median house prices in Cape Coral-Fort Myers, Florida have fallen to USD 92k. Many metro areas across the state have medians around USD 150k or less. Even assuming that many of these locations will be under the sea in a century or two (most of Cape Coral is less than 2 metres above sea level) it's not bad for a century or so lease :)

Meanwhile in Australia, house prices continue to rise. Single family homes in Canberra have now reached a median of AUD 535k (USD 480k). Sydney is at AUD 550k and Melbourne 486k. The median apartment in Canberra is AUD 390k (Sydney 417k, Melbourne 402k).

Moominmama Report December 2009

The US Dollar rose this month depressing returns in USD terms for globally diversified portfolios. As a result Moominmama lost 0.95% this month. The MSCI World Index managed a 2.10% gain somehow though. Moominmama did gain in stocks across the board and especially in non-US stocks. Commodities did poorly:



For the year Moominmama saw a 25.06% gain against a 35.41% gain for the MSCI.

Portfolio Growth for the Decade

At the end of 1999 my net worth was $A141k or $US87k. Today our net worth is around $US415k or $A470k. Is that good or bad? The growth rate is 12.8% per year in AUD terms or 16.9% in USD terms. Our investment rate of return was just 2.7% p.a. in USD terms and 0.1% in AUD terms. The MSCI World Index gained 1.0% p.a. So we beat the index over ten years. My projection spreadsheet predicts around $A1.5 million by the end of the next decade (when I will be 55 years old and Snork Maiden 44). That's a 12.3% p.a growth rate. If investment returns are better this coming decade it looks like that that is possible. I'm not adjusting for inflation in any of these numbers.

Ibis

I just saw an Ibis walking around in the street. I don't remember ever seeing one of those in Canberra before.

Government Co-Contribution

On 8th December the Australian Government finally paid $A1,500 into my superannuation account as their "co-contribution" alongside the $A1,000 I invested last financial year. I'll do another one this year as long as my income is below the cut-off limit. Unless I get another job right away in April after this one ends it probably will be. That page, though, suggests that I need to add my employer super contributions into my income figure, which might bring me near to the limit.

TFSMX at All Time High

At least one of my investments is at an all time high (when you include reinvested dividends). I have gained 27.6% since first investing in 2006. Year to date in 2009 the gain is 17.0%. All the previous profits and a little more were erased at the bottom in the GFC in November 2008 but the previous peak came in June 2008. The Sharpe ratio since inception is 0.67. By comparison the HFRI hedge fund index has a Sharpe ratio of 0.57 over the same period (and a lower rate of return). TFSMX has a beta to that index of 1.05 (R square is only 0.29 so its not a very good hedge fund proxy).

Fees for the fund are high by non-hedge fund standards and this stops some people from investing. But fees per se are irrelevant in my opinion and what really matters is performance after fees. TFS's managers have certainly earned their fees so far.

2009 Travel

Somewhat unusually I stayed in my home country the whole year (but it is almost a whole continent :)), but I did get to take these trips out of town:

1. Cairns, Queensland (for a conference) but I took a daytrip to Kuranda and back by cable car and train through the rainforests and past the Barron Falls waterfall which was very spectacular at that time of year.

2. Sydney, showing my parents-in-law around. All the usual suspect locations :) Yeah, I also gave a presentation at a pseudo interview.

3. Port Douglas, Queensland. Second trip to Cairns airport. This time with my wife and parents-in-law. My first snorkeling, first sighting of cassowaries in the wild and lots of rainforest and beaches.

4. Brisbane, Queensland. Job interview.

5. Darwin, NT and Kakadu National Park. A conference followed by a trip to Kakadu - aboriginal art, saltwater crocodiles, termite mounds and stuff like that.

6. South Coast of New South Wales. Beach walking, echidna sighting, driving through Deua National Park and Araluen Valley...

Before this year I hadn't been north of Brisbane or west of Melbourne on land in Australia (of course I had flown over much of it in a plane). Also during 2009 we thought about going to Europe (my continent of birth by the way) but gave up. Hopefully, we'll get to Europe in 2010. I was last there in 2005. I will also be visiting South Australia for the first time. That leaves only Western Australia.

Australian "Hedge Fund" Investment Opportunities

I have a couple of prospectuses here for investments in Australian "hedge funds" but I think I will skip both:

Platinum Capital Share Purchase Plan: Existing shareholders can buy up to $A15,000 of shares in this listed hedge fund. The shares will be priced at a 5% discount to the average price over some period in February. However, the shares have been trading recently at a fairly high premium to net asset value (including an estimate of franking credits) of around 13%. The premium has been higher in the past - up to 30%. In October 2008 there was a negative premium of -24%. Over the last few years the premium has averaged 6%. Of course we have no way to know what the stock price will be in February. There is a risk that the premium could be even higher. So I prefer to skip this offer.

Everest Credit Opportunities Fund: This is a new offering from Everest Financial to invest in a fund of funds of credit strategies hedge funds. There is no closing date to the offer. Minimum investment is $A10k. As I have been reporting some credit strategies, and in particular convertible arbitrage, have been performing extremely well this year. This fund smacks of chasing high performers. The prospectus says that they expect these credit strategies to continue to perform well in coming years but I doubt the performance will be as good as this year. The initial fund allocation is as follows:



The long-term returns on these funds are fine. Management Expense Ratio at the fund of funds level is around 2.5% with no performance fees. So based on the long-term returns of the individual funds I think we could expect about an 8% return on the fund of funds. There is a 12 month initial lockup period after which funds can be redeemed quarterly with 120 days notice. Given these facts, the relatively large initial investment, and my existing exposure to these kind of strategies via the Everest Alternative Investment Trust, I think I will give this one a miss too.

Credit Suisse/Tremont Hedge Fund Index Performance November 2009

Credit Suisse/Tremont are reporting preliminary results that are a little stronger than both HFRI and HFRX. The overall index is estimated at 2.29% with strong performances from managed futures and global macro:



Convertible arbitrage did OK in these data.

HFRI Preliminary Performance November 2009

The results are more positive than the HFRX returns. Even convertible arbitrage showed a positive return in this larger sample.

Update on Aletheia

An update on the performance of my Mom's investment in an Aletheia fund. I have monthly data now from June 2008 to November 2009. Not a lot of datapoints but this provides a stress test during the GFC. As this fund is invested in US stocks I use the S&P 500 total return index as the market portfolio. Beta is 1.26 and alpha is -0.06% annually over this period. R-Squared is 0.79. In other words this is pretty close to a levered version of the index. Before we invested the fund had a highly positive alpha. It's reassuring to find that at least it doesn't now have a negative alpha!

I'm thinking of doing a longer term analysis. The fund releases quarterly performance data but this might not reflect the level of fees that we are actually paying while this monthly data does, so I'm not sure how useful that would be.

Moominvalley November 2009 Report

As usual everything is in US Dollars unless otherwise stated. After stock market declines in October, November again saw gains in world stock markets while exchange rates were fairly stable. The Australian Dollar barely moved against the USD and the MSCI World Index gained 4.16%. We gained 2.21% in USD terms (AUD: 2.25%; Currency neutral: 2.23%).

Our spending was quite high at $5,147 ($A5,621):



Our rent is now $A1,998 per month. We spent quite a lot on travel to the Northern Territory - actual trip was in October - and the South Coast of NSW - actual trip was in December. In total, $A1,250. Net worth reached $403k ($A440k) an increase of $12k. Asset allocation changed little on last month with a slight move towards our target and a reduction in leverage. Foreign stocks did very well while Australian stocks had modest gains. The following is estimated performances for this month (net of forex movements) by asset class:



Private equity did well due to a strong move in IPE.AX. Estimated alpha fell due to the below market returns though I can't be bothered to post exact numbers :)

Blog/Career Update

Long time readers will notice that I'm posting much less on this blog than in the past. That's because I am focusing on my academic economics career and my professional blog as I forecast. And I'm doing very little on the investment front. I notice I haven't even done any career updates since September. Things have gone a bit better on the career front recently with a couple of requests by journals to revise and resubmit papers (rather than outright rejects). But my most recent response from a journal was again a reject. Otherwise, I've been working on my funded research project, doing some presentations and developing my grant applications. On one application I now have a team of three people including me applying. There is a job available in my department with a January deadline. I've received encouragement to apply for it and so will do. I've also been asked to apply for a job at a Sydney university, though it's not the chairman asking so I may have one supporter but that might not be enough. We don't really want to move to Sydney but can't hurt to apply and see how it goes.

In other news, we've been on a couple of trips - to Darwin/Kakadu and just last week to the NSW South Coast. Both were good and we spotted a bunch of wildlife etc. Maybe Snork Maiden will do some blogposts on this some time? On both trips we stayed in self-catering style cabins which were very nice. One was much more high end than the other but both were good experiences.

I hope to keep this blog running with at least monthly net worth/spending reports, info on hedge funds, and some other occasional posts.

HFRX Hedge Fund Index Performance: November 2009

The HFRX global hedge fund index gained 1.66% in November. Most styles gained this month but there was a tendency for styles that have lagged so far this year to do well (e.g. Macro, Systematic Diversified) and for this year's strong performers to do poorly (i.e. Convertible Arbitrage). I guess that shows the value of diversification :)

Moominmama Performance November 2009

Another good month in which the MSCI World Index rose by 4.16%. Somewhat surprising given the negativity that seemed to be in the news for much of the month. Moominmama saw a more modest gain of 1.44%. US and European equities did best. Despite all the talk of the falling USD, Sterling actually fell against the USD this month. The Euro gained a little but we don't have Euro cash and only 15% of assets overall in Euro denominated investments.

Self-Service Checkout

Our local Woolworth's store has just introduced self-service checkout machines. I've used these before at Big-W (pictured) and in the US. After today's experience though it seemed to me that it would be so easy to rip the store of and steal stuff when using these machines:

1. The machine asked me how many mangoes I had. If I put one instead of the four I actually had, how would anyone know?

2. If I told the machine I had some cheap vegetable in place of the one I actually had how would anyone know?

Or are they planning on random audits of customers leaving the store? I didn't see any evidence of that.

Also I could just leave some stuff in the trolley/cart and not check it out as there doesn't seem to be an electronic security system in place. Or would I get caught if I tried to pull these tricks off?

My "Hedge Fund" Investments

I got a question on a recent post about our hedge fund investments. I count any fund that uses hedging instead of straight asset class investing as a hedge fund. Some of our investments in this class are traditionally classified as hedge funds, some as mutual funds, and some as closed end funds. Here is a list of what is included in this category in order of size of investment:

Platinum Capital: This fund is a global long-short (about 70% long, 30% short) stock fund that also uses currency hedging and is listed on the Australian Stock Exchange (ASX). Information here. We are also invested in this strategy through Snork Maiden's account with Colonial First State. 4.95% of net assets.


EAIT: This is an unlisted fund of hedge funds. You can get information on it here. I originally invested when it was listed on the ASX. The fund is invested in major US based hedge funds. It uses some leverage. 4.29% of net assets.

TFS Market Neutral Fund: This is a US mutual fund that uses a quantitative long-short investing style in US stocks. It is somewhat net long and net market exposure doesn't change much over time.
Info here. 2.91% of net assets.

Hussman Strategic Growth: This is another US mutual fund that is long US equities with a variable options overlay that alters the fund stance from market neutral to fully long. For info see here. 1.78% of net assets.


Aurora Sandringham Dividend Income Trust: This fund uses a dividend capture strategy on large cap Australian stocks. It holds shares for long enough to capture dividends and franking credits in a tax effective manner (there is a minimum holding period under Australian tax law in order to be able to claim the tax credit). It hedges much of it's market exposure. Info. 1.78% of net assets.

Acadian Global Long Short Fund: We invest in this through Snork Maiden's account with Colonial First State. It's a 130/30 fund. 0.74% of net assets.

PSS(AP): 0.58% of net assets are in hedge funds that the PSS(AP) superanuation fund invests in.

We are also invested in Man-AHL but I count that under "commodities" rather than "hedge funds".

Overall we have 17% of net assets and 12% of gross assets invested in hedge funds. I'm happy with the gross level rising back to 14%. I wouldn't want to invest more than 5% in any one fund, so Platinum Capital is capped pretty much at the current level. I'd be happy to see our TFSMX investment grow in size and our allocation via PSS(AP) will inevitably grow. I'll be happy to allocate more to Aurora too. Down the road we might invest in a new fund, but I don't have any compelling choices in front of me right now.

Initial Hedge Fund Returns for October 2009

HFRX shows global hedge funds were more or less flat in October. Convertible arbitrage continued its strong outperformance this year.

Moominvalley October 2009 Report

This report is based on the available data as a couple of funds as usual won't report till near the end of the month. As usual everything is in US Dollars unless otherwise stated. There are some numbers I still can't reconcile and I can't see where my mistake is but here is the report anyway.

After a strong rally for stocks globally for the last 6 months, October saw losses in World equity indices. The MSCI World Index lost 1.53% in USD terms and the SPX lost 1.98%. But the Australian Dollar continued to appreciate, this time gaining by about 3 US cents. This meant that we gained 0.78% in USD terms but lost 2.93% in AUD terms and 2.09% in currency neutral terms. So we beat the market by more than 2 percentage points.

Our spending was pretty normal at $3,896 ($A4,252):



Almost half our monthly spending is going to rent ($A1,955 and $A1,988 from this month). Net worth reached $392k ($A428k), which is a decline in AUD terms. Asset allocation moved slightly towards our target with the biggest gain in Australian small cap stocks (now above target):



The following is estimated performances for this month (net of forex movements) by asset class:



Only Australian small caps had a positive performance. The above market returns this month boosted estimated alpha and reduced estimated beta. Alpha measured against the USD MSCI was 7.6% with a beta of 1.24 currently. Beta remains very high and will have to come down at some point. Performance in AUD terms is similar.

After record falls in net worth we are now seeing a record gain for the last 12 months:



The gap between earning and spending computed in this way is the gain in net worth. In terms of investment returns, total return is back to the levels of early 2005:



Accumulation index is Australian lingo for "total return index" in American. Net worth is back at mid 2006 (or mid 2008) levels:



Retirement accounts are near the all time highs, non-retirement accounts (medium term balance) have not rebounded as well. That is where the trading losses were concentrated.

I think that's enough charts for this time :)

Leverage Can Be Used to Reduce Risk

A point I've made in the past is made again in an article on AllAboutAlpha.

What Gets the Most Comments in the New York Times?

An article on what waiters should and mostly shouldn't do. I find the article and comments pretty amusing. The only things that annoy me are waiters grabbing my plate before I've finished or barely finished eating and keeping coming back and asking questions about how everything is and whether there is any more they can do for us. At cheaper restaurants in the US sometimes it gets very annoying as you keep getting interrupted by the waiter. Of course they are trying to sell more stuff to get a bigger tip and trying to turn over more customers as the individual bills are low. I found as the price went up a bit this was less of a problem. The constant asking of questions isn't much of a problem in Australia where tips are usually a question of rounding the bill off if anything (at least traditionally and in my experience (certainly not an expected percentage).

Moominmama Performance October 2009

Despite the MSCI World Index losing 1.53% this month, Moominmama gained 1.04%. Part of the gain is due to the decline in the USD (though the MSCI World Index is also in USD) and her US and European equities underperformed the index. Despite the introduction of a tax on foreign capital in Brazil her Brazilian fund did best of all. Over in Moominvalley, though not all the final prices are in yet, it looks like we gained too in USD terms.

Income of American Retirees

Interesting discussion in the comments on a Krugman post on retirement income based around this pie chart of income sources of Americans of 65 and older in the 75% to 50% quartile (second from top):



The chart shows that only 9% of this group's income comes from assets - i.e. 401k's, taxable accounts, rental housing etc. But some major caveats are needed in order to understand the results:

1. The asset income does not include capital gains or drawdowns of principal. In reality this group is far more reliant than this on assets they own for their income.

2. The data is for 2008 when interest rates were hitting record lows and dividends were being cut. Income in previous years would have been higher.

3. Defined benefit pensions rely on underlying investments in capital assets, usually the retirees are not exposed to the fluctuations in the underlying investments unless the plan ends up collapsing due to underfunding...

By the way, here is the income sources for the top quartile:



They do get a greater share of their income from assets but they are also working more or more of them are working.

Global Housing Market Trends of the last 40 Years

A nice chart from McKinsey of real house prices over the last forty years in a wide range of countries:



The UK saw the largest rise in prices. The US housing bubble was really quite moderate by comparison. By contrast, house prices just don't go up in Germany ever (but they seem high).

First Look: Credit Suisse Tremont Hedge Fund Index for September 2009

Preliminary figures from Credit Suisse Tremont show a 2.62% return for hedge funds for September. Macro returns are pretty strong and not bad for the year, in contrast to HFRX and to a lesser degree HFRI. There are other differences too. Credit Suisse Tremont shows nice returns for Distressed Securities for the year, for example.