November 2019 Report

A less frenetic month financially but somehow I didn't get to make any blogposts since October's monthly report. We started on refinancing our mortgage at a lower interest rate, but the transaction is not yet complete.
 
The Australian Dollar fell from USD 0.6894 to USD 0.6764. The MSCI World Index rose 2.48% and the S&P 500 3.63%. The ASX 200 gained 3.51%. All these are total returns including dividends. We gained 2.17% in Australian Dollar terms but only 0.25% in US Dollar terms. The target portfolio is expected to have gained 1.53% in Australian Dollar terms and the HFRI hedge fund index is expected to have gained 0.75% in US Dollar terms. So, we out-performed our target portfolio but lagged other benchmarks. Updating the monthly AUD returns chart:

Here is a report on the performance of investments by asset class (futures includes managed futures and futures trading):

Stocks and real estate did well while hedge funds, private equity, and gold did poorly. The largest positive contribution to the rate of return came from large cap Australian stocks and the greatest detractor was gold. The returns reported here are in currency neutral terms.

Things that worked well this month:

• The Unisuper superannuation fund gained more than any other investment in dollar terms.
• Soybeans and Bitcoin were the next best  performers.

What really didn't work:

• Crude oil and gold lost heavily.
• Regal Funds (RF1.AX) fell sharply after it was reported that the firm was under investigation by the regulator, ASIC.

Trading:  The month started with two losing Bitcoin trades but then a big winning trade and we ended the month positive in Bitcoin with a USD 6.1k gain. We also did well in soybeans, shorting four contracts (more than 500 tonnes of soybeans...). The trade is still open and up USD 6.5k. On the other hand, we lost a lot in crude oil, which had six losing trades in a row and more than cancelled out the gains in soybeans.

Using a narrower definition including only futures and CFDs we made 3.55% on capital used in trading or USD 6.5k. Including ETFs we lost just 0.01% or AUD 46. Using the narrow definition, we are catching up to last year's returns. This graph shows cumulative trading gains using the narrower definition year to date:

I think I should increase the risk allocations to soybeans and palladium to USD 5,000 each from USD 2,500 and AUD 1,250 currently. These would be roughly the allocations suggested by the portfolio optimization given current allocations to Bitcoin and oil (USD 3,670 and 2,500). Risk allocation is the maximum potential loss on a single trade.

We moved further towards our new long-run asset allocation.

Futures, bonds, and gold fell and all other asset classes increased their shares.

On a regular basis, we invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Other moves this month:

• I rebought 100,000 shares of Domacom (DCL.AX).
• I bought 10,000 shares of Regal Funds (RF1.AX) after the price fell sharply following an ASIC investigation of the firm.
• USD 100k of bonds (Virgin Australia & Viacom) matured. I bought USD 25k of Dell,  16k of Nustar, and 25k of Tupperware bonds. So our direct exposure to corporate bonds fell by USD 34k.
• I transferred AUD 45k to my Colonial First State superannuation account, investing in the Conservative Fund.
• I bought around AUD 43k and GBP 7k, selling US dollars.
• I bought 750 shares of 3i.

Performance of Optimal Portfolio

The graph shows the monthly profits from idealized trading of an optimal portfolio of Bitcoin, palladium, crude oil, and soybeans futures. The risk budget is the maximum loss possible in one day under ideal conditions.

My results this year somewhat track these. My trading hasn't always been ideal, I have been developing my methods, and my portfolio doesn't have the optimal weights yet. Midyear there were strong returns available and I also did well. Then, in the last four months returns were lower or negative and I also lost money. November was again a good month though not as good as April-June.

Next month I am looking to move closer to the optimal weights and increase the risk budget so that the average return would in theory be around the same amount as my salary, which is one of the goals I have set.

PAYG Installments

I received a letter from the Australian Tax Office that I need to pay quarterly estimated tax payments. However, if the total estimated tax is less than AUD 8,000 you can pay the installments annually. If you self-prepare your tax this means apparently that you don't actually need to pay any installments. So, I selected that option online.

On the other hand, I think Moominmama is going to need to make quarterly payments.