Monthly Review - June 2008

From a financial perspective, June was the worst month I have experienced since I started keeping monthly records in January 2007. If I had been keeping monthly records for longer, I suspect I would have had to go back several years to find a month in which I had lost as much money.

As a group, my mark to market investments all fell in value by meaningful amounts with the sole exception of my relatively small exposure to commodities. Adverse currency movements amplified the losses.

Here are the details:

1. my actively managed funds all fell. I currently have investments in actively managed funds investing in Thailand, Taiwan, Eastern Small Companies, European Small Companies and Vietnam. The loss on the Vietnam fund is now approaching 50% of the capital invested. It is unlikely that I will invest in another fund that effectively locks me in for several years;

2. my equity ETFs also fell. I currently have exposure to Hong Kong and India

3. my residual equity portfolio fell;

4. my commodity investments showed very marginal appreciation with a gain on my commodities fund slightly outweighing small declines in my Nickel and Lean Hogs ETCs;.

5. my properties are all fully rented and tenants are paying the rent on time. I have both a positive cash flow and a surplus of income over expenses (which represents an increase in net worth). Although some of the reductions in interest rates have been slightly reversed with the rise in HIBOR, the cash flows remain positive;

6. currency movements were adverse (the USD recovered some of its losses) and amplified the losses on investment. Currency movements have played a major role in determining the returns on my investments over the last 6-12 months. For the most part I have been a beneficiary of a falling USD. This month was one of the few months in recent times when the currency movement has been adverse.

To put the losses into context, the total mark to market write down was the equivalent of about 7 months of gross income from my Hong Kong rental properties. It is also worth mentioning that many of the investments continue to be held at well above cost. However, this is small comfort when I consider that I could have taken some quite good profits or cut my losses with at least some of them over the last six months.

There were no investments made this month. My income was in line with expectations this month. My spending was on the low side. The resulting savings helped to offset the effects of the losses on my investments. The end result was a decrease in net worth of 1.2% for the month. The year to date increase is 6.2%.

Looking forward, it has been several months since I made any investments and my cash holding has been building up. With inflation running at 5.4% officially and deposit rates still at close to zero, cash is depreciating quite rapidly and finding suitable investments is something of an imperative.