This is the last monthly review for 2013. An annual review will be posted later.
December was the first month in which there is no employment related income hitting the bank account - something that I am still getting used to. At the moment, it looks like I will get a small adjustment in late January or early February.
December was a poor month for my investments. Net worth fell due to the combined effect of flat to slightly lower equity valuations, adverse FX movements (primarily the AUD), a small transfer to Mrs Traineeinvestor and living expenses. Accrued dividends, rent and interest payments were not enough to swing the balance sheet back into positive territory.
Here are the details:
1. my Hong Kong equity portfolio was more or less flat. During the month. There were no sales or purchases this month. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities declined - mostly due to my largest position Westpac falling;
3.my equity ETFs were fractionally down in line with the local markets. There were no new purchases;
4. my commodities appreciated marginally. Silver is my only position;
5. all of my properties were occupied with all tenants paying on time. There were several minor repair bills this month and will be at least two more in January (all related to buildings which received notices for a mandatory window inspection). One tenant has given notice to terminate her lease effective mid-February. Two properties are debt free;
6. currency movements were negative, with a material fall in the AUD;
7. my position in bonds remains small. Some RMB bonds matured and I have purchased some PRC sovereign RMB bonds;
8. expenses were moderate with the usual Christmas spending on gifts and meals and a trip to New Zealand.
My cash position rose slightly. I currently hold 56.1 months of expenses in HKD cash or equivalents. The IShares RMB Bond fund is included a a cash equivalent. This is above my target floor of 24 months.
For the one month period, my net worth fell by 0.26%. The year to date increase is 14.84%. This means that my mark-to-market investments have appreciated this year.
Note 1: my calculation of cash and near cash needs to be revised.
Note 2: my net worth calculation includes accruals for long term expenses such as tax, holidays, home repair etc. At the moment, it appears that I have over provided for both tax and holidays. I will make an adjustment at year end.
Tuesday, December 31, 2013
Tuesday, December 24, 2013
100 Years of Currency Debasement
The US Federal Reserve was created on 23 December, 2013. From Wikipedia:
While many lament the decline in the real value of the dollar and the impact of inflation on savers and fixed income holders, for my part, I believe that the Federal Reserve has done a mostly good job of steering the US economy through two world wars, the great depression, the inflationary oil shocks of the 1970s and economic cycles generally.
Any judgement of the Fed's track record has to take into account (i) that they are operating in an country where the political leaders habitually spend more than the annual tax take, (ii) that the US has remained the largest and (by some measures) most dynamic economy in the world over this time period and (iii) that the US dollar is still the world's dominant reserve and trade currency. Sure, the US's proportionate share of the world economy is shrinking, but this is largely because much of the developing world is belatedly playing economic catch up. For all its many and severe problems, the US has been a better place to live than most of the rest of the world during this time period. Lastly, it also has to be noted that the (on average) mild inflation over the last century has to have been a better outcome than periods of deflation which occurred regularly prior to the Fed's creation.
Of course, the Fed's track record has been far from perfect - contractionary monetary policies at the beginning of the Great Depression unquestionably made that even far worse than expansionary policies would have and we are still being haunted by the very avoidable bubbles of the Greenspan era.
"The U.S. Congress established three key objectives for monetary policy in the Federal Reserve Act: Maximum employment, stable prices, and moderate long-term interest rates."Using this calculator the US has experienced cumulative inflation of 2254.2% since 1913. In other words, the US dollar has lost about 96% of its purchasing power under a century of Federal Reserve oversight.
While many lament the decline in the real value of the dollar and the impact of inflation on savers and fixed income holders, for my part, I believe that the Federal Reserve has done a mostly good job of steering the US economy through two world wars, the great depression, the inflationary oil shocks of the 1970s and economic cycles generally.
Any judgement of the Fed's track record has to take into account (i) that they are operating in an country where the political leaders habitually spend more than the annual tax take, (ii) that the US has remained the largest and (by some measures) most dynamic economy in the world over this time period and (iii) that the US dollar is still the world's dominant reserve and trade currency. Sure, the US's proportionate share of the world economy is shrinking, but this is largely because much of the developing world is belatedly playing economic catch up. For all its many and severe problems, the US has been a better place to live than most of the rest of the world during this time period. Lastly, it also has to be noted that the (on average) mild inflation over the last century has to have been a better outcome than periods of deflation which occurred regularly prior to the Fed's creation.
Of course, the Fed's track record has been far from perfect - contractionary monetary policies at the beginning of the Great Depression unquestionably made that even far worse than expansionary policies would have and we are still being haunted by the very avoidable bubbles of the Greenspan era.
Tuesday, December 10, 2013
You just can't make this stuff up
The benefits of China's leathal air pollution: smog bolsters military defenses.
As noted in the comments, it could also be an effective tool for population control.
As noted in the comments, it could also be an effective tool for population control.
Friday, November 29, 2013
Financial Review - November 2013
November was the first month in which there is no employment related income hitting the bank account - a scary moment. At the moment, it looks like I will get a small adjustment in late January or early February.
November was a good month for my investments. Net worth increased. The combined effect of a strong performance from my emerging market equities and the steady contribution from my properties more than offset the combined effect of a decline in my NZ/AU equities and commodities, adverse FX movements and living expenses.
Here are the details:
1. my Hong Kong equity portfolio appreciated sharply. During the month, I purchased more shares in Ping An (HK:2318) and added Dynam Japan (HK:6889) and Shanghai Petrochemical (HK:338) to the portfolio. I sold shares in Jiangsu Express and China VTM. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities declined slightly - mostly due to my largest position Westpac falling;
3.my equity ETFs increased in line with the local markets. There were no new purchases;
4. my commodities fell. Silver is my only position;
5. all of my properties were occupied with all tenants paying on time. There were only minor repair bills this month but a number of bills will be due either in December or early in 2014. Unfortunately, two buildings have received notices for a mandatory window inspection - I am hoping that I will not have to replace any windows. One tenant has given notice to terminate her lease effective mid-February. Two properties are debt free;
6. currency movements were negative, with a material fall in the AUD being less significant fall in the NZD;
7. my position in bonds remains small. Some RMB bonds matured and I have applied for a new IPO of PRC sovereign RMB bonds;
8. expenses were low.
My cash position fell slightly. I currently hold 55.6 months of expenses in HKD cash or equivalents. The IShares RMB Bond fund is included a a cash equivalent. This is above my target floor of 24 months.
For the one month period, my net worth rose by 1.41%. The year to date increase is 15.14%. This means that my mark-to-market investments have appreciated this year.
Note 1: my calculation of cash and near cash needs to be revised.
Note 2: my net worth calculation includes accruals for long term expenses such as tax, holidays, home repair etc. At the moment, it appears that I have over provided for both tax and holidays. I will make an adjustment at year end.
November was a good month for my investments. Net worth increased. The combined effect of a strong performance from my emerging market equities and the steady contribution from my properties more than offset the combined effect of a decline in my NZ/AU equities and commodities, adverse FX movements and living expenses.
Here are the details:
1. my Hong Kong equity portfolio appreciated sharply. During the month, I purchased more shares in Ping An (HK:2318) and added Dynam Japan (HK:6889) and Shanghai Petrochemical (HK:338) to the portfolio. I sold shares in Jiangsu Express and China VTM. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities declined slightly - mostly due to my largest position Westpac falling;
3.my equity ETFs increased in line with the local markets. There were no new purchases;
4. my commodities fell. Silver is my only position;
5. all of my properties were occupied with all tenants paying on time. There were only minor repair bills this month but a number of bills will be due either in December or early in 2014. Unfortunately, two buildings have received notices for a mandatory window inspection - I am hoping that I will not have to replace any windows. One tenant has given notice to terminate her lease effective mid-February. Two properties are debt free;
6. currency movements were negative, with a material fall in the AUD being less significant fall in the NZD;
7. my position in bonds remains small. Some RMB bonds matured and I have applied for a new IPO of PRC sovereign RMB bonds;
8. expenses were low.
My cash position fell slightly. I currently hold 55.6 months of expenses in HKD cash or equivalents. The IShares RMB Bond fund is included a a cash equivalent. This is above my target floor of 24 months.
For the one month period, my net worth rose by 1.41%. The year to date increase is 15.14%. This means that my mark-to-market investments have appreciated this year.
Note 1: my calculation of cash and near cash needs to be revised.
Note 2: my net worth calculation includes accruals for long term expenses such as tax, holidays, home repair etc. At the moment, it appears that I have over provided for both tax and holidays. I will make an adjustment at year end.
Thursday, November 28, 2013
The expected downside of property ownership
I like property as an asset class - security, leverage, cash flow. It helps that all of my property investments have done well (with the exception of one lemon purchased in the 1990s). But like all investments it has its downside and I am experiencing some issues:
1. house in New Zealand: this has been a great investment, It has (probably) at least doubled in value, my current tenants have been there for about six years now (I think) and it has always been cash flow positive. But ... it's a house and houses have roofs and roofs need to be repaired from time to time and for this house that time is now (some other work will be done at the same time). In synch with the roof needing repairs, a water pipe burst and I have go a repair bill for that as well. None of this is covered by insurance. The bottom line - most of the net rent between now and March will be used to settle these bills. The good news is that the tenants wish to stay while this is being done. The better news is that rents have been rising in Auckland so I should be able to get a rent increase early 2014 once the work has been done.
2. window inspection on apartments in Hong Kong: two units have received notices for mandatory window inspection. The cost for the first one is $600. The second one will be a bit more as it is a larger unit. If I have to replace any windows, that would potentially cost HK$10-15,000 depending on which window(s) need to be done. Rather oddly, I have not received a notice for my oldest unit - I assume the government is doing some kind of roster and I will get one in due course.
3. vacancies: the bane of every property investor's existence. I have been very fortunate to have gone for such a long period without a vacancy. I was particularly fortunate that the tenant of one property agreed to stay on at a reduced rental while building renovation work was being carried on. That happy state of affairs will come to an end in mid-February 2014 as a tenant has just exercised her right of early termination (nothing to do with rent levels). I will find out then how far rents have fallen.
In the overall scheme of things, these are trivial matters and ones which every property investor needs to allow for when making investment decisions.
1. house in New Zealand: this has been a great investment, It has (probably) at least doubled in value, my current tenants have been there for about six years now (I think) and it has always been cash flow positive. But ... it's a house and houses have roofs and roofs need to be repaired from time to time and for this house that time is now (some other work will be done at the same time). In synch with the roof needing repairs, a water pipe burst and I have go a repair bill for that as well. None of this is covered by insurance. The bottom line - most of the net rent between now and March will be used to settle these bills. The good news is that the tenants wish to stay while this is being done. The better news is that rents have been rising in Auckland so I should be able to get a rent increase early 2014 once the work has been done.
2. window inspection on apartments in Hong Kong: two units have received notices for mandatory window inspection. The cost for the first one is $600. The second one will be a bit more as it is a larger unit. If I have to replace any windows, that would potentially cost HK$10-15,000 depending on which window(s) need to be done. Rather oddly, I have not received a notice for my oldest unit - I assume the government is doing some kind of roster and I will get one in due course.
3. vacancies: the bane of every property investor's existence. I have been very fortunate to have gone for such a long period without a vacancy. I was particularly fortunate that the tenant of one property agreed to stay on at a reduced rental while building renovation work was being carried on. That happy state of affairs will come to an end in mid-February 2014 as a tenant has just exercised her right of early termination (nothing to do with rent levels). I will find out then how far rents have fallen.
In the overall scheme of things, these are trivial matters and ones which every property investor needs to allow for when making investment decisions.
Problematic investments
Unless you stick with a simple asset allocation strategy (investing in low cost index funds and periodically rebalancing) , it is inevitable that some investments will be problematic - they will not go as expected. I did some housecleaning back in April and have purged a few other loss making or "too small" investments since then. It's a good habit.
At the moment, I have the following investments which I currently view as problematic for one reason or another (listed from largest to smallest):
1. Various bonds and bond funds: In today's interest rate environment, I prefer to hold at least some of the money that would otherwise be earning zero in bank accounts in bonds or bond funds. For a retail investor, this is something of an exercise in frustration and I have mostly ended up with several very small investments in various HKD or RMB denominated bonds. Status - buy more as and when opportunities arise. I have applied for the current PRC sovereign bond IPO. The small quantities are a pain, but aren't doing me any harm.
2. Silver: I have bought and sold notional silver several times (beginning with my first purchases at a little bit over US$6 per oz well before this blog was started and most recently with a purchase at USD30.03 per oz in December 2012). Unfortunately, records of the early transactions were lost when my computer hard drive failed earlier this year so I do not know my net cost. And yes, I am still kicking myself for not selling when the price spiked to USD49 per oz. Listed because of falling price and lack of income. Status - hold. Will buy again if Silver drops to around USD18 per oz.
3. VTech (HK: 303): I first purchased these back in November 2009 and again in January 2012 paying $58.80 and $80.00 and have received some excellent dividends since then. Although not one of my larger investments, it is big enough to merit close attention and it is of concern that the share price has been drifting lower in a rising market and there is very little support for the company from analysts. That being said, the company should be a beneficiary of the expansion of China's middle class as well as US and European economic recovery. Status - hold as it offers a very good yield.
4. Vietnam Index Tracker (HK: 3087): Net of a partial sale, the average cost of my remaining investment is HK$203.89 meaning that I am sitting on a 7% loss. Status - hold. My conviction in the Vietnam story remains intact.
5. Gold coins: I have a few gold coins sitting in a safe deposit box. Purchased at prices ranging from USD1280 to USD1690 per ounce, this has been a loss making investment. Listed not only because I am holding at a loss but because it offers no yield and the value is within my definition of "too small". Status - hold. No plans to buy more.
6. China Starch (HK:3838): I paid HK$0.212 in May 2013 and have received a dividend. The shares closed at HK$0.221 today. This is currently my only small speculation. While I have no concerns about this investment, I have to remind myself that it was not purchased with a view to a long term holding. Listed only because it is "too small". Status - buy again if it dips enough (without a known cause).
7. Nufarm (ASX:NUF): my oldest investment. Although the records have long since been lost, it is a given that the combination of dividends and partial takeover proceeds mean that I would have received back my original investment years ago, it is listed because it is too small. Status - hold given the improving business performance.
8. Tesco (LN: TSCO): Recently purchased using some cash left in a UK brokerage account. Only listed because it is too small. Status - hold.
9. Whole of life insurance policy: my father took this out when I turned 18. By the time I got around to understanding just how damaging these things are for policy holders, it had reached the point where it made more sense to continue than to surrender the policy. Needless to say, just about anything else would have been a better investment. Status - hold. I have shortened the maturity date from age 65 to age 55. When it matures, I will use the proceeds to add to my NZ/Au share portfolio.
10. Chorus (NZX: CNU): I paid NZD2.68 per share on the theory that the shares had already factored in a negative decision on pricing of its copper fixed line business from the NZ competition regulator. Unfortunately the decision was much worse than anyone anticipated and the company's ability to pay dividends at all is now in question. The shares dropped to NZD1.78 today. Listed because it is loss making and too small. Status: under review - I need more clarity on the impact of the Commerce Commission decision on the company's ability to pay dividends going forward.
11. Specialty Fashion (ASX: SFH): I paid AUD1.20 per share back in 2011. A token dividend was received, but it's been a disappointment from day one. While the share price and profitability has recovered from the lows of 2012, at AUD0.84 it remains a losing investment. Listed because it is loss making and too small. Status: under review. The review is complicated by the company announcing a small acquisition today but I will likely end up selling.
There is also a modest collection of wine in bonded storage in the UK. I have not listed this for two reasons (i) valuations are uncertain and (ii) it is likely that a lot of it will end up being consumed (the next delivery arrives tomorrow). That said, there are a few cases that are too expensive to consider drinking. At some point when the market recovers, I will sell these and reinvest the proceeds in more modestly priced future drinking stock.
Items 7, 9 and 10 are small investments made using whatever cash accumulates from rent on my New Zealand property and my AU/NZ shares.
Items 4, 5, 10 and 11 are currently the only loss making investments in the portfolio.
At the moment, I have the following investments which I currently view as problematic for one reason or another (listed from largest to smallest):
1. Various bonds and bond funds: In today's interest rate environment, I prefer to hold at least some of the money that would otherwise be earning zero in bank accounts in bonds or bond funds. For a retail investor, this is something of an exercise in frustration and I have mostly ended up with several very small investments in various HKD or RMB denominated bonds. Status - buy more as and when opportunities arise. I have applied for the current PRC sovereign bond IPO. The small quantities are a pain, but aren't doing me any harm.
2. Silver: I have bought and sold notional silver several times (beginning with my first purchases at a little bit over US$6 per oz well before this blog was started and most recently with a purchase at USD30.03 per oz in December 2012). Unfortunately, records of the early transactions were lost when my computer hard drive failed earlier this year so I do not know my net cost. And yes, I am still kicking myself for not selling when the price spiked to USD49 per oz. Listed because of falling price and lack of income. Status - hold. Will buy again if Silver drops to around USD18 per oz.
3. VTech (HK: 303): I first purchased these back in November 2009 and again in January 2012 paying $58.80 and $80.00 and have received some excellent dividends since then. Although not one of my larger investments, it is big enough to merit close attention and it is of concern that the share price has been drifting lower in a rising market and there is very little support for the company from analysts. That being said, the company should be a beneficiary of the expansion of China's middle class as well as US and European economic recovery. Status - hold as it offers a very good yield.
4. Vietnam Index Tracker (HK: 3087): Net of a partial sale, the average cost of my remaining investment is HK$203.89 meaning that I am sitting on a 7% loss. Status - hold. My conviction in the Vietnam story remains intact.
5. Gold coins: I have a few gold coins sitting in a safe deposit box. Purchased at prices ranging from USD1280 to USD1690 per ounce, this has been a loss making investment. Listed not only because I am holding at a loss but because it offers no yield and the value is within my definition of "too small". Status - hold. No plans to buy more.
6. China Starch (HK:3838): I paid HK$0.212 in May 2013 and have received a dividend. The shares closed at HK$0.221 today. This is currently my only small speculation. While I have no concerns about this investment, I have to remind myself that it was not purchased with a view to a long term holding. Listed only because it is "too small". Status - buy again if it dips enough (without a known cause).
7. Nufarm (ASX:NUF): my oldest investment. Although the records have long since been lost, it is a given that the combination of dividends and partial takeover proceeds mean that I would have received back my original investment years ago, it is listed because it is too small. Status - hold given the improving business performance.
8. Tesco (LN: TSCO): Recently purchased using some cash left in a UK brokerage account. Only listed because it is too small. Status - hold.
9. Whole of life insurance policy: my father took this out when I turned 18. By the time I got around to understanding just how damaging these things are for policy holders, it had reached the point where it made more sense to continue than to surrender the policy. Needless to say, just about anything else would have been a better investment. Status - hold. I have shortened the maturity date from age 65 to age 55. When it matures, I will use the proceeds to add to my NZ/Au share portfolio.
10. Chorus (NZX: CNU): I paid NZD2.68 per share on the theory that the shares had already factored in a negative decision on pricing of its copper fixed line business from the NZ competition regulator. Unfortunately the decision was much worse than anyone anticipated and the company's ability to pay dividends at all is now in question. The shares dropped to NZD1.78 today. Listed because it is loss making and too small. Status: under review - I need more clarity on the impact of the Commerce Commission decision on the company's ability to pay dividends going forward.
11. Specialty Fashion (ASX: SFH): I paid AUD1.20 per share back in 2011. A token dividend was received, but it's been a disappointment from day one. While the share price and profitability has recovered from the lows of 2012, at AUD0.84 it remains a losing investment. Listed because it is loss making and too small. Status: under review. The review is complicated by the company announcing a small acquisition today but I will likely end up selling.
There is also a modest collection of wine in bonded storage in the UK. I have not listed this for two reasons (i) valuations are uncertain and (ii) it is likely that a lot of it will end up being consumed (the next delivery arrives tomorrow). That said, there are a few cases that are too expensive to consider drinking. At some point when the market recovers, I will sell these and reinvest the proceeds in more modestly priced future drinking stock.
Items 7, 9 and 10 are small investments made using whatever cash accumulates from rent on my New Zealand property and my AU/NZ shares.
Items 4, 5, 10 and 11 are currently the only loss making investments in the portfolio.
Friday, November 22, 2013
Shanghai Petrochemical purchased
This morning I added some shares in Shanghai Petrochemical (HK:338) to the portfolio. This is essentially an investment in a stock that I expect (or hope) will benefit from a combination of regulatory reforms and improved margins for its products. I'm possibly a bit late to be jumping into this one as the share price as already moved quite a bit, but with the most recent brokers price targets ranging from HK$2.50 to HK$3.70 and the forecast PE ratio being relatively modest, I hope there is still a reasonable amount of upside.
I paid HK$2.11 per share. Unfortunately, this was a limit order which was only partially filled and, with the shares closing at $2.21, I am not sure if I want to chase the price.
I paid HK$2.11 per share. Unfortunately, this was a limit order which was only partially filled and, with the shares closing at $2.21, I am not sure if I want to chase the price.
Monday, November 18, 2013
HK Trailwalker completed
I managed to stumble my way around the Hong Kong Trailwalker on Friday/Saturday. Completing the very hilly 100 km course across the New Territories brings with it a wonderful sense of accomplishment and a lot of pain. I am tempted to do it again, but really need to (i) train harder and smarter and (ii) figure out ways to reduce the blistering on my feet (which was seriously affecting my speed over the last two stages). Having three great team mates and a wonderfully dedicated support team really added to the experience.
Full credit to Oxfam not only for their consistently excellent organisation and management of the event but also for neatly foiling the efforts of selfish and greedy local residents who tried to block the route as a means of extorting land belonging to the Hong Kong people for their own commercial gain. All the protesters managed to demonstrate is their own arrogance and greed. It is long past time that the ridiculous apartheid-style land ownership claims of the Kuk were dismissed with the contempt that they deserve.
Full credit to Oxfam not only for their consistently excellent organisation and management of the event but also for neatly foiling the efforts of selfish and greedy local residents who tried to block the route as a means of extorting land belonging to the Hong Kong people for their own commercial gain. All the protesters managed to demonstrate is their own arrogance and greed. It is long past time that the ridiculous apartheid-style land ownership claims of the Kuk were dismissed with the contempt that they deserve.
Tuesday, November 12, 2013
China VTM sold - loss taken
I have sold my shares in China VTM (HK:893). This has been a disappointing investment (to put it mildly) beginning with a small investment when the iron ore price was just beginning its slide and ending when I doubled my investment in an attempt to arbitrage the unsuccessful privatisation. While I remain mystified why anyone voted against the privatisation proposal, the fact is that it failed and the company's share price plummeted. Having spent more time than I should going through the company's financials, press releases (not many of use) and other public information, I concluded that I had very little understanding of the company's assets (mine life in particular) and that a dividend was unlikely. A strong balance sheet with plenty of cash were not enough to overcome these issues. The only two things that caused me to hesitate were (i) the upsurge in China's iron ore imports and (ii) the possibility that there will be another attempt to privatise the company in the future. In the end, I concluded that my money was better invested elsewhere - even if I am not sure what the "elsewhere" will be yet.
I sold at $1.18 taking a net loss of 39%.
I sold at $1.18 taking a net loss of 39%.
Dynam Japan purchased
I have added shares in Dynam Japan Holdings (HK:6889) to the portfolio.
The company sells on very modest fundamentals with a trailing PE of 7.2, a dividend yield in excess of 6% and strong free cash flows. The balance sheet is strong with a reasonable amount of net cash on hand (33.5 billion yen). ROE is high at 19%. The negatives are a diversion into property development in Mongolia (!) and the fact that most of the revenue is derived from pachinko (a declining industry) and is denominated in yen. The former should be addressed in time with the company stating that it will refocus on gaming and the latter through diversification into other gaming ventures (which carries its own risks).
I paid an average of HK$17.07 per share.
The company sells on very modest fundamentals with a trailing PE of 7.2, a dividend yield in excess of 6% and strong free cash flows. The balance sheet is strong with a reasonable amount of net cash on hand (33.5 billion yen). ROE is high at 19%. The negatives are a diversion into property development in Mongolia (!) and the fact that most of the revenue is derived from pachinko (a declining industry) and is denominated in yen. The former should be addressed in time with the company stating that it will refocus on gaming and the latter through diversification into other gaming ventures (which carries its own risks).
I paid an average of HK$17.07 per share.
Wednesday, November 06, 2013
Jiangsu Express sold
Since I am no longer earning a salary and do not want to run down my cash reserves too far, I need to get into the habit of selling shares from time to time. After doing a brief review of the portfolio over the last few days, I sold Jiangsu Express (HK:177) yesterday.
I have four companies which invest in PRC toll roads all of which have suffered due to PRC government imposed reductions in tariffs (including "free" days when extra pollution generating activities are encouraged). Jiangsu Express was the one selling closest to analysts valuations and on the highest PE. In addition, there was a rumour that the PRC government would reduce the concession period from 30 to 25 years (which would do even more damage to the industry). I will miss the 4.7% trailing yield.
I received $9.45 - 9.48 for my shares. This was one of my better investments. I paid HK$5.52 and have received $1.34 in dividends (net) for a 95% profit over (about) two years.
I have four companies which invest in PRC toll roads all of which have suffered due to PRC government imposed reductions in tariffs (including "free" days when extra pollution generating activities are encouraged). Jiangsu Express was the one selling closest to analysts valuations and on the highest PE. In addition, there was a rumour that the PRC government would reduce the concession period from 30 to 25 years (which would do even more damage to the industry). I will miss the 4.7% trailing yield.
I received $9.45 - 9.48 for my shares. This was one of my better investments. I paid HK$5.52 and have received $1.34 in dividends (net) for a 95% profit over (about) two years.
Ping An purchased (#2)
On Monday I purchased some additional shares in Ping An (HK:2318). At current prices it looks the best value in the insurance space in Hong Kong/China (possibly because of concerns over its activities outside the insurance space). Given the growth of the middle class consumer in China, my expectation is that this industry has considerable room to grow.
I paid HK$61.50 for the additional shares.
I paid HK$61.50 for the additional shares.
Thursday, October 31, 2013
Financial Review - October 2013
October was a good month for my investments. Net worth increased. High income produced excellent savings* and the principal component of my mortgage repayments combined with solid gains on my equities and commodities more than offset a small adverse movement in FX rates.
Here are the details:
1. my Hong Kong equity portfolio appreciated. During the month, I purchased shares in Ping An (HK:2318) and added slightly to my shareholdings in Cosco Pacific (HK:1199) and K Wah (HK:173) through dividend reinvestment elections. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities appreciated slightly;
3.my equity ETFs increased in line with the local markets. There were no new purchases;
4. my commodities rose. Silver is my only position;
5. all of my properties were occupied with all tenants paying on time. There were only minor repair bills this month. Unfortunately, two buildings have received notices for a mandatory window inspection - I am hoping that I will not have to replace any windows. One property is now debt free;
6. currency movements were negative, with gains in the AUD being less significant than the fall in the NZD;
7. my position in bonds remains small. Some RMB bonds matured and I purchased some units in the iShares RMB Bond fund (HK:3139 and HK:83139);
8.I have no open derivative positions;
9. savings were high with high income and moderate expenses;
10. there was no transfer to Mrs Traineeinvestor this month.
My cash position rose due in spite of the new investment in Ping An. I currently hold 56.5 months of expenses in HKD cash or equivalents. The IShares RMB Bond fund is included a a cash equivalent. This is above my target floor of 24 months.
For the one month period, my net worth rose by 2.06%. The year to date increase is 13.54%. This means that my mark-to-market investments have appreciated this year.
* I retired on 30 September, 2013. Pay for September hit the bank account at the beginning of October.
Here are the details:
1. my Hong Kong equity portfolio appreciated. During the month, I purchased shares in Ping An (HK:2318) and added slightly to my shareholdings in Cosco Pacific (HK:1199) and K Wah (HK:173) through dividend reinvestment elections. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities appreciated slightly;
3.my equity ETFs increased in line with the local markets. There were no new purchases;
4. my commodities rose. Silver is my only position;
5. all of my properties were occupied with all tenants paying on time. There were only minor repair bills this month. Unfortunately, two buildings have received notices for a mandatory window inspection - I am hoping that I will not have to replace any windows. One property is now debt free;
6. currency movements were negative, with gains in the AUD being less significant than the fall in the NZD;
7. my position in bonds remains small. Some RMB bonds matured and I purchased some units in the iShares RMB Bond fund (HK:3139 and HK:83139);
8.I have no open derivative positions;
9. savings were high with high income and moderate expenses;
10. there was no transfer to Mrs Traineeinvestor this month.
My cash position rose due in spite of the new investment in Ping An. I currently hold 56.5 months of expenses in HKD cash or equivalents. The IShares RMB Bond fund is included a a cash equivalent. This is above my target floor of 24 months.
For the one month period, my net worth rose by 2.06%. The year to date increase is 13.54%. This means that my mark-to-market investments have appreciated this year.
* I retired on 30 September, 2013. Pay for September hit the bank account at the beginning of October.
Wednesday, October 30, 2013
Ping An purchased
This morning I added Ping An (HK:2318) to the portfolio.
Ping An is one of China's larger insurance companies. The company offers exposure to the growing insurance industry in the PRC and could be viewed as an investment in China's growing middle class consumer. While the historical fundamentals are not very exciting (trailing PE of 18.9 and Yield of 0.9 percent), I expect those numbers to improve as the company continues to grow.
I paid HK$59.30 per share.
Ping An is one of China's larger insurance companies. The company offers exposure to the growing insurance industry in the PRC and could be viewed as an investment in China's growing middle class consumer. While the historical fundamentals are not very exciting (trailing PE of 18.9 and Yield of 0.9 percent), I expect those numbers to improve as the company continues to grow.
I paid HK$59.30 per share.
Tuesday, October 29, 2013
Lease renewed
I have just renewed the lease on one of my properties. As this was the highest rental stream in the portfolio it was a relief to sign the tenant up for another two years (with break clause) at a rent that was only (approximately) two percent below the old rent. While the new rent is (probably) a little below the current market, I am still much better off having the unbroken cash flow from a lower rent than getting a higher rent after a short vacancy and incurring all the usual costs involved in renting to a new tenant.
While it is inevitable that there will be vacancies from time to time, starting my retirement with full occupancy on the Hong Kong properties (and having one mortgage free) is a nice.
While it is inevitable that there will be vacancies from time to time, starting my retirement with full occupancy on the Hong Kong properties (and having one mortgage free) is a nice.
Monday, October 21, 2013
IShares RMB Bond Fund purchased
Last week bean counter at My Investment Blog posted about the iShares RMB Bond fund (HK:3139) as a relatively new ETF offering. It sounded interesting so I went and had a look. With more cash sitting in the bank earning next to zero, finding a place where I can invest some of it and at least try to mitigate the effects of inflation without taking undue levels of risk is always welcome.
The iShares RMB Bond Fund meets enough of my criteria to justify investment - it will offer a yield higher than bank deposits (which is not difficult) and is relatively safe from default risk (diversified holdings of bonds).
The uncertainties or negatives are:
1. I am not sure what the yield will be as (i) I could not work out how much of the interest earned on the underlying bonds will be subject to PRC witholding taxes) and (ii) it is inevitable that there will be some defaults in the portfolio at some stage;
2. the underlying bonds are denominated in RMB so I am taking FX risk (or achieving FX diversification) which may affect both the yield and the capital value of my investment in HKD;
3. the underlying bonds would lose value if interest rates were to rise. Given that the average duration is around 3 years, I am not overly concerned about this risk; and
4.the fund is small and illiquid.
Given the short duration of the underlying investments, I will include my units in this ETF as part of my cash/near cash calculation.
I paid HKD43.60-43.70 for my units.
The iShares RMB Bond Fund meets enough of my criteria to justify investment - it will offer a yield higher than bank deposits (which is not difficult) and is relatively safe from default risk (diversified holdings of bonds).
The uncertainties or negatives are:
1. I am not sure what the yield will be as (i) I could not work out how much of the interest earned on the underlying bonds will be subject to PRC witholding taxes) and (ii) it is inevitable that there will be some defaults in the portfolio at some stage;
2. the underlying bonds are denominated in RMB so I am taking FX risk (or achieving FX diversification) which may affect both the yield and the capital value of my investment in HKD;
3. the underlying bonds would lose value if interest rates were to rise. Given that the average duration is around 3 years, I am not overly concerned about this risk; and
4.the fund is small and illiquid.
Given the short duration of the underlying investments, I will include my units in this ETF as part of my cash/near cash calculation.
I paid HKD43.60-43.70 for my units.
Thursday, October 17, 2013
Sinolink Holdings - partial sale
This morning I sold some of my shares in Sinolink Holdings (HK:1168) at HK$0.71. These were essentially the same parcel of shares I purchased for HK$0.66 back in August. Net of transaction costs, I made a profit of 7.1%.
I still believe that the company is undervalued (selling at less than cash backing alone with the properties on top of that) and I continue to hold the bulk of my investment in this company.
I still believe that the company is undervalued (selling at less than cash backing alone with the properties on top of that) and I continue to hold the bulk of my investment in this company.
Tesco puchased
I had a small amount of money sitting in a dormant brokerage account in the UK. Having finally got around to activating the account, I purchased some shares in Tesco (LN:TSCO) last week. The shares have been disappointing but with the UK economy showing signs of recovery, the loss making US operations being disposed of and the move to a JV vehicle in China, I am hopeful that the worst is now behind this company (possibly Europe will continue to disappoint). Even if it takes time to return to growth, the dividend yield of around 4% means that I am being paid while I wait.
I paid GBP3.56 per share.
I paid GBP3.56 per share.
Friday, October 04, 2013
Early retirement - already getting into the swing of things
Okay, so I am only four days into my retirement but it already feels like a different life. On Friday, I put my daughters on their school bus and, instead of then catching the bus into the office, I went for a short run on the Hong Kong trail and had an uninterrupted day dealing with a few tasks that have been languishing in the in tray for years, working on my MFA assignment and having an afternoon nap. I managed to get more research and writing done today than I did in an entire week while I was working. Not exciting but absolutely pressure free. I'm still notionally part time so I checked the Blackberry ... just once.
Thursday, October 03, 2013
Last pay cheque received
Yesterday I received my final monthly pay cheque*. It feels a little strange to know that I will no longer receive employment income for the first time since I commenced my career back in January 1990.
The good news is that I am signing off with our household net worth at an all time high, even with property values updated to reflect lower bank valuations and with what is probably an over provision for future tax obligations.
The bad news is that I have made a list of things that need to be done for one reason or another (lots of yellow post-it notes and mental notes consolidated into a list. So far I have thirty-two items ranging from sending old laptops for recycling to converting some ASX listed shares from broker sponsored to issuer sponsored to doing something with a small amount of money sitting in a dormant broker account to updating my will to ..... it's a long list. Add in the MFA and a few other things and I am actually much busier that I expected. Hopefully things will settle down.
* There will be a further adjustment payment in late January or early February of uncertain amount once the firm's full year results are known. It is also possible that I may receive very small token payment for any consultancy work I do between now and the end of 2014.
The good news is that I am signing off with our household net worth at an all time high, even with property values updated to reflect lower bank valuations and with what is probably an over provision for future tax obligations.
The bad news is that I have made a list of things that need to be done for one reason or another (lots of yellow post-it notes and mental notes consolidated into a list. So far I have thirty-two items ranging from sending old laptops for recycling to converting some ASX listed shares from broker sponsored to issuer sponsored to doing something with a small amount of money sitting in a dormant broker account to updating my will to ..... it's a long list. Add in the MFA and a few other things and I am actually much busier that I expected. Hopefully things will settle down.
* There will be a further adjustment payment in late January or early February of uncertain amount once the firm's full year results are known. It is also possible that I may receive very small token payment for any consultancy work I do between now and the end of 2014.
Tuesday, October 01, 2013
And done - I am now retired
I officially retired on 30 September, 2013.
Although I have been looking forward to this moment for several years, I still feel a little bit apprehensive about the prospect of funding our family for a retirement that I hope will last more than forty years with no income from employment. I know that the numbers make sense, but no amount of financial planning can protect me from every possible negative event, so I spent a bit of time looking at the contingency plans.
1. Off balance sheet assets
We have a few assets which do not appear in the balance sheet for one reason or another:
(i). wine in bond in the UK: this was excluded on the basis that I was more likely to drink it than sell it. As the collection has grown and some of the cases are now too expensive to drink (at least for me);
(ii). gold coins/silver bars: I am not a fan of gold but recognise the metal's long history of being an asset of last resort. Initially the value was too small to bother with but every now and then I buy a little bit of physical bullion and put it in the safe deposit box;
(iii). life insurance policy: many years ago (before I had even started working) my parents took out a whole of life insurance policy in my name. While whole of life policies are (like anything insurance related) a very bad investment, by the time I had educated myself on the evils of such policies, it had reached the point where it was better to keep it than surrender the policy. It matures in 2021. The amount is not large;
(iv). money in a joint bank account: this is used to collect rent and pay expenses on a property in our joint names. Initially there was very little in the account (in fact I often had to top it up whenever we had a vacancy) but as rents have risen and interest rates have fallen, cash has built up (and continues to do so). It is currently earmarked to pay for redecoration of our home as and when we get around to that;
(v). painting: I purchased one painting which is leased for a modest return. Eventually I hope to sell this but it is an uncertain proposition so I have not included this in the balance sheet.
Collectively, these five items would pay for at least a year's worth of living expenses (at worst case valuations) and could pay for up to 18 months worth of expenses.
2. Sources of funds
We have two main options - downsize our home or take out a reverse mortgage. The former is prohibitively expensive in Hong Kong due to the HKSAR government's war against home buyers and investors and (as far as I am aware), reverse mortgages are not currently available.
3. Reduce expenses
There is plenty of fat in the budget which could be trimmed if needed. We can cut back on holidays and a few other areas without feeling any pain.
At some point, my daughters will be off the payroll. Given that they are still very young, I have ignored this when crunching retirement numbers.
4. Get a job
If I have to I will (and I will still do a few hours a week for a year or so just to keep myself current), but even with all the bad things the market has thrown at me over the last few years, the portfolio has still done its thing. All that being said, if I need to get a job, I should look for one as soon as the possible need becomes apparent and not wait .until things get difficult
It helps that Mrs Traineeinvestor wishes to continue with her part time job although my financial model only assumes she continues working until the end of 2014.
All in all, I have a high degree of confidence in the private portfolio's ability to support us for 40+ years.
Although I have been looking forward to this moment for several years, I still feel a little bit apprehensive about the prospect of funding our family for a retirement that I hope will last more than forty years with no income from employment. I know that the numbers make sense, but no amount of financial planning can protect me from every possible negative event, so I spent a bit of time looking at the contingency plans.
1. Off balance sheet assets
We have a few assets which do not appear in the balance sheet for one reason or another:
(i). wine in bond in the UK: this was excluded on the basis that I was more likely to drink it than sell it. As the collection has grown and some of the cases are now too expensive to drink (at least for me);
(ii). gold coins/silver bars: I am not a fan of gold but recognise the metal's long history of being an asset of last resort. Initially the value was too small to bother with but every now and then I buy a little bit of physical bullion and put it in the safe deposit box;
(iii). life insurance policy: many years ago (before I had even started working) my parents took out a whole of life insurance policy in my name. While whole of life policies are (like anything insurance related) a very bad investment, by the time I had educated myself on the evils of such policies, it had reached the point where it was better to keep it than surrender the policy. It matures in 2021. The amount is not large;
(iv). money in a joint bank account: this is used to collect rent and pay expenses on a property in our joint names. Initially there was very little in the account (in fact I often had to top it up whenever we had a vacancy) but as rents have risen and interest rates have fallen, cash has built up (and continues to do so). It is currently earmarked to pay for redecoration of our home as and when we get around to that;
(v). painting: I purchased one painting which is leased for a modest return. Eventually I hope to sell this but it is an uncertain proposition so I have not included this in the balance sheet.
Collectively, these five items would pay for at least a year's worth of living expenses (at worst case valuations) and could pay for up to 18 months worth of expenses.
2. Sources of funds
We have two main options - downsize our home or take out a reverse mortgage. The former is prohibitively expensive in Hong Kong due to the HKSAR government's war against home buyers and investors and (as far as I am aware), reverse mortgages are not currently available.
3. Reduce expenses
There is plenty of fat in the budget which could be trimmed if needed. We can cut back on holidays and a few other areas without feeling any pain.
At some point, my daughters will be off the payroll. Given that they are still very young, I have ignored this when crunching retirement numbers.
4. Get a job
If I have to I will (and I will still do a few hours a week for a year or so just to keep myself current), but even with all the bad things the market has thrown at me over the last few years, the portfolio has still done its thing. All that being said, if I need to get a job, I should look for one as soon as the possible need becomes apparent and not wait .until things get difficult
It helps that Mrs Traineeinvestor wishes to continue with her part time job although my financial model only assumes she continues working until the end of 2014.
All in all, I have a high degree of confidence in the private portfolio's ability to support us for 40+ years.
Financial Review - September 2013
September was an excellent month for my investments. Net worth increased meaningfully. High income produced excellent savings and the principal component of my mortgage repayments combined with solid gains on my equities and appreciation of the AUD and NZD more than offset the decline in my commodities.
Here are the details:
1. my Hong Kong equity portfolio appreciated. During the month, I purchased I opened a substantial position in Swire Pacific (HK:19) and added a few more shares in Henderson Land (HK:12) through the dividend reinvestment. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities appreciated slightly. This gain is understated as some companies went ex dividend during the month but I have yet to receive the dividends;
3.my ETFs increased in line with the local markets. There were no new purchases;
4. my commodities fell. Silver is my only position;
5. all of my properties were occupied with all tenants paying on time. There were only minor repair bills this month. Unfortunately, two buildings have received notices for a mandatory window inspection - I am hoping that I will not have to replace any windows. One property is now debt free;
6. currency movements were positive, with gains in both the NZD and the AUD;
7. my position in bonds remains small;
8.I have no open derivative positions;
9. savings were high with high income and moderate expenses;
10. there was a small transfer to Mrs Traineeinvestor this month.
My cash position fell due to the new investment in Swire Pacific. I currently hold 54.92 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the one month period, my net worth rose by 4.00%. The year to date increase is 11.25%. This means that my mark-to-market investments have appreciated this year.
I retired on 30 September, 2013 (separate post to follow).
Here are the details:
1. my Hong Kong equity portfolio appreciated. During the month, I purchased I opened a substantial position in Swire Pacific (HK:19) and added a few more shares in Henderson Land (HK:12) through the dividend reinvestment. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities appreciated slightly. This gain is understated as some companies went ex dividend during the month but I have yet to receive the dividends;
3.my ETFs increased in line with the local markets. There were no new purchases;
4. my commodities fell. Silver is my only position;
5. all of my properties were occupied with all tenants paying on time. There were only minor repair bills this month. Unfortunately, two buildings have received notices for a mandatory window inspection - I am hoping that I will not have to replace any windows. One property is now debt free;
6. currency movements were positive, with gains in both the NZD and the AUD;
7. my position in bonds remains small;
8.I have no open derivative positions;
9. savings were high with high income and moderate expenses;
10. there was a small transfer to Mrs Traineeinvestor this month.
My cash position fell due to the new investment in Swire Pacific. I currently hold 54.92 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the one month period, my net worth rose by 4.00%. The year to date increase is 11.25%. This means that my mark-to-market investments have appreciated this year.
I retired on 30 September, 2013 (separate post to follow).
Wednesday, September 25, 2013
China's ghost cities not so ghostly
A huge amount has been written about China's real estate "bubble". While a lot of what is written can be dismissed as the frothy ramblings of permabears who see bubbles everywhere, there have been a number of points of legitimate concerns about China's housing market. One claim which I have always had difficulty reconciling with the China's urbanisation (and rational financial behaviour by investors) is the reports of "ghost cities" - large scale residential developments with associated retail shopping malls and other facilities which appear to be empty.
There is little room to dispute the fact that there are a lot of recently completed developments which are empty. However, it Nicole Wong of CLSA has provided a rational explanation for this phenomena - in China new developments are sold as empty shells and it typically takes about three years for a development to reach a point where it has a substantial level of occupancy. Since she visited 137 projects on a recent trip, it can be safely assumed that her position is supported by first hand observation (i.e. it is not just some random theory).
Further details and explanations are here.
While there are aspects of the Chinese real estate market which remain of concern, I am now have a reason for dismissing the "ghost city" claims.
There is little room to dispute the fact that there are a lot of recently completed developments which are empty. However, it Nicole Wong of CLSA has provided a rational explanation for this phenomena - in China new developments are sold as empty shells and it typically takes about three years for a development to reach a point where it has a substantial level of occupancy. Since she visited 137 projects on a recent trip, it can be safely assumed that her position is supported by first hand observation (i.e. it is not just some random theory).
Further details and explanations are here.
While there are aspects of the Chinese real estate market which remain of concern, I am now have a reason for dismissing the "ghost city" claims.
Wednesday, September 04, 2013
Swire Pacific purchased
I have added some shares in Swire Pacific (HK:19) to the portfolio. I do not expect this to be a high preperforming investment - instead I am looking at this company as being a reliable dividend payer and an alternative to some of the excess cash I am sitting on.
I did look at the B shares (HK:87) which trade at a slight discount to the A shares, but the difference in price would very likely have been lost in the lower liquidity and wider spread (unless I hold for a long period of time).
I paid HK$91.75 per share.
I did look at the B shares (HK:87) which trade at a slight discount to the A shares, but the difference in price would very likely have been lost in the lower liquidity and wider spread (unless I hold for a long period of time).
I paid HK$91.75 per share.
Last month
I am now down to my final month in the work force. While I am looking forward to my retirement, it is not without some trepidation that I will be saying goodbye to my career and my pay cheque.
Financially, this year has not been a great one - I have seen my investment in China Metal Recycling (HK:773) reduced to zero, my investment in iShares India has dropped by nearly 30% since the start of the year (but still comfortably above what I paid), the privatisation of China VTM Mining (HK:893) failed causing the shares to drop by over 40% (now partially recovered) and (most significantly), the AUD and NZD have fallen sharply against the USD/HKD. I am also seeing property valuation decline from their peak (which does not bother me at all) and am expecting rental incomes to fall and vacancies to increase as leases come due for renewal (which does affect me). Add in the HKSAR government's mandatory window inspection which is costing me thousands of dollars per apartment and two properties going through refurbishment and the outgoings have been high this year.
But in spite of these issues, I should not forget that:
1. the portfolio as a whole is still doing its job. The issues with equity investments identified above have been mostly offset by good performances elsewhere;
2. all the properties are fully occupied, all tenants are paying on time and there is still more cash coming in than going out. I now have one Hong Kong property mortgage free and am considering paying off the mortgage on one of the others;
3. when I put the numbers into FIRECalc or my own spreadsheet, I have to assume a lot of bad things before I have to worry about sustaining my retirement. I still worry far more about inflation than I do about market volatility;
4. I have more cash than I would like. While this liquidity provides short term safety, it creates long term risk. Finding a home for at least some of the cash is something of a priority right now.
Financially, this year has not been a great one - I have seen my investment in China Metal Recycling (HK:773) reduced to zero, my investment in iShares India has dropped by nearly 30% since the start of the year (but still comfortably above what I paid), the privatisation of China VTM Mining (HK:893) failed causing the shares to drop by over 40% (now partially recovered) and (most significantly), the AUD and NZD have fallen sharply against the USD/HKD. I am also seeing property valuation decline from their peak (which does not bother me at all) and am expecting rental incomes to fall and vacancies to increase as leases come due for renewal (which does affect me). Add in the HKSAR government's mandatory window inspection which is costing me thousands of dollars per apartment and two properties going through refurbishment and the outgoings have been high this year.
But in spite of these issues, I should not forget that:
1. the portfolio as a whole is still doing its job. The issues with equity investments identified above have been mostly offset by good performances elsewhere;
2. all the properties are fully occupied, all tenants are paying on time and there is still more cash coming in than going out. I now have one Hong Kong property mortgage free and am considering paying off the mortgage on one of the others;
3. when I put the numbers into FIRECalc or my own spreadsheet, I have to assume a lot of bad things before I have to worry about sustaining my retirement. I still worry far more about inflation than I do about market volatility;
4. I have more cash than I would like. While this liquidity provides short term safety, it creates long term risk. Finding a home for at least some of the cash is something of a priority right now.
Sunday, September 01, 2013
Financial Review - August 2013
August was a modestly good month for my investments. Net worth increased slighty. High income produced excellent savings and the principal component of my mortgage repayments combined with reasonable gains on my equities and commodities were only partially offset by the impact of a further decline in the AUD and NZD.
Here are the details:
1. my Hong Kong equity portfolio appreciated. During the month, I purchased some additional shaes in Anhui Expressway and Sinolink Holdings. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities appreciated, helped by some excellent results announcements;
3.my ETFs increased in line with the local markets (except India which decreased with the Rupee). There were no new purchases;
4. my commodities increased. Silver is my only position which rallied strongly;
5. all of my properties were occupied with all tenants paying on time. There were only minor repair bills this month. Unfortunately, one building has received notcies for a mandatory window inspection. One property is now debt free;
6. currency movements were negative, with losses in both the NZD and the AUD;
7. my position in bonds remains small;
8.I have purchased a NZD/HKD forward contract;
9. savings were high with high income and moderate expenses (including a summer holiday which came in under budget);
10. there were no transfers to Mrs Traineeinvestor this month.
My cash position rose slightly with money coming in than going out due to new investments. I currently hold 59.43 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the one month period, my net worth rose by 1.08%. The year to date increase is 6.97%. This means that my investments have more or less broken even this year. My retirement date has been fixed for 30 September.
Here are the details:
1. my Hong Kong equity portfolio appreciated. During the month, I purchased some additional shaes in Anhui Expressway and Sinolink Holdings. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities appreciated, helped by some excellent results announcements;
3.my ETFs increased in line with the local markets (except India which decreased with the Rupee). There were no new purchases;
4. my commodities increased. Silver is my only position which rallied strongly;
5. all of my properties were occupied with all tenants paying on time. There were only minor repair bills this month. Unfortunately, one building has received notcies for a mandatory window inspection. One property is now debt free;
6. currency movements were negative, with losses in both the NZD and the AUD;
7. my position in bonds remains small;
8.I have purchased a NZD/HKD forward contract;
9. savings were high with high income and moderate expenses (including a summer holiday which came in under budget);
10. there were no transfers to Mrs Traineeinvestor this month.
My cash position rose slightly with money coming in than going out due to new investments. I currently hold 59.43 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the one month period, my net worth rose by 1.08%. The year to date increase is 6.97%. This means that my investments have more or less broken even this year. My retirement date has been fixed for 30 September.
Friday, August 30, 2013
Sinolink holdings purchased
Yesterday I purchased a few more shares in Sinolink Holdings (HK:1168). The results were disappointing but the drop in profit was largely due to non-cash write downs of certain assets. The company is still sitting on cash equivalent to HK$1.10 per share as well as its other assets. Recurring cash flow should continue to improve as completed buildings move to full occupancy and the hotel opens.
I would like to see the company do two things (i) start paying dividends and (ii) after the Rockbund project is completed not do any more transactions with associated companies - at present too much of the company's balance sheet is locked in in the investment in/loan to the associated company. IMHO, these two steps should result in a material re-rating of the share price.
I paid HK$0.66 for the additional shares.
I would like to see the company do two things (i) start paying dividends and (ii) after the Rockbund project is completed not do any more transactions with associated companies - at present too much of the company's balance sheet is locked in in the investment in/loan to the associated company. IMHO, these two steps should result in a material re-rating of the share price.
I paid HK$0.66 for the additional shares.
Wednesday, August 28, 2013
Anhui Express purchased
Having largely taken my eyes off the markets for the last few weeks (work, study, holiday), this week's catching up on my investments and the markets generally was interesting:
1. I am kicking myself for not topping up on silver when the price was below USD20 per oz;
2. some of my companies have released better than expected results: Cosco Pacific, Automotive Holdings, Challenger Financial, CNOOC and Anhui Express in particular stood out. None of the recent results were disappointing;
3. the melt down in the Indian rupee is disappointing and has impacted my balance sheet. Not sure whether I should bail out now or whether things have reached the point where it makes more sense just to ride it out. The case for India's longer term economic growth remains intact (IMHO);
4. the recovery in the price of Xtep (HK: 1368) has been one of the stand outs. Happy to see one the losers in the portfolio get back to more or less what I paid for them (after adjusting for dividends).
The recent falls in prices has tempted my and I added a few more shares in Anhui Express (HK:995) to the portfolio. This is largely a yield play. I paid HKD4.05 for the additional shares.
1. I am kicking myself for not topping up on silver when the price was below USD20 per oz;
2. some of my companies have released better than expected results: Cosco Pacific, Automotive Holdings, Challenger Financial, CNOOC and Anhui Express in particular stood out. None of the recent results were disappointing;
3. the melt down in the Indian rupee is disappointing and has impacted my balance sheet. Not sure whether I should bail out now or whether things have reached the point where it makes more sense just to ride it out. The case for India's longer term economic growth remains intact (IMHO);
4. the recovery in the price of Xtep (HK: 1368) has been one of the stand outs. Happy to see one the losers in the portfolio get back to more or less what I paid for them (after adjusting for dividends).
The recent falls in prices has tempted my and I added a few more shares in Anhui Express (HK:995) to the portfolio. This is largely a yield play. I paid HKD4.05 for the additional shares.
Sunday, August 04, 2013
Two paydays to go
Just two months to go. Right now, work has picked up and I have started my part time post-graduate studies and I am doing some volunteer work for a non-profit. While I don't regret jumping the gun (so to speak) and starting with my retirement projects a little early, I am looking forward to winding down on the work front and being able to focus properly on the new projects.
I'm still procrastinating on updating my will ... which is fine so long as I don't drop dead before I eventually get around to it.
The CMR debacle (100% loss on my books at the moment but hopefully some recovery as there is an underlying business and, if proven, the allegations should result in claims against the auditors), has been an interesting test of my ability to deal with problems. So far, it does not seem to have bothered me at all. My retirement numbers still make sense and I could survive a few more losses of this nature without my retirement being at risk. It's helpful that I have at four individual equities with realised and unrealised gains and dividends which are greater than the loss on CMR (HWL, Hua Han, Westpac and China Gas). Of course, it does highlight one of the greater risks in buying individual equities instead of funds, but I have no present plans to alter my investment strategy.
I'm still procrastinating on updating my will ... which is fine so long as I don't drop dead before I eventually get around to it.
The CMR debacle (100% loss on my books at the moment but hopefully some recovery as there is an underlying business and, if proven, the allegations should result in claims against the auditors), has been an interesting test of my ability to deal with problems. So far, it does not seem to have bothered me at all. My retirement numbers still make sense and I could survive a few more losses of this nature without my retirement being at risk. It's helpful that I have at four individual equities with realised and unrealised gains and dividends which are greater than the loss on CMR (HWL, Hua Han, Westpac and China Gas). Of course, it does highlight one of the greater risks in buying individual equities instead of funds, but I have no present plans to alter my investment strategy.
Wednesday, July 31, 2013
Financial Review July 2013
July was a good month for my investments. Net worth increased moderately. High income produced excellent savings and the principal component of my mortgage repayments combined with reasonable gains on my equities and commodities and the impact of a further decline in the AUD was offset by the rise in the NZD.
Here are the details:
1. my Hong Kong equity portfolio appreciated. During the month, there were no new purchases (although Fairwood purchased at the end of June only showed up in July). I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities appreciated;
3.my ETFs increased in line with the local markets. There were no new purchases;
4. my commodities increased. Silver is my only position which I added to during the month;
5. all of my properties were occupied with all tenants paying on time. Unfortunately, I have a number of minor repair bills which need to be paid, as well as the cost of repainting etc on a change of tenants and the associated agency fee. One property is now debt free;
6. currency movements were positive, with gains in the NZD offsetting losses in the AUD;
7. my position in bonds remains small;
8. there were no open derivative contracts at month end;
9. savings were high with high income and low expenses;
10. there were no transfers to Mrs Traineeinvestor this month.
My cash position rose slightly with money coming in than going out due to new investments. I currently hold 57.02 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the one month period, my net worth rose by 3.03%. The year to date increase is 5.83%. This means that my investments have lost a small amount money this year. My retirement date has been fixed for 30 September.
Here are the details:
1. my Hong Kong equity portfolio appreciated. During the month, there were no new purchases (although Fairwood purchased at the end of June only showed up in July). I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities appreciated;
3.my ETFs increased in line with the local markets. There were no new purchases;
4. my commodities increased. Silver is my only position which I added to during the month;
5. all of my properties were occupied with all tenants paying on time. Unfortunately, I have a number of minor repair bills which need to be paid, as well as the cost of repainting etc on a change of tenants and the associated agency fee. One property is now debt free;
6. currency movements were positive, with gains in the NZD offsetting losses in the AUD;
7. my position in bonds remains small;
8. there were no open derivative contracts at month end;
9. savings were high with high income and low expenses;
10. there were no transfers to Mrs Traineeinvestor this month.
My cash position rose slightly with money coming in than going out due to new investments. I currently hold 57.02 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the one month period, my net worth rose by 3.03%. The year to date increase is 5.83%. This means that my investments have lost a small amount money this year. My retirement date has been fixed for 30 September.
Thursday, July 11, 2013
Three pay days to go
Okay, so this one is a little late. I am now in my last three months of full time work and there isn't a great deal to report. I have started the course work for my degree (first two assignments have been submitted) and am finding the combination of full time employment (even on less intensive hours than usual),academic study and a small volunteer job to be very intensive. That said, I am really enjoying it all at the moment.
The downside is that I have had less time to focus on my investments than usual. The only material pre-retirement task which is still outstanding is to update my will to reflect the cancellation of my term life insurance.
Mentally, I think that I have gotten used to the idea that there won't be any more pay cheques after I get paid for September.
The downside is that I have had less time to focus on my investments than usual. The only material pre-retirement task which is still outstanding is to update my will to reflect the cancellation of my term life insurance.
Mentally, I think that I have gotten used to the idea that there won't be any more pay cheques after I get paid for September.
Silver purchased
This morning I added a few more ounces of silver to the portfolio. I primarily view this as a diversifier (and, just possibly, something of a contrarian investment at this time). I paid HKD 155.50 per oz for the additional silver (about USD19.98).
Tuesday, July 02, 2013
Fairwood pruchased
Last Friday I placed buy orders for small incremental quantities of some of my existing shares at below the then market prices. The idea was that with share prices sometimes swinging quite widely on a daily basis, there might be an opportunity to pick up some shares at good prices. The only bit that was hit was Fairwood (HK:52) which was sold off a little bit on reaction to a results announcement. The additional shares cost HK$16.00 each.
Friday, June 28, 2013
Financial Review - June 2013
June was an awful month for my investments. Net worth decreased sharply. High income producing excellent savings and the principal component of my mortgage repayments combined were not even close to offsetting the losses on my equities and commodities and the impact of a further decline in the AUD and NZD.
Here are the details:
1. my Hong Kong equity portfolio fell sharply. During the month, I purchased shares in BCIA, GDI and Fairwood. I sold my shares in Tontine Wines and reduced my exposure to China Gas. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities fell slightly;
3.my ETFs fell sharply in line with the local markets. I purchased more A50 ETF;
4. my commodities fell sharply. Silver is my only position;
5. all of my properties were occupied with all tenants paying on time. Unfortunately, I have a number of minor repair bills which need to be paid, as well as the cost of repainting etc on a change of tenants and the associated agency fee. One property is now debt free;
6. currency movements were negative, with both the NZD and the AUD falling against the HKD/USD;
7. my position in bonds remains small. I picked up a mere HK$20,000 in the recent iBond offering;
8. there were no open derivative contracts at month end;
9. savings were high with high income and low expenses;
10. there were no transfers to Mrs Traineeinvestor this month.
My cash position rose slightly with money coming in than going out due to new investments. I currently hold 54.51 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the two month period, my net worth fell by 3.11%. The year to date increase is 2.72%. This means that my investments have lost money this year. My retirement date has been fixed for 30 September.
Here are the details:
1. my Hong Kong equity portfolio fell sharply. During the month, I purchased shares in BCIA, GDI and Fairwood. I sold my shares in Tontine Wines and reduced my exposure to China Gas. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I am currently assuming a 100% loss on this position;
2. my AU/NZ equities fell slightly;
3.my ETFs fell sharply in line with the local markets. I purchased more A50 ETF;
4. my commodities fell sharply. Silver is my only position;
5. all of my properties were occupied with all tenants paying on time. Unfortunately, I have a number of minor repair bills which need to be paid, as well as the cost of repainting etc on a change of tenants and the associated agency fee. One property is now debt free;
6. currency movements were negative, with both the NZD and the AUD falling against the HKD/USD;
7. my position in bonds remains small. I picked up a mere HK$20,000 in the recent iBond offering;
8. there were no open derivative contracts at month end;
9. savings were high with high income and low expenses;
10. there were no transfers to Mrs Traineeinvestor this month.
My cash position rose slightly with money coming in than going out due to new investments. I currently hold 54.51 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the two month period, my net worth fell by 3.11%. The year to date increase is 2.72%. This means that my investments have lost money this year. My retirement date has been fixed for 30 September.
More A50 ETF purchased
Today I added a few more iShares A50 ETF (HK:2823) to the portfolio. I paid HK$8.99 for the additional units.
Only after I placed the order did I notice J-D's comment on my previous purchase. He is quite correct that the CSOP A50 (HK:2822) would have been better - lower premium to NAV and lower total expense ratio.
Going forward, any additional China ETF purchases will be for HK:2822 rather than HK:2823 (assuming the premium/discount does not reverse). When the time comes to sell, it will be the reverse (subject to the same assumption).
As an aside, I am slightly time poor at the moment - still working full time while my university course has started which gives me less time to do the research. It was slightly disappointing that, of the two new stocks that I did look at closely, on quickly overran my limit order (CR Power) and the other was on our restricted list.
Only after I placed the order did I notice J-D's comment on my previous purchase. He is quite correct that the CSOP A50 (HK:2822) would have been better - lower premium to NAV and lower total expense ratio.
Going forward, any additional China ETF purchases will be for HK:2822 rather than HK:2823 (assuming the premium/discount does not reverse). When the time comes to sell, it will be the reverse (subject to the same assumption).
As an aside, I am slightly time poor at the moment - still working full time while my university course has started which gives me less time to do the research. It was slightly disappointing that, of the two new stocks that I did look at closely, on quickly overran my limit order (CR Power) and the other was on our restricted list.
Thursday, June 27, 2013
Some more purchases
I have added a few more units in the A50 ETF (HK:2823) at HK$8.80 and GDI (HK:27) at HK$6.30 to the portfolio.
I also tried to open a position in CR Power (HK:836) as well but the shares jumped 90 cents this morning, well an truly overrunning my limit.
I also tried to open a position in CR Power (HK:836) as well but the shares jumped 90 cents this morning, well an truly overrunning my limit.
A sale, a purchase and some unfilled orders
Yesterday, I placed a number of orders.
The first was to sell some of my shares in China Gas (HK:384). In dollar terms, this has been my most profitable individual share investment. With a then large (for me) investment at an average price of slightly more than HK$2.00 (net of dividends and transaction costs) the amount of money locked up in this company has been uncomfortably high for some time. Accordingly, I sold some of my shares at HK$6.94. Given the subsequent bounce this was pretty awful timing.
The second was to add to my loss making position in the A50 Share ETF (HK:2823). I paid HK$8.76 for the additional units.
I also tried to buy additional shares in BCIA (HK:694) and GDI (HK:270) being infrastructure companies which I believed offered a reasonable balance between stability and longer term growth. Unfortunately, both companies jumped above my limits on opening so these orders went unfilled.
The end result was basically to swap some China Gas shares into the A50 ETF which was not what I wanted.
The first was to sell some of my shares in China Gas (HK:384). In dollar terms, this has been my most profitable individual share investment. With a then large (for me) investment at an average price of slightly more than HK$2.00 (net of dividends and transaction costs) the amount of money locked up in this company has been uncomfortably high for some time. Accordingly, I sold some of my shares at HK$6.94. Given the subsequent bounce this was pretty awful timing.
The second was to add to my loss making position in the A50 Share ETF (HK:2823). I paid HK$8.76 for the additional units.
I also tried to buy additional shares in BCIA (HK:694) and GDI (HK:270) being infrastructure companies which I believed offered a reasonable balance between stability and longer term growth. Unfortunately, both companies jumped above my limits on opening so these orders went unfilled.
The end result was basically to swap some China Gas shares into the A50 ETF which was not what I wanted.
Friday, June 21, 2013
iBond application - a waste of time
I got just two board lots (2 x HKD 10,000) in the third issue of Hong Kong government iBonds. All applicants ended up with either 1 or 2 board lots (no one got any more). Quite frankly, it was a waste of time putting the application in for such a tiny investment.
Friday, June 14, 2013
Shares sold and purchased
Today I added some more shares in Beijing Capital International Airport (HK:694) to the portfolio. Although the yield is a rather low 2.6% (trailing), my expectation is that this will grow over time and that Beijing's airport represents a solid investment with a reasonable degree of protection from competition. I paid HK$5.00 for the additional shares and my average cost is now $4.40 (after allowing for transaction costs and dividends received).
In an effort to get used to the idea that I will shortly lose my work related income stream meaning that new investments have to be funded from the sale of old ones (or a run down of my cash position), I sold my loss making position in Tontine Wines (HK:389). Although Tontine Wines is still sitting on a lot of cash and has a coherent plan for focused growth, the recent decline in profitability and the cancellation of the dividend have led me to conclude that it would be preferable to invest elsewhere. I received HK$0.45 on sale resulting in a loss of 41% on my net investment. Once again, I have been fortunate in that this was a small position but kicking myself for not selling immediately after the last results announcement.
In an effort to get used to the idea that I will shortly lose my work related income stream meaning that new investments have to be funded from the sale of old ones (or a run down of my cash position), I sold my loss making position in Tontine Wines (HK:389). Although Tontine Wines is still sitting on a lot of cash and has a coherent plan for focused growth, the recent decline in profitability and the cancellation of the dividend have led me to conclude that it would be preferable to invest elsewhere. I received HK$0.45 on sale resulting in a loss of 41% on my net investment. Once again, I have been fortunate in that this was a small position but kicking myself for not selling immediately after the last results announcement.
Thursday, June 13, 2013
Longevity in retirement
Bloomberg carried this article entitled Retirement Will Kill You. In summary, the author concludes that the academic studies show that people who retire die sooner than those who don't. In particular, retirees suffer from an increase in clinical depression, a decline in self assessed health and increased difficulties with mobility. At least one study looks at the question of whether underlying health issues can explain the observed deterioration in physical and mental health among retirees and concludes that "retirement doesn't harm health - and may actually improve it". Another contradicts this by finding "harm from early retirement".
Having looked at some of the studies (and some earlier ones), my take is that retirement is not, of itself, the issue.
If retirement means reduced physical activity, reduced mental stimulation, reduced social interaction and a loss of purpose, then it is not surprising that retirees' health deteriorates.
If retirement means walking away from a stressful job that requires long hours and impedes participation in other activities and embracing other activities (mental, physical and social) then it is difficult to see how or why the supposed causes of retirees' health problems would arise. At a personal level, I have mapped out the first two years in some detail (academic studies, writing a novel, one last trailwalker, marathon, volunteering, some travel) and have agreed to remain as a very part time consultant as a transitional matter. Hopefully these activities plus the day to day stuff will give me all the stimulation of the office, keep me physically, mentally and socially engaged and will result in reduced stress levels.
Having looked at some of the studies (and some earlier ones), my take is that retirement is not, of itself, the issue.
If retirement means reduced physical activity, reduced mental stimulation, reduced social interaction and a loss of purpose, then it is not surprising that retirees' health deteriorates.
If retirement means walking away from a stressful job that requires long hours and impedes participation in other activities and embracing other activities (mental, physical and social) then it is difficult to see how or why the supposed causes of retirees' health problems would arise. At a personal level, I have mapped out the first two years in some detail (academic studies, writing a novel, one last trailwalker, marathon, volunteering, some travel) and have agreed to remain as a very part time consultant as a transitional matter. Hopefully these activities plus the day to day stuff will give me all the stimulation of the office, keep me physically, mentally and socially engaged and will result in reduced stress levels.
Tuesday, June 04, 2013
iBond application submitted
My views on the Hong Kong government's third issue of iBonds are the same as for the first two issues - they are a poor investment in general but better than leaving cash on deposit with the banks. My previous comments are here.
Needless to say, I expect the allocations to be as small as last time. If it required any more effort than a few clicks of a mouse, it probably wouldn't be worth it.
Needless to say, I expect the allocations to be as small as last time. If it required any more effort than a few clicks of a mouse, it probably wouldn't be worth it.
Four paydays to go
I am now in the last four months of my working career (at least, I hope I am). I have now informed most of my colleagues that I am retiring at the end of September. Reactions ranged from surprised to happy for me. A few said they wished they could retire early as well. Just about everyone asked what I was going to do with my time.
Financially, everything is in place, although I still think I have too much cash. Between my post-retirement catch up pay which I will receive early next year, the return on my capital which will be paid out in installments after I retire, dividends from the shares for 2013 and 2014 and Mrs Traineeinvestor's part time income we should have no need to touch our savings until some time late in 2015 (estimate). This assumes that all income from our properties will be used up in mortgage payments or other outgoings (which is unlikely to be true, especially since one of our Hong Kong rentals is now debt free).
I have several post retirement activities lined up:
Financially, everything is in place, although I still think I have too much cash. Between my post-retirement catch up pay which I will receive early next year, the return on my capital which will be paid out in installments after I retire, dividends from the shares for 2013 and 2014 and Mrs Traineeinvestor's part time income we should have no need to touch our savings until some time late in 2015 (estimate). This assumes that all income from our properties will be used up in mortgage payments or other outgoings (which is unlikely to be true, especially since one of our Hong Kong rentals is now debt free).
I have several post retirement activities lined up:
- I will complete my university enrollment this month and start my course work before I retire;
- I am planning a short trip to New Zealand later in the year;
- I have taken on a volunteer role with a local non-profit; and
- I am making very slow progress on my novel.
Monday, June 03, 2013
Monthly Review - April/May 2013
Following my tech disaster, I have now recovered most of documents or data that were lost when both my laptop's hard drive and my external backup drive failed. This represents a review for April and May and is likely to be at least slightly inaccurate as not all of my financial records have been recreated.
April and May were volatile months for my investments. The end result over the two month period was a modest decrease in net worth. High income producing excellent savings and the principal component of my mortgage repayments combined were not enough to offset modest losses on my equities and commodities and the greater impact of the decline in the AUD and NZD.
Here are the details:
1. my Hong Kong equity portfolio fell slightly. Over the two month period, I purchased shares in Hutchison Wampoa, Sinopec and China Starch. I sold my shares in Sino Oil and Gas. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I have increased the provision for loss from last traded price from an arbitrary 100%
2. my AU/NZ equities fell slightly with most of the damage being Westpac. I sold my shares in Paladin and added shares in Chorus to he portfolio;
3.my ETFs fell in line with the local markets;
4. my commodities fell fell slightly. I finally sold my Lean Hogs and Nickel ETCs, sold my platinum and added some more silver;
5. all of my properties were occupied with all tenants paying on time. There will be short vacancy at the end of May and beginning of June while I wait for a new tenant to move in. I have cut the rent on a unit in a building which is being refurbished to retain the tenant and settled the balance of the refurbishment levey and two small repair bills. After all these events, cash flow was slightly negative but will be back to positive in June. One property is now debt free;
6. currency movements were strongly negative and were the most significant , with both the NZD and the AUD falling strongly against the HKD/USD;
7. my position in bonds remains small;
8. there were no open derivative contracts at month end;
9. savings were high with high income and low expenses;
10. there were no transfers to Mrs Traineeinvestor this month.
My cash position fell with more money going out than coming in due to new investments. I currently hold 53.1 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the two month period, my net worth fell by 0.32%. The year to date increase is 6.01%. My retirement date has been fixed for 30 September for reasons that have nothing to do with finance - financially, I am past the point where I can afford to retire.
April and May were volatile months for my investments. The end result over the two month period was a modest decrease in net worth. High income producing excellent savings and the principal component of my mortgage repayments combined were not enough to offset modest losses on my equities and commodities and the greater impact of the decline in the AUD and NZD.
Here are the details:
1. my Hong Kong equity portfolio fell slightly. Over the two month period, I purchased shares in Hutchison Wampoa, Sinopec and China Starch. I sold my shares in Sino Oil and Gas. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I have increased the provision for loss from last traded price from an arbitrary 100%
2. my AU/NZ equities fell slightly with most of the damage being Westpac. I sold my shares in Paladin and added shares in Chorus to he portfolio;
3.my ETFs fell in line with the local markets;
4. my commodities fell fell slightly. I finally sold my Lean Hogs and Nickel ETCs, sold my platinum and added some more silver;
5. all of my properties were occupied with all tenants paying on time. There will be short vacancy at the end of May and beginning of June while I wait for a new tenant to move in. I have cut the rent on a unit in a building which is being refurbished to retain the tenant and settled the balance of the refurbishment levey and two small repair bills. After all these events, cash flow was slightly negative but will be back to positive in June. One property is now debt free;
6. currency movements were strongly negative and were the most significant , with both the NZD and the AUD falling strongly against the HKD/USD;
7. my position in bonds remains small;
8. there were no open derivative contracts at month end;
9. savings were high with high income and low expenses;
10. there were no transfers to Mrs Traineeinvestor this month.
My cash position fell with more money going out than coming in due to new investments. I currently hold 53.1 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the two month period, my net worth fell by 0.32%. The year to date increase is 6.01%. My retirement date has been fixed for 30 September for reasons that have nothing to do with finance - financially, I am past the point where I can afford to retire.
Thursday, May 30, 2013
Living with volatility after retirement
Since graduating from university and entering the workforce, I have spent less than I earn from employment almost every year. In other words, not only have I always had money coming in with which to make new investments, but I have never had to consider selling assets in order to fund my living costs. One consequence of this is that I have never been in a position where I have to consider what would happen to our ability to fund our retirement should we see an extended period of economic contraction, high inflation, deflation or higher taxation which result in the real value of our pool of assets shrinking.
Since I will be (more or less) leaving the workforce at the end of September, I am now starting to think differently. I have to. With no income coming in each month, I have to consider how I will deal with the times when the value of our assets decreases, possibly for several years in a row. I no longer have the luxury of just waiting for my savings to repair the damage done when the investments lose money.
A few points to guide me:
Since I will be (more or less) leaving the workforce at the end of September, I am now starting to think differently. I have to. With no income coming in each month, I have to consider how I will deal with the times when the value of our assets decreases, possibly for several years in a row. I no longer have the luxury of just waiting for my savings to repair the damage done when the investments lose money.
A few points to guide me:
- markets are volatile - they will go down as well as up and a twenty percent fall in price is normal and not something to panic over. Most of the time such falls are an opportunity
- individual equities carry greater risk of causing a permanent loss of value than individual properties or index funds. Allocate carefully
- cash may be a losing asset, but it is also insurance against bad days and a means of taking advantage of lower prices. I aim to keep at least two years' worth of expenses in cash/near cash at all times
- I am not smarter than the market
- the residual post-retirement payout from my firm and Mrs Traineeinvestor's part time earnings should meet our family's expenses (including mortgage payments) until at least the end of 2014. Dividends from now until the end of 2015 will cover at least one more year's expenses and take us to the end of 2015
- all my mortgages are P+I. In the course of time, they will be fully repaid and each time one is paid off my cash flow increases
- when it comes to properties, cash flow is king. It is better to cut the rent in bad times than have a vacancy
- if things get really bad, we can downsize our home, cut some of our discretionary spending or even go back to work
- FIRECalc tells me it will work, as do my own spreadsheets (at least they did before my computer disaster)
Tuesday, May 14, 2013
New lease signed - 12.8% increase
One of my tenants has decided to vacate at the end of May. The agent was instructed to advertise the property for rent on Thursday and a new tenant signed a provisional agreement last night.
The good news is that the new rent is 12.8% higher than the old rent.
The bad news is that I am not actually any better off because:
I would have been better off keeping the existing tenant at the old rental (which was not an option).
Still, it could be worse - I could have had an extended vacancy or a smaller rent increase.
The good news is that the new rent is 12.8% higher than the old rent.
The bad news is that I am not actually any better off because:
- there will be a five week vacancy between tenancies
- I have to pay the agent
- I have to pay the stamp duty
- I have to pay for the flat to be repainted, for the airconditioning units to be cleaned and some other minor touch up work
I would have been better off keeping the existing tenant at the old rental (which was not an option).
Still, it could be worse - I could have had an extended vacancy or a smaller rent increase.
Monday, May 13, 2013
Sinopec purchased
This morning I added some more shares in Sinopec (HK:386) to the portfolio. With a single digit pe and a dividend yield above 4%, the shares represent good value in both absolute and relative terms.
I paid HK$8.62 for the additional shares.
I paid HK$8.62 for the additional shares.
Wednesday, May 08, 2013
Five paydays to go*
With retirement at the end of September now less than five months away, it's time to check off a few items. I have been taking a long hard look at our expenses and we have taken steps to reduce a few:
1. as posted, I have cancelled my term life policy - this saves HK$41,000 in annual premium;
2. we will complete the switch from my unsubsidised medical insurance to my Mrs Traineeinvestor's partly subsidised medical policy. While our current policy provides higher coverage, the premium is many times what we will be paying going forward. Based on a look at our actual medical bills for the last few years, we will be better off by several thousand dollars a year unless we have a major incident. In effect we are reducing costs by taking on a bit more risk;
3. my disability insurance will fall away at the end of September saving us HK$12,729 in annual premiums;
4. I have been shedding management responsibilities which has shortened my working hours. As a result, there is less pressure on me to get to and from work quickly and I have begun substituting bus for taxi. Depending on my overall commuting usage post retirement, by the time the process completes, I expect my annualised savings will be around HK$8,000;
5. my SCMP subscription was up for renewal this week and I have switched to the on-line version saving HK$1,239 per annum;
6. we have decided to spend Christmas in Hong Kong this year. Last year we went to Australia which cost multiples of the cost of the previous year's Christmas holiday in Thailand. This year we are going to the other extreme and cutting from three family holidays to two (Easter and summer). Holiday plans in future years will depend on the state of the finances;
7. we have decided to defer our home renovation project for one or two years.
Of course, I do have some planned and unplanned expenses in the pipeline, including my university enrolment fees, the cost of a new computer (I had originally budgeted to replace my lap top every three years but due to a HD failure will be doing it a year early and switching to a more expensive Apple product) and the cost of recovering data from my failed HD (about HK$5,000).
Among other items in my "to do" list is updating my will and cleaning out my office.
There really isn't much else to do.
* previous "X paydays to go" posts were based on a 30 June retirement date.
1. as posted, I have cancelled my term life policy - this saves HK$41,000 in annual premium;
2. we will complete the switch from my unsubsidised medical insurance to my Mrs Traineeinvestor's partly subsidised medical policy. While our current policy provides higher coverage, the premium is many times what we will be paying going forward. Based on a look at our actual medical bills for the last few years, we will be better off by several thousand dollars a year unless we have a major incident. In effect we are reducing costs by taking on a bit more risk;
3. my disability insurance will fall away at the end of September saving us HK$12,729 in annual premiums;
4. I have been shedding management responsibilities which has shortened my working hours. As a result, there is less pressure on me to get to and from work quickly and I have begun substituting bus for taxi. Depending on my overall commuting usage post retirement, by the time the process completes, I expect my annualised savings will be around HK$8,000;
5. my SCMP subscription was up for renewal this week and I have switched to the on-line version saving HK$1,239 per annum;
6. we have decided to spend Christmas in Hong Kong this year. Last year we went to Australia which cost multiples of the cost of the previous year's Christmas holiday in Thailand. This year we are going to the other extreme and cutting from three family holidays to two (Easter and summer). Holiday plans in future years will depend on the state of the finances;
7. we have decided to defer our home renovation project for one or two years.
Of course, I do have some planned and unplanned expenses in the pipeline, including my university enrolment fees, the cost of a new computer (I had originally budgeted to replace my lap top every three years but due to a HD failure will be doing it a year early and switching to a more expensive Apple product) and the cost of recovering data from my failed HD (about HK$5,000).
Among other items in my "to do" list is updating my will and cleaning out my office.
There really isn't much else to do.
* previous "X paydays to go" posts were based on a 30 June retirement date.
Monday, May 06, 2013
A small speculation - China Starch
I have recently done my financial housekeeping and got rid of almost all my "too small" and speculative investments. Going forward, I am allowing myself a maximum of three small speculative investments at a time.
Until last week, I had none*. I have opened a small position in China Starch (HK:3838). The company has around HK$0.16 in net cash per share, is selling on a mid-single digit PE and has a 3.3% trailing dividend yield. Some of that cash will (I expect) be used to fund their new factory premises. The reason why I have classified this as "speculative" is that the trading volumes are extremely low. Some days it would be very difficult to sell out of a position.
I paid HK$0.212 per share.
* My holding of Tontine Wines (HK:389) is currently "too small".
Until last week, I had none*. I have opened a small position in China Starch (HK:3838). The company has around HK$0.16 in net cash per share, is selling on a mid-single digit PE and has a 3.3% trailing dividend yield. Some of that cash will (I expect) be used to fund their new factory premises. The reason why I have classified this as "speculative" is that the trading volumes are extremely low. Some days it would be very difficult to sell out of a position.
I paid HK$0.212 per share.
* My holding of Tontine Wines (HK:389) is currently "too small".
Dell really sucks
I have written about my computer problems. The latest is that about 70% of my documents, photos etc will be recoverable. The forensics experts are still working on it so the recovery rate may well go up but I am told that it is very unlikely to get close to 100% and I will have to wait another two weeks to get it back with whatever has been recovered and a new hard drive. Realistically, I will be faced with the loss of at least some data that cannot be replaced.
While I do not blame Dell for selling me a laptop that fails after less than two years, I do blame Dell for providing zero customer support:
There are two Dell's that are currently in use in our home (and two older ones that we no longer use). By Q3 this year, that number will be reduced to zero. Dell has finally persuaded me to switch to Apple #. The only reasons for the delay is that Apple offers a small discount to students which I will be able to take advantage of later in the year. In the meantime, I am getting by with a combination of my work computer, iPhone and one of the original iPads.
The big decision is now - which Mac to get? I like the portability of the MacAir but I have a lot of photos and anticipate that I may need the larger flash memory that comes with the MacPro.
* and, yes, I have been checking my spam folder
# I gave some thought to getting a Lenovo Thinkpad given how reliable they have been for office use
While I do not blame Dell for selling me a laptop that fails after less than two years, I do blame Dell for providing zero customer support:
- the help line is well hidden and when I "press 3 for English" the result is a recorded message in Cantonese. Attempting to speak to the people who eventually answer the Cantonese or Mandarin help lines only results in being told that I must use the (non-existent) English help line. This is consistent with my experience with my previous dell laptop when the motherboard failed and had to be replaced
- e-mails to the (also well hidden) support e-mail address generated no response whatsoever*
- a message posted on their feedback site with an invitation to contact me produced no response whatsoever*
There are two Dell's that are currently in use in our home (and two older ones that we no longer use). By Q3 this year, that number will be reduced to zero. Dell has finally persuaded me to switch to Apple #. The only reasons for the delay is that Apple offers a small discount to students which I will be able to take advantage of later in the year. In the meantime, I am getting by with a combination of my work computer, iPhone and one of the original iPads.
The big decision is now - which Mac to get? I like the portability of the MacAir but I have a lot of photos and anticipate that I may need the larger flash memory that comes with the MacPro.
* and, yes, I have been checking my spam folder
# I gave some thought to getting a Lenovo Thinkpad given how reliable they have been for office use
Tuesday, April 30, 2013
Limited financial review for April, 2013
Due to the death of my computer and the failure of the backup drive, I am not able to do the usual monthly review this month. Depending on how much can be recovered over the next few weeks, I may have to reconstruct all my spreadsheets. :-(
Some comments:
1. savings rate was high with high income. Our holiday expenses had been budgeted for so would not have had an impact on net worth (only cash);
2. all properties remained fully occupied. However, cash flow was slightly negative this month due to a combination of (i) cutting the rent on a unit in a building which is getting a substantial refurbishment (ii) paying one of the installments for that refurbishment and (iii) some minor repair bills for another unit. I expect to be back to positive cash flow in May. I will also start to receive a slightly higher rental on a unit where the tenant has just signed a new lease;
3. my equities probably declined during the month. I am not able to quantify by how much. During the month, I purchased shares in Hutchison (HK:13), Chorus (NZX: CNU) and Challenger Financial (ASX: CGF) and sold my shares in Sino Oil & Gas (HK: 702);
4. my remaining commodities declined sharply (but they are a small part of our net worth). I sold my units in Lean Hongs (LSE: HOGS) and Nickel (LSE: NICK) as well as my position in platinum and increased my position in silver;
5. currency movements were marginally unfavourable with the AUD in particular weakening against the USD;
6. I am not able to calculate the number of months of net cash (including near cash such as short term bonds) on hand but it would have fallen due to the new investments (in particular HWL which was a large investment).
Overall, I would have expected my net worth to have fallen slightly during the month.
Other matters:
7. we are temporarily carrying double medical insurance. My policy will end when I retire, so we have taken out a different policy through Mrs Traineeinvestor's employer and will cancel my policy this month;
8. one property became debt free with the last mortgage payment being made today. I have cancelled the fire insurance for that unit to save a bit more money;
9. with my retirement date fixed at 30 September, I have exactly five months (and six paydays remaining).
Some comments:
1. savings rate was high with high income. Our holiday expenses had been budgeted for so would not have had an impact on net worth (only cash);
2. all properties remained fully occupied. However, cash flow was slightly negative this month due to a combination of (i) cutting the rent on a unit in a building which is getting a substantial refurbishment (ii) paying one of the installments for that refurbishment and (iii) some minor repair bills for another unit. I expect to be back to positive cash flow in May. I will also start to receive a slightly higher rental on a unit where the tenant has just signed a new lease;
3. my equities probably declined during the month. I am not able to quantify by how much. During the month, I purchased shares in Hutchison (HK:13), Chorus (NZX: CNU) and Challenger Financial (ASX: CGF) and sold my shares in Sino Oil & Gas (HK: 702);
4. my remaining commodities declined sharply (but they are a small part of our net worth). I sold my units in Lean Hongs (LSE: HOGS) and Nickel (LSE: NICK) as well as my position in platinum and increased my position in silver;
5. currency movements were marginally unfavourable with the AUD in particular weakening against the USD;
6. I am not able to calculate the number of months of net cash (including near cash such as short term bonds) on hand but it would have fallen due to the new investments (in particular HWL which was a large investment).
Overall, I would have expected my net worth to have fallen slightly during the month.
Other matters:
7. we are temporarily carrying double medical insurance. My policy will end when I retire, so we have taken out a different policy through Mrs Traineeinvestor's employer and will cancel my policy this month;
8. one property became debt free with the last mortgage payment being made today. I have cancelled the fire insurance for that unit to save a bit more money;
9. with my retirement date fixed at 30 September, I have exactly five months (and six paydays remaining).
Monday, April 29, 2013
Lease renewal
With property prices having fallen somewhat on very light volume and at least some people predicting much bigger declines to come, my attention has been on the leasing market. As a long term property investor, it is far more important to me to maintain occupancy than to extract the maximum fair market rent.
With that objective in mind, I have just agreed to renew a lease at an increased rental of 4.8%. Based on recent comparables (not many in this building), I had assesses the market rent as being slightly higher and would have represented a rental increase of 7.1%. However, if the tenant had not signed up for a new lease, I would have been faced with a vacancy of uncertain duration, at least some redecoration costs as well as agency commission. Settling for a little less than market rent to keep the tenant for another two years was unquestionably the right thing to do.
With that objective in mind, I have just agreed to renew a lease at an increased rental of 4.8%. Based on recent comparables (not many in this building), I had assesses the market rent as being slightly higher and would have represented a rental increase of 7.1%. However, if the tenant had not signed up for a new lease, I would have been faced with a vacancy of uncertain duration, at least some redecoration costs as well as agency commission. Settling for a little less than market rent to keep the tenant for another two years was unquestionably the right thing to do.
Friday, April 19, 2013
Things that really suck
My laptop has failed after the computer was dropped. Having failed to fix the problem myself, I called in an expert and have been told that the hard drive is physically damaged and it will take a few weeks to find out whether all, some or none of the documents, photos etc can be recovered.
Back up? Yes I have an external drive on which everything backs up automatically once a week. At least it was supposed to - when I went to check, I found that the last weekly back up was done in early January. So I could be looking at a loss of four and a half months worth of financial records, photos, progress on my novel and other data.
Back up? Yes I have an external drive on which everything backs up automatically once a week. At least it was supposed to - when I went to check, I found that the last weekly back up was done in early January. So I could be looking at a loss of four and a half months worth of financial records, photos, progress on my novel and other data.
Cutting the rent during renovation work
I have previously posted about the levy for refurbishment of one of the buildings in which I own a flat. It turns out that the work is very extensive (which I should have expected from the size of the levy) and will including putting opaque plastic covers on all the windows for a few weeks, scaffolding over the entire building for a few months, retiling the exterior and removal of the air conditioning units for a while. The entire project is expected to take about six months.
Quite frankly, I couldn't blame the tenant if he wanted to move out. And he did consider it. And I would have agreed to early termination if he'd asked for it. It would have been unconscionable to hold a tenant to a lease in these circumstances. Given that it would be impossible to rent the flat to a new tenant while all this was going on and I would have to repaint the interior (and probably do a few other things) before a new tenant would move in, I offered to cut his rent by one third while all this was going on. He was happy to agree to that arrangement - a "win" for both parties. The tenant has a lower rent to compensate for the inconvenience and I will have at least some rental income instead of a vacancy and a redecoration bill.
Quite frankly, I couldn't blame the tenant if he wanted to move out. And he did consider it. And I would have agreed to early termination if he'd asked for it. It would have been unconscionable to hold a tenant to a lease in these circumstances. Given that it would be impossible to rent the flat to a new tenant while all this was going on and I would have to repaint the interior (and probably do a few other things) before a new tenant would move in, I offered to cut his rent by one third while all this was going on. He was happy to agree to that arrangement - a "win" for both parties. The tenant has a lower rent to compensate for the inconvenience and I will have at least some rental income instead of a vacancy and a redecoration bill.
Hutchison Whampoa purchased
This morning I added some more shares in Hutchison Whampoa (HK:13) to the portfolio. Hutchison is one of Hong Kong's most established conglomerates with some very strong business franchises and an increasingly globally diversified portfolio. While the shares are not priced at bargain levels, the price (possibly affected by the port strike) is attractive and I have confidence that, at some point, the shares will trade higher. In other words, the risk of permanent loss of capital is low.
The investment was a substantial one and, combined with my existing holdings, makes HWL one of my biggest individual shareholdings.
I paid HK$ 79.60 for the additional shares.
The investment was a substantial one and, combined with my existing holdings, makes HWL one of my biggest individual shareholdings.
I paid HK$ 79.60 for the additional shares.
Wednesday, April 17, 2013
Silver purchased
Another update from yesterday.
I used the proceeds from the sale of platinum to add to my position in silver. I paid HK$176.6 per oz (about USD22.64).
I used the proceeds from the sale of platinum to add to my position in silver. I paid HK$176.6 per oz (about USD22.64).
Platinum sold - loss taken
Yesterday I sold my paper platinum. The investment was originally acquired at HKD12,868 per oz in January on the theory that a combination of supply disruption and economic recovery would give prices a lift. Neither event has happened so I decided to move on.
I sold at HK$ 10,694 per oz for a loss of 17%.
As an aside, recent posts would suggest that I am losing a lot of money on my investments. While it is true that I have had several losing investments, fortunately most of the losers have been smaller investments and they are greatly outnumbered by the more successful ones. As a whole, my non-property investments are will above cost.
I sold at HK$ 10,694 per oz for a loss of 17%.
As an aside, recent posts would suggest that I am losing a lot of money on my investments. While it is true that I have had several losing investments, fortunately most of the losers have been smaller investments and they are greatly outnumbered by the more successful ones. As a whole, my non-property investments are will above cost.
Paladin sold - loss taken
Yesterday I sold my small shareholding in Paladin (ASX:PDN). Given that the company is expected to continue to make losses at current uranium price levels and the (IMHO) likelihood of increased supplies of oil/gas from unconventional sources allowing politicians to delay decisions to use more nuclear power, I have lost confidence in my original investment thesis.
Add in the fact that the shares were trading at 20% below my purchase price and I decided it was better to cut my losses.
I received AUD0.80 per share.
Add in the fact that the shares were trading at 20% below my purchase price and I decided it was better to cut my losses.
I received AUD0.80 per share.
Friday, April 12, 2013
Cleaning house (financially)
Over the last few months I have been making an effort to clean up my finances. In many cases I am dealing with things that should have been dealt with a very long time ago. In all cases, the procrastination has ended up costing me money - not just the loss on the investments or expense concerned but the opportunity cost of not having the money available to invest in other things.
House keeping so far:
1. I have cancelled my term life insurance policy which reduces my annual expenses by the amount of the premium. If I have enough money to support the family in retirement, by definition there is enough to support the family without me;
2. I have closed an old investment account in New Zealand. Not much money, but it will pay for a couple of nice dinners with my parents on our next visit. Also, one less institution cluttering up my mail box with statements;
3. I have sold four "too small" investments: Sino Oil & Gas, Shenzhen Express, HOGS and NICK. The first two started out at the minimum threshold but fell below it (in Sino Oil's case, well below). All were sold at losses;
4. I have cancelled a fire insurance policy which I hope is no longer required.
House keeping still outstanding:
5. I have two small speculative positions remaining: platinum (notional not an ETP so no contango issue) and Paladin (ASX: PDN) which is essentially a play on uranium. I am currently holding a small loss on both of them. I have no problem with making a few small speculative investments but have learnt that taking losses early and not having too many going at once is probably a better strategy than my recent practice of just ignoring the losses and hoping things will improve. In any case, I need to decide what to do with these;
6. I have two other investments which are now in the "too small" category. Tontine Wines HKSE: 389) and a single carpark space in Auckland. I have not decided what to do with either of these yet;
7. I need to update my will;
8. I need to update the list of accounts etc for Mrs Traineeinvestor should anything happen to me;
9. I would like to sell a few of the (cheap) paintings in our home so we can refresh with new ones;
10. Mrs Traineeinvestor has some investments of her own which we should discuss.
Loss making investments:
As I was writing this, I noted that I have said on all of the recently realised losses that individually none of them is large. However, collectively, the losses are material. This really reinforces the need to limit the number of speculative investments and to manage them better. Given that I will soon cease to earn an income from employment, this discipline is now more important than previously.
I also took a look at my other investments - happily only three are currently trading at below cost: China VTM (HK: 893), Xtep (HK: 1368) and Vietnam Tracker (HK: 3087). China VTM will more or less break even if the proposed general offer eventually goes through. Xtep is generally rated a sell by brokers but is still well cashed up, generating positive cash flow and paying a good dividend. Vietnam Tracker is exposure to a counrty with excellent demographics and a lot of catching up to do in terms of evolving into a developed economy.
Everything else is currently profitable (although BHP and Sinolink are at about break even), so the non-property investments as a whole have done very well but that does not excuse a failure to deal with my mistakes promptly.
House keeping so far:
1. I have cancelled my term life insurance policy which reduces my annual expenses by the amount of the premium. If I have enough money to support the family in retirement, by definition there is enough to support the family without me;
2. I have closed an old investment account in New Zealand. Not much money, but it will pay for a couple of nice dinners with my parents on our next visit. Also, one less institution cluttering up my mail box with statements;
3. I have sold four "too small" investments: Sino Oil & Gas, Shenzhen Express, HOGS and NICK. The first two started out at the minimum threshold but fell below it (in Sino Oil's case, well below). All were sold at losses;
4. I have cancelled a fire insurance policy which I hope is no longer required.
House keeping still outstanding:
5. I have two small speculative positions remaining: platinum (notional not an ETP so no contango issue) and Paladin (ASX: PDN) which is essentially a play on uranium. I am currently holding a small loss on both of them. I have no problem with making a few small speculative investments but have learnt that taking losses early and not having too many going at once is probably a better strategy than my recent practice of just ignoring the losses and hoping things will improve. In any case, I need to decide what to do with these;
6. I have two other investments which are now in the "too small" category. Tontine Wines HKSE: 389) and a single carpark space in Auckland. I have not decided what to do with either of these yet;
7. I need to update my will;
8. I need to update the list of accounts etc for Mrs Traineeinvestor should anything happen to me;
9. I would like to sell a few of the (cheap) paintings in our home so we can refresh with new ones;
10. Mrs Traineeinvestor has some investments of her own which we should discuss.
Loss making investments:
As I was writing this, I noted that I have said on all of the recently realised losses that individually none of them is large. However, collectively, the losses are material. This really reinforces the need to limit the number of speculative investments and to manage them better. Given that I will soon cease to earn an income from employment, this discipline is now more important than previously.
I also took a look at my other investments - happily only three are currently trading at below cost: China VTM (HK: 893), Xtep (HK: 1368) and Vietnam Tracker (HK: 3087). China VTM will more or less break even if the proposed general offer eventually goes through. Xtep is generally rated a sell by brokers but is still well cashed up, generating positive cash flow and paying a good dividend. Vietnam Tracker is exposure to a counrty with excellent demographics and a lot of catching up to do in terms of evolving into a developed economy.
Everything else is currently profitable (although BHP and Sinolink are at about break even), so the non-property investments as a whole have done very well but that does not excuse a failure to deal with my mistakes promptly.
HOGS and NICK sold - loss taken and lesson learned
Today I finally sold my small experimental positions in two LSE listed exchange traded products - Lean Hogs (LSE: HOGS) and Nickel (LSE: NICK).
I ended up taking a loss of 55% on these investments. I'm taking away three important lessons from this experience:
1. I must take the time to learn more about how things work before investing. In this case, more money was lost from the contango (roll over of futures contracts embedded in the products) than movements in the commodity prices or currency;
2. take my losses earlier. I should have sold these much sooner - like a year or two sooner. Unfortunately, I appear to be too unwilling to admit that I have made a mistake for my own good;
3. while I should normally only invest a meaningful amount of money in anything (and I have a floor), having one or two small speculations running is fine, so long as I do not have too many going at once and I remember to cut my losses early.
As with a couple of other very poor investments, I am grateful that only a small amount of money was at stake here.
I ended up taking a loss of 55% on these investments. I'm taking away three important lessons from this experience:
1. I must take the time to learn more about how things work before investing. In this case, more money was lost from the contango (roll over of futures contracts embedded in the products) than movements in the commodity prices or currency;
2. take my losses earlier. I should have sold these much sooner - like a year or two sooner. Unfortunately, I appear to be too unwilling to admit that I have made a mistake for my own good;
3. while I should normally only invest a meaningful amount of money in anything (and I have a floor), having one or two small speculations running is fine, so long as I do not have too many going at once and I remember to cut my losses early.
As with a couple of other very poor investments, I am grateful that only a small amount of money was at stake here.
Thursday, April 11, 2013
Bitcoins - today's tulip bulbs
There has been plenty written about the Bitcoin craze. Quite frankly, anyone who thinks Bitcoins are a genuine substitute for currencies needs counselling. Consider that:
1. it is not known who creates/issues Bitcoins - do you really want to trust your wealth to what amounts to an anonymous stranger somewhere in cyberspace?
2. Bitcoins are not the only so-called virtual currency. What's to stop more being created?
3. while it is stated that there are limits on the number of Bitcoins that can be created, how can holders be assured that the announced limits will be respected (or are being respected now for that matter)?
4. Bitcoins exist in the hacker-populated world of the Internet. What happens if hackers make another successful attempt at the system?
Bitcoins are only worth what someone else will pay for them. No different from any other real or virtual goods. Like tulip bulbs, cowie shells, Beanie Babies, McSnoopies and a host of other fads, they are worth what people will pay for them and nothing more. Unlike a genuine currency they do not have a universal exchange value and are not widely accepted (not even close).
Sure, fiat currencies have serious issues - most significantly they fail the long term store of value test due to excessive printing by governments and central banks - but Bitcoins suffer from the same issues as fiat currencies and a whole lot of additional issues.
1. it is not known who creates/issues Bitcoins - do you really want to trust your wealth to what amounts to an anonymous stranger somewhere in cyberspace?
2. Bitcoins are not the only so-called virtual currency. What's to stop more being created?
3. while it is stated that there are limits on the number of Bitcoins that can be created, how can holders be assured that the announced limits will be respected (or are being respected now for that matter)?
4. Bitcoins exist in the hacker-populated world of the Internet. What happens if hackers make another successful attempt at the system?
Bitcoins are only worth what someone else will pay for them. No different from any other real or virtual goods. Like tulip bulbs, cowie shells, Beanie Babies, McSnoopies and a host of other fads, they are worth what people will pay for them and nothing more. Unlike a genuine currency they do not have a universal exchange value and are not widely accepted (not even close).
Sure, fiat currencies have serious issues - most significantly they fail the long term store of value test due to excessive printing by governments and central banks - but Bitcoins suffer from the same issues as fiat currencies and a whole lot of additional issues.
Sino Oil & Gas sold
Another investment that started out small and got smaller. A lot smaller. I have finally done something which I should have done a long time ago and taken the loss on Sino Oil & Gas (HK:702). If an announcement that the chairman has increased his shareholding (again) can't spark a rally, I don't know what will. Well past time to move on.
I sold at HK$0.151 for a net loss of 63%.
I'm just thankful that it was a small investment to begin with.
I sold at HK$0.151 for a net loss of 63%.
I'm just thankful that it was a small investment to begin with.
NZD and Chorus purchased
We currently have most of our investment eggs invested in Hong Kong/China. In an effort to get a little more diversification into the portfolio, I purchased some NZD on Monday (@ 6.5786) and have opened a position in Chorus (NZX: CNU).
CNU is largely the fixed line business from the demerged Telecom Corporation. CNU's share price has been hammered over concerns regarding a review of its pricing by the Commerce Commission and expectations of delays and cost overruns for its UFB project. Should either or both of these concerns be overstated, then the shares should get a lift. In the meantime, the expectation is that the current dividend will continue to be paid for at least 2013 and 2014 and (probably) 2015 which gives a degree of protection.
I paid NZD2.68 per share.
CNU is largely the fixed line business from the demerged Telecom Corporation. CNU's share price has been hammered over concerns regarding a review of its pricing by the Commerce Commission and expectations of delays and cost overruns for its UFB project. Should either or both of these concerns be overstated, then the shares should get a lift. In the meantime, the expectation is that the current dividend will continue to be paid for at least 2013 and 2014 and (probably) 2015 which gives a degree of protection.
I paid NZD2.68 per share.
Wednesday, April 10, 2013
Portfolio adjustment
This afternoon I sold my shares in Shenzhen Express (HK:548) and invested most of the proceeds in some additional shares in Anhui Express (HK:995) which has been a better performing company. This was largely an exercise in reducing the number of companies I need to monitor. Shenzhen Express was one of my "too small" investments that I should have sold some time ago.
I sold the shares in Shenzhen Express at HKD2.92 (for a net loss of 15%) and paid HKD4.20 for the shares in Anhui Express.
I sold the shares in Shenzhen Express at HKD2.92 (for a net loss of 15%) and paid HKD4.20 for the shares in Anhui Express.
Is fire insurance really necessary?
For many buildings the question does not arise at all - the cost of fire insurance for an apartment is included in the monthly management fees and you have to pay it. However, some buildings do not have block insurance and it is up to the individual owners to arrange their own fire insurance if they wish. If the property is mortgaged, the bank will insist on coverage at least equal to the amount of the outstanding insurance policy (and will steer you in the direction of their own insurance company).
One of my properties has no block insurance so the bank required me to take out a fire insurance policy equal to the amount of the mortgage loan. With the last mortgage payment falling due at the end of this month, I have been debating whether or not to continue to pay for fire insurance going forward.
The amount is not large but it is still an expense that I do not believe confers any real value. The possibility of a fire sufficiently large to damage my flat in an adequately maintained building is, in my view, remote. Accordingly, I have cancelled the policy.
One of my properties has no block insurance so the bank required me to take out a fire insurance policy equal to the amount of the mortgage loan. With the last mortgage payment falling due at the end of this month, I have been debating whether or not to continue to pay for fire insurance going forward.
The amount is not large but it is still an expense that I do not believe confers any real value. The possibility of a fire sufficiently large to damage my flat in an adequately maintained building is, in my view, remote. Accordingly, I have cancelled the policy.
Monday, April 08, 2013
Challenger Financial purchased
This morning I added a few more shares in Challenger Financial (ASX:CGF) to the portfolio. The company looks relatively undervalued on fundamentals, is buying back shares and may be a beneficiary of changes to Australia's superannuation regime. There have also been some recent broker upgrades.
I paid AUD3.97 for the additional shares.
I paid AUD3.97 for the additional shares.
Monthly Review - March 2013
March was a month where all my investments fell in value and the fall was greater than my (low) net savings from my job and the positive cash flow from the properties. Marginally favourable currency movements did not come close to bridging the deficit. The
result was a modest decline in net worth.
Here are the details:
1. my Hong Kong equity portfolio fell. There were no new investments this month. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I have increased the provision for loss from last traded price from an arbitrary one third to an equally arbitrary one half when the suspension is lifted. There were no new investments in March;
2. my AU/NZ equities fell sharply. I added some shares in Challenger Financial (ASX: CGF) to the portfolio;
3.my ETFs fell in line with the local markets;
4. my commodities fell sharply, with silver the biggest loser;
5. all of my properties were occupied with all tenants paying on time. had three major bills in March - one repair job which is semi-structural and two levies for building refurbishment. One of the building refurbishments is likely to see the tenant move out and a lengthy vacancy;
6. currency movements were slightly positive, with both the NZD and the AUD rising slightly against the HKD/USD;
7. my position in bonds remains small;
8. there were no open derivative contracts at month end;
9. savings were low with low income and high expenses due to the cost of a family holiday;
10. There were no transfers to Mrs Traineeinvestor this month.
My cash position rose with more money coming in than going out due to new investments. I currently hold 55.7 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the month, my net worth fell by 1.57%. The year to date increase is 6.33%. My retirement date has been fixed for 30 September for reasons that have nothing to do with finance - financially, I am past the point where I can afford to retire.
Note: due to travelling, the March 2013 review uses a cut off date of 5 April, 2013 instead of the usual last business day of the month.
Here are the details:
1. my Hong Kong equity portfolio fell. There were no new investments this month. I hold shares in CMR which is currently suspended following an attack by a short seller alleging fraud. I have increased the provision for loss from last traded price from an arbitrary one third to an equally arbitrary one half when the suspension is lifted. There were no new investments in March;
2. my AU/NZ equities fell sharply. I added some shares in Challenger Financial (ASX: CGF) to the portfolio;
3.my ETFs fell in line with the local markets;
4. my commodities fell sharply, with silver the biggest loser;
5. all of my properties were occupied with all tenants paying on time. had three major bills in March - one repair job which is semi-structural and two levies for building refurbishment. One of the building refurbishments is likely to see the tenant move out and a lengthy vacancy;
6. currency movements were slightly positive, with both the NZD and the AUD rising slightly against the HKD/USD;
7. my position in bonds remains small;
8. there were no open derivative contracts at month end;
9. savings were low with low income and high expenses due to the cost of a family holiday;
10. There were no transfers to Mrs Traineeinvestor this month.
My cash position rose with more money coming in than going out due to new investments. I currently hold 55.7 months of expenses in HKD cash or equivalents. This is above my target floor of 24 months.
For the month, my net worth fell by 1.57%. The year to date increase is 6.33%. My retirement date has been fixed for 30 September for reasons that have nothing to do with finance - financially, I am past the point where I can afford to retire.
Note: due to travelling, the March 2013 review uses a cut off date of 5 April, 2013 instead of the usual last business day of the month.
Tuesday, March 19, 2013
Cyprus Deposit Levy - as dumb as it gets
The proposal to levy a tax steal 6.5% of the first EUR100,000 and 9.9% of amounts over that threshold on all deposits held in banks in Cyprus has to be one of the dumbest political moves in history. Leaving aside the moral implications of arbitrary confiscation of savers' wealth, the practical implications are pretty clear:
1. never put money on deposit with any bank in any country which has anything but the most robust of banking systems, a freely convertible currency and strong recognition of personal property rights. It is a given that all Cypriot banks are now insolvent - no sane person would put anything into them and whatever deposits they hold will be leaving Cyprus at the first opportunity. Further, if I was a depositor with a Cypriot bank, I would withdraw my money as soon as they reopen and then max my credit card to the extent of the amount stolen and refuse to pay it back. Sue me and we can fight it out in court;
2. the Euro is believed by many to have largely held together because money has been fleeing the troubled economies of Greece, Spain Portugal, Italy etc for northern EU members - in particular Germany. The Cypriot bank heist sends a clear message that nationals of countries facing financial difficulties cannot be assured that their money will be safe from confiscation even if parked in German banks in Germany. The negative real return being accepted from German deposits/bonds in exchange for perceived safety of principal now looks like an increasingly bad judgement call. Not only would I expect more money to leave fiscally troubled countries but more money to leave the Euro altogether;
3. people will look for ways to hide their wealth. The loss of confidence in the European banks and the Euro generally will not only accelerate economic contraction/retard economic recovery but will result in more business being done for cash which traditionally is less likely to be reported on tax returns. In effect, tax receipts will be likely to shrink even more than the weak state of the economy would suggest;
4. it goes without saying that Cyprus is finished as an offshore banking centre. I don't know how many jobs will be lost but the loss is likely to be permanent.
Even if the Cyprus parliament decides not to steal depositors' money, the damage is done. The proposal has been raised and the fear that they may try again will linger.
If I had money with any bank in the EU, most of it would be leaving at this stage.
1. never put money on deposit with any bank in any country which has anything but the most robust of banking systems, a freely convertible currency and strong recognition of personal property rights. It is a given that all Cypriot banks are now insolvent - no sane person would put anything into them and whatever deposits they hold will be leaving Cyprus at the first opportunity. Further, if I was a depositor with a Cypriot bank, I would withdraw my money as soon as they reopen and then max my credit card to the extent of the amount stolen and refuse to pay it back. Sue me and we can fight it out in court;
2. the Euro is believed by many to have largely held together because money has been fleeing the troubled economies of Greece, Spain Portugal, Italy etc for northern EU members - in particular Germany. The Cypriot bank heist sends a clear message that nationals of countries facing financial difficulties cannot be assured that their money will be safe from confiscation even if parked in German banks in Germany. The negative real return being accepted from German deposits/bonds in exchange for perceived safety of principal now looks like an increasingly bad judgement call. Not only would I expect more money to leave fiscally troubled countries but more money to leave the Euro altogether;
3. people will look for ways to hide their wealth. The loss of confidence in the European banks and the Euro generally will not only accelerate economic contraction/retard economic recovery but will result in more business being done for cash which traditionally is less likely to be reported on tax returns. In effect, tax receipts will be likely to shrink even more than the weak state of the economy would suggest;
4. it goes without saying that Cyprus is finished as an offshore banking centre. I don't know how many jobs will be lost but the loss is likely to be permanent.
Even if the Cyprus parliament decides not to steal depositors' money, the damage is done. The proposal has been raised and the fear that they may try again will linger.
If I had money with any bank in the EU, most of it would be leaving at this stage.
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