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.

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.

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.

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.

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.

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.

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.

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.

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:

• 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.

I almost need to retire in order to find time to do everything I have planned.

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.