Sunday, December 31, 2017

Annual Review - 2017

Financially speaking, 2017 was a fantastic year with our household NAV up by 19.4 percent. Gains were across the board and divided almost equally between property appreciation* and other gains/income streams/ FX movements. Needless to say, I do not mistake the benefits of favourable market movements with any particular genius on my part.

We also finished the year with household gearing (borrowings + accruals) being at 8.8 percent of gross household assets. The rise in gearing was due to drawing down on a facility to buy bonds - a basic carry trade. While the rise in interest rates and a flattening of the yield curve have reduced the spread, it remains a profitable trade and I intend to increase it slightly in 2018.

Liquidity remains high, with reductions on my side of the balance sheet being matched by increases on Mrs Traineeinvestor's side.

As part of a year end tidy-up, some smaller and/or loss making investments have been disposed of: Specialty Fashion (ASX: SFH) and Platinum were sold and I also sold my profitable investment in PG Wrightson (NZX: PGW). I also have identified another loss making investment which will be sold in the next week or so (possibly two) and small amounts of non-HK dollars sitting idle which will be redeployed in an effort to simplify my balance sheet.

On non-financial matters:

  • while I completed a very slow marathon early in the year, recurring back problems have derailed plans to do the HK marathon next month;
  • I have completed a very rough first draft of my second novel (it needs a huge amount of work);
  • I am slightly behind schedule with my research degree but still hope to complete it in mid-2019;
  • I have done a small amount of consulting work which I will continue but the levels are so low it is close to being more trouble than it is worth to continue.

All in all, 2017 was a great year.

* We do not have ready to hand valuations for some properties, so they are included in the accounts either at cost or the amount of an unsolicited offer received a few years ago.

Friday, December 29, 2017

Financial Review - December, 2017

December was another positive month for the portfolio with small gains and losses across all asset classes more or less offsetting each other leaving the net cash flow from investments and favourable FX movements to to produce a 0.69 percent increase in net assets. This is the first year that I can recall having positive outcomes every month of the year.

For the year, the portfolio is up 18.90 percent. The adjusted change from when I retired in September 2013 is a 26.67 percent increase. Hong Kong liquidity stands at 26.68 months of estimated outgoings, well down on January's 38.6 months due to new investments + transfers to New Zealand.

Here are the details:

1. my Hong Kong equities went sideways. I added to my position in Rosedale Hotels (HK:1189) - this is essentially an asset play trading at a substantial discount to the net cash on the balance sheet and CNOOC (HK:883);

2. my AU/NZ equities were were marginally ahead. There were no trades this month. I currently have too high a proportion of my New Zealand assets in cash; equity ETFs were up slightly (India, Hong Kong and China) in line with the local markets;

4. my position in silver rose and my small position in platinum recovered slightly before I sold it at a small loss;

5. all tenants are paying on time and all properties are let. I had some maintenance bills this month and will have to fork out for the pointless window inspection next month;

6. the AUD and NZD were were up against the USD/HKD;

7. my position in bonds remains modest. I have a margin facility in place and my carry trade is doing its thing and generating a small amount of additional income. However, the spread between the interest earned and the interest paid has narrowed to about 2.2% and will likely narrow again on the next roll over date in February, 2018;

8. expenses were high with paying for one of 2018's trips to New Zealand, some medical bills (insurance will pay for most of them, but I won't see the money until January) and a host of minor things all falling due at once. I also settled all my HK tax bills due early next year and found that, once again, I have over provided for tax.

My HK cash position fell slightly during the month. I currently hold 26.68 months of expenses in HKD cash or equivalents (down from 38.6 months on 1 January).

I have revamped my spreadsheets to capture all debt (previously some accounts were entered on a net basis). Total household gearing ((debt+accruals)/assets) is 9.72% of total assets. Property prices are as at 1 January, 2017, so this overstates the gearing ratio. With a mark-to-market of equities, bonds and FX this number will fluctuate even if the amount of debt is being slowly amortised.

I would like to make some additional investments but am struggling to find good value in the markets I follow. With expectations of further rises in interest rates muted, I remain tempted by the carry trade and would do one or two more should the right offers be available. I am reviewing some of the smaller investments in the portfolio with a view to either exiting or adding to my positions - too many very small investments are taking up a disproportionate amount of time to monitor.