Wednesday, July 31, 2019

Financial Review – July, 2019

July, 2019 produced a a small decrease in net worth with small gains in underlying asset values offset by unfavourable currency movements. The end result was a 0.12 percent decrease in net assets.

For the year to date, the portfolio is up 7.88 percent. The adjusted change from when I retired in September 2013 is a 31.75 percent increase. Hong Kong liquidity stands at 43.75 months of estimated outgoings, up from the start of the year's 39.90 months due to sale proceeds being higher than new investments.

Here are the details:

1. my Hong Kong equities were mixed. There were no trades this month;

2. my AU/NZ equities were were up with gains in New Zealand and Australia. There were no transactions this month;

3.my equity ETFs were mixed (India, Hong Kong and China) in line with the local markets;

4. my position in silver was up;

5. all tenants are paying on time and all properties are let. There was only one minor repair bill this month;

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

7. my bonds increased in value on expectations of interest rate cuts. I purchased a perpetual bond callable in 2024 using margin finance. Yield to call is 5.9%;

8. expenses were low.

My HK cash position increased during the month. I currently hold 43.75 months of expenses in HKD cash or equivalents (up from 39.9 months on 1 January). It makes little sense to hold large amounts of cash while also having outstanding borrowings on which we pay interest.

Total household gearing ((debt+accruals)/assets) is 11.1% of total assets – with the increase from last month due to drawing down on a margin facility to purchase an additional bond.    Property prices are as at 1 January, 2019 and will not be marked-to-market until year end and I do not net off cash. With a mark-to-market of equities, bonds and FX this number will fluctuate even if the amount of debt is being slowly amortised.

Value is hard to find: it has become increasingly difficult to find investments which represent good value whether real estate, equities or fixed income. This is particularly problematic when looking to rebalance away from HK/China/USD/HKD exposure which dominates our portfolio.

Saturday, June 29, 2019

Financial Review – June, 2019

June, 2019 produced a solid increase in net worth with gains across most asset classes  compounded by marginally favourable currency movements. The end result was a 4.11 percent increase in net assets.

For the year to date, the portfolio is up 7.98 percent. The adjusted change from when I retired in September 2013 is a 31.88 percent increase. Hong Kong liquidity stands at 42.53 months of estimated outgoings, up from the start of the year's 39.90 months due to sale proceeds being higher than new investments.

Here are the details:

1. my Hong Kong equities were up. The only transaction this month was to swap my Swire Pacific A shares into Swire Pacific B shares. While each A shares is equivalent to 5 B shares, they trade at prices which do not reflect that ratio meaning each A share sold purchased about 6.3 B shares (after transaction costs). This will lift my dividends from the company by about 26%. Assuming that Swire pays the same dividends as last year, the increase in net dividends will be slightly less than costs of swapping the shares in 2019/20 but those costs are one time expenses while the extra dividends will continue for as long as I hold the shares. I'm embarrassed not to have done this years ago (or purchased the B shares from day 1;

2. my AU/NZ equities were were mixed with gains in New Zealand offset by losses in Australia (again!). There were no transactions this month;

3.my equity ETFs were up (India, Hong Kong and China) in line with the local markets;

4. my position in silver was up slightly;

5. all tenants are paying on time and all properties are let. There were several minor repair bills this month;

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

7. my bonds increased in value on expectations of interest rate cuts;

8. expenses were low.

My HK cash position was increase during the month. I currently hold 42.53 months of expenses in HKD cash or equivalents (up from 39.9 months on 1 January). It makes little sense to hold large amounts of cash while also having outstanding borrowings on which we pay interest. We applied some of our cash towards debt reduction this month.

Total household gearing ((debt+accruals)/assets) is 9.66% of total assets – with the effect of partially paying down loans adding to the effect of rising asset values on the calculation.   Property prices are as at 1 January, 2019 and will not be marked-to-market until year end and I do not net off cash. With a mark-to-market of equities, bonds and FX this number will fluctuate even if the amount of debt is being slowly amortised.

Value is hard to find: it has become increasingly difficult to find investments which represent good value whether real estate, equities or fixed income. This is particularly problematic when looking to rebalance away from HK/China/USD/HKD exposure which dominates our portfolio.

Monday, June 03, 2019

Financial Review - May, 2019

May, 2019 produced a significant decline in net worth with losses across most asset classes  compounded by adverse currency movements. The end result was a 3.34 percent decrease in net assets.

For the year to date, the portfolio is up 4.48 percent. The adjusted change from when I retired in September 2013 is a 27.49 percent increase. Hong Kong liquidity stands at 41.30 months of estimated outgoings, up from the start of the year's 39.90 months due to sale proceeds being higher than new investments.

Here are the details:

1. my Hong Kong equities were down. There were no transactions this month;

2. my AU/NZ equities were were mixed with gains in New Zealand offset by losses in Australia. I sold my shares in Automative Holdings (ASX: AHG) into the market rather than wait for the takeover offer conditions to be satisfied;

3.my equity ETFs were down (India, Hong Kong and China) in line with the local markets;

4. my position in silver was down slightly;

5. all tenants are paying on time and all properties are let. There were several minor repair bills this month;

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

7. my position in bonds remains unchanged;

8. expenses were low.

My HK cash position was largely unchanged during the month. I currently hold 41.30 months of expenses in HKD cash or equivalents (up from 39.9 months on 1 January). It makes little sense to hold large amounts of cash while also having outstanding borrowings on which we pay interest. I partially paid down one loan and switched the balance from USD to HKD to take advantage of the lower interest rate and better align the loan currency with the cash flows which will be used to pay it down.

Total household gearing ((debt+accruals)/assets) is 10.41% of total assets – with the effect of partially paying down one loan outweighing the effect of falling asset values on the calculation.   Property prices are as at 1 January, 2019 and will not be marked-to-market until year end and I do not net off cash. With a mark-to-market of equities, bonds and FX this number will fluctuate even if the amount of debt is being slowly amortised.

Tuesday, April 30, 2019

Financial Review – April, 2019

April, 2019 produced a small in net worth with small gains across most assets classes  partially offset by adverse currency movements. The end result was a 0.75 percent increase in net assets.

For the year to date, the portfolio is up 7.30 percent. The adjusted change from when I retired in September 2013 is a 31.01 percent increase. Hong Kong liquidity stands at 41.27 months of estimated outgoings, up from the start of the year's 39.90 months due to sale proceeds being higher than new investments.

Here are the details:

1. my Hong Kong equities were more or less flat. I sold my shares in China Dongxiang (HKX: 3818) after a the company suspended its dividend following a disappointing result. I added a few more shares in a very small GEM listed company (still a very small position) and took out the scrip option for Hua Xian REIT's dividend (HKX: 87001);

2. my AU/NZ equities were were up with gains in both New Zealand and Australia. There were no transactions this month;

3.my equity ETFs were up (India, Hong Kong and China) in line with the local markets;

4. my position in silver was up slightly;

5. all tenants are paying on time and all properties are let. One lease has been rolled over for the same rental;

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

7. my position in bonds increased sharply – and not by design. I have attempted to subscribe for new issues of bonds on five occasions so far this year without receiving any allocation in spite of gearing up my application well above the level I wished to invest. At the end of last month I made my sixth application this year and ended up with a full allocation with the result that, come settlement, on settlement I ended up with more of a single bond issue than I am comfortable with (all purchased with borrowed money). It's a nice spread but it's bad portfolio management;

8. expenses were low.

My HK cash position increased significantly during the month due to sales of investments. I currently hold 41.27 months of expenses in HKD cash or equivalents (up from 39.9 months on 1 January). It makes little sense to hold large amounts of cash while also having outstanding borrowings on which we pay interest. Absent new investments, we will be paying down some of our debts during May.

Total household gearing ((debt+accruals)/assets) is 10.61% of total assets – with the unexpectedly large purchase of bonds being responsible for most of the increase. Property prices are as at 1 January, 2019 and will not be marked-to-market until year end and I do not net off cash. With a mark-to-market of equities, bonds and FX this number will fluctuate even if the amount of debt is being slowly amortised.

Sunday, March 31, 2019

Financial Review - March 2019

March, 2019 produced a small in net worth with gains across all assets classes except silver partially offset by adverse currency movements. The end result was a 2.14 percent increase in net assets.

For the year to date, the portfolio is up 6.66 percent. The adjusted change from when I retired in September 2013 is a 30.23 percent increase. Hong Kong liquidity stands at 35.97 months of estimated outgoings, down from the start of the year's 39.90 months due to new investments.
Here are the details:

1. my Hong Kong equities increased. I topped my my holding in Hua Xian REIT (HK:87001) and made a very small speculation in a GEM listed company;

2. my AU/NZ equities were were up with gains in New Zealand offsetting a small loss in Australia. I purchased shares in Nufarm (ASX: NUF) ahead of the company's worse than expected result;

3.my equity ETFs were up (India, Hong Kong and China) in line with the local markets;


4. my position in silver was down slightly;

5. all tenants are paying on time and all properties are let. I had one major repair bill in March. One lease expired and was renewed to the same tenant for an increased rental;

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

7. my position in bonds remains modest. Bonds have been frustrating. I have attempted to subscribe for new issues of bonds on five occasions so far this year without receiving any allocation in spite of gearing up my application well above the level I wished to invest. This week I made my sixth application this year and ended up with a full allocation with the result that, come settlement later this week, I will have more of a single bond issue than I am comfortable with. I will look to sell some of the position before applying for any more bonds;

8. expenses were high due to a trip to Australia.

My HK cash position fell during slightly the month due to new investments. I currently hold 35.97 months of expenses in HKD cash or equivalents (up from 29,9 months on 1 January). 

Total household gearing ((debt+accruals)/assets) is 7.49% of total assets – with a partial pay down in a margin facility and increased share prices accounting for the reduction. This will increase in April when I draw down to pay for the new bond purchase. Property prices are as at 1 January, 2019 and will not be marked-to-market until year end and I do not net off cash. With a mark-to-market of equities, bonds and FX this number will fluctuate even if the amount of debt is being slowly amortised.

Friday, March 01, 2019

Financial Review - Febuary, 2019

There is no review for January, 2019 due to travelling and other commitments. The February review covers the two month period form 1 January to 28 February, 2019.

The two month period saw a recovery in net worth with gains across all assets classes compounded by adverse currency movements. The end result was a 4.84 percent increase in net assets.

For the year to date, the portfolio is up 4.84 percent. The adjusted change from when I retired in September 2013 is a 27.95 percent increase. Hong Kong liquidity stands at 36.30 months of estimated outgoings, down from the start of the year's 39.90 months due to new investments.
Here are the details:

1. my Hong Kong equities increased. I added a a position in Shun Tak Holdings (HK:242) to the portfolio;

2. my AU/NZ equities were were up. I sold my shares in NZ Exchange (NZ: NZX) and Genesis (NZ: GNE) and am looking for replacements;

3.my equity ETFs were up (India, Hong Kong and China) in line with the local markets;

4. my position in silver was up slightly;

5. all tenants are paying on time and all properties are let. I will have one major repair bill in March;

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

7. my position in bonds remains modest. There were no additional purchases this month. With the prospect of further increases in interest rates more muted, I am looking at buying some more bonds;

8. expenses were low (in spite of a short trip to Singapore).

My HK cash position fell during the month due to new investments. I currently hold 36.3 months of expenses in HKD cash or equivalents (down from 29,9 months on 1 January). 

Total household gearing ((debt+accruals)/assets) is 8.54% of total assets – with a partial pay down in a margin facility and increased share prices accounting for the reduction. Property prices are as at 1 January, 2019 and will not be marked-to-market until year end and I do not net off cash. With a mark-to-market of equities, bonds and FX this number will fluctuate even if the amount of debt is being slowly amortised.

Tuesday, January 01, 2019

Annual Review – 2018

The best word to describe 2018 was unsatisfactory.

Financials*

Financially speaking, we ended the year with a 1.3% decline in net worth with the decline being split more or less evenly between real estate values and equities/bonds with FX also making a contribution to the loss. Measuring performance is sightly complicated by the fact that Mrs Traineeinvestor is still working and, or course, as a retiree I was drawing on our investments to pay for living expenses and other outgoings. In any event, given where markets ended the year, I should be reasonably happy with this result.

It was disconcerting that every major asset class declined in value during the year. The only asset class in our portfolios that showed positive returns was cash and, even then, the return was below the rate of inflation. Diversification was still important, but not as valuable as I had hoped.

One things that stood out was that a small number of shares in the portfolio delivered unexpected bad news which hit their share prices hard: Fletcher Building in New Zealand, Lend Lease in Australia and Sinopec in Hong Kong. While these sorts of issues will happen from time to time (and may even represent opportunities), they do highlight the importance of diversification.

On a more positive note, income from all sources (rents, dividends etc) hit a record post-FIRE high which is encouraging – if I can keep the income streams coming in then day-to-day market fluctuations are of lesser concern than if I was dependent on selling assets to fund expenses.

The other noticeable feature about out portfolios is that, between us, we have a lot of cash/term deposits which currently earn very little – less than the interest rate we are paying on our margin facility and mortgages. I remain of the view that modest amounts of debt are a positive element of our portfolio because (i) debt provides an inflation hedge and (ii) interest cost is generally lower than the returns which can be expected from investments over the longer term. However, it makes no sense to maintain large cash balances over long time periods instead of paying down debt. Accordingly, we have decided to reduce the level of cash/deposits held and pay of some of our debts. In December, I made a partial pay down of a margin facility and when some term deposits mature in May, we intend to pay off one of our mortgages in full.

Non-financial

In other areas, I also more or less did not meet expectations. I did less exercise than planned (in part due to recurring back problems and in part due to additional travel), my research degree is on schedule to finish but likely towards the end of 2019 rather than mid-2019 and, the novel needs quite a bit more work, but I should have it up Amazon by the end of 2019.




* Note: the numbers for the annual review differ from the monthly reviews because they include (i) changes in real estate values and (ii) an update on Mrs Traineeinvestor's position.

Financial Review – December, 2018

December saw a further reduction in net worth with losses in equities compounded by adverse currency movements. The end result was a 2.12 percent decrease in net assets.

For the year to date, the portfolio is down 3.96 percent. The adjusted change from when I retired in September 2013 is a 21.61 percent increase. Hong Kong liquidity stands at 39.90 months of estimated outgoings, significantly increased from the start of the year's 26.68 months due to net asset sales and a new mortgage loan.

Here are the details:

1. my Hong Kong equities fell. I added a few more shares in CK Assets (HK:1113) to the portfolio;

2. my AU/NZ equities were were down ... again. There were no new transactions;

3.my equity ETFs were down (India, Hong Kong and China) in line with the local markets;

4. my position in silver was more or less unchanged. I slightly increased my position in silver;

5. all tenants are paying on time and all properties are let;

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

7. my position in bonds remains modest. There were no additional purchases this month. Recent interest rate increases have pushed the holding values of some of my bonds to  below par - since I intend holding to maturity (other than a solitary perpetual) this is not a problem. I have a margin facility in place and my carry trade is doing its thing and generating a small amount of additional income;

8. expenses were moderate as I low as we did not take a holiday this Christmas.

My HK cash position rose during the month due to full occupancy on the properties and a number of dividends being received. I currently hold 39.90 months of expenses in HKD cash or equivalents (up from 26.68 months on 1 January). 

Total household gearing ((debt+accruals)/assets) is 8.85% of total assets – with a partial pay down in a margin facility offsetting declines in asset values. Property prices are as at 1 January, 2018 and will not be marked-to-market until year end and I do not net off cash. With a mark-to-market of equities, bonds and FX this number will fluctuate even if the amount of debt is being slowly amortised.