A quick review of the latest interest rate fixings on my mortgages shows that the cost of debt financing has crept up off the low points set in the second quarter. The increases are not large and even the highest rate is still well below both the net yield on the underlying properties and the rate of inflation. In other words, debt finance is still cheap.
The interest rates I am currently paying range from a low of 2.1286% to a high of 3.0014%.
As an aside, given that deposit rates have not moved (still close to zero), this effectively represents margin expansion for the lending banks. New loans are currently available on less favourable terms than some of the more recent loans I have taken out, which will also help the banks' profitability.
Wednesday, August 06, 2008
A typhoon and an attempted scam
The typhoon #8 signal was hoisted early this morning which means that offices, schools (it was summer holidays anyway) and most shops will be closed and services suspended until the signal is lowered. Depending on the severity of the weather, a reasonable number of people will go to work anyway. It is usually possible for those like myself who do not live on or close to an MTR station to find a taxi although you may get quite wet in the process.
The first taxi I flagged down wanted to charge me a HK$30 premium because of the typhoon. This would have roughly doubled the fare. I have been living in HK for well over a decade and this is the first time a taxi driver has tried to extort more than the metered fare from me. It's illegal for them to charge more than the metered fare. In any case, with two other taxis coming down the street behind him, it was a rather pointless exercise and I had no hesitation in telling him to foxtrot oscar. My only regret is that I forgot to make a note of his licence plate.
The first taxi I flagged down wanted to charge me a HK$30 premium because of the typhoon. This would have roughly doubled the fare. I have been living in HK for well over a decade and this is the first time a taxi driver has tried to extort more than the metered fare from me. It's illegal for them to charge more than the metered fare. In any case, with two other taxis coming down the street behind him, it was a rather pointless exercise and I had no hesitation in telling him to foxtrot oscar. My only regret is that I forgot to make a note of his licence plate.
Monday, August 04, 2008
Monthly Review - July 2008
July was another ugly month. While not as awful as June, it was the second month in a row that my net worth declined. This is the first time this has happened since I started keeping monthly records in January 2007.
As a group, my mark to market investments largely went sideways and showed a small net loss. Adverse currency movements amplified the losses and were the biggest contributor to the overall decline.
Here are the details:
1. my actively managed funds were mixed. I currently have investments in actively managed funds investing in Thailand, Taiwan, Eastern Small Companies, European Small Companies and Vietnam. The loss on the Vietnam fund is now approaching 50% of the capital invested. It is unlikely that I will invest in another fund that effectively locks me in for several years;
2. my equity ETFs recovered some of last month's losses. I currently have exposure to Hong Kong and India
3. my residual equity portfolio fell;
4. my commodity investments showed very marginal decline with a loss on my commodities fund slightly outweighing small gains in my Nickel and Lean Hogs ETCs;
5. my properties are all fully rented and tenants are paying the rent on time. I have both a positive cash flow and a surplus of income over expenses (which represents an increase in net worth). Although some of the reductions in interest rates have been slightly reversed with the rise in HIBOR, the cash flows remain positive;
6. currency movements were adverse (the USD recovered some of its losses) and were the biggest single factor in the net loss for the month.
The only investment made this month was a small subscription for an RMB bond issue. My income was in at the low end of expectations this month. My spending was in the mid range. The resulting savings were less than previous months but still helped to offset the effects of the losses on my investments.
The end result was a decrease in net worth of 0.3% for the month. The year to date increase is 5.8%. Looking forward, it has been several months since I made any meaningful investments and my cash holding has been building up. With inflation running at 5.4% officially and deposit rates still at close to zero, cash is depreciating quite rapidly and finding suitable investments is something of an imperative. The difficulty is finding somewhere attractive to invest the money.
As a group, my mark to market investments largely went sideways and showed a small net loss. Adverse currency movements amplified the losses and were the biggest contributor to the overall decline.
Here are the details:
1. my actively managed funds were mixed. I currently have investments in actively managed funds investing in Thailand, Taiwan, Eastern Small Companies, European Small Companies and Vietnam. The loss on the Vietnam fund is now approaching 50% of the capital invested. It is unlikely that I will invest in another fund that effectively locks me in for several years;
2. my equity ETFs recovered some of last month's losses. I currently have exposure to Hong Kong and India
3. my residual equity portfolio fell;
4. my commodity investments showed very marginal decline with a loss on my commodities fund slightly outweighing small gains in my Nickel and Lean Hogs ETCs;
5. my properties are all fully rented and tenants are paying the rent on time. I have both a positive cash flow and a surplus of income over expenses (which represents an increase in net worth). Although some of the reductions in interest rates have been slightly reversed with the rise in HIBOR, the cash flows remain positive;
6. currency movements were adverse (the USD recovered some of its losses) and were the biggest single factor in the net loss for the month.
The only investment made this month was a small subscription for an RMB bond issue. My income was in at the low end of expectations this month. My spending was in the mid range. The resulting savings were less than previous months but still helped to offset the effects of the losses on my investments.
The end result was a decrease in net worth of 0.3% for the month. The year to date increase is 5.8%. Looking forward, it has been several months since I made any meaningful investments and my cash holding has been building up. With inflation running at 5.4% officially and deposit rates still at close to zero, cash is depreciating quite rapidly and finding suitable investments is something of an imperative. The difficulty is finding somewhere attractive to invest the money.
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