November was the sixth successive month in which my investments declined in value. However, savings and net rentals were sufficient to result in a small increase in net worth for the month.
In financial terms, my investments declined (again) and the currency moved against me (again). In both cases the adverse movements where much smaller than in September or October.
Here are the details:
1. my actively managed funds all lost money. I am now holding losses on all of them. I currently have investments in actively managed funds investing in Thailand, Taiwan, Eastern Small Companies, European Small Companies and Vietnam. In a demonstration of the high beta nature of emerging markets and the leverage of the currency factor, some of my funds are down about 50% in HKD/USD terms;
2. my equity ETFs all lost money. I currently have exposure to Hong Kong and India. I added to both positions towards the end of the month;
3. my residual equity portfolio lost money local currency terms and lost more money due to adverse exchange rate movements;
4. my commodity investments went sideways. Fortunately, I only have positions in nickel and lean hogs left and these are very small (even smaller now that they have declined so far);
5. all my properties are all fully rented and the 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). One lease has expired and the tenant is staying in place while we see if we can reach agreement on a new lease;
6. currency movements were adverse as the USD strengthened and compounded the loss on my investments this month.
Two portfolio investments were made towards the end of the month (Hong Kong and India ETFs). I made made two small trades in warrants on the Hang Seng Index - one profitable and one loss making.
My income rose during the month but this is not expected to be sustainable. My expectation is that my income will decline by at least 20% from its peak. My spending was moderate. I did have to pay for the airfares and accommodation for our Christmas holiday - however this was already provided for. The resulting savings and the net rentals on the investment properties were greater than the losses on my investments - but not by much. For the month, my net worth increased by 0.37%. The year to date decrease is 4.25%.
Friday, November 28, 2008
Thursday, November 27, 2008
India ETF purchased
I completed my cash draw down on Monday when I added to my position in two India ETFs.
I picked India as for the second part of my attempt to make some investments at what appear to be attractive levels based on my views that:
1. the Indian economy has good long term growth prospects driven by a combination of demographics, deregulation, improving infrastructure and the rapid expansion of a skilled, educated and affluent middle class ;
2. there is considerable scope for interest rate cuts and other government measures to support or stimulate the market;
3. the Indian market has lagged many other markets in bouncing off its recent lows.
I initially placed an order for units in the Lyxor India ETF (stock code: 2810) which I already hold before remembering that the iShares Sensex India ETF is also listed in Hong Kong now (stock code: 2836). As the latter is larger, more liquid and has lower fees I attempted to switch my order from the Lyxor fund to the iShares fund and ended up with some of each. This is sub-optimal but is unlikely to do may any real harm.
I have now reduced my cash position to the equivalent of about 2.5 years living expenses and accrued tax liability.
I picked India as for the second part of my attempt to make some investments at what appear to be attractive levels based on my views that:
1. the Indian economy has good long term growth prospects driven by a combination of demographics, deregulation, improving infrastructure and the rapid expansion of a skilled, educated and affluent middle class ;
2. there is considerable scope for interest rate cuts and other government measures to support or stimulate the market;
3. the Indian market has lagged many other markets in bouncing off its recent lows.
I initially placed an order for units in the Lyxor India ETF (stock code: 2810) which I already hold before remembering that the iShares Sensex India ETF is also listed in Hong Kong now (stock code: 2836). As the latter is larger, more liquid and has lower fees I attempted to switch my order from the Lyxor fund to the iShares fund and ended up with some of each. This is sub-optimal but is unlikely to do may any real harm.
I have now reduced my cash position to the equivalent of about 2.5 years living expenses and accrued tax liability.
Wednesday, November 26, 2008
Positive savings rate in the US
According to to the U.S. Bureau of Economic Analysis, the savings rate in the US has risen over the last two financial quarters and is in positive territory.
Although not showing a return to the (modest) levels prior to the consumption frenzy of the last few years, it is still an improvement. Given that an excess of consumption and a deficiency in savings by American households has been cited as one of the causes of the current economic crisis this is, in one sense, encouraging. However, it also has to be remembered that high levels of spending by American consumers were a significant contributor to the last economic boom (both in America and the countries which sold goods and services to those consumers). Less spending by American consumers has to result in less income for the companies and individuals who supplied goods to them. (The economic theory known as the paradox of thrift states that increased savings levels results in lower levels of income for the economy as a whole.)
A few comments on the savings data:
1. American households are doing the opposite of governments and central banks - they are spending less in the face of economic uncertainty and adversity;
2. American savings rates are still significantly below rates in Asia. In fact a savings rate of just over 1% is very low by any measure;
3. the data does not reflect the wealth effect of rises and falls in asset values;
4. if the economy does shed jobs (and incomes for those still in employment declines), it is an open question whether the trend will be reversed as savings are drawn down to fund living expenses and/or households will make further cutbacks in spending thereby perpetuating the economic contraction.
Although not showing a return to the (modest) levels prior to the consumption frenzy of the last few years, it is still an improvement. Given that an excess of consumption and a deficiency in savings by American households has been cited as one of the causes of the current economic crisis this is, in one sense, encouraging. However, it also has to be remembered that high levels of spending by American consumers were a significant contributor to the last economic boom (both in America and the countries which sold goods and services to those consumers). Less spending by American consumers has to result in less income for the companies and individuals who supplied goods to them. (The economic theory known as the paradox of thrift states that increased savings levels results in lower levels of income for the economy as a whole.)
A few comments on the savings data:
1. American households are doing the opposite of governments and central banks - they are spending less in the face of economic uncertainty and adversity;
2. American savings rates are still significantly below rates in Asia. In fact a savings rate of just over 1% is very low by any measure;
3. the data does not reflect the wealth effect of rises and falls in asset values;
4. if the economy does shed jobs (and incomes for those still in employment declines), it is an open question whether the trend will be reversed as savings are drawn down to fund living expenses and/or households will make further cutbacks in spending thereby perpetuating the economic contraction.
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