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Wednesday, 22 December 2010

Start of the holidays

My workplace is shutting down between Christmas and New Year's, so all the staff have to take some of their annual leave days during this period. It isn't much of an imposition though, as most staff would probably want to take leave during that period anyhow. I've also taken a few extra days off before Christmas, so today was my last day of work until the 4th of January.
During the break I want to read through a couple of the planetary science textbooks I got from Amazon.com. I'll also have another go at using the Meade CCD camera I bought last year. I've written a first draft of an application for a student fellowship position at the Australian Astronomical Observatory - the competition for these positions is fierce (usually 30+ entries for the 2-3 available slots), so I'm not likely to get one. I'll revise the cover letter and CV during the holidays and send the 'final' version to the lecturer at JCU for some feedback before I send it off to the AAO in late January. It does no harm to apply, and some of the documentation can probably be recycled if I apply to the JCU doctorate program in a couple of years time. If I did get accepted I'd have to arrange to take the 10-12 weeks off work in June-August. Fortunately I have 8 weeks of long-service leave and 8 weeks of annual leave accumulated so this should be possible (although the boss might not like the idea).
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Sunday, 12 December 2010

The down-side of ordering textbooks online

My textbooks order arrived from Amazon.com a couple of days ago, so I'll have lots to read while I visit my parent's farm for the holidays. Unfortunately the cardboard box had been broken in transit and 'repacked' by simply dumping the entire contents and box into a soft 'tote bag'. Obviously that didn't provide much protection for the books as they travelled airmail from the US to Australia, so all the books arrived with some damage. The heavier, hard-cover textbooks (costing over $100 each) arrived with damaged spines and covers. I emailed both Amazon.com packaging feedback and their customer service, but the response so far has been underwhelming. The customer service department responded within 24 hours of my complaint, but all I got was a boilerplate response offering either a refund or replacement books if I send the damaged books back to Amazon.com

That would be fine if I lived in the US (so postage costs and delivery time wasn't an issue), but sending the damaged books back for replacement would cost at least $50 postage, plus I'd have to wait two or three months for the replacement textbooks to arrive.

Since I want to start reading the textbooks NOW, I've emailed again reiterating my original request for some compensation by way of a partial refund. A small amount of compensation by way of an Amazon.com gift card would appear to be a win-win solution. I'd be able to keep the damaged books and start using them immediately, have some funds to use towards buying additional books from Amazon.com in the future, and avoid having to pay expensive postage to return the books to Amazon.com. And Amazon would win by the gift cards costing less than the cost of mailing replacement books out to me (which could get damaged again!), and would also benefit by my next order using the gift card most likely being for more than the value of the gift card.

We'll see if I actually get a "human" responding to my second email, or just another stock standard response to return them for a refund or replacement.

One especially irritating feature of the customer feedback process was that the customer feedback form doesn't allow attachments (so I could not include the photos of the damage to the books and packaging that I had sent to them using the packing feedback form), and the reply (with photos attached) I sent to their initial customer service reply bounced - so I had to reply using the same customer feedback form that doesn't allow attachments!





UPDATE: Amazon came back very quickly with a refund of the shipping cost plus a "goodwill refund" of part of the cost price of the books. In total I will get $146.46 refunded out of the $585.84 originally paid. Part (~2/3) of the refund is being credited back onto the CC I used to make the purchase, and the remainded will be credited as 'gift card' value onto my Amazon.com account (and will be automatically deducted from the total of my next order). Overall, I'm happy with Amazon's response as I don't have to wait for the books to be replaced and I get some compensation for the books not arriving in good condition. Although the box used for the shipment of 7 books (which included three hefty hardcovers) was obviously not strong enough in this case, my previous orders from Amazon had all arrived in excellent condition. So the problem could have been caused by excessively rough handling of the package through the postal system, rather than the standard of packaging - in which case it was not really Amazon's fault.

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Monday, 6 December 2010

MoA update

The results for my second semester subject (Astronomy Instrumentation) came out this morning -- another Distinction. Considering I was ill for a month in the middle of the semester it's about as good as I could reasonably expect. On the one hand I need to start earning some High Distinction grades if I'm to have any chance of getting a university medal, so I was hoping I might somehow still have done well enough on the final exam to get an HD. At the same time I was worried I might wind up with only a credit, as I had been too busy finishing off my assignment tasks at the end of the semester to put in enough time revising for the exam.

While I'm waiting for my textbook order to arrive from Amazon.com I've started reading through some of my old technical writing and research project management textbooks in preparation for the Literature Review and Pilot Research Project subjects I'll be taking in the final year of the MoA course. The last time I did a literature review and project (for a GradDip in Applied Chemistry more than a decade ago) I was woefully disorganised and just dived straight into reading papers and "doing the lab work" without spending any time defining specific goals or planning the overall project. I'm also re-reading the posts in the 'Study Hacks' blog (calnewport.com) as it seems to have some good pointers on how to narrow ones focus (and underload) in order to achieve excellence. This is the exact opposite of my previous approach (attempting to do too many things simultaneously - such as enrolling in two different post-grad courses at the same time!).

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Thursday, 2 December 2010

Net Worth Update: November 2010

The stock market didn't do so well this month, what with Ireland going broke, North Korea going (more) insane, and locally the Reserve Bank raising interest rates only to find that the economy had practically ground to a halt in the last quarter (0.2% GDP growth). However our property valuations rose a bit during the month, so my overall net worth figure hardly declined. With the economy slowing down, unemployment rising slightly (although still at almost 'full' employment) and interest rates rising at a time household debt is at an all-time high, I don't expect Sydney real estate prices to rise in 2011 or 2012. Most likely prices will remain close to current levels, which will result in a small (5%-10%) drop in real prices over that period.

Assets___________$ Amount______$ Diff_____% Diff 
Stocks_*__________$16,491_____-$7,486______n/a % 
Retirement_______$347,568_____-$1,261____-0.36 % 
Properties_______$942,757______$4,815_____0.51 % 

Debts____________$ Amount_____$ Diff_____% Diff 
Home Mortgage(s)_$363,441________-$81____-0.02 % 

Net Worth________$943,376_____-$3,851____-0.41 %

* the Stocks figure is portfolio value - margin loans. As my portfolio value (and margin loan debt) is around $500,000 relatively small movements in the stock market produce huge percentage swings in the net value of my stock portfolio each month.

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Wednesday, 1 December 2010

Extra expenses due to the new car

The week before I collected our new car I decided I'd better tidy up the garage and install an automatic opener on our roll-a-door. I'd been parking the old car outside in the carport, but didn't think that would be such a good idea with the new car - someone had stuck screws into two of our tyres a couple of weeks ago, and on Halloween night some eggs had been thrown at our house (but luckily didn't hit the car or make too much mess).

I bought the cheaper 'HomeEntry' brand door opener kit ($275) at the local hardware as it was almost identical to the version made by B&D (the local 'name' brand roll-a-door manufacturer) - but the B&D version cost over $400. After cleaning up the garage and grinding the padlocks off the roll-a-door I found that it was very difficult to open the door manually, and that it had a lot more wear and tear than I remembered. So I arranged for a couple of quotes for the old door to be replaced with a new one, and for the automatic opener kit to be installed. The cheapest quote was $1,190 but the door couldn't be delivered before Christmas, so I ordered the slightly more expensive B&D door ($1,280) as it 'might' be ready for installing the week before Christmas.

Hopefully there won't be any other unexpected expenses due to owning the new car.

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Saturday, 20 November 2010

Bought a new car

We finally decided to go ahead and trade in our 10-year-old Ford Festiva for a new 4WD/AWD SUV (A Ford Escape ZD). With the kids now 4 and 10 the Festiva was getting a bit cramped, and I was getting tired of driving a manual car for an hour and a half in peak hour traffic every day. This model is usually priced around $34,000 but at the moment is on 'sale' for $27,990 "drive away" so it's about the same price as the base model Hyundai ix35 (which we were also considering), and a fair bit cheaper than a Subaru Forester (which is what I'd buy if money was no object).

We got a $1,500 trade in valuation on the Festiva (which has only done 123,000 km but is ten years old), and after asking for their "best price" arrived at a final price of $26,300 with some car mats and a bike rack thrown in as sweeteners. Some other Ford dealers were advertising a slightly lower sticker price, but we may not have got as much for the trade in or the "free" accessories, so I decided not to spend the whole weekend visiting multiple dealers to try and knock down the price a bit further.

DW wanted a light colour (for visibility/safety) so black and 'royal ego' (metallic black/dark grey) were ruled out, and I was sick of red cars after driving a red Ford Capri and then a red Ford Festiva for the past twenty or so years. We both aren't keen on white cars, so that left a choice of either 'moonlight' silver or 'metallic sand' (a light-tan shade of silver). I decided on the 'metallic sand' as it may not look as dirty after every Sydney rain storm (I don't often wash my car, and begrudge spending money on a car wash - although that may change for the first couple of years with this new car).


I paid the $500 deposit using my credit card and will drop off a personal cheque for the balance tomorrow. The registration and other paperwork and 'preparation' will be done during the week (while my cheque clears) so we should be able to drop off the trade-in and drive away the new car next weekend. Meanwhile I need to reorganise the 'stuff' stored in our garage, and install the roller-door motor kit I bought last week ($275). I'll probably take out comprehensive car insurance on the new car (at least for the first few years), before reverting to theft and fire insurance, and eventually only keeping third party property damage (and the compulsory third party insurance) when the car has depreciated to under $10,000 valuation.

I expect to keep this car for at least ten years, so the annual cost is about $2,630 depreciation plus ~$500 for registration/CTP insurance, ~$1,000 or so for regular servicing, ~$200 each year accrued for new tyres, and $500 for comprehensive car insurance (not too expensive since DW and myself are both over 40). All up around $5,000 pa. Petrol costs should be similar to our current, smaller car (at around $35 each week), as although the Escape is larger and heavier than the Festiva, the newer engine technology means the Escape has similar fuel consumption figures (around 10L per 100km). Aside from the daily commute to and from work and the normal weekend family activities, we will be using this car for trips to my parents farm at Wallis Lake (about 350 km north of Sydney) every couple of months during the school holidays. There are lots of scenic 4WD tracks there, so we may even lock the car in '4WD mode' occasionally ;)


I'm not sure how often we will use the bike rack, but the roof racks should be used quite often to transport my wind-surfer and kayak when we visit the Lake. The large boot and rear 12V power point will also be useful if I take my 10" Meade SCT on field trips ;)

ps. I'd previously blogged about second-hand cars being much better value than buying new vehicles, but at the current sale price the new Escape is only a few thousand more than a 2-3 year old second-hand Escape.

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Saturday, 13 November 2010

Saving money buying textbooks online

Last time I checked, buying textbooks online from Amazon.com and paying for shipping to Australia was about 1/3 cheaper than buying the same textbooks "locally" from the Uni Co-op bookshop (even after the ~10% "member" discount). So, while the Aussie dollar is at parity with the greenback I decided to order all the remaining textbooks and recommended reference books for the rest of my MAstron course. Below is a comparison of what I'm paying for these books from Amazon.com and what the Co-op bookshop would charge:

Introduction to Modern Astrophysics, An (2nd Edition) [Hardcover]          $132.10
Writing Scientific Research Articles: Strategy and Steps [Paperback]        $21.86
Encyclopedia of the Solar System, Second Edition [Hardcover]               $102.53
How to Write and Publish a Scientific Paper [Paperback]                     $24.56
Physics and Chemistry of the Solar System, Volume 87, 2nd Ed.) [Paperback]  $66.47
Scientific Writing: Easy When You Know How [Paperback]                      $47.95
Planetary Sciences [Hardcover]                                              $78.84
Data Reduction and Error Analysis for the Physical Sciences [Paperback]     $50.62
                                                       Shipping & Handling: $60.91
                                                         Amazon.com TOTAL: $585.84

Prices if purchased from the Uni Co-op bookshop:
Introduction to Modern Astrophysics, An (2nd Edition) [Hardcover]          $145.56
Writing Scientific Research Articles: Strategy and Steps [Hardback]        $109.20 *
Encyclopedia of the Solar System, Second Edition [Hardcover]                  N/A
How to Write and Publish a Scientific Paper [Paperback]                     $36.35
Physics and Chemistry of the Solar System, Volume 87, 2nd Ed.) [Paperback] $128.31
Scientific Writing: Easy When You Know How [Paperback]                      $52.73
Planetary Sciences [Hardcover]                                             $181.09
Data Reduction and Error Analysis for the Physical Sciences [Paperback]    $111.88
                                                       Shipping & Handling:  FREE
                                                 Uni Co-op bookshop TOTAL: $765.12
If you add another $100 or so for the textbook that isn't even available from the Uni co-op, the total cost buying locally is around $865, which is 53% more than it cost using Amazon.com.

Most of the textbooks I could find searching the Uni Co-op website were also listed as "out of stock" - which most likely means that the Uni Co-op bookshop simply orders these items from Amazon.com themselves!

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Tuesday, 9 November 2010

And the answer is....

I finally managed to complete my last prac assignment for 'Astronomical Instrumentation' during my lunch hour and email it to JCU. When I checked my email again after work the lecturer had already marked and returned it! As I had expected, there was LOTS of "constructive criticism" feedback scattered throughout - so I was pleasantly surprised to still manage to score 8/10. Overall I averaged around 90% on the tutorial and prac assignments, so I might manage to scrape together an HD if I did OK on the final (and if everyone else hasn't scored even better!).

Nothing to do now but wait for the result to come out on 6 December.

Since the Aussie dollar is currently worth a bit more than the USD, I may order all the text books and recommended references for next years subjects. If they arrive from Amazon.com before Christmas I'll have something read during the 10-hour train ride to visit my parents up at Inverell ;)

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Sunday, 7 November 2010

Exam 1, Student 0

Well, I just spent the past 24 hours doing the "open book" final exam for this terms Master of Astronomy subject, 'Astronomical Instrumentation'. I actually got about five hours sleep and slacked off (aka as lunch, dinner and a shower) for several hours, so all in all I "only" took 15 hours to complete the ten multi-part questions! I emailed my answers to the lecturer 30 minutes before the deadline - just in case there were any last minute Internet connection hiccups (our router and cable modem have been playing up recently). The questions in the exam paper were all fine - everything had been covered in the lecture notes or the textbook - but there were just too many of them. It took forever to check I was using the correct formulae, calculate the result, find reference material and image data on the web, double check my result etc. etc.

I had thought the exam paper last term was overly long (it took around 12 hours of effort to complete the ten questions), but this paper was even worse because the last question was worth 40 marks (the other nine questions were only ten marks each), and was basically a repeat of the last practical assignment - which unfortunately I hadn't finished yet (I was sick for a month in the middle part of this term and fell behind. Fortunately the lecturer had granted me extensions on the due dates, but I'm still finishing off the last prac assignment!). So for the final question I was working out how to do the question as well as researching the data and writing up my answer...

Ah well, as soon as I finish of the last prac tonight (or tomorrow) I'll be able to "relax" and start working on last year's tax returns for DW, myself and the kids. It will be interesting to see what grade I wind up getting for 'Astronomical Instrumentation' - I really need to get an HD to have any chance of getting a university medal for my MoA coarse (I got a D last term in 'Modern Astrophysics', and you have to get a GPA of 6.5 or better to be considered for a university medal. Basically that means getting Distinctions for 3 of the subjects, and getting High Distinctions for the other 3 subjects. And it may be difficult to get HDs for the final two subjects - the literature review and research project - as it will depend a bit on what research topic I am assigned).

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Sunday, 31 October 2010

Net Worth Update: October 2010

The stock market ended the month with a modest gain after being up strongly in the first weeks of October. Despite many pundits proclaiming the Australian real estate market is now a bubble, prices continue to hold up overall, and our property valuations rose strongly, more than regaining the slight drop in average sales price the previous month. Although real estate prices are definitely high, and appear to be at unsustainable levels compared to average income, the continue strength in sales prices and the shortfall between new home construction and population growth rates makes me doubt we are in a "bubble". There is little sense that investors are piling into Australian property in the hopes of large capital gains - it seems more likely that the lack of supply is causing prices to be bid up, and that "average income" buyers are dropping out of the market. It would be interesting to know how the average income of people taking out mortgages has changed over the past decade as prices doubled. I expect the income of new mortgagees has risen much faster than the average wage. In other words, as prices have risen faster than wages, the percentage of home owners in the Australian population has been dropping and therefore today's home purchasers come from a more affluent cohort than in the past.

Our retirement account (self-managed superannuation fund, SMSF) showed good growth during the past month - investment gains were boosted by two month's worth of employer contributions being processed during October. This was somewhat offset by the payment of quarterly provision tax to the ATO in late October.

Assets___________$ Amount______$ Diff_____% Diff 
Stocks_*__________$23,977______$3,694______n/a % 
Retirement_______$348,829______$8,728_____2.57 % 
Properties_______$937,942_____$33,555_____3.71 % 

Debts____________$ Amount_____$ Diff_____% Diff 
Home Mortgage(s)_$363,522_______-$434____-0.12 % 

Net Worth________$947,226_____$46,431_____5.15 %

* the Stocks figure is portfolio value - margin loans. As my portfolio value (and margin loan debt) is around $500,000 relatively small movements in the stock market produce huge percentage swings in the net value of my stock portfolio each month.

Net Worth is tracked in AUD terms, so the recent strength in the Aussie dollar would show our current NW in USD terms is close to our all time high, rather than still being some 30% off our previous AUD peak in 2007.

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Sun Sets on NSW Household Solar Power Industry

A couple of days ago the NSW state government announced the outcome of their review of the solar power incentives scheme. As expected, the "feed-in tariff" was cut, as the scheme had proved more popular than expected and the targeted capacity had already been exceeded (and was therefore going to cost the government a lot more than expected). It was also proving to be a political liability, as people began to realise that to pay the 60c per kWhr tariff to those who had installed a PV system (usually middle and upper income households), all electricity consumers were going to be slugged with higher power bills (which would have greater impact on lower income households).

However, the cut to only 20c per kWhr was a lot more drastic than expected. At that rate, it really won't be worthwhile paying up front to have a PV system installed, even with the cost heavily subsidised by the federal government rebates. At 20c per kWhr for "feed-in" electricity generated by the PV system, and electricity consumption costing up to 17c per kWhr, the net value of electricity generated by the PV system will take a decade or more to pay back the up-front cost of installing the smallest (and most subsidised) PV system. Larger systems will probably never generate enough net revenue to pay for their cost.

Fortunately our application to have a PV system installed had been made well before the new feed-in tariff was announced, so we will still get paid the higher rate (for the first 4-5 years). On the downside, the change will probably drive all the PV system installers out of business in NSW. Our installer (NuEnergy) is based in Victoria, so hopefully they will stay in business and the reduced demand for new PV systems in NSW from now on will just mean that our new system gets installed on time (due sometime in December).

We'll see how this all works out. I'll track total installation cost, power generation data and net revenue and post occasional updates.

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Saturday, 23 October 2010

Yet another blog ranking service

I've added a ranking badge from Money Crashers to the bottom of this blog's template. There are quite a few ranking services out there, and several aggregators that combine the various ranks and popularity indicators to provide an overall 'ranking' of personal finance blogs. This new listing from Money Crashers uses a large set of indicators to come up with their overall ranking score, and the list seems very comprehensive (although they had somehow overlooked my incredibly popular blog until I pointed it out to them). If you like reading personal finance blogs, then it will be worth your while to browse the list and see what good blogs are out there that you haven't come across before.

BTW - my ranking is currently 357 out of 387 (down from 335 in the couple of days between being added to the list on 18/10 and the recent update on 21/10 - go figure). My 'score' is only 4 'points' out of a possible 100! Aside from not having a google pagerank (my pagerank got clobbered for some reason a while back) I'm not sure why my blog ranks so poorly (although getting a bit more traffic couldn't hurt).

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Thursday, 21 October 2010

All quiet on the blogging front

I haven't been blogging much lately -- DS1 was in and out of hospital three times in the past two months, and I've also had to take time off work due to illness (first for a bout of 'flu that lingered on for months and developed into bronchitis/sinusitis, and then for a leg infection that required a couple of weeks in bed/on the sofa and getting IV antibiotics twice a day).

All that put me way behind with my Master of Astronomy coursework, so I'm currently flat out catching up with assignments and lab reports before the end of semester. I somehow doubt that I'll be getting an HD for this subject either ;(

Nothing much to blog about - except maybe the cost of medicines and doctors visits...

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Thursday, 7 October 2010

Stagging QR National float

I was wondering why QR National began a TV advertising blitz last month - lots of long, long goods trains shipping mountains of coal around the place. All became clear why the share float/privatisation was announced - the Queensland government is selling off this public asset.

The prospectus won't be issued until next weekend, but from the amount of interest and pre-registration for share allocations it appears that the float will be a "success". And, as it is the Queensland government selling the shares, with Queensland residents getting a higher guaranteed allotment of shares than other Australian residents, I expect the issue price will be set slightly low for political reasons (don't sell voters shares that immediately drop in price!). So, I've pre-registered for a prospectus and guaranteed allotment, although if there is too much interest there is likely to be a scale-back, which reduces the scope for significant stag profits. Once the prospectus is released I'll look into details such as the loyalty bonus and maximum issue price and make a final decision on whether or not to invest in QR National.

With the resources boom likely to continue for a decade or more, a freight rail investment may be worth holding long term - especially if the privatised company makes significant cost savings post-float.

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Tuesday, 5 October 2010

Recipe for contentment

The SMH reported briefly on a study on happiness published by Professor Headey in the journal Proceedings of the National Academy of Sciences. After tracking the happiness of 60,000 Germans for 25 years he found that over the long-term, happiness was variable, and depended on the life goals and choices of the individual, rather than being largely decided by personality traits moulded early in life and genetic factors.

In summary, the keys to happiness are:

1. Have a happy partner

2. Don't be overworked or under worked

3. Prioritise family and community, and have a partner who does so as well

4. Don't be materialistic

5. Don't be obese

I think that #1 is a bit rough on unhappy people - if we all tried to find a "happy" partner, the unhappy would end up even sadder and more lonely. #2 makes sense, although I suspect that being "under worked" would only be a problem due to lack of income, unless you had no interests or hobbies outside of work! I think the importance of #3 will depend a lot on whether or not you are an extrovert or introvert, and how social and emotional you are. And the benefits of community service to ones happiness will depend on how much satisfaction you get from helping others - if it gives you a sense of worth and "goodness", then doing volunteer work will add to your happiness and can be increased as much as you want for little financial cost.

#4 will help most people increase their happiness simply because most people will find it hard to earn enough to satisfy a seriously materialistic lifestyle without affecting items 1-3 above.

#5 is easier said than done (from personal experience), but I've no doubt that maintaining a healthy weight improves your happiness (if for no other reason than the deleterious health effects that being obese will eventually produce).

What other items do you think should be in a "top 10" list of the keys to happiness?

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Sunday, 3 October 2010

Net Worth Update: September 2010

The stock market gains during August were largley offset by one of our property valuations declining considerably, but the latest average sales figures show more typical prices that will cause a rebound in our property valuation for next month's NW figure.

I've had a serious health problem recur twice in the past couple of months, which has led to brief discussions with DW about what we would do if I could no longer work. Fortunately selling off the rental property (at current prices) would allow us to clear our mortgage, and selling my liquid stock investments would clear most of the margin loan debt - a bit would probably have to wait until the "capital guaranteed" hedge fund investments reach maturity date in a few years time.

Accumulated leave entitlements and savings would see us through the two year waiting period of my loss of income insurance, which would then provide 75% of my current income until age 65 if I could no longer work. Without a mortgage that should be sufficient to live off and keep saving for "retirement age". Although if I can't clear up this health problem I probably don't need to plan for my retirement savings to last until age 90+!

Assets___________$ Amount______$ Diff_____% Diff 
Stocks_*__________$20,283_____$11,953______n/a % 
Retirement_______$340,081______$9,587_____2.90 % 
Properties_______$904,387____-$15,484____-1.68 % 

Debts____________$ Amount_____$ Diff_____% Diff 
Home Mortgage(s)_$363,956________-$62____-0.02 % 

Net Worth________$900,795______$6,188_____0.69 %

* the Stocks figure is portfolio value - margin loans. As my portfolio value (and margin loan debt) is around $500,000 relatively small movements in the stock market produce huge percentage swings in the net value of my stock portfolio each month.

Net Worth is tracked in AUD terms, so the recent strength in the Aussie dollar would show our current NW in USD terms is close to our all time high, rather than still being some 30% off our previous AUD peak in 2007.

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Tuesday, 14 September 2010

Portfolio Update

An updated snapshot of my specific stock and mutual fund investments is shown below. The current situation is far from ideal - with an extremely high loan:value ratio (LVR) of almost 100% (pre-GFC I had been maintaining the overall LVR around 65% by buying additional investments as the value of my portfolio increased. That strategy was based on expected long-term ROI of 10%+ and occasional bear market dips of 10%-25%). Unfortunately I had to sell off some of the more liquid stocks to avoid margin calls in early 2009, and so the portfolio hasn't gained as much during the stock market rebound as it lost on the way down.

Also, the portfolio now includes a large amount of illiquid holdings such as ING Private Equity, the Ord Minnett Hedge Funds (now mostly invested in bonds and fixed interest), and the Macquarie 'Select Opportunities' Fund (also now mostly invested in cash, with current NAV about 15% below the capital protected amount that should be paid out in 2014). Altogether around $162,000 of the $500,000 invested has limited upside potential, while I'm stuck paying about 8%+ interest on the investment loan balance! As these investments reach the maturity dates I'll cash them out and be able to reinvest the funds (or, more likely, reduce the outstanding loan balances).

The portfolio no longer includes my 'investments' in managed agribusiness funds (Timbercorp Pine Forest, Rewards Teak and Rewards Sandlewood projects) which all went out of business.

Overall, my worst investments have been in 'managed' funds, with 'tax effective' agribusiness schemes performing the worst (~100% loss), ING private equity losing around 50% of it's value since launch/rights issue (although it may recover a bit), Macquarie equinox  down about 15% (but should pay out the capital protected amount on the 30 May 2014), and the Ord Minnett 'Hedge' Funds currently frozen until maturity (OMIP 220 matures 30 Jun 2015, OMIP 320 matures 30 Dec 2016, and OMIP SL matures 30 Jun 2017) - but at least they locked in some profit via the 'rising guarantee' mechanism prior to the GFC.

Lessons learned?

1. Gearing (or investing using 'other peoples money') is great when things work out as expected, but the downside risk can be extremely painful. Unfortunately, with margin loans you can be forced to liquidate investments at the worst possibly time - IE. selling out at the bottom, rather than being able to invest when the market is down. In hindsight, I should have avoided borrowing more against the rising value of my portfolio as the bull market matured, and should have taken profits and paid off loans when the market had done well and upside potential was less obvious (eg. in 2007)

2. So-called 'expert' managers are better at protecting their fees than they are at managing portfolio risk. If you can't pick the best stock investments yourself, what makes you think you're an expert at picking the best managers? Most under perform the market, after taking fees into account. And some are real shonks (but can write a great looking prospectus).

3. The 'fine print' is often so voluminous and incomprehensible that you don't really understand the risks involved. For example, I had expected hedge funds would have returns uncorrelated with the stock market, and would be able to make profits during a severe bear market by shorting stocks and indexes. In reality, hedge funds tracked the market down, and ended up being frozen due to the capital guarantee requirements. I had also expected the risks in agribusiness investments were mainly crop yields and lower than expected prices when the timber matured (and the exorbitant up-front management fees and investment advisor commissions). In reality, it turned out that when the management company went broke, the investors ended up 'owning' trees on land that had the leases terminated - so immature trees had to be sold off at fire-sale prices by the management company liquidator, rather than being able to be retained by the investors until maturity.

4. Be very wary of tax considerations affecting your decision making. I decided not to sell off some of my portfolio in 2007 due to potential capital gains tax liability (and the potential impact of the extra 'income' on family tax benefits). Instead I tried to be 'smart' and protect my portfolio from a possible bear market by buying Index put options in March 2007. Eventually those options expired (Dec 2007) just before the market crashed, and my lack of experience trading options meant I didn't have put options in place during 2008.

5. In theory, investing in a dozen high-risk, high-return investments should work out OK, as sufficient diversification will reduce the overall risk. In reality, the risk-premium was insufficient and the diversification proved to be illusory (the investments negative returns turned out to be highly correlated during a global recession).



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Sunday, 12 September 2010

Free international phone calls

When I was a lad, international phone calls cost a small fortune and the line was often so bad you could hardly understand what the person on the other end was saying. Over the years the cost of international telephone calls slowly dropepd and quality improved, and for the past few years DW has been able to call her overseas relatives using a pre-paid 'calling card' which only cost a few cents per minute for calls from Australia to the US and Malaysia.

Now calls to the US (landline numbers) can be made at practically no cost, with the advent of free internet calls to US numbers via GMail for Australian users (if they have their GMail account setup to use US English). DW has made a couple of half-hour VOIP calls to her sister in the US using GMail, and was delighted with the quality (and no cost). Apparently the service is free until the end of 2010,  so I'm not sure if there will be charges for using it in future (for example, calls to mobile phones cost a few cents). Any charge would have to be negligible or else DW will go back to using her  'calling card', especially since she can't use the GMail VOIP to make free calls to Malaysia.


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Friday, 3 September 2010

Going Green(ish)

Yesterday I signed a contract for NuEnergy to install a 1.5kW photovoltaic power system on our roof. The installation won't happen for 10-12 weeks (as all the application paperwork for the Federal government rebate has to be approved before installation can commence). So, hopefully, the system will be installed before Christmas.

I decided to sign-up immediately because the state government feed-in tariff of 66c per kWhr power generated by small PV systems is due to be reconsidered now that the review threshold of 50MW PV capacity has been reached. The review is due to be completed by the end of September, and soon afterwards new legislation will be passed by state parliament for a new (probably lower) Gross feed-in tariff, or possibly removing the option of Gross feed-in for new agreements. So, time was of the essence in getting signed up for the existing Gross feed-in tariff with Energy Australia.

The PV system should cost around $3,000 installed (due to the Federal governments rebate worth about $6,000!), and at a Gross feed-in tariff of 66 per kWhr the system should generate about $1,400 income per year until the end of the current tariff in 6.5 years time. So the PV system should pay itself off in the first two years, and earn us a net profit of around $5,000 by 2017. After that it should continue to provide about 15% of our energy needs at zero cost, saving around $500 off our annual electricity bill. Since the cost of electricity is rapidly rising the annual saving from 2017 is likely to be much greater, but we will still have a much bigger electricity bill than today. By 2017 there may be more efficient PV cells available, so it might be worth augmenting the capacity of our system at that time.

Once the system is installed and I have actual energy production data available from the 'smart' meter, I may experiment with boosting output by positioning some mirrors around the PV panels. As second-hand mirrors are available for minimal cost, it may be possible to reflect additional sunlight onto the panels relatively simply. A carefully positioned fixed mirror would direct additional sunlight onto the panels in the middle of the day, and only cast a shadow onto the PV array when the sun is at low altitude. The net effect should be a gain in total daily output from the PV system.

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Net Worth of My Children

No, this isn't a soppy "my kids are priceless" post, just an occasional updates on their financial net worth. As of 30 August, DS1 (10 yo) had a net worth of $55,504.50 spread between his retirement savings account (superannuation), share portfolio and Vanguard Index fund investment. DS2 (4 yo) had a net worth of $7,091.64 - with relatively more invested in bank accounts, a small retirement savings account, and a small stock portfolio.

The chart below shows the progress of their net worths over the past few years. I had hoped that the stock investments and superannuation account deposit I had made for DS2 would have grown enough by now to match the value DS1 had when he was four. Unfortunately the GFC has meant not much growth in the investments of DS1 and DS2 over the past three years, so DS1 is falling behind. The small overall growth in DS1's NW over the past three years has been almost entirely due to the money he has earned busking, at the government superannuation co-contribution matching amounts he has received into his retirement savings account when he has deposited some of his earned income into super each year. He was also helped by my switching his super out of the geared share fund at the start of the GFC, and moving back into shares close to the bottom in 2009.


The chart also shows that from age 4-7 DS1 saw a substantial rise in his NW. This was due to a combination of his stock portfolio doing very well in that period, but also because he (with a lot of help from me) had a paper round earning almost $100 a week for those years. As I don't feel like getting up before dawn anymore to "help" with a paper round, DS2 will have to find some other source of revenue. If he manages to learn a bit of recorder music I think I'll let him join DS1 when he goes busking from an hour on the weekend - they can split the earnings which should help DS2's age-equivalent NW catch up over time. Although DS2's presence may help DS1 collect a bit more when busking, sharing it will reduce DS1's busking income - his first experience of 'taxation' and 'redistribution of wealth' ;)

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Wednesday, 1 September 2010

Net Worth Update: August 2010

The stock market weakened considerably during August, resulting in lower valuations for my geared stock portfolio and our Self-Managed Superannuation Fund. Property valuations also declined slightly, and the latest average sales figures show an even greater decline will impact next month's NW figures. However, with the latest Australian economic growth figures showing robust growth (around 3.3% pa) I expect 2010 overall to show modest or no growth in house prices, rather than the US-style crash in property prices some pundits have been predicting for the past couple of years.

While it is interesting to plot the daily gyrations of the stock market and monthly ups and downs of the real estate market, it is probably more useful to concentrate on sticking to my budget, looking for additional areas to reduce expenses, and leave my retirement and investment savings plans running on autopilot. Better to focus on the small effects I have control over, than worry about the big effects on my NW that are outside my control (since I don't intend to change my asset allocation on the basis of recent performance diverging from historic averages).

Assets___________$ Amount______$ Diff_____% Diff 
Stocks_*___________$8,330_____-$3,531___-29.77 % 
Retirement_______$330,494_____-$4,054____-1.21 % 
Properties_______$919,801_____-$2,824____-0.31 % 

Debts____________$ Amount_____$ Diff_____% Diff 
Home Mortgage(s)_$364,018________-$54____-0.01 % 

Net Worth________$894,607____-$10,355____-1.14 %

* the Stocks figure is portfolio value - margin loans. As my portfolio value (and margin loan debt) is around $500,000 relatively small movements in the stock market produce huge percentage swings in the net value of my stock portfolio each month.

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Tuesday, 31 August 2010

How to save the planet (and my wallet) one electron at a time

My last quarterly electricity bill showed that the price of electricity had gone up by 10% fro 1 June, and the price hikes are expected to continue for many years. The $800+ quarterly bill showed that our daily household electricity consumption is around 48 kWh a day - which is much higher than the 'typical' household usage figure - so it is worth looking for areas where we can save power. I made up a list of all the electricity consuming devices in our home that I could think of, and used average hourly 'cost-to-run' figures and our estimated hours of use each day to calculate where our electricity was being consumed:


The grand total was surprisingly close to our actual bill, and it is immediately obvious what the most power-hungry devices are, and which devices get the most use. Some of these are definitely needs rather than wants (for example, turning off the fridge/freezer wouldn't be a smart move), and some of the power-hungry devices are used very little, so there isn't much scope for saving electricity. However, the stand-out items that are ripe for making significant savings are our computers (currently often left running all day and night) and the reverse cycle air-conditioning/heater.

Simply shutting down all our computers at night apparently could save around $50 a month! We could also save a significant amount by running the a/c intermittently, and wearing a jumper indoors, although that might be a tougher sell for DW and the kids. After those items it gets harder to find significant savings, but running the swimming pool filter for a shorter period (especially in winter when it's not being used), turning off the TVs when no-one is watching them during the evenings, and making sure lights are turned off in unoccupied rooms could save another $10 a month (although a cold, dark, silent house would be depressing). All up, we might be able to cut our power consumption by 20% with a few simple changes in our behaviour. Every little bit will help, as our supplier charges $0.1753 per kWh for the first 19 kWh/day, and the price rises to $0.255 per kWh for higher usage.

Another potential way to cut our power bill is to have a photovoltaic (PV) power generation system installed. A typical 1.5 kWh system (six panels) with an inverter costs around $13,000 installed, but, due to government rebates and credits, some providers have such systems advertised as 'from' $1900. However, the fine print adds in a couple of hundred dollars for 'extras' (such as installation on a tiled roof ($300), or a metal frame to install the panels at the correct angle on a flat metal roof, such as my garage ($300)), and for that price you also have to arrange and pay for the 'feed-in' smart meter to be installed by the electricity company (around $500). Our local government council also doesn't class PV systems as an 'exempt' development, so I'd have to put in a development application and have it approved (takes ~4 weeks) before signing a contract for the PV system. Fortunately the DA for a solar power system 'probably' won't cost anything according to the council planning department. So, all up, a 1.5 kWh system should cost me a bit under $3,000.

In Sydney the system should produce 5.85 kWh each day on average (the supplier quotes 7.3 kWh/day but I prefer to believe the official government 'green energy' website), which will earn $0.60 per kWh using a gross feed-in meter. That $3.85 a day adds up to around $1,400 each year, so the pay-back period should only be 2-3 years. The feed-in rate is fixed until the end of 2016 in NSW, so after the system has paid for itself we should 'make' about $1,400 a year for the following four years. After that the situation isn't so clear, as the feed-in tariff is likely to be cut to be closer to the usage cost. Once that happens the PV system output will cut our net electricity consumption by around 15%-20%, so there will be some ongoing benefit. The system has an expected life of 25+ years, although the PV cells lose around 0.5% efficiency each year.

I've also considered buying a 'heat-pump' water heater to replace our current 'off-peak' electric water heater (which is getting close to replacement age anyhow). However, even with the $600 government subsidy on heat-pumps, the new system would cost over $1,000. And apparently installing the 'smart meter' required for the PV system doesn't mean you automatically lose access to off-peak electricity (according to the electricity company rep), so it wouldn't be worthwhile having a heat-pump system (using electricity at $0.17 per kWh) replace the current off-peak system (using electricity at $0.076 per kWh). If it turns out that having the PV system installed does result in the removal of our off-peak electricity supply, I'll have to reconsider getting the heat-pump.

It will be interesting to see how well our energy saving efforts work out, and how convoluted, lengthy and expensive if turns out to be to have a PV system installed. I'll keep you posted on developments.

In a couple of years I'll be able to work out our actual savings - both in dollars and 'black balloons' of carbon dioxide emissions.

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Friday, 27 August 2010

Australian Budget - where does all the money go? (and come from)

The annual budget announcement often highlights the details of specific changes being made, so much so that the overall budget picture often isn't clear. So I had a look at the top-level figures for the 2009-10 budget and divided the amounts by the current Australian population (around 22.5 million) to get a better feel for the amounts involved:

Budget Revenue (2009-10):

Income tax:..................$122,710 million
Other revenue:...............$167,901
TOTAL revenue:...............$290,611
which works out to be $5,454 income tax per person. This level of government impost doesn't seem too onerous, until you how many Australians aren't wage earners (eg. children, elderly, unemployed/not working). And the total government revenue per person ($12,916) is even higher.

So where does this money go each year?
Budget spending (2009-10):

Social security and welfare..$110,994..=..$4,933 pp..=..33% of budget
Community services , culture..$12,188.......$542 pp
Health........................$51,223.....$2,276 pp.....15%
Infrstructure, transport......$13,886.......$617 pp......4%
Defence.......................$20,952.......$931 pp......6%
Education.....................$35,222.....$1,565 pp.....10%
Industry , workforce..........$13,271.......$590 pp
General government services...$80,478.....$3,577 pp
TOTAL........................$338,214....$15,032 pp

Deficit.......................$47,603.....$2,116 pp

What stands out is that most (about half) of government spending goes on caring for the sick (health costs) and elderly / unemployed (social security). And, given increasing health costs and the aging population this will only increase.

It also highlights the massive expense of the planned NBN ($43,000 million) - even though that cost is to be spread out over 5+ years, it is still massive compared to the amount being spent on national infrastructure each year. Although it would be nice to have optical fibre to every suburban house in Australia, I can't see that everyone needs it. NBN seems to be more of a national 'want' than a 'need', especially compared to spending the money on more conventional infrastructure such as roads, rail and port facilities. Many suburban areas already have 'fibre to the node', so running fibre to individual houses should be done privately and at the households expense (user pays). Where there isn't already 'fibre to the node' the government could pay via 'NBN-lite' - for example to rural towns and new suburban land releases.

Defence doesn't seem to be such a huge expense on a per capita basis - although I can't see the value of some big ticket defence items like strike fighters, given the actual tasks our military is involved in (usually ground troops and naval and air transport). The old F-111s, for example, were never used in anger, so a smaller 'deterrent' may have sufficed. In any major conflict I expect we would have to rely on support from our allies - whether we had just a handful of flighters, or a dozen. That will still be true for their planned replacement, the vastly expensive Joint Strike Fighters. So there is probably some room for reallocating funds from defence to infrastructure or education. And, as for the cost-benefit value of our fleet of non-nuclear submarines...

The 2009-10 deficit isn't huge either (as a one-off), but that $2,116 per person translates to about an extra $200 a year revenue required just to service the interest on the debt. No wonder neither party was promising tax cuts in the recent election campaign.

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Friday, 20 August 2010

Coalition to win the Australian Election?


Yesterday online betting agencies were reporting that Labor was still firm favourite to win tomorrow's federal election, with odds around 1.5 compared to 4 for the coalition picking up enough seats to form government. This was despite the coalition being favoured to pick up a large number of marginal seats in NSW and Queensland (where state Labor governments are decidedly unpopular after years of over-promising and under-delivering). So I placed a $10 bet with Betfair for the coalition to win at odds of 4-to-1), although I'm still doubtful that the coalition will be able to get over the line on the day.

Today the odds on a coalition win have shortened to around 3 (glad I placed my bet yesterday), but Labor is still favourite to win the election. By all appearances this election really will be a close one (they say that nearly every election, despite many of them turning out to be a "landslide" in the end), with the coalition (Liberals and Nationals) having a solid primary vote (over 40%) and likely to pick up a handful of marginal seats in both QLD and NSW, but Labor likely to pick up a couple of seats in NSW (due to a recent redistribution) and also gaining some seats in VIC and SA. Labor is suffering a substantial "protest vote" due to many policy implementation snafus under Rudd (you don't see many "Kevin '11" T-shirts these days!), with their primary vote down in the low 30%'s. However, most of that protest vote is disillusioned socialists giving their vote to local independent or green candidates. Under our preferential voting system the second preference votes will mean that most of these green votes flow back to Labor (usually around 60% of Green votes flow to Labor, this time I expect the Green primary vote will be higher, and that Green preferences will flow 70%+ to Labor).

If the coalition does manage to pick up a dozen marginal NSW and QLD seats, and loses a few seats in NSW and a handful in VIC/SA we are quite likely to be staying up late on Saturday night waiting for the early results to flow in from WA. With the housing affordability and mining tax issues having a big impact in WA (and neither Rudd, Gillard or Abbott coming from WA) the final result may hinge on how many seats the coalition can gain in WA.

While Labor still appears to be favourite to remain in power, the coalition may have sufficient momentum to close the gap by election day. Although Green preferences will offset Labor's poor primary vote to a large extent, in the event of a hung parliament the Libs/Nats have better prospects of doing a deal with the 3-4 independent Representative MPs and being able to form a government in that situation.

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Wednesday, 11 August 2010

Exactly how fast does broadband need to be?

With the Australian federal election campaign in it's final weeks, the focus yesterday turned to the 'National Broadband' plans of the two major parties. The incumbent Labor party has embarked on a $43 billion dollar scheme that aims to provide access to 100 megabits per second to 97% of the Australian population (apparently it's vitally important for everyone to have fast internet - except for the 3% or so of Australians who live in the remote outback where even Labor concedes providing optical fibre would be too expensive). Supposedly we'll all want to sign up for fast internet once it's available (at around $100 per month), and to ensure maximum uptake (so the government can try to sell off the NBN and recoup the cost) it will apparently be 'opt-out' ie. your house will be connected up unless you say no (I wonder how many households will let their homes be connected, at government expense, but then never agree to open an account and pay for using the NBN?)

The coalition (Liberal/National parties) plan is to 'only' pour about $6 billion of government money into fast broadband, leaving it up to the private sector to invest in providing as much fast broadband as people want.

I think both plans have pitfalls - the Labor plan seems awfully expensive (over $2000 per man, woman and child in the country!) and assumes that everyone needs 100 Mbps internet access. I use the internet a lot for my uni studies, online financial transactions, share and CFD trading etc. and the modest speed of 3.6 Mbps download and 0.1 Mbps upload provided by my cable connection is fine. Unless I wanted to download movies every day, I can't see any need to faster access. So the coalitions plan, providing 12 Mbps to 97% of the population (and up to 100 Mbps in some cases) seems more than adequate. However, by just providing limited funding and relying on the private sector, some areas (with lower demand) will end up missing out - so spending the extra $36 billion will undoubtedly help address 'social equity' concerns (but not, for example, aborigines living in remote settlements in central Australia).

A recent poll by the SMH showed less than 20% of people supported the coalition's 'cheap' option - apparently everyone would like fast internet (as long as the government is footing the bill). As usual, there is a disconnect between the voters desire for lower taxes, a balanced budget, and massive government spending to provide 'free' services.
All in all, I'm dubious that it will turn out to be worthwhile spending $44 billion dollars to 'fibre up' Australia - as with most high technology fields, there is likely to be a faster and cheaper option available within a few years, making the current expenditure a) wasteful, and b) unlikely to be recouped by selling off the NBN once it's up and running. I also doubt that more than 10% of the population has any economic/business need for the NBN. Spending about $6,000 of public money per household to provide fast download of movies and video phone calls seems a huge waste.

Many of the critics of the coalition's NBN-lite policy appear to have vested interest in the government spending $44 billion on NBN - for example Optus sees the NBN as a means for the government to strip away a large part of Telstra's residual infrastructure advantage. And some commentators, such as Rod Tucker appear to be both biased (since he is paid as Director of the Institute for a Broadband-Enabled Society (IBES) and Director of the Centre for Ultra-Broadband Information Networks (CUBIN)) and misguided. He wrote that "Building a broadband network will, as the government has pointed out, have the same kind of transformational impact as the railways in the 19th and 20th centuries" - I suggest he reads up on the 'railway bubble' of the late 19th century in the UK. At that time everyone was entranced by the revolutionary technology of the railway line, prompting dozens of schemes to build myriad railway lines to every urban centre in the UK. Vast fortunes were lost when most of the schemes were found to be uneconomic (not enough patronage), although in that fiasco it was mostly private investors who paid for their folly. In any event, the 'revolutionary' technology of railway transport was soon competing against the motor car and later on with air transport.

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Friday, 6 August 2010

A comparison of Income and Spending

2millionblog.com recently posted a monthly income and expenses 'snapshot', so I thought I'd compare it with our current budget. I've adjusted the budget figures I recently posted to add back in the superannuation contributions to our net pay, and exclude business, rental and investment items to be comparable to 2millionBlog's figures:

_______________________________2millionBlog__________Enoughwealth
Net pay........................4,916.................6,750
Wife's Net pay...................751.................1,667

Total Income...................5,667.................8,417
- Total Expenses...............4,853.................6,917
= Saved..........................814.................1,500

Expenses:
House payments.................1,494.................2,817
Food.............................861...................850
Vacation.........................661.....................0
Utilities........................251...................250
Gifts............................112....................30
Charity............................0.....................0
Petcare............................0.....................0
Miscellaneous....................188...................185
Healthcare.......................185...................400
Retirement plans.................850.................2,000
Transportation...................251...................235
Uni fees and texts.................0...................150

One thing that is very noticeable is that our expense for food, utilities and transportation is almost identical. On the other extreme, we spend twice as much on house payments -- explained by the relative average house prices in Australia compared to the US, and mortgage interest rates. I'm also socking away more into retirement savings - which makes sense given my age and income level. I'm spending considerably more each month on healthcare (due to prescription medicines for DS1, DS2 and myself) and have some university expenses (the Masters course I'm studying part-time) which 2millionBlog doesn't have. In contrast, he had a sizeable vacation payment for a cruise compared to our having no monthly expense or savings for a holiday (as we plan on having a virtually free 'staycation' at my parents' farm).

The other big difference is that $1,350 of the 'saved' amount is actually interest I'm paing each month on my St George Bank investment loan (home equity loan). The payments have to be funded out of my salary income as all the investment income is already earmarked to cover the margin loan interest costs. The theory is that this effectively 'converts' taxable salary income (reduced by the tax deductible investment loan interest) into long-term capital gains (on the investment) that are tax-deferred, and, under current rules, concessionally tax (at half my marginal income tax rate). In practice this is only a *good idea* if the total ROI of my investment (dividends and capital gains) exceeds the interest cost - unfortunately this hasn't been the case over the past decade due to the bear markets of 2000/1 and 2008/9.

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Thursday, 5 August 2010

Planes, Trains or Automobiles

We'll be travelling from Sydney to Inverell (in the far north of the state) to stay at my parents' farm over the Christmas/New Year period - a distance of 621 km. The cheapest option would be to drive up in our 10-year-old Festiva, but the car is a bit too cramped for long distance journeys. The drive would take about 6.5 hours each way (longer if we take a lunch break on the way), and cost around $200 or so in petrol for the round trip. A bit should be added on for wear-and-tear on the tyres, car servicing costs etc., but there's effectively no depreciation cost for using the car as it's already more than a decade old and has over 115,000 km on the clock (one careful driver ;). Next year when we visit my parents at their other farm at Forster each school holiday we'll probably trade in the old jalopy for a near-new (1 yo) Hyundai ix35 Highlander (about $41,500 new).


An economy-class return train fare for a family of four costs $356.44 (the adults cost $172.22 each, while the kids are only charged $6.00 each!), and the kids enjoy travelling on the train for a change. The train takes about the same amount of time overall (we have to catch a City train to Hornsby before changing onto the countrylink train). DW is insisting we take the train rather than drive, which is easy for her to stipulate since she won't be paying for the train fares (I can't really complain, since staying a week with her in-laws isn't her ideal vacation!). I don't really mind paying the extra $150 to take the train, since I'll be able to sleep, watch a DVD or read a book during the 6 hour train trip, rather than stare at the road! The train doesn't actually pass through Inverell, so we'll have to get off at the closest station (about an hour drive) and be collected by my parents.

My parents had also asked about us taking a plane, but the cost is exhorbitant. It would cost $1025 for the family - nearly triple the cost of travelling via train. The flight time from Sydney to Armidale is just over an hour, but it would take around an hour to get to Sydney airport from home, plus another hour or so to get from Armidale to Inverell. So the total travel time would be around half via plane rather than train or car. The one-way airfare is $144 per person, so it would be worthwhile for adults (a 60% premium compared to economy train fare, or about the same price as first class train travel), but there isn't any discount available for children.



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Wednesday, 4 August 2010

Comparing my net worth with that of other PF bloggers

I used to do a monthly summary table of the NW of the various bloggers who posted this data each month. Many of the bloggers were not directly comparible - some were paying off debt/student loan, some were retired, and many were just starting out to accumulate wealth. Although it was a fair bit of work each month, the post was popular - so popular in fact that other bloggers started to do something similar. So I stopped doing the monthly comparison (I think the other blogs then also gave up after a few months...), and now mostly compare my progress against statistical data on income and household net worth (such as from the Australian HILDA reports) and the cut-off for the BRW's annual "rich list". I also compare my NW to that of Moomin, since he is of similar age, income, etc and investment risk tolerance to me, and he tracks his NW each month using NetWorthIQ ;)


I recently did a comparison of my NW over the past decade with that of PFBlog. His NW is currently very similar to mine, although he is younger (~35 vs ~48) and started from a lower base (~$50K in 2002 vs. ~$400K in 2002). I'm not too surprised that his NW is overtaking mine, as he indicates most of the $950K NW accumulated over the past decade is a result of saving around 30% of their gross income each year (he comments that he has had negligible overall investment return during that period). That suggests his household income is around $317K pa, whereas ours is just over $100K.

What is rather disappointing (and shows up clearly in the chart below) is the huge drop in my NW during 2008-9 compared to PFBlog. Clearly using margin loans to gear up my stock portfolio was *not* a good idea in the GFC era. I also had to reduce my gearing levels in the second quarter of 2009 (to avoid margin calls), so the rebound in my NW over the past year has been more subdued than it would have been if I'd been able to retain my level of margin loan debt.


It will be interesting to see how the NW of myself, Moomin and PFBlogs compare during the 2010's - and whether PFBlogs retires by 40 as he originally planned. My target retirement age has slipped from 58 to 67 due to the GFC, but could change again depending on how the economy performs over the next couple of decades.

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Net Worth Update: July 2010

Stock market gains during July resulted in increased valuations for my geared stock portfolio and our Self-Managed Superannuation Fund. Property valuations were not updated this month as sales data wasn't available. From the June Quarter statistics it looks like house prices have flattened out overall, but that may not correlate with the performance of my property portfolio as I'm only interested in the two postcode areas where I own real estate.

On paper a relatively modest 5% appreciation in house prices and 10% total return for the stock market during the current financial year would see my net worth hit the $1m mark again -- in reality the continued global financial crises means negative returns are a distinct possibility. In 20-20 hindsight I should have jumped at the chance to make a large undeducted contribution into superannuation (undeducted contributions below $1 million between 10 May 2006 and 30 June 2007 were tax-free) by liquidating my geared stock portfolio. Any stock investments within the SMSF would have remained ungeared during the GFC, minimising losses, and if I'd invested our super in term deposits my net worth would probably now be twice it's current amount. Ah, what might have been!

Assets___________$ Amount______$ Diff_____% Diff 
Stocks_*__________$11,861______$5,537____87.56 % 
Retirement_______$334,548______$9,913_____3.05 % 
Properties_______$922,625______$____0_____0.00 % 

Debts____________$ Amount_____$ Diff_____% Diff 
Home Mortgage(s)_$364,072________-$34____-0.01 % 

Net Worth________$904,961_____$15,484_____1.74 %

* the Stocks figure is portfolio value - margin loans. As my portfolio value (and margin loan debt) is around $500,000 relatively small movements in the stock market produce huge percentage swings in the net value of my stock portfolio each month.

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Asset Class Performance - when risk is underestimated

I remember reading Bernstein's views on expected asset class performance back in 2006 - he basically held the view that stock and other growth assets were overpriced, as expected returns didn't justify the high prices. While he didn't explicitly "call" the GFC, I certainly wish I adopted his views and wound back my stock market gearing (continuing to invest in stocks using other people's money made no sense if the returns for the next decade were going to be 5% or less, rather than the "historic average" of around 11%)...

As it turns out, Bernstein was right and I was wrong (although I almost redeemed myself by having index put options in place during 2007 - pity I didn't get around to rolling them over in Dec '07...). The actual asset class performance figures for the past ten years (data from Pitcher Partners) make depressing reading (to 30-Jun-10):

......................1 YR.....3YRS......5 YRS.....10 YRS
Australian Shares ....13.1%....-7.9%......4.5%......7.0%
International Shrs.....5.2%...-11.5%.....-2.2%.....-4.6%
Aust Listed Property..20.4%...-23.8%.....-8.0%......2.9%
Australian Bonds.......7.9%.....7.7%......6.1%......6.4%
Cash...................3.9%.....5.6%......5.8%......5.5%

When you take into account the extra cost of trading shares (or fees for investing via managed funds), it really wasn't worth taking on any investment risk during the past decade.



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Sunday, 25 July 2010

Is Dotster the worst discount domain name registrar in the universe?

I originally started this blog using blogger, then decided to register the domain name using Dotster and setting up Blogger to utilise the 'custom domain' enoughwealth.com. After a bit of fiddling with settings in my Blogger dashboard and paying extra for DNS settings management with Dotster, I got the http://enoughwealth.com URL to work OK (ie. displaying my blogger content), but the 'www' version (ie. http://www.enoughwealth.com) never worked. I used the Dotster 'help' form to send details of my problem last week, and got the following response back via email:

"Dear Valued Dotster Customer

Dotster is committed to supporting our customers in a professional and timely manner. This is to notify you that your email has not been received. To submit your request, please use the web submission form below to contact Customer Service..."

WTF? If they didn't receive my first email (which was generated by filling in the web submission form) how were they able to respond to the email address I had provided in my help request? This seems extremely odd - either the web form didn't send through the information I had provided about my issue, or else this is their customer service way of shifting my help request into the 'too hard' basket and hope it just goes away.

Any way you look at it, this is a pretty poor way to handle a customer's request for help.

Just another reason to think about going through the hassle of transferring my domain name registration to another discount provider such as GoDaddy - my experience with them has been much better, and they charge less as well!


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The frugal joy of 'lagging edge' computer software and hardware

It's a well known fact that keeping up with the techno-Joneses by buying the latest cool techo-toys can be a wee bit expensive (do you want an iPad with your iPhone?), not to mention the 'joys' of living on the "bleeding edge" of technology and being one of the first to uncover that exciting new 'undocumented feature' (no, no, you're just holding your iPhone 4 the wrong way you klutz - there's nothing wrong with it!).


So it's a lot cheaper to take a few steps back from those money black-holes and cultivating a mind-set of 'discovering' that latest and best games and hardware a few years after everyone else. I do this by a) hanging on to my old games (Kings Quest 4 anyone?) and old hardware as long a possible, and then b) only looking on the discount table of EB Games to find out 'what's the 'latest', cool new game). Provided I don't go near the current gaming mags or try impressing anyone else, I'm perfectly happy with living on the 'lagging edge'. I still get to buy shiny new toys, but don't pay much more than I would for a used copy of the latest releases.

Hence, last week I bought a copy of Microsoft Combat Flight Simulator 3 for $14, and proceeded to replace my old serial port joystick with a brand-new Logitech Attack 3 USB joystick for $25 (on clearance sale, used to be around $35). I'm amazed by how great the graphics look when playing on my Dell Inspiron Laptop, and although the software first came out in 2002 it runs perfectly well under Vista.

Another benefit of buying games well after they were first released is that any bugs have probably been fixed - from what I read on the 'net, when CFS3 first came out you had to manually hack the config file to get the Logitech joystick to work under Vista. I had no problems at all, so it seems that Microsoft eventually got around to fixing that bug.





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Wednesday, 14 July 2010

Library costs for distance education students

It's a lot easier to be a 'distance education' uni student today compared to the situation back in the 80s. In those days when I was enrolled at Charles Sturt University there was an endless stream of paperwork being sent to and fro by snail-mail - application forms, enrollment forms, course notes and assignments. In contrast my current studies at James Cook University have involved minimal paperwork - after sending in some certified copies of my previous academic results along with my application form, everything has been done online via email, online discussion forums, course materials provided electronically, and assignments sent in via email.

One thing that hasn't changed much for the better is library access to books. Back in the 80s I could search for a book in the library catalogue using a dial-up modem connection, and as a distance education student books I requested were mailed out to me. If I didn't want to pay return postage I could check out the library of one of the local university campuses, and you could get a library card for free access under reciprocal borrowing rights. These days, it's "user pays" - to borrow the same book I just requested from JCU from the local UTS library (one of my 'almae matres') I'd have to pay $77 for one year library membership with borrowing privileges. Given the transportation costs to make two trips to the UTS library (to borrow and return a book) would exceed the cost of paying return postage to mail a book back to JCU library, it isn't worth the time and effort to visit a university library in person. One benefit of being a Masters student is that loans are for the entire semester rather than just a few weeks.

However, although borrowing books by mail is reasonably convenient, I still feel that the university could afford to provide pre-paid return postage. After all, distance students don't utilise the on-campus facilities at all, so while the university charges distance students the same fees as other students, they save on the depreciation costs that would be incurred if they had to build the additional lecture rooms etc. that would be required if all the distance students were attending campus. In a truly 'user pays' system distance education students would have to pay postage in both directions (plus the cost of the librarian picking and packing the requested volumes), but we would pay reduced course fees commensurate with on-campus facilities not being utilised.


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Friday, 9 July 2010

Should I upgrade from Vista to Windows 7

As a part-time student I can buy the academic versions of Microsoft Office 2010 Professional and Windows 7 Professional at a substantial discount to the RRP. Today I bought the Office 2010 download for AUD$99 (and an extra $14 to be sent the DVD in case I need to reinstall in the future). I haven't downloaded the installation file yet as it is around half a GB, which would use up 50% of my monthly 'peak period' broadband allowance - I'll start the download after midnight so it only consumes 25% of my 'off-peak' 2GB allowance.

I'm still deciding whether or not to upgrade from Vista Home Premium to Windows 7 Academic. I haven't had any problems with Vista (SP2 seems pretty stable), so the main advantage I can see from the upgrade to Windows 7 academic would be the automated backup tool which would simplify data file backups over the network (Vista Home Premium backup only allows file backups of music and video - proper automated data file backups require the Business version). However, at the moment I get bye OK with saving all my data files onto an external 0.5 TB USB HDD 'drive F' and copying all the files onto an identical 'drive G'. I have to run a manual copy of all the files from F to G every couple of weeks to ensure I haven't forgotten to write any files to both drives. Aside from being a manual process, it means that if drive F was corrupted, I might lose a few files. The Windows 7 Academic backup tool would make things easier and more fool-proof.

However, upgrading from Vista Home Premium to Academic version of Windows 7 requires a 'clean install' - so after doing the Windows upgrade I'd then have to reinstall all the existing apps. The process should be simple, but will waste a couple of hours (although I can do it during the TV ad breaks). A more serious concern is that some of the less mainstream apps (such as Robolab, CLEA virtual observatory, and the Meade DSI image processing apps) may not run properly under Windows 7 in 'XP mode'. On a more positive note, the new telescope control software I'm thinking of buying is available in Windows 7 version and should run better under the new OS.

I think I'll make a list of all my installed apps (on both my laptop and Desktop PCs) and google each one to check if it works OK under Windows 7 before I make a decision to buy the upgrade.

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Investing for 70 year olds - 7.25% term deposit

My parents sometimes ask me about the choices available for investing their retirement funds, and I've previously told them about investing in index funds as an alternative to cash or bond funds. However, they have never been very comfortable with the ups and downs of the stock market, and since they are now both in their 70s, investing in the stock market for potentially higher returns compared to a term deposit doeesn't seem particularly suitable. After all, they can get 7.25% pa for a five year term deposit (min $25,000) invested with Citibank with relatively low risk (the main risk being a period of high inflation and higher rates becomming available - but at the moment it appears that rates may be close to a peak), and since they will be consuming all their investment over the coming decade or two, there isn't really enough time for compounding of any extra return obtained from investing in the stock market to significantly increase the total amount available to spend.

Aside from the peace-of-mind provided by the predictable interest payments and return of capital provided by fixed term investments, it also makes budgeting a lot simpler - although my parents are loath to prepare a budget and tend to just put everything on their credit card and get a rude shock every month when the bill arrives.

I told my dad about the Citibank TD but he has already invested their liquid funds (around $400,000) in a 7 month TD with their credit union at 7.00%. I have suggested that he 'ladders' his TD investments so he has some investment maturing every month, rather the investing the entire lump sum at one time (especially if he invests in a five year TD). It will be interesting to see what rates are available in 4-5 months when he needs to rollover his current investment. When I first drafted this post a couple of weeks ago Citibank was offering a 12-month TD for $10,000 minimum at 7.15%. That offer appears to have been replaced by the five year TD, and with a 6-month TD only offering 6.35% pa.

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Tuesday, 6 July 2010

MAstron update: A dollar short and a day late - close but no cigar

The results for last semester's MAstron subject 'Modern Astrophysics' came out yesterday - I got a Distinction but missed out on the High Distinction I was aiming for. My raw scores for tutorial and prac assignments were sufficient for an HD grade, and the lecturer has confirmed that I got around 80%-85% in the final exam, so apparently I ended up missing out on an HD because so many of the students doing the course performed at a very high standard that the raw marks had to be scaled down to conform with the JCU policy regarding grade distribution (ie. only ~10% of students are awarded a High Distinction, another 15% get a Distinction, etc.).

I now regret emailing my final exam in at 5am and going to bed, rather than staying up until the exam deadline at 10am to double check my calculations as much as possible. Even though I wasn't alert enough at 5am to solve the final question, I could have slowly checked through the working of the first nine questions to look for 'silly mistakes' (for example, in one of the tutorials I'd lost several easy marks by using the area of a circle formula instead of the volume of a sphere when calculating a density). A couple of extra marks in the final exam might have been enough to get an HD. Although I probably also needed to pick up some extra marks in the weekly tutorial assignments, and the prac report that only scored 7/10.

To qualify for a university medal at the end of the MAstron course I'll have to get at least half HD and half D grades (in order to acheive the minimum required GPA of 6.5) - so there's a big difference between getting a D or HD. This first course was apparently quite easy compared to the rest of the courses - which could be a good or a bad thing. On the one hand I may struggle to get top marks in the harder courses, but on the positive side the other students may get lower grades and remove the need for adjusting raw marks to 'the curve'. In the final (third) year it may also be harder to get an HD in the literature review and project subjects, as the grades for those subjects will depend more on the talent and originality shown in the reports, than just putting in enough hours of effort.

The subject next semester, 'Astronomy Instrumentation', is a bit more mathematical, so I'd better spend some time brushing up on my differential calculus and intergration (I have three weeks left before next semester commences). It's been thirty years since I last studied calculus, and I haven't used it much since then, so I need to spend some time working through the revision material available from http://www.mathcentre.ac.uk/

I also want to have a first read through the textbook 'Astrophysical Techniques' during the "holiday break".

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Monday, 5 July 2010

Net Worth Update: June 2010

Stock portfolio value continued to decline during June, which also meant our SMSF account value dropped despite the addition of some employer contributions during the month (our superannuation is largely invested in the stock market via the Vanguard High Growth Index Fund). However, our real estate investments saw a significant rise in valuations as the Sydney market had been rising during the first half of 2010, and updated property sales data wasn't available last month, so this month's figures show two month of gain. I expect property price growth to be much lower for the rest of 2010, possible dropping slightly (5%-10%) if the RBA raising interest rates as inflation remains stuck above its 2%-3% band during 2010.

Our mortgage balance continued to decrease v-e-r-y slowly, as 2/3 of our mortgage is currently on a fixed-rate, interest only contract (another 2-4 years before resetting to standard variable rate, interest only), and the remaining 1/3 is standard (for Australia) variable rate, but also set for interest-only repayments while DW continues to work part-time. We had hoped DS2 would start Kindergarten in 2011, but the local primary school head-mistress decided against allowing 'early entry' (DS2 was born in September, missing the annual "cut-off" date by a couple of months). So, DW will stick with working 2 days a week during 2011. She's decided against returning to work full-time anyhow - preferring to work 3 days a week once both our kids are attending school. It makes sense from her point of view, as when she was working full-time she used to put some of her wage towards our living expenses budget and most of the rest went towards paying off our mortgages as fast as possible. If she went back to working full-time she wouldn't end up having much extra 'pcoket money' to spend, as she would resume contributing towards to family budget, and would also start paying back the money she "borrowed" from me for our trip to overseas to visit her relatives five years ago. From my point of view it means I have to continue paying all our living expenses and that the mortgages won't get paid off -- oh well, the GFC had ruled out my tentative 'early retirement' plans anyhow. It now looks like I'll be working until 70 - unless I get laid off earlier...

The balance of my stock portfolio margin loans remained constant as I am paying interest only on these balances. As interest rates are continuing to rise, I took the opportunity to fix the interest rate (@8.50%) on most of the balance of my Leveraged Equities Margin Loan for next financial year, although it is doubtful whether my stock portfolio will appreciate by more than 8.50% during that time. Due to the margin loan interest being deductible against my PAYG income (at a marginal tax rate of 30% or 38% depending on my other taxable income/deductible expenses) while any capital gains (held >12 months) are taxed at half my marginal tax rate, my leveraged stock portfolio only has to achieve a total return (capital gains + dividends) of around 7% for me to "break even".

I bought some shares in Elders (~$5,000 worth @ $0.41) during the month, betting that although they are currently losing money, they won't go broke (or be taken over at a bargain price) and the cost-cutting measures will return them to profitability. A turn around could see the share price above $2 again in a couple of years.

Late in June I reduced our SMSF investment in IQ (ASX200) CFDs by half - if the stock market continues to decline I'll close out that position before we make a loss on the CFD investment. I had intended to buy-and-hold the CFDs for the next 15+ years, but this may be an opportunity to reestablish our CFD investment at a lower entry price. It will then be hard to decide when to reinvest, as any bounce could be temporary. By the time it becomes obvious that the market has bottomed out, prices may have rebounded above the price we sold out. I may start to dollar-cost average back one CFD per month if the market drops 10% below the price we sold at. I tend to suck at market-timing.


Assets___________$ Amount______$ Diff_____% Diff
Stocks____________ $6,324____-$10,305___-61.97 %
Retirement_______$324,635_____-$2,030____-0.62 %
Properties_______$922,625_____$40,921_____4.64 %

Debts____________$ Amount_____$ Diff_____% Diff
Home Mortgage(s)_$364,106_________-$8____-0.00 %
Net Worth________$889,478_____$28,594_____3.32 %


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