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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