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Thursday, 27 August 2020

Covid has apparently caused pet inflation

I'd read about a surge in interest in having a pet due to Covid-19 impacts on human behaviour (lots of lockdowns, and increased WFH (work from home) even where lockdowns were not in place) creating more 'at home' time and boredom - which combined to make the thought of having a pet more appealing, and prices to start to increase for dogs and other pets.

So I wasn't surprised to find that when I searched online for a free female guinea pig there were none available, with prices now in the range of A$30-$50+.

Last time I had looked at guinea pig prices several years ago there were lots being given away (some even came with a free hutch). We had picked up a couple of female guinea pigs (a 'middle aged' one aged around 4 years old and her daughter aged 4-6 months old) for free, and we had slowly transitioned from keeping them in a hutch (with daily outings to an enclosed grass area) to letting them go 'free range' around our grassed play area and front garden. They had plenty of hedge plants to hide amongst when they weren't grazing on the front garden lawn.

The 'mother' guinea pig had been enjoying her 'golden years' in our front garden, having long naps in the winter sunshine while sheltered under some succulents this year. She had gotten a lot slower moving than her daughter but would still come out for a piece of carrot or celery 'treat' on most days. Then she stopped appearing for the morning feed for the past two days and we couldn't find her despite looking in all the usual hiding places. This morning DW found her peacefully 'at rest' in the front rockery, where I'd looked yesterday. So she must have passed away last night or perhaps this morning while having a final sun bake.

It was a bit of a relief to find the remains, as DW was worried that the guinea pig might had been snatched by a cat and met a grisly end. The 'piggy' is now buried in the front rockery with a pebble marking the resting place (and to hopefully avoid it being dug up by a passing scavenger). I'll keep an eye out for a young free female guinea pig to keep the 'daughter' company - there are still a few free male ones available, but its best not to keep a mixed pair (unless you want to end up with lots of surplus guinea pigs to give away).

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Tuesday, 25 August 2020

"12% solution" portfolio update

I didn't get around to checking my "12% solution" portfolio on Saturday mornings for the past two weeks, so here's a current snapshot of how things are going so far compared to my last review.

Portfolio as at Mon 24 AUG 2020:                   Value       Profit/Loss

50 Betashares Asia Technology Tigers ETF A$   488.50   + A$    63.00

34 Proshares UltraPro QQQ (All Sessions)       US$ 4,920.48   +US$   702.78

27 SPDR Barclays High Yield Bond ETF           US$ 2,853.90   +US$     7.02


Total positions                                 A$11,351.94    +A$ 1,058.47

Cash                                            A$  - 26.73


Portfolio                                       A$11,323.85


So far it has been an amazing initial performance, but that is obviously just a fluke of timing. It will mean that my 3, 5 and 10 year performance figures for this portfolio will be much higher than if I'd  started trading just a few weeks later. The negative cash balance is due to a quarterly A$50 account keeping fee having been debited (I forgot about that fee when I was deciding to trade the "12% solution" portfolio using my IG account!).

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Tuesday, 18 August 2020

Every cloud has a silver lining

Apparently the Covid-19 pandemic has boosted the wealth of the top 12 billionaires in the US by 40% to a total of more than US$1 trillion. As might be expected, this is mostly due to them having large stakes in online services and retail channels that have received a major boost during the pandemic. The 'top 12' list is:

1. Amazon founder Jeff Bezos $189.4 B USD

2. Microsoft founder Bill Gates $114 B USD

3. Facebook founder Mark Zuckerberg $95.5 B USD

4. Berkshire Hathaway CEO Warren Buffett $80 B USD

5. Tesla founder Elon Musk $73 B USD

6. Former microsoft CEO Steve Ballmer $71 B USD

7. Businessman and investor Larry Ellison $70.9 B  USD

8. Google co-founder Larry Page $67.4 B USD

9. Google co-founder Sergey Brin $65.6 B USD

10. Walmart heiress Alice Walton $62.5 B USD

11. Walmart heir Jim Walton $62.3 B USD

12. Walmart heir Rob Walton $62 B USD

Unfortunately this vast boost to wealth at the top end has occurred while thousands of people are dying and millions of people losing their jobs due to Covid-19.

Of course Covid-19 hasn't helped all the rich get richer - those with fortunes tied up in airlines, travel agents, hotels, and restaurant chains have probably taken a huge hit due to the pandemic.

And even if you are 'working class' the impact of the pandemic on your finances has depended on who you work for - I've been lucky in that my job seems reasonably secure, I haven't had a pay cut or a reduction in hours, and I've actually enjoyed the transition to working from home for the past several months.

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Saturday, 8 August 2020

Weekly "12% solution" portfolio performance update

Saturday morning and the AU and US markets are closed, so I can do a weekly post on how my implementation of the "12% solution" portfolio is performing in my IG trading account. As mentioned previously, I already had a few hundred dollars in the IG trading account I opened to get some 'free' Qantas Frequent Flyer points last year, and that money is invested in the ASIA Technology Tigers ETF as a long position (ie. I'll just let it sit there for 5+ years and see how it goes). The other $10,000 I recently added to my IG account using funds from my portfolio (home equity) loan to trade each month per the recommendations given in the end-of-month email updates from David Alan Carter per his "12% solution" trading methodology.


Portfolio as at Sat 08 AUG 2020:                   Value       Profit/Loss

50 Betashares Asia Technology Tigers ETF A$   475.00   + A$    49.50

34 Proshares UltraPro QQQ (All Sessions)       US$ 4,319.02   +US$   101.32

27 SPDR Barclays High Yield Bond ETF           US$ 2,858.76   +US$    11.88


Total positions                                 A$10,503.76    +A$   207.66

Cash                                            A$    23.37


Portfolio                                       A$10,527.03


This week was all sunshine and puppies, but I won't be making >1% gain every week ;)

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Wednesday, 5 August 2020

August 12% solution portfolio trades and status

The A$10k I transferred from my portfolio loan into my IG trading account on the weekend arrived in my IG account today. The markets required for the "12% solution" trades opened at 11:30pm Sydney time and I bought approximately A$6,000 (60%) QQQ and A$4,000 (40%) JNK per the August asset allocation provided in the monthly email I received.

Each month I'll make any required trade(s) to adjust my holdings to the recommended position, although it won't be exactly per the model due to timing of the trades, and the fact that I can only buy a whole number of shares (so there will be a small cash residual balance).


Trades executed for August:

04 Aug 2020 23:35:45 BUY 34 QQQ A$5961.31

04 Aug 2020 23:37:56 BUY 27 JNK A$4024.27

Residual Cash balance: A23.27


Current IG Portfolio:

34 QQQ ProShares UltraPro QQQ (All Sessions)

27 JNK SPDR Barclays High Yield Bond ETF

50 ASIA Betashares Capital Ltd - Asia Technology Tigers Etf


Having this trading portfolio in place will give me something to play with once a month while my major investments in Index Funds within my superannuation sit on 'autopilot' and slowly compound. And the IG 'workspace' display looks quite cool with all the charts and flashing price changes on every 'tick' ;)

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Tuesday, 4 August 2020

Net Worth: JUL 2020

Surprisingly the estimated valuation for our home, based on sales data for our suburb, increased during the month. This is contrary to the general trend in residential real estate prices across Sydney, so I wouldn't be surprised to see a decrease next month.

My retirement savings (SMSF account balance estimate and company super account balance) also increased substantially during the past month - mostly due to a generally positive share market during July, plus the usual monthly salary sacrifice and SGL contributions.

The stocks figure is the usual net amount of my margin loan portfolio assets minus the margin loan balances and my portfolio loan balance, but I started including the balances of a couple of minor share trading accounts (as I will be putting $10K into the IG account to trade the '12% solution' portfolio model) and a few cash accounts that I previously hadn't bothered including in my monthly NW spreadsheet calculations. Overall this added around $11,000 to the net 'Stocks' figure. On the other hand, I am funding the $1,500 monthly 'running costs' for my financial planning business from the portfolio loan, and also paying my quarterly uni fees for the MFinPlan degree out of that account, so the 'Stocks' figure isn't a pure reflection of the movements in my stock portfolio.

Overall my NW increased by $35,993 (1.40%) to $2.602m which I think is probably another 'record high' for me.


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Monday, 3 August 2020

Apology to the Walking Dead (and all disaster movie) writers - people really do act more stupidly during disasters than I believed possible

As a closet 'Prepper-lite' (I have an ultraviolet water purifier, some GM detectors and a few packets of iodine tablets sitting in a box - 'just in case'. If you thought it was hard to find toilet paper during a pandemic, just wait and try to get hold of a dosimeter after a nuclear accident or when WWIII looks likely!) I've always enjoyed watching disaster movies and series such as The Walking Dead and imaged how I'd deal with such life-or-death situations. (Of course the reality is I'd probably be the first one to come to a grisly end, but that doesn't stop me being an arm-chair critic and scoffing at how unbelievably stupid the behavior of people is portrayed in these movies and TV series.)

I've watched in disbelief when characters are portrayed as behaving as if everything is fine the minute an immediate threat is no longer apparent - examples that come to mind are the young lady in The Day After who insisted in running out of the relative safety of the basement shelter and into fields contaminated with lethal fallout just because she'd been cooped up for a few days and the weather outside looked fine (just ignore all the dead livestock lying on the ground), or the myriad examples in The Walking Dead series where the group has heroically hacked and slashed their way through legions of zombies to get to a place of relative safety - only to then chillax as if everything was back to normal if there is no longer an immediate threat.

I had put this all down to screen writers taking artistic licence with the stupidity of the average human being - surely no-one could act with such self-destructive nonchalance is a real disaster situation?

But, having watching people in the US and Australia rub shoulders at concerts or when queuing up to get into a pub in the midst of an out-of-control pandemic - when there is active community spread of a virus that kills about 1% of the infected (and more if you're over 50), and to which no-one (that hasn't already survived it) has any immunity - I now believe that, yes, people really can act that idiotic during a bona fide disaster.

So, my apologies to all disaster movie and TV series writers - your scripts aren't as woefully unrealistic as I had assumed them to be. Some people are just plain dumb, inconsiderate, live in denial, or use 'magical thinking' as the basis for their decision making. Go figure.

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Sunday, 2 August 2020

Implementing the "12% solution" trading system on a small ($10K) portfolio as an experiment

A few years ago I bought an eBook by David Alan Carter called "The 12% solution" (the Kindle edition only costs about five bucks, so its good value) and was interested in his method of tilting a simple asset allocation each month according to his calculated trading signals. Having bought the book I get a free monthly email at the end of each month telling me what asset allocation the method has decided is 'best'. The assumption being that you trade asap (the next trading day) to move your portfolio allocation to the new recommended mix.

I was going to start trading a test portfolio using these monthly trading recommendations a few years ago on my CitiIndex CFD tradining account, but discovered that not all the assets used in the 12% portfolio were available to trade. So I put the idea on the back burner.

When I received this month's email, showing that the '12% solution" portfolio 2020YTD performance is +18.1% and for 2019 was +12.4%, I decided I might try to test this methodology on a small scale using $10,000 of borrowed funds (from my St George 'portfolio loan' account, currently charging 4.98% pa interest, which is tax deductible as I use it for income producing investments) and trading on my newly opened IG share trading account. The IG account currently only has a balance of $468.85 and is invested in the Asian Tigers technology fund (code: ASIA). I'll use the $10,000 I've added to the IG account to make the recommended investments: 60% QQQ + 40% JNK.

Trading using the IG account costs $8 per Australian share trade (if 0-2 trades were made the previous month), and I saw a mention that US share trades on the IG platform cost $0 (not sure if that is correct - there are probably some other costs involved). With only $10,000 invested, an annual return of 12%, minus the 5% loan interest costs, would yield an expected net 7% return ($700 pa). Making an average of two trades per month (assuming I have to sell one holding and buy another most months), would cost up to $16 per month, or $192 pa. This would mean that I would mostly be making money for St George (interest) and IG (trade fees), and I might end up with a taxable profit of only $508 pa, which is hardly worth the effort and extra work when filing my annual tax returns.

So I might reduce trading frequency to every second month, which would halve the trading costs (Carter apparently tested different trading periods, such as bi-monthly or quarterly, and decided that the monthly trading cycle provided the best returns, but with a small account balance, frequent trades will have a larger drag on performance). What impact trading every second month will have on the portfolio performance is unknown. Trading every second month will obviously produce somewhat different results, but, as the trading signals are a 'point in time' calculation of the 'best' allocation to make, there is no reason why it should be much worse to hold that allocation for two months rather than just one month before rebalancing to the current recommendation.

We'll see how it goes. I might increase the amount invested (which will reduce the relative impact of the trading fees) if actual results go according to 'theory' for the next year or two.

In terms of how I've mapped the recommended ETFs in the "12% solution" portfolio to what is available to trade in the IG platform, I decided to use the following:


"12% solution" ETF list <> [ IG share trading platform ]

IWM - iShares Russell 2000 Index Fund <> [iShares Russell 2000 ETF]

MDY - SPDR S&P MidCap 400 Index Fund <> [SPDR S&P 200 Mid Cap Growth ETF]

QQQ - PowerShares Nasdaq-100 Index Fund <> [ProShares Ultra QQQ]

SPY - SPDR S&P 500 Index Fund <> [SPDR S&P 500 ETF Trust (All Sessions)]

JNK - SPDR Barclays High-Yield Corporate Bond Fund <> [SPDR Barclays High Yield Bond ETF]

TLT - iShares 20+ Year Long-Term Treasury Bond Fund <> [iShares 20+ Year Treasury Bond ETF]

CASH - cash or the SHY 1-3 Year Treasury Bond ETF <> Cash or [iShares 2-3 Year Treasury Bond ETF]

For many of the codes provided for the "12% solution" there were multiple similar investments listed for trading in the IG platform, so I've picked whichever one seems closest to the correct description and put that on a watch list in the IG platform so I can buy and sell the chosen units each month.

There will probably be some additional complications when I try to implement this portfolio within my IG account - for example the buy costs may not allow the exact percentage allocation recommended by purchased, so I may have a small residue sitting in 'cash' each month (earning 0% but costing me 5%pa in interest!)

The current unit buy prices are:

IWM  $ 147.61
MDY  $   57.08
QQQ  $ 169.68
SPY  $ 327.03
JNK  $ 106.10
TLT  $ 171.00
SHY  $   86.63

As soon as the $10,000 I've transferred from my St George Portfolio Loan account is available in my IG account I'll try placing buy orders for 35.36 units ($6,000) of 'QQQ' and 37.70 units ($4,000) of JNK.

As a benchmark I'll track my actual IG account balance each month vs. how an equal-value allocation to the seven listed securities performs. I'll also compare how my actual implementation performs compared to the performance reported for the 'ideal' implementation of the "12% solution" that is reported in the monthly email notifications.

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