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Sunday, 19 September 2021

Diet week 5

My macronutrient daily averages for week 5 were:

fibre            15.6 g
fat              18.9 %
protein          85.8 g
sodium         2630.1 mg
energy         1978.9 kcals
carbohydrates    63.2 %

My average weight for week 5 was 107.6 kg, a slight increase of 0.3 kg. In theory I was consuming less than my basal metabolic requirement, so I should have lost a small amount of weight rather than putting weight on, but I had started a bit of body weight exercise and slightly more walking, so perhaps I lost fat and replaced it with lean mass instead. According to my bathroom scales my body fat % hasn't decreased, but I know from previously tracking data that the body fat % reading isn't very reliable or consistent. I do need to cut out having the occasional 'dessert' snack after dinner, as that should ensure I actually lose weight rather than just 'flat line'.

My average daily step count last week increased slightly (2,251 steps/day), as I went for a lunchtime walk four times last week. Need to add an evening walk to my routine as well. I also need to do 5BX every evening, rather than just doing a bit of resistance training whenever I 'feel like it'.

I also need to arrange for our pool pump to be fixed next week, so I can get the pool ready for 'swimming season' to commence.

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Thursday, 16 September 2021

Australia finally plans for an effective sub fleet

In a shock outbreak of intelligent decision making, the Australia government today announced that they would scrap the trouble-plagued deal to build a fleet of vastly expensive, and probably ineffective, conventional submarines in Adelaide, and instead shift to building much more capable nuclear-powered subs in conjunction with the US and UK.

While this always seemed the obvious best solution for replacing our trouble-plagued fleet of Collins class conventional subs, I was shocked that such a rational decision has actually been made. Usually anything with the word 'nuclear' in it gets blocked in Australia (they even renamed Nuclear Magnetic Resonance imaging (NMR) as Magnetic Resonance Imaging (MRI) to cater to radiation-phobes). Hopefully costs don't blow out too much by trying to build as much as possible in Adelaide (this usually turns out to  be a very expensive way to buy local jobs), but at least the end result should be an effective submarine fleet at a reasonable life-cycle cost per unit, compared to the conventional French-designed sub that had seen costs blow out from the initial estimates.

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Sunday, 12 September 2021

Diet week 4

My macronutrient averages for week 4 were:

fibre            12.7 g
fat              17.5 %
protein          61.7 g
sodium         2360.9 mg
energy         1745.1 kcals
carbohydrates    68.0 %

My average weight for week 4 was 107.3 kg, a decrease of -0.7 kg, which was close to what I expect at my current BMI when I stick to my diet plan of around 1,800 kcals/day. I could do with a bit more fiber and protein in my diet though - probably more vegetables and fruits would be good.

My average daily step count last week was still a lot less than I should be doing (averaging just 933 steps/day), and I didn't really have any excuses last week, just lacking self-motivation. I just need to make sure I go for a brisk walk every day and get back into the habit. It was a lot easier when I was going to the office, as I walked quite a bit just going to work by bus and train, plus I would go for a walk during 'lunch hour' most days. Working from home I can go for a walk at any time, which means that I tend to keep putting it off and never get around to it.

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Tuesday, 7 September 2021

Diet week 3

My macronutrient averages for week 3 were:

fibre            16.1 g
carbohydrates    65.1 %
fat              18.1 %
protein          85.2 g
sodium         3480.7 mg
energy         2118.1 kcals

My average weight for week 3 was 108.0 kg, an increase of 0.2 kg. I had expected my rate of weight loss to slow as my metabolism adjusted to the reduced caloric intake, but due to consuming slightly more calories than planned, my average weight for week 3 was actually slightly higher than in week 2. Fortunately my weight started to decrease again by the end of week 3.

My average daily step count last week was also less than I had intended (averaging just 850 steps/day), probably due to the rainy weather. I'll have to make sure I do more regular walks from now on.

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Thursday, 2 September 2021

Net Worth: AUG 2021

My monthly NW estimate has been updated in NetWorthShare for the end of August. Chart is in the side-bar.

Stocks and managed fund investments increased this month, up $7,499 (2.33%) to have $327,379 net equity in my geared share portfolios. But this figure includes using $9,500 from my home equity 'portfolio' loan that I used to purchase the 2002 S-type Jaguar. I have included the purchase price (8,000) as an asset under 'cars' so it doesn't affect my overall net worth.

Our estimated house price for August (my half) increased by $18,822 (1.94%) to $986,861. For some reason the realestate.com.au pages where I normally get the average sales price data for our suburb has stopped displaying any data, so I used the more general corelogic house price index for the whole of Sydney and used the change since last month in that index to adjust our estimated house price.

The value of my retirement savings rose during August, to $1,523,170 (up $38,338 or 2.58%).

The value of my precious metals (gold and silver proof coin collection) decreased slightly during August, to $24,487 (down -$24 or -0.10%). My unallocated precious metal holdings with the Perth Mint online depository are included in the geared share portfolio net value.

Overall, my estimated NW reached $3,169,406 by the end of August - up by $72,857 (2.35%).

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Wednesday, 1 September 2021

End of AUG 2021 "12% solution" portfolio changes

For the end of August the emailed trading signal is to invest 60% in QQQ and 40% in TLT. As this is the same allocation as last month, I don't need to do any trades this month, which will help reduce trading costs.

My current IG trading account balance is A$14,054.53. In addition to the "12% solution" holdings I have A$519.00 invested in the ASIA (Betashares Asia Technology Tigers) ETF which results in my IG account not tracking perfectly the "12% solution" benchmark.

According to the monthly newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance is now +20.7%. My YTD performance is 27.56%. The performance difference is a result of trade timing differences, buy/sell spread, trading costs, not having an exact 60:40 asset allocation (due to rounding down to the nearest tradeable quantity) and the fact the my '12% solution' portfolio is on my IG trading account which also includes some ASIA (Betashares Asia Technology Tigers ETF). There is also an impact from AUD/USD currency movements some months, as my portfolio result is reported in AUD terms, whereas the '12% solution" model portfolio reports returns in USD terms.

So far the "12% solution" trading signals seem to result in market timing that might actually add to long term performance (compared to a simple buy-and-hold with annual rebalancing strategy). For anyone that wanted to invest a significant portion of their financial investments to this strategy I'd suggest tweaking the 60:40 "risk-on":"hedge" ratio to match your personal risk tolerance (eg. a more risk averse investor might want to adjust it to 50:50, while a more risk tolerant investor may move to  70:30 allocation). One concern is that this is a US-centric model portfolio, so it may underperform in periods when US equities underperform non-US global stock market returns.

Personally I only have 0.42% of my NW invested in my IG trading account used to follow this strategy, so it's performance won't have a material impact on my overall wealth.

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Tuesday, 31 August 2021

Diet week 2

My macronutrient averages for week 2 were:

fibre            16.1 g
carbohydrates    67.7 %
fat              14.7 %
protein          57.7 g
sodium         2170.5 mg
energy         1318.8 kcals

My average weight for week 2 was 107.8 kg, a decrease of 2.1 kg from the week before. I expect my rate of weight loss will now decrease to about 1.25-1.5 kg/wk due to caloric deficit. The first few weeks of a diet always have a bit of extra weight loss due to the decrease in total food volume being ingested (and hence fluid retention in the digestive system).

I did a little bit more walking last week, (averaging 1,653 steps/day) but still not nearly as active as I should be. I'll try to do at least 5,000 steps most days this week and some 5BX exercise each evening. I doesn't look like the Sydney lock-down will end soon, so I probably won't be able to go back to Kendo training until November or December. Haven't started doing any weight training at home yet, so that is still on my 'to do' list.

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Covid-19 has increased retirement age

An article in today's SMH summarized a report by KPMG which found that during 2020-21 the average expected retirement age for males in Sydney rose by six months (to 65.3) compared to the previous year (the expected retirement age for women remained unchanged). That appears to be partly due to restrictions on migration and associated tightening of the labor market (contrary to initial expectations at the start of the pandemic), coupled with a reduction in the attraction of retirement (what's the point when you can't travel overseas, interstate, or even outside of greater Sydney at the moment?)

Personally I hadn't intended to 'retire' from my full-time employment for another ten years or so (and to then continue working part-time as a financial advisor), but the pandemic (and associated work-from-home and occasional "lock downs") has meant that I haven't bothered to take much annual leave since the start of 2020 (fortunately in Australia unused annual and long service leave accumulates - although your employer can require that you take some). There's no much point taking a day (or week) off work if you end up just sitting at home anyhow.

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Thursday, 26 August 2021

Back into 'diet' mode

My weight had crept back up over the past 18 months of 'work from home' (and 'ad libitum' eating), so on Sunday 15th I decided to go back on a 'diet' - basically just cutting out all the junk food (lollies and chocolate) that I shouldn't be eating anyhow, and not having any 'dessert' after dinner or snacks during the day (and recording what I eat). I haven't started doing any intermittent fasting (yet), but I decided to delay having breakfast as soon as I get up in the morning, and instead have it as 'brunch' around 11am. I then have my dinner early (for me) before 7pm so there is a 16+ hour period of not eating and my morning. Having a 'mini fast' each day is supposed to be good for your health, although it isn't long enough to result in ketosis or autophagy. I find that I don't get hungry before bed after having an early dinner (even though I usually don't go to bed until 2-3am) and I don't even feel particularly hungry in the morning (although I am looking forward to 'breakfast' by 11am). I didn't find intermittent fasting particularly difficult last time I was trying to lose weight, so I might start having a weekly fasting day once the weather warms up (having no/few calories on cold winter days is just plain miserable).

So far my diet has been going 'according to plan' with my weight dropping from 110.8 kg to 109.2 over the first week. My macronutrient averages for the first week were:

fibre            17.2 g
carbohydrates    64.7 %
fat              19.7 %
protein          66.8 g
sodium         2435.8 mg
energy         1759.6 kcals

This pretty close to my target daily dietary averages, which are 5-15% calories from fat, 60-120 g protein, 900-2,300 mg sodium, and 1,800-2,400 kcals/day (preferably towards the bottom of that range).

At my starting weight (111 kg) my basal metabolic calorie requirement was 2,068 kcals/day, and while sedentary my required daily maintenance calories (for no weight gain or loss) was around 2,813 kcals/day. If I start doing a bit of daily activity such as brisk walking and 5BX and some pushups in the evenings (which would put me in the 'low active' region), my daily calorie requirement would be around 3,112 kcals/day. So sticking to an average of 1,800 kcals/day I should lose around 1.3 kg per week (1.0 kg per week even if I remained sedentary).

As my weight drops my caloric requirement will also decrease, so at my target weight (around 75 kg) my calorie requirement at a 'light active' level of activity would decrease to only 2,487 kcals/day, which would mean my rate of weight loss would slow to around 0.7 kg/week (even if my body metabolism doesn't adapt and slow in response to the caloric restriction over time).

Once I get to my 'ideal' weight I'll either increase my caloric intake slightly (to around 2,100 kcals/day) which would provide about 15% caloric restriction (which theoretically might be good for longevity), or if I've increased my activity level to 'active' (by doing regular kendo training and going to the gym for weight training three times a week) it would boost my maintenance caloric requirement to 2,788 kcals/day. In which case I'd eat a bit more protein to have around 2,370 kcals/day (still around 15% CRON) and focus on lowering my body fat while retaining/increasing muscle mass.

This is basically the same plan I had in the middle of 2019, when I was able to reduce my weight from 11.8 kg to 84.2 kg by March 2020 (when I stopped going to the office, or the gym, due to Covid). Hopefully if I can get back into my diet and exercise routine while in 'lock down' I won't have any reason/excuse for 'falling off the wagon' this time around.

I'll try to remember to post my weekly diet and exercise summary each week - hopefully that will help me to stick to my plans (public embarrassment can be a great motivator).

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Sunday, 15 August 2021

Another D'Oh! moment

I've been parking my 'new' (second-hand 2002 model) S-type Jaguar under our carport since I took delivery of it last week, as our lock-up garage was full of things being 'stored' in our garage (for example a kayak and a wind-surfer I'd bought years ago and hardly ever used, that are supposed to be shipped up to the lake house 'sometime' - definitely not yet as we're currently in lock-down). I didn't want to leave the 'new' car permanently parked under the car port awning as the rear end wasn't under cover and gets pretty hot during the day (even though we are currently in Australia winter), which won't do the leather upholstery any good. So I spent some hours last weekend and this weekend throwing out some of the junk stored in the garage and tidying the rest so it is all neatly stacked away on the side shelving.

I finally got everything tidied up in the garage this evening and got DW to watch as I drove the S-type into the garage to make sure I had enough clearance on the sides. I had checked the garage should be wide enough for the car, but I had to keep fairly close to one side in order to have enough clearance to open the driver's side door. Unfortunately when DW indicated I had driven as far into the garage as possible (there is an old wood workbench fixed to to the end wall of the garage) the rear of the Jag wasn't far enough in to allow the roller door to be closed! I should have also checked the length of the car! D'Oh!

Oh well, the Jag will have to remain parked outside under the car port awning until I can take the kayak and some other things up to the lake house, and then I'll probably demolish and remove the work bench (I'll first check that the car will sit into the garage once the bench is removed!). Hopefully I'll be able to park the car in the garage by Christmas.

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Trying to stick to a healthier diet (again)

Prior to the pandemic and work-from-home (WFH) regime that commenced in March 2020, I had been quite successful in losing a lot of my excess weight, and had been going regularly to the gym (conveniently located on the way home via train and bus). But since WFH commenced I had not been walking as much (about 1/3 of my daily 10,000 step target had been achieved simply walking to the bus stop from home and then from the train station to my office, and vice versa). Also, although I saved time not having to commute to work every day, the economic uncertainty of the pandemic, combined with an increase in the volume of work tasks needing to be completed on schedule meant that I didn't even spend time going for an evening walk or during lunch time. Overall, I became extremely sedentary for the past 18 months, and I also stopped sticking to my 'diet plan' and didn't bother tracking my daily calories or macro-nutrients.

The result was a slow but steady weight gain, to the extent that I'm back to the most overweight I've ever been (currently just over 110kg). So, today I stuck to my planned diet (no snacks or junk food) and also skipped lunch. From now on I'll try to have breakfast a bit later (around 11am) and then only have dinner (around 7pm) and avoid any after-dinner dessert or late night snacks, so I get a decent 16 'fast' period between dinner and 'break fast'. I might also try to do intermittent fasting by not having any meals on Sundays.

We currently have a 'lockdown' in Sydney due to the delta variant outbreak, and are limited to exercising within 5km of our homes, so I won't be going back to the gym any time soon. However, we do have some dumbell and barbell weights, so I'll try to do a bit of 'pumping iron' every lunchtime (at least three times a week) and also get back into the routine of doing regular walks.

If and when I get back down to my 'ideal weight' (around 75 kg) and body fat level (12% or less), I my continue a mild form of caloric restriction with optimal nutrition (CRON) diet plan, as caloric restriction is known to improve longevity in mice and other short-lived small animals, and recent evidence (such as reported recently in Nature) in closer human-analogues such as small lemurs supports the conjecture that it may also extend healthy lifespan in humans.

First step is to get down to a healthy BMI and exercise more. Then I'll worry about tweaking my ongoing diet regime to extend lifespan. For the past 18 months my diet has been reducing my lifespan!

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Thursday, 12 August 2021

Australians household wealth reaches all-time high

Despite the economic impacts of the pandemic in the 2020 - a "short sharp recession", on dip in house prices, and the share market bear market during the first half of the year, the growth in household wealth has actually boomed during past past decade. This has been largely due to a booming housing market and strong share market growth, as wage growth as been negligible.

Australian net household wealth (dwelling and financial assets minus liabilities) has increased from around 550% of annual household disposable income, to now be 825% of annual household disposable income. This increased level of household wealth should result in strong economic growth in coming years due to the psychological 'wealth effect' (people are more willing to spend a greater portion of their disposable income as their perceived wealth increases). This may also be boosted by a real increase in wages in Australia, due to the impact of the pandemic on our usual level of immigration flowing on to produce some labour shortages and hence competition for staff.

Of course this rise in wealth has not been uniform across all socio-economic segments - those who rent do benefit from rising house prices, and the bottom quartile of the population (with negative or low net worth) do not benefit from the rise in value of financial assets. Some of the increased household wealth nationwide will be redistributed via the progressive income tax scale (incomes over $180,000 have a marginal income tax rate of 47% plus 2% medicare levy, while low incomes (below$23,227) effectively have no income tax liability due to the LITO and LMITO tax offsets) but growth in average household incomes generally results in some increase wealth inequality. On the other hand, everyone benefits from stronger economic growth, as it reduces unemployment and supports real increases in minimum wage and provides governments with the budget capability to provide real increases in welfare support.

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Tuesday, 10 August 2021

Delta variant of Covid-19 running rampant in parts of Sydney

After getting through 2021 relatively unscathed (compared to the US, Europe and many other countries) in terms of infections and deaths, most people had expected 2022 would continue to see Australia maintain close to zero community transmission while the two available vaccines (AZ and Pfizer) were slowly rolled out by the end of 2022. The spread of the delta variant in Sydney (starting from a single community case of an unvaccinated driver coming into contact with an infected international aircrew he was talking to hotel quarantine) has shown that our existing 'gold standard' lock-downs, contract tracing etc. isn't capable of getting the delta variant under control (especially when some people were breaching the public health orders - for example going to regional areas of NSW, or attending parties in nearby cities).

What is more worrying (to me) is that the daily case numbers are continuing to climb despite already 1/3 of all Australians (>40% of 'eligible' Australians i.e. adults) having had one dose of vaccine, and over 20% already being 'fully vaccinated'. I would have expected the lockdowns coupled with a sizeable fraction of the population being fully vaccinated would have seen lower rates of spread by this stage. Hopefully things do improve in September (when we should be getting close to 50% of all eligible adults fully vaccinated), but I'll be extra cautious until I get my first dose of Pfizer in late September...

So far Australia still has less than 1,000 deaths from Covid-19 in total, so I suppose we are still the 'lucky country' in terms of how Covid-19 has impacted us.

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Extra car expenses (of course)

The S-type Jag was delivered yesterday, and it looks very stylish and is in pretty good condition. A little bit of wear and slight cracking in the driver's seat, but that is to be expected for leather seats that are almost 20 years old (especially in Australia). Some scuffing on the door handles, but no scratches or dings in the body paintwork, and as far as I can tell everything seems to be working OK. I drove DW to her part-time job at lunchtime and the car is great fun to drive. Upon delivery I was told that the $500 12-month 'extended warranty' I had purchased only covers the engine block, drive train and gearbox, and I could have purchased a 'comprehensive' extended warranty for $870 that also covers the electrical system, computers, brakes, aircon, cylinder heard etc. It was also cheaper (per year) to take out 3-year or 5-year warranty. In the end I opted for the $1,290 3-year comprehensive extended warranty, so if anything goes wrong (like the computer system that broke in the last S-type I bought three years ago) it *might* be covered by the warranty. Each item covered only provides $350 per claim, so if something expensive goes wrong it could still get expensive to repair. I decided to pay the $790 extra to get three years of 'comprehensive' warranty cover. I'll also have to pay $240 stamp duty when I go to the local car registry office (within 14 days) to record the transfer of ownership.

I got an online quote to get comprehensive car insurance from Budget Direct. With limited km cover (5,000 km pa), no drivers under 50, $750 excess (except for windscreen excess of $40), and private/business usage, the insurance quote was about $455 pa, which seems quite reasonable.

I checked through the vehicle's service log book and it really has only had one prior owner, who had done the proper annual services with an approved Jaguar service center for the first 6 years, and then done bi-annual services using a local mechanic in years 8 and 10. The car had only done about 10,000 km pa for the first 12 years (2002-2014) and the the driver (a country town solicitor) had retired in 2013 and had only driven a few thousand km over the next six years (and had spent some money getting a new battery and the electronic throttle replaced in 2014).  After a few more years he had then obviously decided he didn't need the Jag any longer and traded it in to the dealer I bought it from. Overall the car seems quite a good buy for about $8,000 (it cost around $120,000 when new). Hopefully this car will last me for the next ten years while I am still working full-time and running my financial planning business on the side.

As this car will be used for my home-based financial planning business as a sole trader I should be able to claim back the GST on the purchase price and also claim a per km amount for business use (or a percentage of actual expenses).

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Friday, 6 August 2021

Bought another S-type Jaguar

Having recently given away my Ford Escape to DS1 as his 21st birthday present, I decided to have another go at buying an S-type Jaguar as my 'new' (used) car. Last time I tried this was back in August 2018, and on that occasion I ended up buying a lemon from a private selling (hence no warranty) that had an electrical problem which ended up making the car a total write-off only a few months after I bought it.

This time I've bought a 2002 Jaguar S-type SE from a local used car dealer. Being in lock-down in Sydney I didn't go to inspect the vehicle in person, relying on the car dealers photos (the body work, paint and interior all appear to be in good condition) and I paid an extra $590 for a 12-month warranty. The car cost $8,000 and I was told that it had only one previous owner and it has reasonably low mileage (123,000 km) for its age. We'll see how reliable the car turns out to be in reality. The car dealer has a mixed bag of very good and very poor reviews regarding the quality of their used cars and after-sales service, so I suspect if the car is OK everything will be fine, but if it has any major issues I may have trouble getting the dealer to rectify it under warranty. Fingers crossed that this turns out to be a reliable vehicle, but I won't be surprised if it turns out to be another expensive mistake.

I've arranged for it to be delivered early next week, so this weekend I'll spend a few hours rearranging the boxes and junk stored in my garage so I can park the Jag inside rather than under the carport. The current  registration lasts until next February - if it is still driving well by the time I have to get it inspected to renew the registration, I'll think about getting a personalized licence plate with a nice rego number and in a colour to match the vehicle (which will cost about $125 pa). I'll probably continue to work from home several days a week even once the pandemic ends, and I normally take public transport to the office, so I will probably only use this car a few times a week, and for occasional visits to any of my financial planning clients/prospects that want a 'house call', as well as the occasional longer drive up to the lake house during school holidays.

The total purchase cost (including 12-mo warranty, delivery charge, and a $100 'admin fee') was $8,709. And annual registration and CTP insurance will cost about $1,000. Being a 3.0L V6 engine it isn't very fuel efficient, allegedly needing 10.8 - 12.5 L per 100 km, and emitting around 314g CO2 per km. The 70L fuel tank will cost around $100 to fill at current fuel prices, and should provide a range of about 560 km. The running costs will largely depend on how much basic log book servicing costs, and if it develops any expensive faults.

I already have a 1960 Mk2 Jaguar that my parents gave me for my 18th birthday, but that car is stored up at my parent's farm and hardly ever gets used these days (I used it for daily commutes to university and then to my work back in the 1980s, but we did a respray and interior restoration and haven't used it much in the past twenty years). The styling of the S-type is based on the classic Mk1 and Mk2 models.

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Tuesday, 3 August 2021

DS1 seems to be on the path to financial success

DS1 finished his computer science degree (with Distinction) last year, and ended up with two good job offers, eventually taking a position at a local IT 'unicorn' company. He's recently passed his 6-month 'probation' period, and is working from home several days a week normally, or full-time WFH during 'lockdowns', so his income stream seems quite secure at the moment. Given his starting salary was similar to my current salary (!) plus he gets some stock options (which will probably be quite valuable when they 'vest' and if/when the company gets listed) and still lives at home rent free, he is able to save a large chunk of his income. His NW is already around $180K, which is pretty impressive for a 21 year old (it is partly due to the modest share portfolio and superannuation investments I made on his behalf during childhood).

He has a small amount of HELP debt (around $30K of accumulated university fees) which will slowly be repaid via an annual compulsory repayment. Repayments are required when your taxable income exceeds the threshold (currently $47,014), and the repayment rate depends on taxable income (for DS1 it will be around 7.5%). So, effectively DS1 will be paying off his $30K StudyAssist debt at the rate of around $7,500 pa for the next 4 years or so.

In the meantime he is saving as much as possible for a deposit on an investment property, which he'll probably purchase sometime this year (if he has enough deposit saved up and the current 'lockdown' ends). His living expenses are quite low, as he doesn't pay rent, makes use of the household groceries (although his does some of his own grocery shopping if he wants anything in particular), and I gave him my old car for his 21st birthday a few months ago (although it is still registered in my name and I have full insurance cover for when I want to 'borrow' his car). I'll probably buy myself a second hand S-type Jaguar soon, just so I don't have to 'borrow' DS1's car too much.

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Monday, 2 August 2021

Net Worth: JUL 2021

My monthly NW estimate has been updated in NetWorthShare for the end of July. Chart is in the side-bar.

Stocks and managed fund investments decreased slightly this month, down -$32,464 (-9.21%) to have $319,930 net equity in my geared share portfolios. But this figure includes a withdrawal of $30K from my home equity 'portfolio' loan that I used to make an non-concessional (un-deducted or 'after tax') contribution of $30K into my SMSF (we needed some extra money in the SMSF cash account to fund DW's annual pension withdrawal of $25K and the annual tax assessment liability for FY 2020, and I chose to make a NCC rather than sell off some of the Vanguard High Growth investment held by our SMSF).

Our estimated house price for July (my half) increased by $18,137 (1.91%) to $968,039. The Sydney housing market (especially houses) continues to trend up, although the rate of increase has somewhat slowed, and will probably reduce further with the whole of Sydney currently being in 'lock down' to fight an outbreak of the Delta strain of Covid-19.

The value of my retirement savings rose during July, to $1,484,832 (up $30,345 or 2.09%). But as stated above, most of this increase is due to the $30K non-concessional contribution.

The value of my precious metals increased slightly during July, to $24,511 (up $1,054 or +4.49%).

Overall, my estimated NW reached $3,096,549 by the end of July - up by a relatively modest $17,346 (0.56%).

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Saturday, 31 July 2021

End of JUL 2021 "12% solution" portfolio changes

For the end of July the emailed trading signal is to invest 60% in QQQ and 40% in TLT. As this is the same allocation as last month, I don't need to do any trades this month, which will help reduce trading costs.

My current IG trading account balance is A$13,022.59. In addition to the "12% solution" holdings I have A$507.50 invested in the ASIA (Betashares Asia Technology Tigers) ETF. The ASIA ETF has been in a downtrend since Feb, which has resulted in my IG account underperforming relative to the "12% solution" benchmark.

According to the monthly newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance is now +17.8%. My YTD performance is 18.19%. The performance difference is a result of trade timing differences, buy/sell spread, trading costs, not having an exact 60:40 asset allocation (due to rounding down to the nearest tradeable quantity) and the fact the my '12% solution' portfolio is on my IG trading account which also includes some ASIA (Betashares Asia Technology Tigers ETF). There may also be some AUD/USD currency movements affecting my result (reported in AUD terms) compared to the USD returns reported for the '12% solution" model portfolio each month.

So far the "12% solution" trading signals seem to result in market timing that might actually add to long term performance (compared to a simple buy-and-hold with annual rebalancing strategy). For anyone that wanted to invest a significant portion of their financial investments to this strategy I'd suggest tweaking the 60:40 "risk-on":"hedge" ratio to match your personal risk tolerance (eg. a more risk averse investor might want to adjust it to 50:50, while a more risk tolerant investor may move to  70:30 allocation). Once concern is that this is a US-centric model portfolio, so it may underperform in periods when US equities underperform non-US global stock market returns.

Personally I only have 0.42% of my NW invested in my IG trading account used to follow this strategy, so it's performance won't have a material impact on my overall wealth.

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Monday, 26 July 2021

Perth Mint Online will be offline next weekend

My monthly automatic transfer of funds into my PMO cash account was processed on the 15th, and my savings plan standing order to buy gold and silver at the start of each month would normally be filled at close of business on the first business day of the month (2nd August for the coming transaction). If there is an outage (unscheduled or for planner maintenance) the T&Cs state that "Any order/orders will be filled by us at the first available opportunity and you accept full responsibility for any losses or damage".

There is a scheduled maintenance to The Perth Mint Depository Online (DOL) platform and Perth Mint websites that will run from 5.00pm AWST (GMT+8) Friday 30 July until 8am Monday 2 August 2021. So my automatic investment *should* happen as normal on Monday afternoon. I'm not too fussed if the transaction does get delayed, as the price could move either up or down, so on average any delay in processing my regular bullion purchases should not make any significant difference.

They'll probably be some conspiracy theorists that decide this is all part of some grand plot to limit sales of physical bullion and/or cover up a shortage of physical metal and/or manipulate the price. ;)

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Thursday, 15 July 2021

Checking on adviser commissions I have paid

As a consumer I was only vaguely aware of the extent of the 'commissions' being paid to 'advisers' by financial products I had invested in. I knew they existed, and because I bothered to read the 'fine print' of product PDSs, I also knew that the commission was paid to 'your financial adviser' (if you had one), but that if you didn't have an adviser (for example, if you applied directly to the product manufacturer) they didn't rebate the commissions, but simply kept the extra profit margin.

Eventually, back in 2013, I found out about a new 'commission rebate service' that would at least rebate to me 50% of the trailing/on-going commissions that product providers normally paid to financial advisers (or kept for themselves if there was no adviser 'attached' to an account). Getting half of the fees rebated was better than nothing! A few years later the rebate service introduced a flat $75 'account admin fee', which reduced the rebate to a bit less than half, but it was still good to get a large chunk of the 'trailing commissions' on my financial investment products and insurance policies rebated. Over the years the commissions that were built into the financial products (margin loans, managed funds and personal insurance products) were:

Year       commissions       admin fee      rebated*
2013       $1,197.66           $      0.00      $   598.33
2014       $   937.76           $      0.00      $   468.88
2015       $1,027.10           $      0.00      $   513.55
2016       $1,226.25           $    75.00      $   575.63
2017       $1,223.25           $    75.00      $   574.13
2018       $1,428.08           $    75.00      $   676.54
2019       $1,530.21           $    75.00      $   727.61
2020       $1,605.17           $    75.00      $   765.09
2021       $   309.11           $    75.00      $   117.06

* addendum - in the original version of this post I had accidentally put $596.33 as the amount rebated every year, rather than the actually figures.

Over nine years I had paid $10,484.59 in commissions, and had been rebated $5,106.82. Other product customers that had applied directly (without an adviser) or who had an adviser that didn't rebate part of the commissions, would have been $5,106.82 worse off!

But even after going through the process of finding and arranging for the commission rebate 'adviser', I still paid $5,467.77 for the following "services" (as listed in the annual Fee Disclosure Statements):

1. Getting a portion of commissions received by xxxxxx as your Broker for the products
2. Member account maintenance as requested and required.

At least I was getting something in exchange for the trailing commissions being charged - a lot of consumers had 'advisers' receiving trailing commissions that they had never even met (I remember my father, an airline pilot, complained once that there was an 'adviser' in Tasmania listed on his insurance policies, and he'd never had any communication at all with that 'adviser'), or who provided no ongoing service.

Prior to the Royal Commission revealing the extent to which Australian customers had been paying 'fees for no service' the existing regulations (requiring an annual Fee Disclosure Statement) were supposed to protect consumers by making them aware of the fees and commissions being paid. Except that, as in my case, if you had bought a product direct from the manufacturer you still paid the fees and commissions. And most advisers didn't rebate much (if any) the commissions paid to them.

Last year one of the reforms introduced due to the findings of the Royal Commission was that trailing commissions were banned for financial products, with the exception of life products (personal insurance policies). That is why the total commissions for 2021 dropped to only $309.11.

I have received correspondence for the non-life product companies stating that commissions had been turned off, and that the 'cost saving' would be passed on to me (the consumer) via lower costs (eg. lower margin interest rates, lower managed fund management fees etc.). Whether or not the benefit of eliminating commissions has been fully passed on to consumers is hard to know (I'd guess not, but I can't be bothered trying to work out how much has actually been passed on to me out of last year's reduction in commissions).

As I got registered as a financial planner (adviser) in late 2018 I could have filled in some forms to 'change adviser' to myself. I probably should have done so, as I would have received 80% of the commissions (my AFLS/broker group retains 20% of any fees and commissions I receive as their Authorised Representative). However, the amount after tax wasn't huge, and I would have probably needed to worry about providing myself with an annual 'Fee Disclosure Statement' (:

Now, that I'm (hopefully) about to get my first few paying clients as a financial adviser (and will need to process annual Fee Disclosure Statements etc), I may as well send in a 'change of adviser' form for my life insurance (Income Protection) policy, so that I will get 80% of the annual $310 trailing commission, rather than just 50%.

ps. Advisers (and insurance brokers) used to get 80% of the first year insurance premium, and then a 20% trailing commission. This was slowly reduced to 70%/20% in 2019, and 60%/20% from 2020 onwards. This lower commission regime for life products is one of the reasons (the others are the FASEA exam, the increased educational and CPD requirements and increased administrative burden of regulatory requirements) that many financial advisers/insurance brokers are leaving the 'industry'. There is also 10% GST added to all fees and commissions, and some 'clawback' provisions around the first year premium commission (if the policy is cancelled or cover amount reduced in the first few years).

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Wednesday, 7 July 2021

The difficulties with getting concessional superannuation contributions exactly 'right'

I've tried to contribute the maximum amount allowed as a concessionally taxed contribution in my superannuation each year. For the last few years that was $25,000 pa, but this FY it has been increased by 10% in line with CPI increases since the decision to regularly index was legislated.

As I had setup a 'salary sacrifice' arrangement to make additional employer contributions in exchange for a reduction in take-home pay, I didn't bother changing this when they introduced tax deductibility of contributions for employees. I had expected to wind up pretty close to the $25,000 'cap' for last FY, as I was expecting a small pay rise in Feb when my employer does their annual salary reviews (it turned out that this year was 0% increase), and aside from the normal SGL contributions my employer also makes some 'additional voluntary' contributions to reimburse part of the superannuation fund admin fees, and to pay for the standard amount of life, TPD and IP insurance offered as part of our superannuation plan (this is this reason why I currently have employer contributions going into the company's super scheme, while most of my super is sitting in our SMSF - the extra cost of having two super funds is more than offset by the benefit of the 'free' insurance cover).

Since the FY has ended I was able to log in to the superannuation fund online platform and check all the contributions made during the FY. All the expected contributions add up to a few hundred dollars over the $25,000 cap, which is fine as I would only have to pay extra tax equivalent to the difference between the concessional 15% tax charged on concessional contributions and my marginal tax rate. The excess is then reclassified as being a non-concessional contribution, but as I make hardly any non-concessional contributions I am well below the $100,000 annual limit for non-concessional super contributions.

However, for some weird reason one month my employer had paid three lots of the normal bi-monthly SGL contribution, which made my excess CC another $500 or so higher. What is worse is that they had a late monthly payment arrive in the super fund accounts in early July 2020 in addition to the normal contribution towards the end of July, and then this June the monthly payment was deposited exactly on 30 June. This meant that last FY I received 13 'monthly' SGL and salary sacrifice contributions, which added another couple of thousand dollars worth of 'excess concessional contributions'. This will mean I'll probably have to pay an extra $500 or so tax. But since they appear to have made an extra bi-monthly deposit I'm not too upset (although I suspect this 'extra' payment has something to do with the how they calculate the bi-monthly payments, and not really anything 'extra'). They also have already been contributing 10% SGL since 2018 instead of the required 9.5% (which only increased to 10% from 1 July). I just wish the 'monthly' contributions were deposited on a more regular schedule so it was possible to make a more accurate calculation of how much the annual concessional contributions total will be before the end of the FY has passed and it is too late to make any adjustments.

I'm actually an employee-appointed representative on the company superannuation committee, so I had mentioned the difficulty in working out how much 'spare' CC cap was left at the end of the FY (so one could make a 'top up' contribution and claim a tax deduction for it, to exactly meet the cap amount. The super fund rep told me to check the online transactions in late June to work out what the total contributions were -- but since the final contribution was only credited at close of business on 30 June that would have been too late to make any voluntary contribution anyhow!

I'm going to leave my current salary sacrifice arrangement in place for this FY - due to the increase in the CC cap I should have plenty of 'cap space' left next June (especially as they won't be able to squeeze in a 13th monthly contribution now that they are completely up to date), and I should be able to calculate the 'cap space' in the last week of June and work out how much I can deposit as a voluntary tax deductible super contribution to just hit the CC cap.

Aside from the concessional contributions I might also make a $100,000 non-concessional contribution into my Qsuper account, as I want roughly that amount (or more) in the QSuper account so I transfer it into their lifetime annuity product when I retire. Once my total super balance (TSB) exceeds the $1.7m TSB cap I won't be able to make any further non-concessional contributions into super (except if I make a 'downsize contribution' of up to $300K if/when we sell our home). Fortunately you can still make concessional contributions (SGL and salary sacrifice) after you reach the TBC.

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Saturday, 3 July 2021

Applying for the Tax Commissioner's Discretion

Normally you can't claim a loss (tax deduction) for a business that is only a hobby or lifestyle choice. Even if it has business-like characteristics, if it is unlikely to ever make a profit AND doesn't have a significant commercial purpose you can't offset the loss against your other income. In that situation you can only defer the loss until you make a profit from the business (at which time the carried forward losses can be offset against the profits to reduce the tax liability).

If you're a sole trader or an individual partner in a partnership, and you meet at least ONE of the non-commercial losses requirements ( the four 'standard tests'), you can offset your business losses against other assessable income (such as salary or investment income) in the same income year.

The non-commercial business loss requirements if you have income under $250,000 are:

1. your assessable business income is at least $20,000 in the income year, OR

2. your business has produced a profit in three out of the past five years (including the current year), OR

3. your business uses, or has an interest in, real property worth at least $500,000, and that property is used on a continuing basis in a business activity (this excludes your private residence and adjacent land), OR

4. your business uses certain other assets (excluding motor vehicles) worth at least $100,000 on a continuing basis.

Since my financial planning business hasn't generated any income yet, has not yet broken even or made a profit, and is run from a home-office, it doesn't pass any of the four 'standard tests' yet. So normally I would simply have to carry forward the losses until eventually the business makes more than $20,000 income. My original business plan had projected getting my first client in year 1 (2018/19), and then have enough clients during FY 2019/20 to 'break even'. Due to Covid-19 and repeated lockdowns I have yet to sign up my first paying client. Business costs have included paying $1,150 each month as an Authorised Representative of my dealer broker (and remain registered as a financial adviser), paying annual membership fee to the Financial Planning Association, paying university fees for the Master of Financial Planning degree I'm undertaking to meet the new FASEA educational requirements, and paying small amounts for marketing (my business website, and a couple of magazine ads). Overall, the annual business expenses were approximately:

2018-19: $25,095

2019-20: $29,271

2020-21: $25,637

and projected expenses for the current FY:

2021-22: $22,245 (slightly lower as I finish my uni degree this year, but will upgrade from student to full membership of the Association of Financial Advisers). At this stage I'm expecting to sign up my first paying clients during 2021-22, although the amount of income will depend on the number and nature of the clients.

I'm a bit behind in lodging my annual tax returns, so it would be nice to claim a deduction for these expenses, but I normally wouldn't be able to claim a deduction as I haven't meet any one of the four 'standard tests'.

However, if you are a sole trader and have income under $250,000 you can apply for the tax "commissioner's discretion" to allow the losses from the business activity to be offset against your other income. There are only two reasons for obtaining the discretion:

1. the business activity has commenced and has a standard lead-time before it can pass one of the four standard tests or produce a taxable profit. But this normally only applies where an inherent characteristic of the business prevents making a profit - for example the time taken after planting a new vineyard due to the nature of grape growing. It does NOT include situations starting out small or building up a client base. So no chance of my business qualifying on this basis.

2. special circumstances such as drought, flood, bushfire or other circumstance outside your control that have prevented the activity from passing one of the four tests. This is where I *might* be able to get the commissioner's discretion, due to the impact of Covid-19 preventing me from producing a tax profit as yet.

So, I've applied for the tax commissioner's discretion regarding non-commercial business losses for 2018-19, 2019-20, 2020-21, and 2021-22. We'll see what he/she decides.

I also have to lodge a backlog of annual BAS (business activity statements), which should at least provide a refund of GST paid on inputs (the fees paid to my dealer broker, ads etc.) as I have had no business outputs (SOAs) subject to GST.

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Thursday, 1 July 2021

Net Worth: JUN 2021

My monthly NW estimate has been updated in NetWorthShare for the end of June. Chart is in the side-bar.

Stocks and managed fund investments increased this month, up $10,941 (+3.20%) to have  $352,394 net equity in my geared share portfolios. This is similar to what is was back in 2007 before the GFC, but I have much lower gearing nowadays.

Our estimated house price for May (my half) increased by $24,875 (2.69%) to $949,902. This increase seems to confirm that last month's sudden jump was actually indicative of the strong property market in Sydney, rather than being an aberration.

The value of my retirement savings rose during June, to $1,454,487 (up $36,609 or 2.58%). I'm on track to reach the 'transfer balance cap' (maximum amount that can be moved from 'accumulation' to 'retirement' phase) before I hit 65 (when I'll be able to make the transfer without retiring). The TBC is currently $1.7m (increased in line with CPI on 1 July).

The value of my precious metals declined slightly during June, to $23,457 (down $920 or -3.77%).

Overall, my estimated NW reached $3,079,203 by the end of June - up by a healthy $71,776 (2.39%).

I continue to include the value of the 'other real restate' at cost in my NW calculation, but the lake house is likely to have increased from $337,000 to around $676,725 since I 'bought' it from my parents, and the value of the off-the-plan unit is likely to have increased from the purchase cost of $1m + $40,452 stamp duty, to $1,160,695 - but I'll wait until I get an official valuation done when the unit construction is completed in 2023 before I start tracking changes in the unit's value as part of my NW estimate.

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End of JUN 2021 "12% solution" portfolio changes

For the end of June the emailed trading signal is to invest 60% in QQQ and 40% in TLT. As this is a change in allocation from last month, it requires selling off both SPY and JNK and buying 60% QQQ and 40% TLT. When the market is open (Thursday night my time) my monthly trades will therefore be:

SELL SPY : SPDR S&P 500 Index Fund 

SELL JNK : SPDR Barclays High_yield Corporate Bond Fund

BUY QQQ : Powershares Nasdaq-100 Index Fund

BUY TLT : iShares 20+ Year Long-Term Treasury Bond Fund

My current account balance is A$12,164.40 and aside from the "12% solution" holdings I still have A$581.50 of the ASIA ETF, so the actual investment amounts for this month will be around A$6950 (60%) QQQ and A$4600 (40%) TLT, but the exact amount trading will be rounded down to the nearest whole number quantity of the ETFs.

According to the monthly newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance is now +13.7%. My YTD performance is only 10.43% due to a combination of timing differences, buy/sell spread, trading costs, not having an exact 60:40 asset allocation (due to rounding down to the nearest tradeable quantity) and the fact the my '12% solution' portfolio is on my IG trading account which also includes some ASIA (Betashares Asia Technology Tigers ETF).

I didn't get around to closing out my positions and shutting down the IG account before the end of June (Australian FY end), so I'll probably keep doing these monthly trades for another 12 months and see how things go. It's really not cost effective to do the required monthly trades with such a small portfolio using the IG trading platform. To do this properly would require either a larger financial committment (say a portfolio amount of $100,000+) or else find a trading platform that has suitable ETFs available to trade and $0 trade fees and no account keeping fee. Doing monthly trades also means any capital gains will be taxed at my marginal tax rate (you only get the 50% CGT discount for assets held for more than 12 months), so this would probably also be something better done inside an SMSF where the tax rate applied to short term capital gains is the same as long term capital gains, as is only 10%.

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Saturday, 26 June 2021

Back into lockdown we go

After several months of relative normality since the North Beaches region of Sydney was in lockdown (I was still working from home (by choice), but DS1 was going to his new job in the city on most days, DS2 was attending school and sports training and events, and DW was working PT and going out and about socializing) it looks like the whole of Sydney will soon be in another period of lockdown (only going out for work if you can't work from home, and staying at home except for shopping for food, exercise (subject to limits on how far from home you're allowed and the max size of groups exercising out-of-doors), and to get medical care etc.). This latest outbreak started from a single limousine driver being exposed to the delta variant of Covid-19 from an international aircrew, and from there it spread to family members and the local community in the Eastern suburbs of Sydney. One 'super spreader' event (a party where ten of the thirty guests caught Covid-19) and some community transmission and we're now in the situation where new cases numbered 29 in the past 24 hours, and some of those cases occurred outside of the area already in lockdown. Given the more contagious nature of the delta variant I suspect we'll see most of greater Sydney put into lockdown by the end of next week.

(** update: just a few hours after I wrote this the entire Greater Sydney area was put into two weeks lockdown for the next 14 days **)

Unfortunately the roll-out of the vaccination program has been a quite slow in Australia. The government has placed orders for five different vaccines last year, but two didn't work out, and our biggest supply was for the AstraZeneca vaccine that can be produced locally, but which has turned out to have some more serious potential side-effects than was initially known. The Pfizer mRNA vaccine seems to be a better option, but limited supplies initially meant it was only available to those aged under 40 (where this risk of blood clot complications from the AZ vaccination was greater than the risk of Covid-19). Subsequently that was raised to under 50, and recently those under 60 are eligible for the Pfizer vaccine.

But being eligible doesn't mean you can get vaccinated immediately. DW and myself are both under 60 (until the end of this year!) so we've booked in for the Pfizer vaccine. The earliest available date for the first injection was in September, so we won't be getting the second jab (and likely have immunity to Covid-19) until late October.

Meanwhile community spread of Covid-19 and subsequent lock-downs remains 'situation normal', probably until the end of the year when sufficient numbers of people have been fully vaccinated to slow the rate of spread of any future outbreaks.

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Thursday, 24 June 2021

Millionaires of Australia

In an annual study produced by investment bank Credit Suisse the median level wealth for Australian adults was calculated to be $A315,380, pulling ahead of previous #1  country - Belgium. However, Australia 'only' ranked fourth in mean wealth (at $A640,852 per adult) due to averages being skewed by a small number of extremely wealthy people in the top three countries - US, Hong Kong and Switzerland (which conversely means that Australia would be considered more egalitarian than those countries).

Currently 9.4 per cent of Australian adults are millionaires, and ranks behind only Switzerland (15 per cent) for millionaire density, and ahead of the United States (with 8.8 per cent).

The report predicts that over the next four years the number of millionaires in Australia will rise by 70 per cent to 3.1 million, which is just below one quarter of the adult population! The calculations included the value of owner-occupied houses, but also took into account an individual’s debt. So it measures net wealth rather than simply gross assets.

In general the international growth in the number of millionaires is quite high, with the report predicting that the number of millionaires will swell by 49 per cent across the board during the next four years. Australia will add to its tally of millionaires faster than the UK (where numbers are predicted to rise by 50 per cent) and the US (where millionaire numbers are expected to increase by 28 per cent).

With the title 'millionaire' rapidly losing its ability to define who can be considered 'rich', a new measure of 'rich' is the ‘very high net worth individual’ (VHNMI) which consists of those people having $US50 million ($A66 million) net wealth. Australia currently has 3262 VHNMIs.

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Wednesday, 2 June 2021

Perth Mint Unallocated bullion purchase - May

My second monthly savings plan deposit (I increased the amount from $100/mo to $200/mo in May) went across to my Perth Mint online depository account on the 15th May. The scheduled bullion purchases ($100 each of gold and silver) were automatically processed at the close of business pricing on the 1st business day of June.

This month 0.040 troy ounces of gold were purchased for A$99.29 (including the $0.50 transaction fee), and 2.682 troy ounces of silver were purchase for A$100.00 (including the $0.50 transaction fee).

Total unallocated bullion holding are now:

gold: 0.083 troy ounces

silver: 2.682 troy ounces

The residual A$1.07 cash balance will carry towards next month's bullion purchases.

In my monthly NW calculations my bullion holdings are split into two components - the bullion value of my proof gold coin collection is recorded under 'other assets' and is probably undervalued as these proof coin sets were limited qty and generally have higher numismatic value than bullion value.

My Perth Mint bullion holding is valued at the spot bid price at the end of the month, and is currently included in my geared share portfolio valuation (I included it there as the first month was only $100 sitting in the cash account pending the first bullion purchase). I might remove it from the share portfolio calculation and add it to my gold coin collection next month, so that all my 'bullion' holdings are grouped together in my monthly NW reporting.

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Tuesday, 1 June 2021

Net Worth: MAY 2021

My monthly NW estimate has been updated in NetWorthShare for the end of May. Chart is in the side-bar.

Stocks and managed fund investments decreased slightly this month, down $2,121 (-0.62%) to have  $341,453 net equity in my geared share portfolios.

Our estimated house price for May (my half) increased by $58,041 (6.69%) to $925,027. While the Sydney house market has been rising strongly, this monthly gain seems a bit high. Possibly due to the particular mix of sales in our suburb making the median price bounce around (in previous months our suburb median price appreciation had seemed rather subdued compared to the overall Sydney housing market).

The value of my retirement savings rose during May, to $1,417,878 (up $25,704 or 1.85%). 

The value of my precious metals rose significantly during May, to $24,377 (up $1,432 or 6.24%). 

Overall, my NW reached $3,007,427 by the end of May - up by a healthy $83,427 (2.85%).

I continue to include the value of the 'other real restate' (the lake house I 'bought' from my parents, and the off-the-plan unit I 'bought' with a 10% deposit and paid stamp duty on) at 'cost'. The portfolio loan used to pay the deposit on the unit and the stamp duty (and the remaining mortgage I'll need to obtain upon settlement in 2023) is listed under 'other mortgages'. In reality the value of the lake house has increased since I 'bought' it, but I will never realize that capital gain as I intend to leave the lake house to my sons, and although the value of the off-the-plan unit is likely to be higher than 'cost' (based on movement in unit sales prices in that suburb since I bought) I'll wait until I get a valuation done when the unit construction is completed before I start tracking changes in the unit's value.

I did indeed become a tri-millionaire before the end of the financial year (as I mooted last month might occur), but it could easily drop again. I remember when I first became a 'millionaire' prior to the GFC, only to see my NW plunge during 2008/9. It is also sobering to remember that Australia now has over 100 billionaires - so being a billionaire is similar to the level of relative wealth a 'millionaire' had back in the days of the Great Gatsby,  and being a 'millionaire' these days simply means you are comfortably middle class.

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Sunday, 30 May 2021

The financial benefits of Medicare in Australia - a personal example

Medicare is Australia’s universal health insurance scheme. It guarantees all Australians (and some overseas visitors) access to a wide range of health and hospital services at low or no cost. Australians make more than 150 million visits to a GP every year. Medicare — the public health insurance system — helps pay for those visits, hospital treatments, and prescription medicines (that are on the PBS list).

For example, I've had severe atopic dermatitis (eczema) since I was a young child. Atopic dermatitis is long lasting (chronic) and tends to flare periodically. It may be accompanied by asthma or hay fever (I had asthma as a child but grew out of it, but I still have severe allergies such as dust mites, mould, rye grass etc). No cure has been found for atopic dermatitis. In my case it also resulted in two bouts of Cellulitis that could have killed me.

The traditional treatments include topical corticosteroids (creams and ointments) and oral prednisone or prednisolone for the most severe 'flare-ups', although often the disease relapses once medication is discontinued. So for the past fifty or so years I've benefitted from paying the basic PBS (Pharmaceutical Benefits Scheme) amount (currently around $40 per prescription) rather than the full cost of prescribed medications.

As DS1 had even more severe eczema than myself (he was hospitalized several times as an infant and young child for both eczema flare-ups and severe asthma), and DS2 has eczema and asthma similar to what I had as a child, we have still ended up paying several thousand dollars each year for visits to our GP and specialists (partly refunded via Medicare) and for prescription medications. But a large part of the costs was covered by Medicare, as was the cost of public hospital treatments. We also currently have private medical insurance (paid for by my employer) which comes in handy for 'elective' hospital treatments (such as cataract operations etc.), dental care, and has also reimbursed us for ambulance costs (which aren't covered by Medicare) and the few occasions we have used private hospital accommodation (such as for my cataract operations).

Recently a new biological treatment for severe eczema called Dupixent came onto the market. Rather than being a topical treatment (applied to the external skin) it is an injected human monoclonal antibody that inhibits signaling of the interleukin IL-4 and IL-14 which are linked to the subcutaneous inflammation that causes severe eczema symptoms. This medication is delivered via a single injection every fortnight, but before it was added to the PBS schedule each injection cost around $750! My immunologist specialist had told me that a few of his other patients had been on Duprixent - either paying the full cost 'out of pocket' (around A$22,000 pa), or were covered by an overseas medical insurance policy that included this treatment. However, even though I earn a decent wage, paying $22,000 pa made this treatment effectively unaffordable.

Dupixent had been evaluated as effective by the Australian Therapeutic Goods Administration (TGA) several years ago, but had twice been rejected for inclusion on the PBS registry due to the cost (and the limited budget allocation for PBS). Fortunately it turned out to be 'third time lucky' and this medication was finally added to the PBS list on 1 March 2021, at an estimated cost of A$270 million pa. It is estimated that this medicine will be of benefit to more than 3,600 Australians. Turns out that I'm one of them, with my specialist getting approval and writing me a prescription for Duprixent on Friday. I'll collect the first batch of medicine from my local pharmacy next week and I have another appointment with my specialist in a fortnight to get the initial two injections and to be instructed on how to self-inject the single injection required every fortnight.

Hopefully with this new treatment my eczema will significantly improve - clinical trials showed that around 50% of patients had their eczema improve by 75% after 16 weeks of treatment, and around 75% of patients after one year. Switching from taking immunosuppressant medication will also remove the need to have regular blood tests, and will remove the increased risk of skin cancer that the immunosuppressant treatments have.

From a financial point of view, I'll be joining the ranks of Australian tax-payers that actually pay no net tax (receive more value in benefits received than they pay in tax) as the income tax on my salary is around A$28,000 pa and the value of the PBS subsidy for Duprixent will be worth around A$22,000 pa. When added to the benefit of DS2 receiving free pubic school education at a selective High School I'll be getting more back in taxpayer-funded benefits than I am paying out in income tax. Long live socialized health and education!

Once I reach pension age (66) I may also be able to get a Commonwealth Seniors Health Card that would reduce the cost of PBS prescriptions from $41.30 to only $6.60. While I won't ever qualify for the Age Pension (due to the Asset Test Threshold for a partial pension being just over A$1 million of assessable assets for a home-owning couple), there is only an deemed income cap of A$89,920 for a couple to be able to obtain the Seniors Health Card. There is no assets test for the Health Card. Although we will hopefully receive more than A$90K pa in actual income during our retirement, the deemed income will be significantly lower as the deeming rate is 2.25%. This means we would have to have more than $4 million of financial assets (excluding the family home) before we would be ineligible for the Seniors Health Card. In any case, whether I pay $41.30 or $6.60 per prescription will make little difference. 

From the Federal budget point of view, the fact that the Regeneron patent on Dupixent will expire on 27 October 2029 means that the cost of having this medication on the PBS list should greatly reduce once it goes 'off-patent' as other manufacturers will then be able to produce 'generic' versions of the medication at a much lower cost to the Federal government. There are apparently also other similar biologic treatments in the pipe-line, so the cost of Dupixent may also fall due to competition before the patent expires.

Side note: apparently in the US 82% of medical insurance plans cover Dupixent at a co-pay of $60-$125. So the out-of-pocket cost of Dupixent would end up similar to our cost on Medicare (but the average cost of health insurance in the US is around $6,000 pa, whereas the Medicare Levy in Australia is only 1-1.5% for medium and high income earners who do not have private hospital cover). Around 8% of people in the US have no health insurance.

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Saturday, 29 May 2021

End of MAY 2021 "12% solution" portfolio changes

For the end of May the emailed trading signal is to invest 60% in SPY and 40% in JNK. As this is a change in allocation from last month, it requires selling MDY and buying SPY. When the market is open (Monday night my time) my monthly trade will therefore be:

SELL MDY : SPDR S&P MidCap 400 Index Fund

BUY SPY : SPDR S&P 500 Index Fund 

HOLD JNK : SPDR Barclays High_yield Corporate Bond Fund

According to the monthly newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance is now +11.2%. My YTD performance is only 6.78% due to a combination of timing differences, buy/sell spread, trading costs, not having an exact 60:40 asset allocation (due to rounding down to the nearest tradeable quantity) and the fact the my '12% solution' portfolio is on my IG trading account which also includes some ASIA (Betshares Asia Technology Tigers ETF) which has been trending down in recent months.

I suspect that due to the small value of this portfolio (around $10,000) the trading costs and account keeping fees will be a massive drag on my actual ROI compared to the 'model portfolio'. It would probably be better to implement the "12% solution" via an account that has zero trading costs and no account keeping fees, but I can't be bothered opening yet another trading account for what is basically an experiment. I'll probably close all positions at the end of June, close the IG account and repay some of my portfolio loan, as the potential profit doesn't justify the extra calculations I'll need to do for my annual tax return for this account. 

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Wednesday, 12 May 2021

Budget projections bad news for my off-the-plan apartment investment

While unit (apartment) prices in the suburb where I bought my $1m 'off-the-plan' unit have remained fairly steady during the pandemic, last night's federal budget projections regarding the resumption of immigration to Australia mean that I'm unlikely to see much increase in the unit's value before I need have to take out a mortgage when the unit construction is completed in early 2023. I had hoped that international travel and migration levels might already be getting back to 'normal' by the end of next year, but the budget forecasts have cut the population forecast for 2023 by 41,000 compared to the figure in last October's delayed budget. And NSW is expected to have a net population decrease of 20,000 or more each year until 2023-24.

So it looks like rental yields and price appreciation will be weak for my investment unit at least 2025. While I'm still working full-time and can benefit from negative gearing that won't be too much of a problem, but it would have nice for the unit valuation to exceed my purchase price when construction is completed, and for the cashflow deficit to be as small as possible.

Immigration levels might yet pick up faster than predicted in this latest forecast, but they could also be worse than anticipated. In the longer term, hopefully the current fall in new unit approvals (down 26% Y-o-Y to near decade lows) will mean a more favourable demand:supply ratio once immigration levels eventually return to normal.

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Monday, 10 May 2021

Good news and bad news

On a positive note, the ASX200 closed at an all-time high of 7172.8, finally surpassing the previous closing high set in Feb 2020 (just before the pandemic's impact), and within 25 points of the all-time intraday high.

On a less happy note, a few days after Chinese Foreign Ministry spokesman Zhao Lijian accused Australia of "operating with a Cold War mentality against China" the Chinese State-run outlet The Global Times published an editorial from its editor-in-chief Hu Xijin that included the suggestion that "China make a plan to impose retaliatory punishment against Australia once it militarily interferes in the cross-Straits situation" and that "The plan should include long-range strikes on the military facilities and relevant key facilities on Australian soil if it really sends its troops to China’s offshore areas and combats against the PLA (People’s Liberation Army)." Of course an editorial in a Chinese state-controlled newspaper isn't exactly the same as a speech by a sitting Australian politician, but its a little bit of the 'pot calling the kettle black'.

Meanwhile China continues to buy more than 60% of its imported iron ore from Australia, and switching to an alternative supply (such as a new mine at Simandou in West Africa) could take 5-10 years (or be very expensive if China just went shopping to existing global suppliers for additional iron ore). In that context I'm not sure that long-range missile strikes on Australian soil would do China all that much good, especially if they were in the middle of an invasion of a Taiwan supported by the USA and Japan at the time.

Hopefully we can get back to the pretense that the 'one China' policy means (to us) that Taiwan will remain 'Chinese' without losing its democratic self-government, while at the same time meaning (to Beijing) that Taiwan will eventually/inevitably come under direct party control. Unfortunately the rapid build-up of Chinese military capability, combined with their future demographics and the leader's advancing years, means that the prospects of 'direct action' to 'reunite' Taiwan with mainland China seems to be growing each year.

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Friday, 7 May 2021

Decided to increase my precious metals regular savings plan and diversify metals

As I already have a regular monthly transfer of cash into my Perth Mint Depository online account, and the first monthly $100 gold purchase was processed as expected, I decided to increase my monthly transfer to $200, and to setup a second automatic bullion purchase for $100 of silver each month. The change increases the annual allocation to $2,400 (which is still only about 0.08% of my NW, or about 8% of my overall savings rate). As there is a flat 0.50% transaction fee it doesn't increase costs to make two $100 purchases rather than a single $200 purchase each month, and diversifying across both gold and silver means that I'm exposed to 'precious metals' as an inflation hedge without caring if the gold:silver price ratio varies over time (which it does).

It is slightly more expensive to invest in silver than gold in terms of the buy/sell spread (about .5% for gold and about 1.35% for silver), but  investing in a combination of gold and silver the average buy/sell spread of 0.9% + 1% 'round trip' transaction fees isn't too bad compared to other investments. 

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Thursday, 6 May 2021

My 1 Amazon CFD was closed out last night

My conservative trailing stop-loss on my Amazon CFD position closed me out last night when Amazon shares continued the previous day's weakness. I'll wait a while before going back in, as the price has dipped below the apparent 'support' level shown in latter weeks of  April, so may well continue down to around 3,000 - which would be close to the bottom of the horizontal band its been in since last August. Doesn't seem to be any great upward momentum at the moment, so I'm not in a rush to reopen a long position in Amazon, although I would like to get back in at some stage for the long haul.

My ishares MSCI Australia Index CFDs are in the black still. That position will remain open unless there is a sufficient market correction for the trailing stop-loss to close them out.

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Wednesday, 5 May 2021

Global warming thought of the day

To take my mind off the worries of Covid-19 pandemics, potential stock market bubbles bursting, and rampant economic stimulus measures leading to high inflation, I though I'd just grab the latest public data on carbon emissions, average global surface air temperature and atmospheric CO2 concentration to see for myself what the data currently shows.

1. Global warming is currently underway, and the obvious culprit is carbon emissions.

Yes, you can make up alternate explanations involving solar activity, interstellar dust clouds, or little green men, but when combined with other effects (such as increasing oceanic acidity) it seems obvious that the driver for the observed rise in global average temperature is the rise in atmospheric greenhouse gas concentrations.


2. We all have to do our bit, but China ain't helping much

The world's scientist were well aware of the potential for rising carbon emissions to cause global warming due to the 'greenhouse effect' back in the 1980s (I actually studied this as part of an environmental chemistry elective I took for my BAppSc (Applied Chemistry) degree at UTS back in the early 1980's). And by 2000 the world's governments were getting serious about starting to tackle the issue. Hasn't been very effective so far, but at least most developed countries pledged to reduce the total CO2 emissions, and many are now aiming to stop net emissions entirely within the next decade or two (i.e. become 'carbon neutral'). Except that in the Paris Agreements China only agreed to stop increasing its emissions by 2030. Given the fact that China only produced 8% of global emissions in 1980, 14% by 2000, and is currently producing around 28% of global CO2 emissions this really is a bigger problem that whether or not Australia gets to 'carbon neutral' by 2040, 2050 or whenever. What China does (or doesn't) do about its carbon emissions will determine whether our great-grandchildren are living in a world that has a less hospitable environment that today, or one that is facing an existential climate crisis.

Unfortunately China seems more interested in 'reunifying' by invading Taiwan that it is in reducing greenhouse gas emissions. Hopefully in 2030 China hasn't invaded Taiwan and has started to reduce its carbon emissions (not just promise a per GDP emission reduction).

3. How bad is it really?

A simple projection of the rate of atmospheric CO2 concentration and global average surface air temperature shows that we are likely to hit 500 ppm CO2 by 2060, and for the global average surface air temperature to have risen another 1 degree Celcius by around 2070. So the amount of change that has happened since I was born will have doubled (roughly) by 2060-70. That will have some significant impacts (mostly bad, but a few good, and varying a lot by geographic location), but its what will happen by 2100 and beyond that is the real cause for concern (unless you don't give a rat's about what happens to the planet once you are dead).

It also seems that there is a bit of a 'lag' between rising CO2 concentration in the atmosphere and rising temperatures and sea levels (currently rising about 3mm pa). So temperature rise could continue long after we've achieved global 'carbon neutrality'. Never mention possible (theoretical) 'tipping points' about run-away greenhouse effects coming into play (such as release of greenhouse gases if the Siberian perma frost or seafloor icy methan hydrates are released due to rising temperatures), or the eventual melting of the Antarctic continental ice sheets.


All in all not very cheerful news. I'll go back to worrying about whether or not to get the AstraZeneca Covid-19 vaccination or wait until the Pfizer vaccine becomes available to those over 50...

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Tuesday, 4 May 2021

Referral code for $50 bonus from peer-to-peer lender Plenti

If anyone in Australia is thinking about investing in peer-to-peer lending, the lender Plenti is currently (until 30 Nov 2021) offering a $50 bonus if you invest $1,000 in their 5-year income lending market. (I'd also receive a $50 bonus BTW) via this link.

I currently have $3,227.57 invested with Plenti - $1,177.98 in the 1-month rolling investment, and $2,049.87 in the 5-year income investment. I've earned $432.72 in interest since I first started investing in Plenti bac in March 2018. As I write this post, the interest rate available to lenders on the 1-month investment is 1.5% and for the 5-year income investment is 4.0%.

Be sure to read the product PDS before making any investment decision.

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My first Perth Mint gold purchase via online depository account was processed today

The first $100 monthly cash transfer into my depository account was processed in the middle of last month, and my regular savings plan of a $100 gold purchase each month was processed today, being the first business day of the month.

I checked my account online at 6pm (Sydney time) and it was still only showing the $100 cash balance, but I later received an email (sent at 8:50pm) stating that the order had been 'completed' at 16:00:02, and then a second email that had also been sent at 8:50pm stating that the order had been 'processed and delivered' at 16:43:02. I had to log in to my online account to view and download the order confirmation pdf, which showed that 0.043 toz had been bought for A$2,305.54, costing $99.14 and a $0.50 transaction fee.

It looks like the available cash balance is used to purchase a multiple of 0.001 toz, rather than convert $99.50 into an amount of gold with too many decimal places. I expect the left over 36c will go towards next month's bullion transaction.

Allowing for the time difference between Sydney and Perth, it looks like the transaction was processed promptly at the close of the first business day of the month. I'm not exactly sure where the $2,305.54 price comes from, as the latest spot asking price showing on their website is A$2,304.58 as at 5:00 pm AWST. I presume it was the spot asking price at the exact time the transaction was processed.

The 0.043 toz is slightly less than 1/20th of an ounce. As an example of how much premium you would pay for buying physical gold coins in such small quantities, the 1/20th gold coin is currently priced at $167.08. So a 0.043 toz as a gold coin would have cost around $143.69, rather than $99.64. I have a few 0.5g (0.0161 toz) gold coins that I bought many years ago (on 'sale' so the premium to the spot price was slightly reduced), so I can easily envisage my gold purchase each month being roughly equivalent to buying three of those tiny gold coins.

There is a strange mystique to gold that makes purchasing even a tiny amount 'on paper' somehow seem like more real wealth than buying a similar value of stocks, mutual funds or CFDs. A bit like how I used to enjoy seeing my bank balance updated in a physical passbook when I was a kid. But I'm not about to liquidate my entire NW and purchase 25 50-oz bars of gold!

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Monday, 3 May 2021

Net Worth: APR 2021

My monthly NW estimate has been updated in NetWorthShare for the end of April. 

Stocks and managed fund investments gained a healthy amount this month, rising $8,618 (2.57%) to have  $343,574 net equity in my geared share portfolios.

Our estimated house price for April (my half) increased by $14,510 (1.70%) to $866,986. The strength in the housing market continues unabated, but the rate of gain has started to slow as affordability issues reduce the pool of prospective buyers. 

The value of my retirement savings rose significantly during April, to $1,392,174 (up $43,385 or 3.22%). I opened a new super accumulation account with QSuper and intend to make undeducted (after tax) contributions into that account before I hit the total super balance cap ($1.7M for 2021-22) which will reduce my non-concessional contributions cap from $110,000 pa to nil.

I also started tracking my precious metals investments (gold and silver proof coin sets, bullion bars etc.) under 'other assets' as I have started regular investment of $100/mo into gold via my Perth Mint Depository account. Based on the spot gold and silver price and purity of the various coins, the April valuation was $22,945. 

Overall, my NW reached $2,924,099 by the end of April - up by a healthy $89,727 (3.17%). Excluding the one-off impact of including my precious metals holdings for the first time, the monthly gain would have been $66,782 (2.36%).

It looks possible that my NW could hit $3M by the end of the FY rather than the end of 2021 calendar year, but it reminds me of when I first became a 'millionaire' in 2006, only to see my NW plunge by >40% during the GFC, so I'm actually feeling a bit wary. Especially given the fact the the S&P 500 has more than doubled over the past five years while at the same time governments around the world have incurred massive amounts of debt in order to provide economic stimulus during the pandemic.

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