Thursday 24 March 2022

Bought some Oil (OOO)

I keeping with the war profiteering theme, I decided to buy into an oil ETF on my margin lending account. Of course oil would have been a great investment back in 2020 when it bottomed out at $25 a barrel, and with the current price around $120 being close to the previous peak it certainly doesn't seem cheap. But, given the likely impact of the Russian invasion of Ukraine on Russian oil sales and then on their oil production, it seems like oil could remain in an uptrend for quite a while yet.

Apparently the exit of western companies from Russia will leave a large gap in the expertise required to continue to operate their eastern oil fields that sell product to China. And in the west, sanctions and war impact on tanker access to Russian ports will prevent production that normally flows to Europe being sold elsewhere. In the worst case production may have to be scaled down to the extent that it has impacts on the pipeline and oil field infrastructure in Siberia, which would take years to reverse.

Anyhow, there seems more potential for global oil supplies to be restricted further rather than getting back to 'normal' in the short term, so the oil price could continue to rise. This may be a short term trend rather than the longer term impact on food production and prices, but this is probably quite a speculative play.

I bought about $10,000 worth of OOO.AX using some of my remaining margin loan capacity. The BetaShares Crude Oil Index ETF-Currency Hedged (synthetic) OOO.AX enables investors to gain exposure to the performance of the crude oil included in the S S&P GSCI Crude Oil Index Excess Return without the need to invest in the futures market or take physical delivery of the commodities.

Overall my Commsec margin loan portfolio is now quite highly geared and risky (with fairly low maximum LVRs applying to the three investments):

Investment                      Units        Price        Value            LVR

CFS Geared Global Share Fund    38,898       $1.5759      $61,299.88       35%

BETASHARES GLB AGRICULTURE ETF   1,200       $8.40        $10,080.00       60%

BETASHARES CRUDE OIL INDEX ETF   1,000       $9.95        $ 9,950.00       35%

The value of these holdings is likely to be very volatile, so I will have to keep an eye out and be prepared to close out the positions if things start to go pear-shaped. Another risk is that Commsec could suddenly change the LVR on one of more of these risky investments, which could trigger a margin call even if the unit price doesn't drop too much.

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Tuesday 22 March 2022

Bought some FOOD.AX

Although I had sold off most of my direct share investments recently (to simplify my record keeping and tax returns) I couldn't resist having a bit of a bet that the Russian invasion of Ukraine will create global food shortages in the short-medium term, due to the fact that Russia and Ukraine both export a large fraction of the world's food and fertilizer supplies. Both countries will suffer reduced production and exports due to the war - Ukraine due to the direct impact of the invasion, and Russia due to the economic sanctions imposed on it in response.

So, I just placed an order for about $10,000 of a global agricultural index fund listed on the Australian stock market. The investment objective of the BetaShares Global Agriculture Companies ETF - Currency Hedged (FOOD.AX) is to provide an investment return that aims to track the performance of the Nasdaq Global ex-Australia Agriculture Companies Hedged AUD Index, before taking into account fees and expenses.

There has already been a substantial run-up in the stock price since the start of the war, and it has risen another 4% since I first thought about buying the stock on Friday. But I'm reasonably confident there is potential to outperform relative to the broader stock market over the next 1-2 years. The amount of any potential gain or loss is rather trivial  on a $10,000 investment (I only had about $15,000 lending capacity on my margin loan account, and didn't want to go 'all in' and risk a margin call), but it will be interesting to see if the price moves as I expect over the next 1-2 years.

I do feel a bit guilty about potentially making a profit as a result of a war, even if indirectly. At least I made a donation to a Ukraine relief charity last month, so 'on balance' I don't feel too morally bankrupt making this investment.

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Tuesday 1 March 2022

Net Worth: Feb 2022

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

Stocks and managed fund investments increased slightly during this past month, up $3,999 (1.37%) to have $296,660 net equity in my geared share portfolios. This change is affected by some cash movements noted below. I have no clear view of how stock markets may perform over the next 1, 5, 10 years - there appear to be plenty of potential risks (aging demographics in many countries, increasing inflation, hence increasing cash rates, reduction in globalization, war in Ukraine, war spreading beyond Ukraine, conflict over Taiwan, impacts of global warming (direct effects, and/or costs of mitigation of impacts or decarbonization of economies), ongoing pandemic impacts, etc.) but the timing and scale of their impacts are unclear.

Our estimated house price for February (my half) rose $10,634 (0.90%) to $1,163,409. Prices rises have dropped off rapidly, with the overall Sydney market declining slightly in February, and our suburb showing little price appreciation during the month.

The value of my retirement savings decreased again during February to $1,450,028 (down -$32,094 or -2.17%) as it is invested in the Vanguard High Growth fund, which tracked the decline in US and Australian stock markets during February. Overall, my estimated NW decreased to $3,245,647 by the end of February - down by $16,685 (-0.51%).

I received an insurance payment for the replacement value of two firearms that were damaged beyond repair when my garage was inundated during a severe storm a few years ago. This added $9,035 to my 'Stocks' figure (as my bank account balance is included in the overall share portfolio valuation). On the other hand a quarterly PAYG tax instalment of $9,744was paid from our SMSF bank account at the end of February, reducing our SMSF valuation and hence my Retirement savings figure (my share of our SMSF is currently around 71%). I also decided to make a spouse superannuation contribution of $3,000 into DWs super - I will get an 18% tax rebate ($540) on the contribution.

My father received an inheritance of around $25,000 from his Aunt who passed away last year at age 104. He is in the process of renovating his farm property at the moment (intending to sell it and move into the lake house he gave me several years ago, where I pay the rates and insurance, so my parents living expenses should reduce considerably). I had lent him $5,000 last year to pay for some of the renovations, so he used part of his inheritance money to repay me, which also added to my Stocks figure. Hopefully they sell the property before rural real estate prices in NSW start to decline.

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