Wednesday, 8 March 2023

Another monthly RBA meeting, another interest rate hike

The RBA decided to raise interest rates by another 0.25% on March 8. I had hoped (due to my vested interest in interest rates due to my mortgage) that declines in US inflation and energy prices (and some signs of inflation having 'peaked' in Australia) might make the RBA 'pause' for a month or two, rather than keeping hiking until the 'inflation dragon' is well and truly dead. A forlorn hope.

I can understand why the RBA wants to make sure inflation doesn't "get out of control" as the 1970s proved that once high inflation is built into employee expectations a cycle of wage rises (and the industrial action required to get them) can become entrenched. But higher household indebtedness levels probably make the Australian economy a lot more sensitive to relatively small interest rate rises than in previous decades, and there is little evidence of a break out in wage growth as yet (possibly due to much lower levels of union membership now compared to back in the 1970s, and legislative changes that have made many of the industrial actions that were used to pursue wage claims illegal).

What I don't understand is why the RBA has shown such a sustained reaction to inflation being above their 'target' range of 2%-3%, but showed practically no response at all for many years when inflation persisted to remain well below this target band.

There also seems to be a significant difference in how quickly the RBA will increase rates compared to have quickly it will lower them. Combined with the 'lag' of at least a quarter after a trend in CPI becomes evident before the RBA changes tack, and there seems a real risk that rates could be held "too high for too long" and push Australia into a recession.

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Wednesday, 1 March 2023

Commenced PhD candidature

After completing my MFinPlan degree at WSU (Western Sydney University) I had hoped to be able to do a PhD part-time at WSU, as the lecturer for the two 'research' courses I completed as part of the Masters degree was willing to be my supervisor. Unfortunately it turned out that WSU rejected my HDR application and suggested I first enrol in their MRes coursework degree instead. That would have taken four years part-time and cost around $35,000 in fees! No thanks.

So I then applied with ACU (Australian Catholic University) as they have a campus conveniently close to my workplace (if/when I return to working out of the office, rather than working from home). However they also rejected my application, this time on the basis that it wasn't in line with their 'strategic vision' and there wasn't a suitable supervisor available (I think they have basically stopped running any degrees in financial planning).

So I then applied in early January to UNE (University of New England) via an 'expression of interest' and was matched to a potential principle supervisor and a co-supervisor. A short (30 minute) meeting/interview via zoom ended with them agreeing to be my supervisors, so I then had to complete an official 'application' form with details of all my previous tertiary studies, qualifications, any research experience, publications etc. That was processed very quickly and I was accepted. Yay! So I then had to quickly fill in the online enrolment form last Monday, as put today (1 March) as the 'commencement date'. I received confirmation of my enrolment yesterday and started reading through the 'orientation' material and the various research policies etc. and setup my uni email account/login.

So I'm now official a part-time, off-site PhD candidate (subject to confirmation in six month's time) with a 'completion date' of 28 Feb 2029. On Monday I'll have to get in touch with the administrator who assisted with the zoom interview (he was on annual leave this week) as I think he mentioned a 'research methods' course I should enrol in this session that was due to start this week.

ps. As an Australian resident the HDR uni fees (around $12K pa) will be covered by a commonwealth government RTP (research training program) scholarship, so the only fees I'll have to pay are the $120 or so annual student association charge.

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Net worth: Feb 2023

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

The purchase of my investment apartment settled on 24 Feb, and as part of the loan conditions the $1MM loan was used to pay the balance of the purchase price ($900K), the various fees and adjustments, plus pay off our remaining home loan balance and 'portfolio loans'. As my residential loan was used to pay off DW's portion of our home loan (around $8K) and her 'portfolio loan' (about $67K) I actually have a 'credit' in the form of an IOU from DW that I haven't included in Networthshare. So my NW will be understated by around $75K - assuming DW eventually pays me back ;)

I have removed the deposit and stamp duty payments from the 'stocks' figure, so the 'stocks' figure showed an artificial drop this month, but the reported figure now more accurately reflects what  I actually have invested in 'stocks' - some NAB shares, some cash sitting in my margin lending accounts, my Superhero US stock/ETF trading account, shares in my employer (a 'fortune 500' US company), my investment bond (which is invested in a mix of Vanguard and Dimensional index funds), and an investment in a MAM investment fund. Plus whatever cash is sitting in various bank accounts at the end of each month. The revised 'shares' figure for this month was $149,833.

The value of my 'Other Assets' category (gold and silver proof coin collection, valued at bullion value only, Perth Mint unallocated gold, silver and platinum holdings, and my small art investment via Masterworks) was down slightly during February, falling -$446 (-1.34%) to $32,917.

Our estimated house price for February (my half) fell another $5,182 (-0.49%) to  $1,062,356 with continued weakness in the Sydney real estate market due to rising interest rates. The RBA increased interest rates by another 0.25% in early Feb, which will increase the monthly interest payments on my residential investment loan by about $7 per day ($2,500 pa) -- so hopefully inflation will start to moderate soon and the RBA will stop raising interest rates!

The value of my retirement savings decreased to $1,468,798 (down -$12,908 or -0.87%) during February. I have ceased making any salary sacrifice into super, as I will need the extra cashflow to fund the residential loan interest payments (and the negatively geared property make the tax benefit of salary sacrifice negligible). I may submit a PAYG tax variation with the ATO in July, so I have less income tax withheld from each bi-monthly pay, rather than just get a huge tax refund after the end of the financial year. I should have a better idea of the rent income and actual expenses (and have a depreciation schedule) by June.

As I now own the residential apartment (well, it is mortgaged 100% to the bank) I will track the 'estimated value' each month of both the residential apartment and the 'lake house' (hobby farm). As part of the residential loan approval process the bank obtained valuations for both our home (which is being used as collateral) and the residential apartment. Our home valuation was almost exactly what my monthly estimate predicted. The residential apartment on the other hand received a very low valuation (only $750K) which I think was based purely on 'similar' one bedroom apartment sales in the suburb (which has a lot of older, low-rise apartments that are not really comparable to the high-rise 'luxury' development my apartment is in). However, the purchase price was $1MM (back in October 2019) and prices have risen considerably since then. Also, the same residential apartment (but a few floors higher up) was recently sold for $1.35MM, so I'll be sticking with my 'estimate' (which is currently $1,181,330) as I think it is a better guestimate of the actual market value for my residential apartment.

Overall, my estimated NW for the end of February is $3,779,984. It can't really be compared to previous months due to incorporating current market value estimates for the residential apartment and my weekender/lake house. It is probably a reasonable "ball park' figure of what my NW currently is.

ps. For the loan application I had received a 'rent estimate' of $700-$750, but when I collected the keys the agent said the rent should be in the range of $750-$800 (due to the apartments being in high demand). It then turned out that some overseas students (funded by their parents) want to rent the apartment and will pay $850 per week (the extra being due to having a small dog - and many investors are unwilling to rent to tenants that have pets).

pps. Labor announced plans to increase the tax rate on superannuation in accumulation accounts from 15% to 30% for the amount over $3MM. It won't affect me (I'm unlikely to exceed the $1.9MM transfer balance cap by the time I retire), but I think it isn't good for governments to legislate for tax changes they didn't announce during the recent election campaign. It also isn't a great idea to have tax changes apply retrospectively (although it will be future income that is taxed at 30%, the money was invested years ago under the prevailing tax arrangements -- and it is especially dodgy to change tax retrospectively on an investment that can't legally be accessed/withdrawn until retirement age). The whole 'foregone tax' argument also seems a bit spurious to me -- after all, superannuation income is deferred income (for up to 40+ years) NOT current income, so there really isn't any reason to compare the superannuation tax rates to the income tax rates. Also, if taxing superannuation at 15% is a 'cost' to the budget compared to the maximum personal income tax rate of 45% that 'should' apply, then the 'cost' of the progressive tax system itself should also be publicised -- just imagine the huge 'cost' to the budget of having an $18K tax free threshold, and the bottom marginal tax rate being 18% rather than the 45% income tax rate that apparently Labor thinks "should" be applied to all income (unless you are in Labor's voting demographic). Anyhow, I don't think capping the amount that can be held in the accumulation account is a bad idea (it is already effectively capped due to the limits on concessional and non-concessional contributions), but they are trying a blatant 'tax grab' by looking at a relatively small number of high value accounts that were accumulated into super years ago under the tax rules applicable at that time. Perhaps a fairer change would be to limit the total amount that can be held within superannuation to 2x the TBC ie. $3.8MM once the TCB increased to $1.9MM on 1 July. Any amount about 2x TBC at the end of each FY would have to be withdrawn from super (same as now applies to any excess contributions).

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Sunday, 26 February 2023

Million dollar mortgage

The purchase of my off-the-plan investment unit finally settled last Friday. I had paid $100,000 deposit back in 2019, plus $41,000 stamp duty, so the balance of $900,000 was due upon settlement. However, the residential mortgage approval required I pay off and close down some of my existing credit cards and lines of credit, plus our existing $37,000 home mortgage had to be paid off and also the $90,000 or so owing on 'portfolio loans' against our home equity. The balance of the investment unit purchase price and our remaining home loan and most of the portfolio loan were paid off using the new $1 million residential mortgage, and I also had to transfer $40,000 into the bank account that will be used for the monthly mortgage payment direct debits and which was also used to pay off any part of the portfolio loan balance that couldn't be covered by the new residential mortgage. Around $31,000 was taken from that account for settlement, which probably also included a few thousand in bank loan fees, valuation fees, title transfer fees, adjustments relating to pre-paid or owing rates, land taxes, insurances etc.

The opening balance of my 'million dollar mortgage' is shown below - quite an impressive round number in terms of debt IMHO. Next step is to collect the 'settlement box' which will contain the unit keys etc. on Monday morning, do a quick check of the apartment (I think the balcony railing needed a final wipe over), and then I'll hand the apartment keys to the managing agent to show the unit to prospective tenants. Hopefully it won't take too long to find a tenant, and the rental ends up being somewhere in the estimated $700-$750 per week range ($3,000 per month). Given that the monthly mortgage payment is $4,705 and that there will be other outgoings deducted from the rent income, I hope the unit doesn't have extended period of vacancy.

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Sunday, 12 February 2023

Astrophotography - attempt 3 - comet E3 conjunction with Mars

I had planned to drive out to a nearby 'dark' sky site (slightly less light pollution than where I live), but due to intermittent cloud cover I decided to just wait at home and when there seemed to be a break in the cloud cover I took 180x3 second exposures )using my 55-200mm zoom lens at 55mm, F/4, ISO 12,800) from my front balcony, with the camera in a corner where the glare from a nearby street lamp was blocked from directly hitting the lens. I also took 50 'dark' frames (3 sec with lens cap on) and 50 'flat' frames (using some white cloth in front of the lens illuminated using my tablet, and Automatic exposure length), and had planned to take 50 'bias' frames (1/4,000 sec exposures) but the SD card was full after taking 34 bias frames. There was still probably some light cloud cover passing overhead, but none of the lights showed obvious cloud cover, so I didn't discard any of the images from the stacking process. A car also drove past and turned on a floodlight across the street, so I expected 4-5 of the lights would be ruined, but I couldn't see any obvious problem images (although the final result could probably be improved by eliminating some of the light frames that were affected by cloud cover or the car/floodlight glare -- but I'd need to run through the pre-processing manually to do that).

I did automatic pre-processing using the standard script in SiriL, and then saved the resulting image as a jpg and did some rudimentary brightness and contrast tweaking in GIMP (although I don't really know what I doing and just played around with some settings).

At least in my 'final' image you can tell the comet E3 is in close conjunction with Mars, so I'm happy enough with the result. At least I managed to get the stars reasonably in focus this time! Usually with exposures taken over a period of around 10 minutes the comet would have moved compared to the star field, so some fancy processing to register and stack the stars and then separately register and stack the comet with the stars removed from the image would be required. But there doesn't seem to be too much movement/blurring of the comet in my final image - not sure if it is because the comet is now on the way out from the sun and its apparent angular motion has reduced already, or just due to the relatively short total time period during which the lights were taken.

Anyhow, I took my first astrophotograph of a comet, and the result is at least recognizeable. So I'm happy.

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Thursday, 2 February 2023

Net Worth Jan 2023

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

My 'Stocks' figure was down -$330 (-0.11%) to $289,243 net equity The Australia and US markets were both higher during January, but in AUD terms the rise in the AUD vs USD meant the value of my 'portfolio' in AUD was flat. It is also distorted by the fact that I don't have many stock/fund investments remaining outside of super, and that for historic reasons I include the deposit and stamp duty I paid in 2019 for the investment apartment in this figure. Once 'settlement' happens (in the next week or two) I will remove this from the 'stocks' figure and include it the 'other real estate' and 'other mortgages' figures.

The value of my 'Other Assets' category (gold and silver proof coin collection, valued at bullion value only, Perth Mint unallocated gold, silver and platinum holdings, and my small art investment via Masterworks) was up slightly during January, rising $246 (0.74%) to $33,363.

Our estimated house price for January (my half) fell another $18,137 (-1.67%) to  $1,067,538 with continued weakness in the Sydney real estate market due to rising interest rates. The RBA has recently indicated that they believe inflation peaked at the end of 2022, which *might* reduce the likelihood of further interest rate rises. There are also a lot of homeowners with fixed interest rates due to revert to variable rates during 2023, which will magnify the impact of the mortgage interest rate increases that already occurred during 2022. So real estate prices could continue to be subdued during 2023, but the cycle of mortgage interest rate increases may soon end.

The value of my retirement savings increased to $1,481,706 (up $70,779 or +5.02%) during January. The $10K I transferred from one of my superannuation accounts to purchase a deferred lifetime annuity is still counted as part of the overall superannuation balance, although it won't commence providing an income stream until 2061 (if I am still alive).

Overall, my estimated NW increased to $3,183,910 during the past month - up by $52,806 (+1.69%). The valuation for the investment apartment the bank obtained during loan approval came in very low ($750K), which is a lot lower than the price ($1MM) or a recent sale for a similar unit ($1.4MM). I suspect the valuation was done based on 'similar sales' of 1-bedroom units in the suburb, which wouldn't be accurate as the suburb has a lot of 'older low rise' apartment blocks which would have different pricing compared to the latest new developments (which are 'high rise' luxury apartment complexes). So, I'll just continue to use the 'cost price' in my NW estimates until there are more 'similar sales' occurring in the suburb, so the median 1 and 2 bedroom apartment prices start to reflect the inclusion of these new developments.

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Friday, 27 January 2023

Astrophotography - attempt 2

There were a few hours of clear skies on the evening of 25/26 Jan, so I did another session. My initial attempt to block out the street lamp flare by using the lens hood didn't work - test exposures showed a nicely illuminated 'circle' around the outside of the image -- with the lens hood encroaching into the FOV and being well lit by the street lamp. I think the lens hood must be meant for use with my 50-200 mm zoom lens rather than the 18-55 mm zoom lens.

So I removed the lens hood and relocated from the front porch the our back yard, where our house and boundary fencing block out all direct illumination from street lights and the neighbouring houses (can't do much about the Bortle 5 sky darkness in my back garden. Driving 15 minutes to a nearby national park provides a slight reduction in light pollution (Bortle 4) which will be helpful to try and image the E3 comet on 11 Feb. If I drive 3.5 hours to my hobby farm/lake house I have access to a 'dark sky' which is Bortle 2. The best dark sky site I could access is at Coonabarabran, close to the Anglo-Australian Telescope (AAT) at Siding Spring Observatory -- unfortunately that is a 6 hour drive from Sydney!). Orion was getting low by the time the skies had cleared, so I simply aimed at a patch of sky above Orion. Unfortunately having the camera pointed more towards the zenith made it a bit awkward to check the focus after each test shot, and my homemade Bahdinov mask (cut from some paper and cardboard) didn't seem to work very well, so after ten minutes I gave up and simply turned the focus ring all the way over to 'infinitiy'. Big mistake. Especially as I didn't bother taking another test exposure to check the focus, but simply cleared the SD card and commenced taking a series of lights, darks, biases and flats.

I took 11 sets of 9 x 3 second exposures at F/5,5, 55mm FL and ISO 12,800. The sets of 9 exposures were due to the D3300 self-timer mode only supporting up to 9 shots in a sequence. You then have to press the shutter button again for another set of 9 shots (after the initial delay of 5 seconds I had set to minimize camera shake from pressing the shutter button). I also had to reset the self-timer mode after each set as the camera display shut down after a few seconds and reverted to single exposure mode. I could probably fiddle with the shut-down delay setting to avoid having to reset the self-timer setting after each series, but that might cause an issue with battery life (the fully charge battery lasted for two nights - about 3 hours of camera use - before needing to be recharged).

I had also worked out how to get properly exposed 'flats' using the 'A' mode (aperture priority) that kept all the manually setting unchanged, but worked out the correct exposure time. I used a piece of fine weave white cloth (a lot of people use a 'white T-shirt') over the lens and the 'light box' app on my tablet to provide a uniform illumination. The flats seemed OK (the automatic exposure time was 1/8th second) with the histogram being fairly central for the flat exposures.

I processed the lights, darks, biases, and flats using SiriL, and all went well until it got to the 'find stars' stage required to register (align) and stack the lights. The software reported the process failed, with '0 stars found' - which is due to my lights being too out of focus. The software finds stars by finding the centroid of a star (a couple of illuminated pixels), and won't work if the image is too out of focus. Looking at a couple of my 'lights' the stars were totally out of focus and spread over dozens of pixels! I definitely should have taken a single test exposure and checked the focus was 'reasonable' before wating an hour taking exposures.

I've made two small purchases to improve future astrophotography sessions with my DSLR and tripod - I bought a commercially produced 'Bahdinov mask' for about $6 (it is being shipped from China, so probably won't arrive until the end of Feb -- well after I want to image Comet E3 around 11 Feb). I also ordered a cheap ($24) intervalometer from that will allow me to 'program' a series of exposures and then execute them with a single button press on the hand controller. This will allow me to execute an entire series of 100 or more 'lights' with a single button press, rather than having to use a series of 9 shots each individual started. Also, because I won't have to touch the camera at all during the series of exposures, I won't have to have a delay between each exposire -- so rather than a 3 second exposure being followed by a 2 second delay, I can just fire off a series of 3 second exposures one after the other -- reducing the overall time by around 40%. Once the 64 GB SD card on order has arrived (to replace the current 8GB SD card) I will also be able to increase the number of lights, darks, biases and flats from 99/54/45/45 to 300/100/50/50 - which should improve the signal to noise ratio and bias compensation. There isn't another clear night predicted for a week or more, so hopefully my SD card (and possibly the intervalometer) will have arrived before my next imaging session.

How to waste an hour by not checking focus before taking a series of 99 3-second exposures. D'Oh!

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Tuesday, 24 January 2023

Astrophotography - attempt 1

I've been interested in astronomy since childhood, and spent a large chunk of the money I earned working during vacations while I was a uni student in the early 1980s on a Meade 10" telescope (I previously had a 4.25" Tasco reflecting telescope during high school, that my mum bought me as a birthday present - it wasn't cheap but wasn't particularly good quality). Despite having invested a considerable amount of money (around $5K for the telescope, lenses, solar filter etc - which in the early 80s was about 1/20th the cost of a three bedroom house!) I didn't actually use the telescope very much. More recently (early 2000s) I bought a Meade DSI monochrome CCD camera, but had trouble using it to take any astrophotographs at prime focus, so gave up again. Then, a few years ago, I bought a Nikon D3300 DSLR camera to use while on vacation in New Zealand, with plans to also use it for astrophotography. Yesterday was a clear night, so in preparation for trying to take some images of Comet C/2022 E3 (ZTF) when it is visible close to Mars in the southern skies around 11 Feb, I setup the camera on a tripod on our front porch and took a set of 90 x 2 second exposures (total 3 min exposure) of the Orion constellation using the 18-55mm 'kit' lens at F/3.5 and ISO set to 12,800. I also took a set of 45 matching 'dark' frames and a set of 45 1/4,000th second 'bias' frames and 45 (badly overexposed) 1/15th second 'flat' frames, which all were then processed/stacked using the free software SiriL.

I was pleasantly surprised by the result (in parts) of my astrophoto, with the region near the M42 nebula in the Orion constellation being recognizable, and of roughly comparable (OK, mine is a lot worse) quality to a similar photo taken in 1890 by the Government Astronomer at Sydney Observatory using a 6" portrait lens on an astrographic camera with a 4 hour long exposure.

But despite the region around M42 being 'OK' in my image, the overall image was rubbish, with a lot of 'flare' being apparent. I think I had two major issues: 1) I didn't check the histogram of the 'flat' images taken using a 'white screen' on my tablet, so ended up with vastly overexposed 'flats', and 2) I didn't put on the lens hood that came with the 18-55mm zoom lens, so may have ended up with 'flare' due to light from a nearby streetlight getting caught by the lens. Next clear night I'll repeat the exercise, but try a more zoomed in view (55mm) and properly exposed 'flats' (and the lens hood!).

One good thing about astrophotography as a hobby (once you have bought the equipment) is that it is cheap to do -- you just recharge the camera battery and delete the files from the SD card and you are ready for another night of imaging.

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Thursday, 12 January 2023

$1MM home loan conditionally approved

The bank finally approved (with conditions) my investment property home loan application. The loan amount will be $1MM (the full 'purchase price') of which $900K will be used for settlement and the remaining $100K use to clear and close some existing liabilities (our remaining home loan and associated portfolio loan). The conditions that have to be met by the settlement date are mostly to reduce my existing credit lines on various credit cards and the Citibank 'redicredit' unsecured personal loan 'line of credit' by a total of about $120K. I'm currently in the process of closing the an credit card account (that has a $27K credit limit) and reducing the balance outstanding on my 'redicredit' account from $60K to $30K (which is a bit of a pity, as it has a fixed interest rate of 2.9% until May 2025). I also have to reduce the credit limit on a couple of my credit cards from around $15K and $25K to 'only' $2K and $3K (as the bank credit risk calculation assumes you have to service payments on the entire credit limit at the exorbitant 19% interest rate that would apply if you didn't pay the credit card balance in full each month).

After settlement I will basically only have the single $1MM mortgage (at around 5.39% interest) as outstanding debt, plus $30K on the redicredit account (at 2.9% interest) due to be paid of in May 2025, and a couple of credit cards with low credit limits for everyday spend (that is paid off in full each month).

The vendor is scheduling valuation appointments during the coming week, so I should also find out the current valuation for the apartment from the bank in due course (I expect it to be somewhere in the vicinity of $1.3MM). The valuation of our home was already done last week and came in about $100K lower than my monthly estimated valuation. The report noted that some 'deferred maintenance' had affected the valuation, so if we were going to sell our home we would fix up any minor and cosmetic issues which would probably bring the market value closer to my monthly estimated figure.

Aside from the risk of not being able to let the apartment for the expected rental (or having lengthy periods of vacancy) my biggest concern (aside from if I lost my job) would be if the mortgage interest rate rose significantly. Every 0.25% hike in the overnight cash rate set by the RBA is likely to be passed on as a 0.25% increase in the variable mortgage interest rate, and on a $1MM loan that would translate into an additional $48 per week in interest. Hopefully inflation might start to moderate early in 2023. It appears to have already peaked in the US, but the Australian monthly data isn't showing a similar dip as yet.

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Monday, 9 January 2023

Challenger ripped me off on my deferred lifetime annuity

As previously posted, I ran a quote for a deferred (for 40 years) lifetime annuity with Challenger the week before my 61st birthday. At the time the quote was to receive monthly payments of $4,625.51 (on my $10,000 investment) cpi-indexed after the 40 year deferral period (so would commence the month before I turned 101. There was a notice that the quotation was only valid until my birthday (the following week), so I made sure to submit the application online and did the electronic document signing online, so it was all submitted the week before the 'deadline'.

However, even though the $10,000 rollover from my superannuation account was processed and I received a welcome letter from Challenger with details on how to setup my online account password, when I logged in there was no investment product listed. So I phoned the customer service and was initially told that the processing had been delayed as the admin team needed to confirm the 40 year deferral period with the client (me) or my advisor (also me) and for some reason couldn't contact me (even though they had sent me several emails for the application confirmation etc.).

I then received another email stating the payments could not be deferred 40 years, but could only be made immediately (either monthly, bi-annually, or annually), which made no sense as I had applied for a deferred annuity, not an immediate annuity. So another call to customer service. This time they said that according to the PDS the maximum deferral period could not commence annuity payments more than one year after you turn 100. But I pointed out that I had actually submitted everything electronically the week before my 61st birthday, so the first payment should have occurred within the year after I turn 100 (which is just within the limit specified in the PDS). I suggested that perhaps the problem was simply that when they got around to processing the application it was after my birthday, so the first payment date was after the allowed maximum - in which case I was happy to change the deferral period to 39 years.

I was supposed to receive a call-back to confirm the situation that afternoon (last Tuesday) but never received a call, so today I had to call Challenger again to chase up what was going on. This time they confirmed that the application had now been processed  (on 4 Jan) with a deferral period of 39 years. I checked what the payment amount would be, as it reduces slightly for each year less deferral. It turned out that the new monthly payment amount was now only $3,722.92 (or $44,675.04 pa) indexed to cpi, which is a massive reduction from the figure I had been quoted for the 40 year deferral.

I suspect that not only was the payment amount reduced due to the deferral period changing from 40 years to 39 years, but that they also calculated a reduced amount due to my now being 1 year 'older', and also the annuity amount may have changed due to rising interest rates/cpi etc.

Overall, the fact that they didn't process my application in a timely manner reduced my annual annuity amount by $10,801pa. The only reason I'm not more annoyed by this is the fact that it is very unlikely that I will live long enough to start receiving any annuity payments, so I've basically thrown away $10,000 on a long-shot bet that I might live past 100 ;)

Oh well, at least it will give me something to whinge about on my 100th birthday.

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Tuesday, 3 January 2023

Net Worth: Dec 2022

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

My 'Stocks' figure was up $8,942 (3.19%) to $289,573 net equity I closed out a lot of positions during late December to accumulate cash in preparation for the settlement on my investment property in late Jan/early  Feb. Once that happens this 'stocks' figure will drop to around $50K and the current 'home mortgage' figure will disappear as we will be paying off our remaining home loan and replacing it with a mortgage for the investment property.  The 'other mortgages' figure will also drop (to reflect the actual mortgage balance outstanding) so there won't be any net effect on my NW total (currently the deposit and stamp duty paid in 2019 is reflected by a positive amount in 'stocks' and a negative in 'other mortgage(s)' - this was due to the way I used stocks funds to pay the deposit and stamp duty, so it was being recorded in a strange category.

The value of my 'Other Assets' category (gold and silver proof coin collection, valued at bullion value only, Perth Mint unallocated gold, silver and platinum holdings, and my small art investment via Masterworks) was up slightly during December, rising $1,124 (3.51%) to $33,117. I've suspended my regular savings plan purchases of bullion in my Perth Mint online depository account, as I may need all available cashflow to pay the interest on my investment property loan from Jan onwards.

Our estimated house price for December (my half) fell another $2,592 (-0.24%) to  $1,085,675 with continued weakness in the Sydney real estate market due to rising interest rates. Declines are likely to continue until inflation is brought under control, the RBA ends the cycle of interest rate hikes, and home loan interest rates stop rising. If the Dec Qtr Australian inflation figures look like inflation has peaked, and the US monthly inflation data for Dec and Jan is OK, then the current cycle of interest rate hikes might have ended. Fingers crossed. But I expect falls in absolute terms to continue, with the decline in real terms being worse due to inflation (currently running at 7.3% pa).

The value of my retirement savings decreased to $1,410,927 (down $57,946 or -3.94%) during December. The $10K I transferred from one of my superannuation accounts to purchase a deferred lifetime annuity is still counted as part of the overall superannuation balance.

Overall, my estimated NW decreased to $3,131,104 during the past month - down by $50,217 (-1.58%). In January or February I will have a valuation for the investment property, which *should* boost my NW figure by a 'one off' $300K or so. From then on I will track a monthly estimated valuation based on changes in the average sales price for units in the suburb. I might also update the valuation used for my hobby farm/weekender in the 'other assets' category, so my overall NW should more accurately reflect my current NW (but still excludes DW's NW).

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Sunday, 1 January 2023

How is my war profiteering going?

The Russo-Ukraine war was one of the 'black swan' events of 2022. It has cost me about $1K (in donations to charities providing humanitarian aid to Ukraine), but as war has historically been an 'investment opportunity' (the Rothschilds made a killing when Wellington won at the battle of Waterloo - but introduces an obvious ethical dilemma. I decided to have a small 'punt' on guessing how the war would impact some asset classes - particularly agricultural products exposed to Ukraine and Russia disruptions (Corn and Wheat), the general negative impact on global markets (via the QQQ - the Nasdaq-100 index), and the industrial-military complex of 'the West' gearing up to cater to the support being provided to Ukraine (I chose the iShares US Aerospace and Defence ETF - ITA).

I initially also punted on a boost in the price of oil, but the slowing global economy due to interest rate hikes aimed at fighting inflation overwhelmed any positive impact due to supply disruptions, so I closed out that position as it was too uncertain.

I ended up with a small investment (via my Superhero trading account) that has done quite well during the past 6 months. Especially in terms of volatility and also overall performance compared to the general stock market:

At some time in 2023 I'll probably close out the short position (SQQQ) and probably open a long position in the S&P 500 if it looks like the current cycle of interest rate hikes has ended if inflation continues to moderate in the US, and the prospects of a global recession (mild or severe) become clearer as 2023 unfold.

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New Year's Resolutions for 2023 and review of 2022 NY Resolutions

Review of how I did re my 2022 NY 'resolutions' went, and what to do for 2023:

1. Keep working in my full-time job (i.e. hope that I don't get retrenched). TICK. Another year, another dollar. At least I still had my full-time job (which made applying for the investment property loan possible). DW also went back to FT work (which also helped with the loan application - she isn't on the investment property title, but agreed to be on the loan application). So, the same resolution for 2023 (ie. don't lose my job or I won't be able to afford the repayments on my investment unit).

2. Complete my margin lending and SMSF specialist courses from Kaplan TICK. Did the courses. Still haven't heard from my broker-dealer group about having these added to my advisor profile. I don't expect to advise any clients to use margin lending (not with current interest rates and market prospects), but ASIC has done a 'reality check' and decided an SMSF *can* be cost-effective with less than $500K in super (is now minimum $200K - which seems more in line with actual SMSF admin/audit costs eg. approx. $1K pa via eSuperFund etc.)

3. Work on my PhD research/training. FAIL. WSU didn't accept my application to enrol as a PT PhD student (wanted me to enrol in the MRes coursework degree first - which would take 6 yrs PT and cost another $30K or so in fees). I'm still waiting to hear from ACU regarding my application to enrol there (I'll chase them up next week when the admin team might be back from holiday close-down period).

4. Complete the courses required for CFP and CFA certifications. FAIL. I confirmed I only have to do one course (and the exam) for the CFP, but haven't enrolled yet. If I'm not doing a PhD (yet) I'll probably enrol in Q2 to do the CFP course and sit the exam mid-year.

5. Get some paying clients for my financial planning business. FAIL. My 'warm prospect' went cold and I didn't do any 'cold calling' during 2022. So I'll start do an hour or two of 'cold calling' after work on the days I don't do some DoorDash deliveries (should be 3-4 weeknights each week). Should be able to make 5-10 calls x 4 days = 20- 40 calls per week. Theoretically that *should* result in 1-2 appointments for a free initial face-to-face meeting each week, and *maybe* one client being on-boarded each month. If I can add one client per month during 2023 I might be able to start covering the fixed costs of my business. (I don't mind 'working for free' but paying to be a registered financial advisor when I don't have any clients seems a bit of an expensive hobby).

6. Continue with my regular savings plans into various investments (an investment bond, gold and silver 'depository' account, and superannuation salary sacrifice). TICK. But I've cut out my regular savings plans and cancelled my superannuation 'salary sacrifice' as I'll need the cashflow to cover the repayments on my investment property loan (which will be negatively geared).

7. Lose excess weight and do more exercise. FAIL (again). I actually put on a bit of weight working from home and not going to the gym for the past few months. I've started doing Doordash deliveries again (which at least gets me to do a bit of walking) and will start going to the gym regularly (I am paying gym fees every fortnight, so should make use of the gym!). Having spent $10K on a deferred lifetime annuity that won't pay anything unless I live past my 100th birthday might help motivate me ;)

8. Waste less time on computer games and  TV/streaming. FAIL. I did a lot of binge watching during 2022 (I also spent a lot of time watching updates re the Ukraine war), so for 2023 my 'resolution' is to spend a few hours each day after work either doing Doordash deliveries (on the busy nights Fri-Sun) or making some 'cold calls' to local phone numbers (Mon-Thu).

Overall, quite similar goals for 2023 as I had for 2022 -- but I'll aim to achieve more of them this year.

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