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Saturday, 24 October 2020

Betting on the US election

It's quite surreal watching the US Presidential election campaign from afar - the disconnect between much of what the US President says and the reality of the terrible loss of life being experienced due to Covid-19 in the US does not seem to be reflected in the voting intentions showing up in US opinion polls. One would think that in this sort of situation a sitting President would be much further behind than the ~8% the polls suggest. There must be a huge number of voters that simply vote Democrat or Republican regardless of who the candidate is or the current economic/health situation or the candidates policy details (not that US Presidential elections appear to give much weight to actual policy platform details).

The voter intention polls got the outcome of the last election very wrong, so the current poll numbers need to be treated with caution, but I still find it hard to believe that Trump can claw his way back into contention this late in the campaign, especially as a large portion of US voters have already cast their ballot via pre-polling. So I decided I'd place a small wager ($10) on Biden to win the 2020 Election, and I also put another $5 bet on Biden getting between 49-52% of the popular vote, and another $5 on him achieving between 52-55% of the popular vote.

We'll see how it turns out, but I'm guessing there might be a small 'shy Trumper' effect that reduces the actual popular vote for Biden down to about 51-53% in the final wash-up.

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Friday, 23 October 2020

The new Australia Vanguard online access really, really sucks!

I've been a Vanguard customer for decades, and currently have both personal investment and our SMSF investments in some Vanguard Index Funds.

Up until this week, we have perfectly good online access to our accounts, able to access transaction history, daily unit prices, and pdf copies of statements etc.

Then they forced all existing retail customers onto their new 'personal' platform, and closed the existing funds to new investments. So, after wasting time 'activating' my new SMSF login using a customised link they sent us, and having to provide three different types of ID details (even though we are existing account holders and provided ID when we opened the accounts, and already had online access via their old platform), it turned out that I'll also have to provide a certified copy of one of the IDs!

Given Covid-19 I'm not going to queue up somewhere to get a photocopy of my ID and then get it certified by a JP (I'm a JP but aren't allowed to certify copies of my own documents - go figure). So I've sent in a jpg of my new digital driver licence (which in NSW the police are happy enough to take as ID - they simply scan the QR code). Authorised businesses can also go online to check the details for a drivers licence number, but Vanguard obviously hasn't bothered to do that (they did have some ID checking built in to the account activation process, but it apparently didn't work - probably because they ask for your name in one screen (where I entered my full name) and then ask separately for middle and surname (and there was no option to 'go back', so it probably failed the automated ID checking process. And no option to try again, or fix typos etc.

The new website is also a total waste of space - the unit price data is harder to navigate to than in the old website, and the whole thing seems to have just been 'dumbed down' to make it mobile phone friendly (and doesn't display well on  laptop). Modern website design autodetects whether the user is browsing using a phone or larger screen, and automatically send appropriate html for the device.

The new system also has only replace having to send in faxes (or mail) for investment instructions (eg. switch from one fund into another) with the ability to send forms electronically via their 'secure message' system once you log in to your account. Most modern financial product websites allow you do transact securely online once you have logged in - eg. switch fund options using an online tool, NOT still requiring investors to fill in forms and send them in to be processed!

Overall, the new Vanguard website and personal investor fund is highly disappointing, and a real pain for existing investors to switch to and activate...

Not surprisingly the new website is displaying a message that they are taking 5 or more days to respond to queries and have long delays on phone enquiries - apparently a lot of their customers aren't happy with the migration.

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Tuesday, 13 October 2020

The sexist double standard applied to female politicians

It's been a few years since Australia had its first Female PM, Julia Gillard. While I generally prefer have a Liberal government to a Labor government (for policy reasons), there was nothing particularly bad about Julia Gillard as a PM. But it was amazing the amount of criticism that was simply rampant sexism (eg. rather than "Dump Gillard" we had protestors waving "Ditch the Witch" placards).

The latest example of the double standard often applied to female politicians is the criticism of the NSW Premier Gladys Berejiklian (who is female and single) for having a 'close personal relationship' with a former NSW politician who was found to be abusing his position for (attempted) financial gain, and was dumped and left politics in 2018 after a previous ICAC investigation. There is no evidence (yet) that the NSW PM acted improperly on a professional level, just that she had a relationship with someone known to be 'shady'.

Yes, in an ideal world politicians would only have relationships with persons of impeccable character, and would immediately dump anyone that they found had the slightest character flaw. But is this really expected of male politicians? No. So why expect female politicians to apply higher standards to what are, after all, private considerations regarding who they have a relationship with.

It may yet turn out that the NSW Premier acted improperly (eg. gave Darryl Maguire information or support in his dodgy business dealings) and has to exit politics, but so far it appears that she has done nothing wrong herself. The days of the worth of a female professional being at all affected by who their partner is should be long gone. Gladys is doing a great job as NSW Premier during the Covid-19 pandemic, and who she is (or isn't) dating should be irrelevant.

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Sunday, 11 October 2020

Are the 2020 Budget tax cuts 'fair'?

Some people (such as the welfare lobby) have argued that the tax cuts brought forward as an economic stimulus measure in this year's Australia budget are 'unfair' as the largest benefit is received by those on higher income levels, and there is no benefit to those on low or no income (such as the unemployed).

Of course the fundamental reason for the unemployed and low income workers getting no benefit from this tranche of tax cuts is that you can't benefit from a tax cut if you already pay no tax!

But looking at the criticism that these tax cuts provide the biggest benefit to those on higher incomes, one has to look at the cuts not just in dollar terms, but as a percentage change in the amount of tax paid:

Taxable Income        FY2018                    FY2021                     Change in Tax

                              $ amnt  % change     $ amnt  % change     $ amnt  % change

$40,000                   $4,947     12%         $3,887      10%         -$1,060     -21.4%

$60,000                   $12,147   20%         $9,987      17%         -$2,160     -17.8%

$80,000                   $19,147   24%         $16,987    21%         -$2,160     -11.3%

$100,000                 $26,632   27%         $24,187    24%         -$2,445     -9.2%

$120,000                 $34,432   29%         $31,687    26%         -$2,745     -8.0%

$140,000                 $42,232   30%         $39,667    28%         -$2,565     -6.1%

$160,000                 $50,032   31%         $47,467    30%         -$2,565     -5.1%

$180,000                 $57,832   32%         $55,267    31%         -$2,565     -4.4%

$200,000                 $67,232   34%         $64,667    32%         -$2,565     -3.8%

This shows that the biggest percentage reduction in tax burden is flowing to those on lower incomes.

Overall, it seems a bit churlish on those already paying a lot less tax than they receive in benefits (e.g. free schooling, medicare, NDIS, JobSeeker etc. etc.) to complain that those who foot the bill for their benefits will be getting a small reduction in the amount of tax they pay.

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Thursday, 8 October 2020

How the budget provides business stimulus at no cost (over time)

With Covid-19 having dumped Australia into its first recession in decades, this week's Federal budget went to great pains to provide massive amounts of stimulus to business in order to protect as many jobs as possible, and to provide the means for businesses to survive and grow the economy (as soon as a Covid-19 vaccine becomes widely available and things such as immigration, tourism and foreign students can start to recover). Two of the key strategies in the budget to support and stimulate business were the carry backwards of business losses (i.e. rather than having to record business losses this year and deduct them against future profits (if the company services), businesses will be able to offset losses this year against previous year's business income, and get a tax refund of previous taxes paid), and to be able to immediately 'write off' business expenses (rather than apply the normal depreciation rates, which make the expense a deduction over the working life of the item). The SMH has a good article providing some more details about these budget measures.

What is especially smart about providing business with immediate assistance via these budget measures is that although they provide an immediate cash flow boost to business in this financial year (when its needed most), they will actually not cost the government much over time. The reason being that unlike government expenditure on stimulus measures such as business grants, increases JobSeeker payments, or building vast tracts of public housing, these measures are being paid for from money that the government would have had to pay back to business anyhow - just in future tax years under normal circumstances.

So, rather than business losses this FY reducing tax takes in future years, the government is refunding immediately some tax collected in previous years. But as those losses will have been used up this year, future business tax revenue will increase by this same amount. They are simply moving tax revenue and refunds from one financial year (or years) into another. No net tax cost to the government - just adjusting its timing.

And rather than business expenses this year reducing business taxes over several years, the expense will reduce tax liability this financial year in one hit. But the net deduction over the life of the item will remain unchanged.

Overall, a very clever way to provide extra immediate cash flow benefits to businesses this financial year without building it costing the government anything over the long term! Basically businesses will end up with more cash flow to stay in operation and employing people this year, but will pay it back in future years.

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Friday, 2 October 2020

Poetic Justice - POTUS and FLOTUS have COVID-19

In an ironic twist to US Presidential election campaigning, Pres. Trump has announced that he and Melania have tested positive to Covid-19, most likely being infected by Trump's close aide Hope Hicks. He'll be in quarantine for a couple of weeks, and might miss the next scheduled Presidential 'debate'.

One can only hope that he does what his doctors recommend, and doesn't self -medicate with hydroxycholoroquine or injects himself with bleach!

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Thursday, 1 October 2020

Net Worth: SEP 2020

My monthly Net Worth calculation has been updated in NetWorthShare as at the end of September. The stock markets got a bit wobbly, which adversely affected my NW. Our estimated house price showed a modest rise, despite the overall Sydney real estate market starting to show weakness. The extent and duration of any decrease in the value of my real estate assets will depend on how long immigration and the economy remains impacted by Covid-19. If a safe and effective vaccine for Covid-19 becomes widely available during early 2021, things may start to pick up by the middle of next year. My net worth figure decreased by $11,805 (-0.44%) overall, to $2,641,515.

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Saturday, 26 September 2020

Does the SGL need to increase to 12%?

There's a bit of a 'culture war' going on regarding when and if the SGL rate should increase to 12% on schedule, be brought forward, or deferred. Those on the left side of politics view the Australian Superannuation system as one of their great social reforms, although moving towards a self-funded retirement system was probably a demographic inevitability regardless of which side of politics was in power given the aging population was causing an increase in the ratio of pensioners to tax payers since the 1980s. As the introduction of the SGL was a Labor initiative, they therefore jump on any suggestion to defer the planned increase of the SGL rate as an attack on the Superannuation system itself ('mediscare' seemed to work, so expect a host of 'superscare' election ads if there is any delay to the SGL increase before the next election).

Those on the hard right of course hate the very concept of government mandated savings for retirement, as they would prefer people to be able to choose for themselves whether or not to spend current income or defer some of it for their retirement (then again, the far right is also against redistribution of income and welfare, so if left to their own devices, those without any retirement savings would presumably end up in poverty if they didn't save for their retirement).

Since we have a Superannuation system in place, and the rate is planned to eventually rise to 12%, the real question is whether the rate change should proceed according to schedule, or, due to the economic impacts of Covid-19, whether the rate increase should be brought forward or deferred.

The argument for bringing forward the SGL rate increase is that it would be a proxy wage rise, given that the SGL is employer funded. Given the current lack of wage inflation, an SGL increase is at least one way to funnel company profits into employees pockets rather than to shareholders (even if the employees can't access the funds until they retire). The original SGL was a trade-off of wage rises for superannuation contribution (at a time of high inflation and wage increases), so any SGL increase would theoretically result in a commensurate decrease in future wage rises. But in a time of negligible wage rises, an increased SGL contribution would initially simply be an additional cost to employers. Of course, there is the possibility that imposing an SGL increase on employers would therefore discourage employment, at a time when unemployment has increased due to the economic impacts of Covid-19.

The  argument for deferring the SGL rise is that people need as much current income as possible in the current economic environment, so it makes no sense to defer additional current income to fund retirement spending. And that this isn't the right time to impose an additional cost on employment when many companies are already struggling financially.

Of course the superannuation 'industry' is in favour of the SGL increase happening sooner rather than later, as SGL contributions add to the pool of retirement savings they can 'clip' for management and admin fees. And trade unions favour larger Industry Super Funds as they promote Industry Super as if superannuation is a worker benefit that is provided by the trade unions (union membership has been declining for the past few decades, so anything that makes trade unions seem more relevant to workers is vital to their continued existence).

However, looking at the SGL rate dispationately, the key question is whether an increase from 9.5% to 12% is actually critical to making Superannuation provide an adequate retirement income in the long term. It has been pointed out that currently 40% of retirees report that their superannuation doesn't provide an adequate income for a comfortable retirement, which is taken as evidence that the SGL rate needs to rise. But the reality is that current retirees did not accumulate their Superannuation at the current SGL rate of 9.5%, but for most of their working lives the SGL rate was much, much lower. SGL was only introduced in 1992 at of rate of 4%, and the rate has slowly increased over the years.

For example, looking at a 45 year working life (from age 20-65), those that retired in 2017 would have received SGL at an average rate of only 4.54%. Those retiring in 2018 after working 45 years had an average SGL contribution rate of 4.75%, and even those that retire this year after working 45 years only received an average rate of SGL at 5.38%.

So, even with the SGL rate at "only" 9.5%, twenty year old works will retire after 45 years after having received roughly twice the total SGL contributions of recent retirees. The actual impact on their final retirement balances will be even greater, as the impact of receiving 9.5% SGL in year 1 of saving for your retirement rather than in year 45 is much more than double due to the benefits of compounding for 45 years. So, while 40% of retirees may have inadequate Super balances at the moment, in future years the current SGL rate will already provide a much greater benefit at retirement age.

Overall, keeping the SGL at the current rate for a few more years will not have much impact on eventual retirement balances, but might assist with the recovery in employment rates over the next few years.

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Tuesday, 22 September 2020

2/3 through my Masters in Financial Planning degree

Last Friday I got my result for the subject I did in Q3 (Portfolio Management) - I got another Distinction grade, which was actually a bit disappointing as I need to pick up another HD this year to get on the Dean's List again in 2020 (I recently got the notification that I made it onto the 2019 Dean's List), and keep on track to graduate "with Distinction" next year. Unfortunately I only got a Credit for the subject I did in Q1, so I'll need to get another HD during 2020 to offset that result.

I'd gotten about 88% for the assignments and mid-term quiz (collectively worth about 55% of the course mark), so I must have only received a 'credit' grade on the final exam. Not entirely surprising as one of the six questions was about a theory we'd covered at the start of the course and I'd forgotten one particular definition (which was basically the question, worth about 20% of the exam!). There's nothing more annoying than sitting in an exam knowing that you've read about a particular piece of terminology, but not being able to recall exactly what the definition was. I was actually a bit surprised to find that question was even in the exam, as the final was supposed to only be on material covered in modules 5-9 of the course (as modules 1-4 were covered in the mid-term exam, and that definition was covered in module 2). I also probably didn't get full marks on a calculation question as I didn't have a calculator available during the online exam. Although the uni subject and exam guides had both said that any "non-programmable" calculator could be used in the exam, when I logged in with ProctorU to sit the online exam they told me that according to their exam instructions only a "financial" calculator was allowed, so I couldn't use my standard scientific calculator! I emailed and tried phoning the lecturer to clarify this, but couldn't get hold of him before the exam was due to start, so I had to sit the exam sans calculator. After I logged out of the exam session I was able to check my emails, and the lecturer had meanwhile responded that it would be fine to use by scientific calculator - D'Oh!

I was going to lodge a 'misadventure' form, but they all required supporting letters for broken legs, illness etc. and there was no form that seemed to cover "total stuff-up by the university and ProctorU" as an option ;)

Anyhow, I've decided to revert to only doing one subject in Q4 (I've been doing the normal one subject workload as a part-time student so far, but had initially enrolled in two subject for Q4 with the idea of finishing the degree by the middle of next year) as that will make it more likely that I can get an HD in Q4. The Q4 subject is 'Insurance' so I already know most of the material from my DFP and CPD studies, but the trick will be to put enough effort in to actually get an HD.

My main goals for the next few months are to: complete the Q4 subject with an HD grade (so I get onto the Dean's List for 2020 and get my GPA back up to the 6.0 minimum required to graduate "with Distinction" next year), finish off the two 'specialist' financial planning courses I'm doing (in Margin Lending and SMSF), and get one of the four ADFP modules completed by the end of this year. It would also be nice to get a paying financial planning client by the end of this year.

Next year's goals will be to: finish the MFP degree, finish the ADFP qualification, do the required TPB course to be registered as a financial (tax) advisor, and do the course required for CFP (I'll get a credit for three of the four required CFP courses for completing the MFP degree). I'll also apply to enrol as a part-time PhD student at WSU when I've completed the Masters degree. Looks like 2021 will be quite a busy year (aside from my full-time job).

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$50 bonus available to new accounts with peer-to-peer lender Plenti

I've invested a few thousand dollars with the Australian online peer-to-peer lender Plenti (previously known as RateSetter), mostly just to see for myself how peer-to-peer lending works. They currently are offering a $50 bonus to new investors that invest $1000 in the five year lending market and setup their account using this offer link. Their five year lending is currently offering investors around 6.3% pa interest rate.

Disclosure: I will also get a $50 bonus if anyone joins up using that link and invests $1000 in the five year lending market. Make sure you read the PDS. I'm not providing any advice about this product - I've invested a relatively small amount myself, but I can afford to loose it.

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