Affiliate Ads support this blog:

Monday, 30 March 2020

Who will ultimately pay for the Covid-19 pandemic?

Aside from those unfortunates who are paying with their lives, ultimately the economic cost of the Covid-19 pandemic, and the mind-boggling amounts being spent by governments around the world on 'stimulus', 'safety-nets', and myriad expenditures to simply to to keep the modern socio-economic order from falling apart, will be paid by... you and me.

For all the media coverage of 'government expenditure' we have to bear in mind that governments do not have any wealth or income per se. Everything the government owns is, essentially, owned by 'the people'. And, ultimately, all government revenue is sourced from 'the people'. Either via direct income taxes on 'the people', or company taxes (which eventually get paid via 'the people' as costs for goods and services, or via 'the people' as investors when company revenues get squeezed), or via loss of value of existing savings via inflation if the government decides to simply 'print more money' (and hence inflate away the real value of the debts they are accruing). Ultimately every dollar that governments are currently spending to support the economy, provide resources to health care services, guarantee wages or provide stimulus payments or pay unemployment benefits is a dollar that 'the people' eventually have to pay back. It's a bit like a gigantic, unfunded insurance policy where those currently (and in future) fortunate enough to have a job (or savings/investments) will all have to contribute to pay out benefits to individuals or companies that need immediate assistance.

Subscribe to Enough Wealth. Copyright 2006-2020

Sunday, 29 March 2020

Putting a toe into the water

Despite the ever-worsening Covid-19 situation (things in Europe and Australia are bad and getting worse, we have yet to get any real sense of how badly the US is handling its outbreak, and almost no reliable data on most of the developing countries' situations) Wall Street and hence other stock markets such as Australia seemed to stabilise a bit late last week, with several days of market gains. So I decided to start cautiously buying back into my previous ETF positions (QUAL, VAS, VISM, CGAD, VSO and MVW) last Thursday night, starting with a small tranche ($5K) of QUAL. But the 'limit' order I initially placed for QUAL overnight didn't get filled (the price spiked higher on opening), so I had to modify the order to 'market' on Friday morning (only to see the ASX drop back in the afternoon). That used up my available credit on the Commsec ML account, so I then had to transfer some cash into the account.

I transferred $50K (borrowed on my SGB portfolio loan) into my Commsec ML account, so I'll be able to purchase several tranches of $5K in the other ETFs that are on my 'list' during the coming weeks. This may well not be the 'bottom' for this bear market, but as a 'long term' investor with (supposedly) a high risk tolerance, I have to start reinvesting at some point.

My current total investment portfolio (excluding our SMSF) is shown below:


The ASX200 is about 33% below its high of 20 Feb, and the S&P500 is about 25% below its high of 19 Feb, so making some further investments at the current levels seems reasonable when you take a long term (10+ years) view of where the market is likely to go once the Covid-19 pandemic is 'history'.

I had tried to sell my CFS GGSF, VIISF and VLHGF holdings back in early Feb (I phoned to relevant funds to redeem the units) but it turned out that because they were collateral on my margin loan accounts a phone redemption could not be processed, and a paper form needed to be printed, signed and lodged (scanned and uploaded for Colonial First State, or faxed/mailed in the case of Vanguard). I did do the paperwork to transfer our SMSF investments in the Vanguard High Growth Fund into more conservative investments, but didn't bother doing it for my SGB ML account. Having already moved our SMSF investments into more conservative options I decided to retain some market exposure (not a great decision in hindsight). In the case of my CFS geared global share fund investment on the Commsec ML account I initially was told that a phone redemption was OK, but a week later found out that a form needed to be signed, scanned and lodged. I didn't bother to proceed with that redemption, which is probably the worst decision I made back in February. My worst decision in March was probably buying some Westpac shares too soon, but that was a relatively small investment amount.

What my worst investment decision in April turns out to be is anyone's guess ;)

Subscribe to Enough Wealth. Copyright 2006-2020

Thursday, 26 March 2020

Diet 2020 Wk 12 - week ending 22.MAR.2020

I haven't got my weekly macro summary figures to report, as I'm working from home and haven't updated my daily figures for the past week or so as I had a uni exam yesterday and didn't have much spare time. I'll probably do some catch-up data entry this weekend and report two week's of data next week.

Regardless of what the exact figures turn out to be, I know that my weight has slowly been increasing and I've been eating too much junk/snack food while stuck at home. I also have only been walking  about 5,000 steps/day while at home (especially as its been raining quite a bit for the past week), compared to over 10,000 steps/day when commuting to work. Combined with not going to the gym (gyms are now officially closed by government edict) or to Kendo training (indoor sports are also banned), I'm eating a lot more calories and burning off a lot less. So the inevitable result of having a calorie surplus is to gain weight.

So I need to set myself a strict meal plan and schedule to avoid browsing or snacking during the day and after dinner, and I also need to do some more walking and do some more weight training at home using my barbell and dumbbells.

I did manage to find my old skinfold calipers yesterday, so took a set of skinfold readings and used an online calculator to calculate body fat using various equations. The calculated body fat results were:
Formula               BF%
J-P 7 pt              15.98%
J-P 3 pt              13.71%
J-P 4 pt              15.10%
Parillo               15.86%
D/W                   24.89%
Navy tape             25.33%

There is significant variation in the results, depending on which formula is used, but the values close to 17% match the values I'd been getting (on average) from my old bathroom scales (which broke last week). My new bathroom scales seem to produce much higher body fat readings (around 25%), which I don't think is accurate.

As long as I get back into 'diet mode' and slowly reduce my weight to my target, and keep doing weight training to preserve lean mass, I don't think I have to worry too much about trying to get accurate body fat readings along the way. Once I get closer to my target weight I'll get my second DEXA scan done, and that should provide a more accurate reading of what my body fat is. In any case my goal is to loose the 'spare tyre' of fat I still have around my waist, not to hit any particular body fat reading.
 Subscribe to Enough Wealth. Copyright 2006-2020

Monday, 23 March 2020

Covid-19 actions all seem to be implemented a week too late

A week after I started working from home (indefinitely) and told DS2 to stay home from school (he had a bit of a 'sniffle' anyway, so I decided to keep him at home even though there's no known case of Covid-19 at his school) the NSW Premier has today announced that although the state's schools remain open (for the moment) children should stay at home 'if possible'. And the Australian Prime Minister announced that all 'non-essential' businesses should shut (their physical offices). And two weeks after I stopped going to the gym (at a time the 'experts' were saying it was still OK to go to the gym, as long as you wiped equipment down and washed hands afterwards) the PM has also shut-down all indoor sports activities and gyms (for six months!). So, many actions previously thought to bve 'too cautious' has morphed into mandatory precautions, but a week or two after it should they should have been implemented (to have a significant impact on 'the curve').

Aside from the trivial annoyance of having recently changed my gym membership from month-to-month to an annual paid-in-advance membership (oh well, my contribution to keeping businesses going I suppose), and the relatively small investment I still have in the stock markets (down another 8% on opening this morning, to an 8-year low), my biggest concern is that DW still had to go to work today (I'm expecting they'll decide to either ask employees to WFH (work from home) or take leave (annual, sick or unpaid) from tomorrow. It would have been better if DW could have avoided going to work and catching public transport for the past week, but hopefully the probability of exposure to Covid-19 is still quite low at the moment.

In the longer term the question will be whether or not DW and I keep our jobs - even large, healthy companies are likely to suffer extreme financial stress during 2020, and there will be a massive increase in unemployment during the course of 2020. If we're "lucky" we may receive a redundancy payment and be in a position to take an 'early retirement' if we need to. DS1 will be graduating at the end of this year and still seems to have an optimistic outlook regarding his chances of getting a well-paid IT job -- personally I won't be surprised if he ends up living at home rent-free and doing a post-grad degree for a couple more years...


Subscribe to Enough Wealth. Copyright 2006-2020

Saturday, 21 March 2020

Heading towards 1MM Covid-19 cases and 40,000 deaths globally by the end of March

Unfortunately the Covid-19 situation outside of China is dire, with countries being too slow to introduce detection, then containment, and now social distancing/self-isolation. During January and February the world first learned about the novel coronavirus in Wuhan, and then watched on in amazement at the draconian measures being taken to contain the spread within China. All while taking minimal actions to prepare for a possible pandemic.

The fact that China apparently managed to bring its outbreak under control (and the few cases detected outside of China during February) seems to have actually hindered global preparations - governments around the world were focussed mainly on reassurance and preventing economic dislocations by maintaining 'business as usual' approaches for far too long.

Now, the global rate of increase in Covid-19 cases and deaths has grown sufficient to outweigh the positive results achieved in China and South Korea, as can be seen below.

Global Covid-19 cases outside of China continued to rise exponentially:


While control achieved within China gave a false sense of security to the WHO and other countries:
But cases outside of China have now increased sufficiently to dominate the overall trend in global cases and deaths:

And with no indication that the spread of Covid-19 is yet being adequately controlled outside of China and South Korea, it looks as if the world may hit 1 million cases and close to 40,000 deaths from Covid-19 by the end of this month...

Governments around the world are belatedly trying to boost their ICU capacity by ordering mechanical ventilators - which will rapidly exhaust stock is on hand around the world (the government equivalent to suddenly running down to the local supermarket and trying to buy a month's supply of toilet paper!).

Hopefully everyone takes 'social distancing' and 'self-isolation' seriously enough to slow the rate of increase ('flatten the curve') to an extent that health capacity isn't totally overwhelmed. Otherwise the death rate could climb due to lack of trained staff, facilities and specialist life support equipment even in developed countries. What the situation is going to be like in India and African and South American countries in 2 or 3 months doesn't bear thinking about.

Subscribe to Enough Wealth. Copyright 2006-2020

Wednesday, 18 March 2020

What the world should have done differently

Now that the global spread of Covid-19 is causing airlines to cancel international flights, governments to close borders and impose 14-day quarantines on everyone that arrives, and advocating mass testing and 'social distancing', not to mention many businesses (restaurants, theatres, bars etc.) and institutions (universities, sporting events etc.) to close down it is apparent just how insane the initial response of the WHO and governments outside of China was when Covid-19 started to spread from Wuhan throughout China.

At the time (only six or so weeks ago!) the WHO was advocating against closing down international travel, reading from a play book that obviously had been drawn up in the belief that the economic impacts of draconian measures would be far worse that any possible impacts of a disease spreading around the globe. And any government that banned arrivals from another country had to provide a 'please explain' to the WHO, and was criticised for their 'excessive' response. And governments generally were busy reassuring the public that 'all will be fine' and to not 'over-react' else there might be adverse economic impacts. While SARS and MERS should have been warnings to 'be prepared', the fact that they turned out to be relatively minor in terms of global impact meant that the wrong lesson was learned - that economic impacts should be minimised by taking a 'calm and measured' approach and avoiding too much disruption to international travel and trade.

Well, six weeks ago a blanket ban on arrivals from any country reporting corona virus cases, and a universal 14-day quarantine of all international passengers would have meant two weeks of relatively minor economic impacts, with adverse effects on tourism and the travel industry (but not much else), and providing the chance to implement a testing regime to detect and isolate all cases of Covid-19 as they arrived (so incoming passengers would now only need to be in isolation for two days awaiting test results). If those relatively minor inconveniences to international travellers had been enforced back in January, economies around the world would now still be functioning relatively normally, rather than coming to a grinding halt.

Of course, if such drastic measures *had*been done back in late January to detect all instances of international transmission (at the same time China was taking drastic measures to control communal spread within China) it would have never got to the stage of having communal spread in the USA, Iran, Italy, Germany, France, Spain etc. etc., so we'd now be looking back and criticising the 'over-reaction' that had occurred when there were never more than a handful of cases that didn't originate in China... Oh what might have been.

Hopefully when this is all over in a couple of years time the WHO 'play book' will be re-written (yet again) to handle all future Covid-xx outbreaks as potential pandemics, rather than make the (false) assumption that any new outbreak will be relatively minor and should be handled with priority given to minimising immediate economic impacts.

Subscribe to Enough Wealth. Copyright 2006-2020

Monday, 16 March 2020

Panic in the market?

Looks like today's 8% plunge in the Australian stock market has started to spook 'the market' itself, rather than just individual investors. ASIC has asked 'large equity market participants' to reduce their executed trades volume by up to 25% to avoid 'disruption to market services'. UniSuper has suspending its lending to the short selling market ('any stock currently lent out to short sellers will be returned within two days') and the South Korean financial regulator has banned short selling of listed shares on its market for six months...

It is often the case that when stock markets suffer a rapid decline 'short sellers' are blamed for much of the decline. But, in reality, short selling only occurs when investors expect the market to drop further (after all, they will lose money - LOTS of money - if the market goes up after they short-sell), so short-selling simply adds to market liquidity and makes the market decline to its new 'equilibrium' level as quickly as possible. By banning or restricting short-selling, market regulators and large participants can only slow the rate of decline, not avoid it completely. While it may reduce the amount of 'overshoot' that occurs at the bottom of the sell-off, it generally isn't an effective means to prop up falling share markets. Indeed it may just slow the decline enough to allow large, professional investors to reduce their exposure, while 'mum and dad' (small, retail) investors are gulled into believing the market sell-off it abating, and leave them 'holding the bag' if they end up buying the stocks that the professionals are quietly dumping.

Similarly many institutional investors/fund managers are trotting out the usual 'stay the course' mantra in the face of a rapid market decline (that may continue for an extended period). This may be largely motivated by the fact that they have restricted flexibility to reduce market exposure (due to their investment 'mandate' or asset ranges documented in their PDS's), so they have a vested interest in encouraging small investors to not sell their share holdings, so that their own portfolio losses are minimized.

While 'stay the course' and 'time in the market, not timing the market' and generally sound investment advice, if there is a paradigm shift in the global economy that may dampen global growth for an extended period, it may be sensible to reduce market exposure until the worst has passed.

A look at how the stock market reacted to Spanish Flu pandemic and its aftermath suggests that once the scope of the pandemic start to decline the stock market recovery may be quite rapid. So it may be a good time to invest in the market in 3-6 months time (if the market is significantly lower at that time, and the rates of reported cases and deaths has started to decline). One difficulty with determining when the peak of the pandemic has passed will be the likely inability for testing to keep pace with demand at the peak rate of community spread. So case rate figures are likely to be progressively under-reporting the true infection rate (which might make the fatality rate appear to be increasing when it really isn't). The death rate seems to correlate with the true case rate, but with a lag of about two weeks for any inflection points (this was apparent in the Chinese case numbers and fatalities during Feb/Mar when they managed to restrict the rate of community spread), and it will probably be possible to fairly accurately track death rates even at the peak of the pandemic. So keeping an eye on the daily WHO Sitreps reported deaths might provide a suitable indicator for when 'the worst is over' and it might be time to look at investing close to the bottom of the market cycle...

Subscribe to Enough Wealth. Copyright 2006-2020

Diet 2020 Wk 11 - week ending 15.MAR.2020

I didn't get back into 'diet mode' as I had planned - due to the Covid-19 situation and slowly increasing social distancing recommendations etc. I did one day of 'work from home' (the company was checking that everyone could work from home if/when they need to implement this) on Wednesday, so didn't go to the gym. On Friday I had planned to go to the gym (DS1 joins me as a 'guest' now that I've upgraded to 'platinum' membership), but in the end decided to avoid going to the gym as although it is deemed 'low risk' it seems to be an avoidable risk and not really an essential activity. And by Sunday afternoon the Australian government was recommending 'social distancing' on public transport etc. (i.e. stay 1.5 m apart), which makes the gym not really advisable (people are often within 1.5 m of each other) although the government seems to be in 'have your cake and eat it too' mode -- recommending strict social distancing, but then telling people it is still OK to go to gyms etc.

I also stayed home on the weekend, deciding to skip my final 'beginner' kendo class, and DS2's kids kendo classes had actually been cancelled. So I didn't go to the shops etc. on the weekend and my stepcount was very low (I should really go for walks around the neighbourhood, but this weekend it was raining quite a bit too). Aside from staying home and getting no exercise, I also overate on the weekend. Not sure if it is 'stress' due to the Covid-19 pandemic and associated market gyrations that caused me to eat 'comfort foods', or some weird so of 'end of the world, so why not indulge myself' mentality taking hold. Either way, time to get a grip and stop eating icecream and chocolates.... ;)

Overall, my macro averages for the week were abysmal, and the overeating had alrready started to show up on the bathroom scales as a slight (so far) increase in my weight. So I've gone back into 'strict' diet mode today and will avoid carbs as well, so I can get back into 'keto' dieting mode asap.

Calories:   3,824.5 kcals/day
Fibre:         16.7 g/day
Carbs:         39.2 % of cals
Fat:           44.0 % of cals
Protein:      140.1 g/day
Sodium:     4,085.3 mg/day
Weight:        86.8 kg
BMI:           28.3
Steps:      6,863   steps/day
Sleep:          6.1 hrs/night
Body Fat:      16.8 %
Gym sessions:   0

Subscribe to Enough Wealth. Copyright 2006-2020

Saturday, 14 March 2020

Friday's 'relief rally' in US and Australia probably premature

After record losses on Thursday, the Australian market started out badly on Friday but then recovered (and actually ended with slight gains) in the afternoon. Then the US market did quite well in Friday trading, recovering a large fraction of Thursday's decline. As usual, market commentators attempted to attribute the market movements to one 'sound bit' cause - in this instance the 'prospect' of the US congress and the US President getting their act together and providing some financial support in terms of sick leave and other measures to provide financial support to victims of Covid-19. However, I don't think that 'fiscal measures' are going to be particularly effective in ameliorating what is a medical and social behaviour crisis. Normally providing financial support (e.g. $750 government hand-outs to welfare recipients in Australia) would boost spending, and have a 'multiplier effect' (you give someone $100 extra cash and they go to the shops and spend $200). But in this crisis I don't think that having some spare cash will encourage people to go shopping if they are sitting at home in order to avoid catching Covid-19. Similarly, while providing 14 days sick leave in the US will replace income for those required to self-isolate for two weeks, it won't go far for those that actually catch Covid-19 and end up in hospital for treatment, and will be of limited help for those that finish off two weeks self-isolation due to exposure ('close contact') to a Covid-19 case, but find out that they are 'negative' for the virus. In those cases they are still likely to eventually catch Covid-19 for real - and will have already used up their sick leave. I suspect people will be extra cautious and any financial support will end up being used to reduce household debt or kept as an emergency reserve (to pay bills when you are actually sick with Covid-19). People are only likely to spend the extra cash on household consumption (and hence provide economic stimulus) if they feel that the crisis is being mitigated and will be brought under control by government action - and I can't see this happening any time soon.

Given the continued rate of growth in global Covid-19 cases (about 4% increase in numbers each day), and the worrying death rate (about 3%-4%, which suggests considerably under-reporting or lack of testing), the economy is likely to suffer more and more as patient numbers overwhelm medical capacity and death rates rise exponentially. This is likely to disrupt business and the economy no matter what fiscal stimulus measures are taken.




Subscribe to Enough Wealth. Copyright 2006-2020

Friday, 13 March 2020

Not game to go back into the market just yet

After the overnight collapse in the US and European stock markets, the ASX200 was down by another 7% or so on the opening. So the All Ords is already down to about 5,000 pts (where I said I'd *think* about reinvesting about 25% of my previous $100K portfolio mix back into the market using my portfolio loan credit line), and the banks (NAB and WBC) that I have small (and getting smaller!) investments in are already down to the lows they reached at the nadir of the post-GFC crash!

BUT, with the market dropping so rapidly, and the Covid-19 situation surely going to get a *lot* worse (cases are growing at 4% each day, and the fatality rate is creeping up over 4% of reported cases - which suggests that there is both under-reporting of case numbers, and, therefore, a lot of undetected cases in the community to spread the disease...) before it can start to 'improve', I can't see any chance of the economy (global and Australian) not suffering a huge hit in the next 3-6 months. So, I suspect that there will be more significant market declines to come (interspersed with some 'bounces' and 'bargain hunting' on the way down).

Overall, I'm not willing to invest $25K of borrowed funds in the stock market at the moment, and putting in a smaller amount (say $10K) seems rather pointless. So, for the moment, I'll just continue to sit on my hands and what the disaster unfold...

** update **

In the end I decided to buy 100 WBC at $15.63 to increase my WBC holding by 20% to 600 shares in my Commsec ML account. A fairly trivial amount, but lets me feel like I'm buying some stocks when they are cheap (?). It also lets me enjoy the slight increase in share price this afternoon (ignoring the recent decrease in WBC and NAB share price). I would have also bought some NAB more shares, but they are held on my Leveraged Equities ML account and trading on that account has to be done via a third party (broker) so it isn't as easy to trade as on my Commsec ML account. I'll just let the NAB holding build up over time via the DRP (assuming the July dividend isn't slashed, I should end up getting 2 or 3 NAB shares via DRP rather than the normal 1 or 2, due to the decline in share price).

I also still have some Vanguard Index Fund investments on my St George ML account (I didn't bother doing a redemption in Feb as they wouldn't accept my phone redemption request and I couldn't be bothered filling in the paper form and mailing it in! Fortunately I did bother with our SMSF investments), and some Colonial First State Geared Global Share Fund units on my Commsec ML account. I haven't bothered calculating how much these holding have declined in value since Feb - they were worth about $150K in total, so I guess I'll be down by about $50K overall - I'll find out when I do my monthly NW calculations at the end of March. Ah well, at least I moved our SMSF investments out of Vanguard High Growth Fund (down about 16% based on yesterday's closing unit price compared with 6 Feb), and into a mix of Vanguard Conservative Fund (down 'only' 4.6%) and Vanguard Diversified Bond Fund (its actually up by 1.5% since 6 Feb). As we are invested about 30% in the Bond Fund and 70% in the Conservative Fund (excluding the 4% of SMSF assets sitting in a cash account), the overall SMSF investments are down by 2.6% since 6 Feb (to yesterday's closing unit price) - a lot better than if I'd left us invested in the 'High Growth' Fund.

Overall it seems (so far) that it was lucky that I decided to buy a $1MM 'off the plan' apartment last year, as that encouraged me to liquidate my share holdings in early Feb when it looked like the share markets could be adversely affected by Covid-19. It allowed me to clear off nearly all of my portfolio loan and margin loan debts, so I'll be in a better position to fund the $900K that will be due upon 'settlement' in 2023. I suspect that the share market decline/volatility will encourage a lot of investors to switch to investing in real estate - as was the case in 1988 after the 1987 stock market crash. We'll see how things develop.

Subscribe to Enough Wealth. Copyright 2006-2020

Thursday, 12 March 2020

Should I increase my life insurance?

Just had a random thought - should I increase my (and DW's) life insurance? I have a minimal amount of death cover via my retail superannuation account (the company pays the premium, so why not), and DW doesn't have any cover as it seemed to make sense to 'self insure' given the cost of premiums at our age and the fact that we have sufficient financial resources to cope if one of us were to die. However, I'm guessing (I haven't checked yet) that life insurance premiums probably haven't been adjusted yet to account to any increased risk due to Covid-19, so it may be a reasonable 'worst case' preparation to take out some life cover for DW and myself. We can also cancel the policies if we're both still around next year ;)

Subscribe to Enough Wealth. Copyright 2006-2020

Too much or too little?

We seem to be living in a strange situation where it is unclear (even the 'expert' advice seems to be somewhat inconsistent) as to what is the 'right' thing to do personally with regards to Covid-19. Do you panic and sell off stocks, or follow traditional advice to 'stay the course' and not try to time the market? If you have sold your portfolio, when do you start buying again? Do you join the growing ranks of 'panic shoppers' and stock up on non-perishable foods (thereby causing shortages for others that stick to their normal shopping habits), or follow the general advice to not panic buy/hoard? (All very well until travel restrictions and shop closures happen, like in Italy, or supplies aren't available when you need to get some). Should you believe those that are saying, basically, that 'there is nothing to fear but fear itself' (ie. the effects of a panic will kill more people than the corona virus itself), or those that say we are being too blase about Covid-19 (i.e. it's *not* 'just the flu')? (Given that when the WHO officially declared a pandemic overnight they made comment that "we are deeply concerned both by the alarming levels of spread and severity, and by the alarming levels of inaction." it seems that many people, even in government, have been not treating the situation seriously enough).

Personally I'm trying to take the 'middle road' (but erring towards caution). I'm still going to work (by bus and train), although my workplace did have half the workers test out 'work from home' yesterday, and the other half today - we'll find out next week if those that can 'work from home' are directed to do so. But I'm sitting (as much as possible) as far from others in the bus and if a train arrives fully loaded I'm giving it a miss and waiting five minutes for the next train. And today I skipped getting on a packed elevator at work and waited to get on the next (empty) one. At the shops I'm taking advantage of the disinfectant wipes provided and wiping down the trolley handle before starting to shop, and making sure I don't touch my face while 'out and about', and washing my hands for the recommended 20+ seconds when I get home (before touching anything around the house). And I'm generally trying to stay 1 meter clear of everyone as I walk around the shops, train stations, bus queues etc.

Over-reacting? Probably/maybe. Under-reacting (I'm still going to work even though I have enough accumulated leave to take a couple of months off work if I wanted to)? Possibly. But this is probably as good a time as any to err on the side of caution. After all, the NSW Health Minister has today suggested that 20% of the state's population (i.e. 1.5 million people) will catch Covid-19 (which, if the fatality rate is around 3% would mean 45,000 deaths). And Angela Merkel suggested that 60% of Germany's population (ie. about 50 million people) will catch Covid-19 there (which could mean an astounding 1.5 million deaths). While being extra cautious might only 'delay the inevitable', it will provide two major benefits - 1) the peak of illness will be lower and spread over a longer time period (allowing emergency health care to better cope - there are a finite number of ICU beds available, and limited scope to increase resources), and 2) at some stage (in 12-18 months?) a vaccine should become available, so having as few people as possible spreading Covid-19 in the interim will help reduce the number of fatalities overall.

Subscribe to Enough Wealth. Copyright 2006-2020

Monday, 9 March 2020

When to start bargain hunting stocks?

Answer: no-one knows.

Still, given the superior long-term returns* provided by 'growth' investments such as stocks, compared to having cash sitting in the bank (or under the mattress), it is a decision all investors have to make, or else they will end up never investing.

At the moment the Australian stock market is already down by about 18% compared to the highs reached only last month. It's been an amazingly fast sell-off, more similar to the crash of '87 than the GFC bear market of '17/'18. So I have to start wondering when (and how much) to start investing again in the stock market.

The 'portfolio' of investments I had purchased a few years ago (and had intended to hold for 10+ years) using my Commsec margin lending (CSML) account was sold off on 6 Feb, and, based on current prices I could already buy back that portfolio at a 18% 'discount'. But so far I've only purchase a small tranche (~$10K) of Westpac Bank shares using my CSML account a few days ago - and that purchase proved to be a bit premature (WBC is down by about 10% in just two days!).

So, I'm tempted to start buying, but unsure just how far the market might sell off before a true 'bottom' is reached - share markets could rebound from here (but that could easily be a 'dead cat bounce' and the market might then continue even lower as the global health crisis worsens -- we are likely to see total Covid-19 cases exceed 200,000 by the end of the week, and deaths to exceed 6,000 -- which could lead to *real* panic in Europe and the US, where society has become increasingly risk averse in recent decades and the population may not cope at all well with a personal existential crises - even if the risk of death is 'only' 3% (on average) when/if you catch the disease!), or the ASX200 could fall to 5,000 (another 15% decline) or even to 3,000 (another 50% decline to the post-GFC lows) before bottoming out.

So, while an 18% drop is significant, I don't see any indication that the spread of Covid-19 globally will be brought under control in the next few weeks, so I suspect that market may stagger quite a lot lower before a bottom is reached. How far? Who knows.

I'll probably (maybe) buy back some (maybe 1/4) of my previous holdings if/when the market (ASX200) drops to ~5,000, and then see how things develop.

Subscribe to Enough Wealth. Copyright 2006-2020

* based on historic performance: past returns are not a reliable indicator of future performance, yada yada. History rhymes, but doesn't repeat.

Diet 2020 Wk 10 - week ending 08.MAR.2020

Had a bit of a disaster of a week, diet-wise. I ate some extra snack foods on Tues-Wed, and then instead of being 'strict' about my diet over the weekend (as I'd planned) I ended up eating a lot of junk foods, including quite a bit of chocolate and biscuits on Sunday (I had a total of 4,395 cals on Sunday!). My weight had been hovering around 85-86 kg all week (and for the past month), but it had gone up to 87.9 kg this morning (hopefully a lot of that is just fluid retention due to the bulk of food eaten yesterday)! My average daily cals for the week was only about 200 more than 'maintenance' so as long as yesterday was only a lone 'cheat day' it shouldn't have a ruinous impact on my overall weight loss progress. The main thing is to get back on track asap. It didn't help that I had only gone to the gym twice last week, and my average daily step count was also down a bit (due to not doing much walking on the weekend) - so my caloric requirement was probably also lower than normal for the past week.

So, today I skipped breakfast and will make an extra effort to stick to my strict low-cal/keto diet plan, and I'll then stick with my low cal/keto diet plan for the rest of March and April to try to get rid of the last 6-8 excess kilos I need to shed. I'll go to the gym for some weight training on the way home from work tonight , despite the rapidly increasing risk of corona virus exposure in Sydney these days! Keeping my hands away from my face during the gym session and doing a thorough hand wash at the end might help reduce the health risks - and it helps that the gym is less busy than usual these days (the shopping center was almost deserted when I went there on Saturday afternoon).

Averages for past week were:
Calories:   2,836.2 kcals/day
Fibre:          9.9 g/day
Carbs:         36.9 % of cals
Fat:           43.1 % of cals
Protein:      126.9 g/day
Sodium:     4,280.1 mg/day
Weight:        85.1 kg
BMI:           27.8
Steps:      8,174   steps/day
Sleep:          6.1 hrs/night
Body Fat:      16.9 %
Gym sessions:   2
WT Reps:      643
WT volume: 39,625   kg
Treadmill:    37:38 mins

Subscribe to Enough Wealth. Copyright 2006-2020

Sunday, 8 March 2020

Catching a falling knife - WBC

As I suspected, it was a bit early to buy bank shares - so the $10K worth of Westpac shares I bought early last week at $22.49 were already down to $21.35 by COB on Friday, and will probably be lower in Monday trading in Australia after Wall Street had another decline on Friday. It's not really a surprise, but with a trailing p/e of only 11 it is likely to 'come good' when the economy eventually improves and the fallout from the Royal Commission washes through. I keep an eye out for other 'bargains' as the market falls, and buy a tranche of this or that each month or so (essentially 'dollar cost averaging' into the market on the way down). I might defer buying an more shares for a while though, as it is probably way too early for the market to 'bottom out' yet.

The other shares I still own are a small holding of NAB bank shares - I initially got some via a final dividend payment DRP after I had previously sold out my share holding in 2018, and have received 1 or 2 shares every 6 months via the ongoing DRP (I'll have to keep my 'portfolio' records up to date with the DRP details, as the eventual CGT calculations when I sell the shares are otherwise a pain - as I found out when I sold shares in 2018 that I'd initially bought back in the 1990s...)

Anyhow, Westpac remains in a bit of a down trend while the market is heading south, so it probably has quite a bit further to fall before hitting the bottom, but you never can tell. If you believe in 'charting' there *might* be some support around $20 (if the broader market isn't in a melt-down)...

Subscribe to Enough Wealth. Copyright 2006-2020

Wednesday, 4 March 2020

I might buy some Westpac shares

Having already been hit by the fallout of the Royal Commission, the general December market dip, and now the effect of Covid-19 on market sentiment, it looks like Westpac shares *might* be a reasonable long-term buy:

"Westpac is down 1.9 per cent to $22.51, the lowest it has been since July 2012. However, this takes Westpac's price to earnings ratio down to 11.49 times earnings and a gross dividend yield of 11 per cent if it can maintain dividends, according to Bloomberg data. Overall the financial index is at a one-year low."

I have a tiny amount of NAB shares currently sitting in my Leveraged Equities Margin Loan account (left over due to a dividend reinvestment that got applied just after I'd sold my NAB holding), so buying some Westpac shares using some left over cash balance in my Comsec Margin Loan account might be a reasonable step at current prices.

Subscribe to Enough Wealth. Copyright 2006-2020

Tuesday, 3 March 2020

Market rebound - rationality or wishful thinking?

The US Market was up a healthy 5% or so overnight, due to the Fed making reassuring noises and a teleconference being organised by G7 finance heads to 'deal' with the economic implications of the corona virus. Now, this can either be a rational response to a rate cut that will boost economic activity and make equity returns relatively more attractive, or a 'dead cat bounce' or relief rally based on flawed premise that the outbreak will be contained within Q1 (ie. by the end of March) and have relatively little impact on global economic growth.

My guess is that this situation isn't as amenable to fiscal stimulus and rates cuts as most economic weaknesses, and I'm happy to sit on my hands for the next month or two and see how things develop. If I was still geared or highly invested in equities I'd be looking at the current bounce as a 'second chance' to tilt away from growth/equity investments while prices are still reasonably close to recent highs.

Subscribe to Enough Wealth. Copyright 2006-2020

Monday, 2 March 2020

Diet 2020 Wk 9 - week ending 01.MAR.2020

Well, I didn't get straight back into 'keto' mode as I'd planned, but I managed to eat less than maintenance calories on average last week, so my weight was back down to where it was two weeks ago. This week I'll focus on avoiding excess carbs and sticking to my meal plans. While I haven't lost any weight over the past fortnight I do seem to have replaced some fat with lean mass, which is what I'm hoping to do after I've reached my target weight!

Averages for past week were:
Calories:   1,952.3 kcals/day
Fibre:          7.4 g/day
Carbs:         23.1 % of cals
Fat:           48.5 % of cals
Protein:      124.5 g/day
Sodium:     4,363.2 mg/day
Weight:        85.4 kg
BMI:           27.9
Steps:      9,876   steps/day
Sleep:          5.4 hrs/night
Body Fat:      16.3 %
Gym sessions:   4
WT Reps:    1,127
WT volume: 77,452   kg
Treadmill:    65:31 mins

Subscribe to Enough Wealth. Copyright 2006-2020

Net Worth: February 2020

This month my NW increased by $51,713 (2.07%) which was due to a combination of receiving my annual bonus (around $10K - used to reduce margin loan balances), increased house valuation (around $44K - which reflected two months of price changes), a slight gain ($9K) in my SMSF account balance, and a very modest (-$2K) overall decline in the value of my geared share portfolio. I sold off a substantial portion of my managed fund and share/ETF investments on 6 Feb and used the proceeds to pay off nearly all of my margin loan balances and the portfolio loan - thereby avoiding most of the impact of the market sell-off that happened during the past week.

Our SMSF investments also avoided the worst of the recent COVID-19 inspired market volatility (so far), due to my decision to go 'risk off' in early February. Our previous major asset allocation (Vanguard High Growth Fund) would had declined -7.97% by the end of Feb, compared to where it was when I implemented our switch in asset allocation. The investments we switched into were down -1.88% (Conservative Fund) and up 1.36% (Diversified Bond Fund) since the date I switched our asset allocation, so, overall, our investments (excluding the 5% or so we have sitting in the ANZ V2 cash account) were down by only 0.80% since we switched allocations. The switch cost about $3,000 due to the buy/sell spread (transaction cost), but has reduced the potential losses (if we'd stayed in the same asset allocation) on our SMSF investments by $108,500. And, given the ongoing potential for corona virus concerns to flow through into global economic performance and market returns during 2020/21 I'm happy to be invested more conservatively for the time being.

In my overall NW calculation I've included the amount paid so far towards my $1m investment unit ($100K deposit and $40,452 stamp duty) as the 'equity value' of my unit, and I won't start tracking a monthly estimated value for this apartment until construction is completed and the purchase 'settles' in early 2023. But for interest's sake I've been tracking the 1 and 2 bedroom unit prices for the suburb, and the overall 'trend' unit pricing, and the data up to this month suggests a potential increase of about $141,650 (14.17%) since I put down the holding deposit last year. I'll get a better idea of the real 'starting value' for my unit valuation tracking when construction is completed and I get a valuation done in order to get a mortgage on the unit. At the moment I'm ignoring any notional increase in the value of my 'off-the-plan' unit from my net worth calculations, and simply assuming I'd "break even" if I sold it before settlement. I'm carrying the notional total cost ($1m + $40K stamp duty) under 'other mortgages' as I included the deposit and stamp duty payment as 'equity' in my overall geared share valuation (as I initially paid these amounts using my portfolio loan). In reality the balance that will be due on settlement is $900K, and I'll fund that using a combination of a mortgage secured against the valuation of the apartment (at the time of settlement), and a draw down of available funds from my portfolio loan line of credit.

Our estimate house price has finally been updated with the recent (27 Feb) sales data for our suburb, and confirms that a significant recovery in Sydney real estate prices is underway (last month there wasn't any updated sales data available). At the bottom of the recent slump in house prices, the year-on-year decline in 6 month price averages had reached -12% (from the previous high). And the worst 12 month price drop was -13.4% (reached in July 2019). Currently the 12 month price change is +5.0%, and we're now only -8.13% below the previous peak (reached in October 2017). While concerns about corona virus may impact buyer confidence (and the numbers attending auctions!) in the short term, the correction in the share markets is likely to push investors towards real estate (as it did after the 1987 crash) as the only viable 'growth' asset, so should support a continued rebound in Sydney real estate prices. In the longer term, the slump in new construction commencements that has occurred is likely to be exacerbated by any weakness in the economy, and lead to a shortage in new stock once the current batch of developments has completed and settled. The troubles in Hong Kong (pro-democracy protests and corona virus concerns) may also encourage some additional migration of wealthy Chinese to Australia, which could also strengthen demand for high-end apartments. Overall, I'm reasonably optimistic regarding the eventual performance of my investment apartment.

Subscribe to Enough Wealth. Copyright 2006-2020

Sunday, 1 March 2020

Covid-19 won't be contained

Well, it certainly looks like attempts to contain the spread of Covid-19 have failed. The rapid increase in cases outside of China is now making a significant contribution to the total number of cases and fatalities, and looking at the ex-China case numbers there doesn't appear to be any significant reduction in the exponential increase in cases.



The fatality rate has also trended towards the upper range of my estimate at 3.4%-3.6%, with the 'current day' deaths/cases converging with the 'current day' deaths/T-4 cases. I've seen one 'expert' suggest that this fatality rate might overestimate the actual death rate for those that catch Covid-19, with the logic being that the number of cases is probably under-reported (with many 'mild' cases of Covid-19 not being diagnosed/tested/reported). But to me that would also mean that the actual rate of spread is a lot worse than the reported figures indicate, which would certainly not be good news.

The other reason to 'not panic' that was cited by medical experts in the early stages of this pandemic was that while the fatality rate for Covid-19 (at the time) was thought to be around 1%-2%, the number of cases was much lower than occurred in a 'normal' 'flu season, so the absolute number of fatalities would not become significant. That made the unwarranted (optimistic) assumption that Covid-19 would be easily contained...

Unfortunately, it looks like Covid-19 may eventually spread throughout the global population and could end up infecting 25%-75% of the population. If the true fatality rate (with access to ICU treatment levels) is around 3%, and could be as high as 5% in areas without access to ICU levels of treatment, then the possible number of deaths resulting from Covid-19 during the coming 12-18 months is truly horrendous (I won't bother putting the figure here, as I don't want to be overly alarmist). The thing to bear in mind is that Covid-19 may infect more people than occurs in a 'normal' 'flu season, because a) there is no vaccine available, b) people have no immunity at all, and c) it is highly contagious (more like the 'flu than MERS). And the other thing to remember is that 'flu typically has a death rate of around 0.05% to 0.1% while Covid-19 may have a death rate of around 3% - which is 30-60 times higher!

One thing that may (or may not) be reassuring (depending on your age and overall health) is that the overall death rate is skewed by its impact on older persons - the death rate is 14.8% for those over 80 (I'll tell my parents to stay on their farm and not visit town if at all possible!), and is 8% for those aged 70-79, and 3.6% for those aged 60-69. 1.3% for those aged 50-59 (me and DW), and just 0.2% for those aged 10-39 (and no-one under the age of 9 has died so far). That still means that in our family, if we all eventually catch it (and barring any new treatment regime becoming available), there is about a 1-in-30 chance that one of us would die.

Subscribe to Enough Wealth. Copyright 2006-2020