Monday 27 April 2020

Installed COVIDsafe

The Australian government has finally released it's contract tracing app for iPhones and Android phones, called COVIDsafe. After all the usual knee-jerk privacy paranoia it turns out that the App doesn't track your location or store data on some government database, it simply records when you get within blue-tooth range of another smart phone that has the App installed, and the data stays on your phone until you choose to give it to the health department's contact tracers (IF you catch Covid-19 and have a positive test result). If you never get Covid-19 before the pandemic ends you won't ever be asked to share the data, and it can be deleted at any time you choose (eg. when the pandemic is over).

The installation was quick and easy. The only trouble I had was that I had to use google to find the government health department page to get the link to the app in Google Play - searching for 'CovidSafe' within the App store failed to bring it up!). I did initially think that the registration/PIN wasn't working when I didn't get sent the PIN via SMS -- but it turned out that I'd just entered my phone number incorrectly. Hopefully enough Australians install COVIDsafe you the country to be able to quickly contract trace any future instances of community transmission. That way we'll be able to ease restrictions and minimise social and economic disruption. It might turn out that we are the 'lucky country' yet again.

ps. If Australia and NZ manage to get on top of Covid-19 and open up trans-tasman travel, we might go skiing in NZ for our next overseas vacation. It will probably be the only place Aussies can go overseas for quite a while...

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Saturday 25 April 2020

The World is a giant laboratory at the moment

One positive aspect of the many varied approaches being taken around the world to social isolation, lockdowns, business closures and re-openings, testing rates etc. is that the will be an abundance of data available for researchers to analyse regarding what are the best approaches to limit the spread of a pandemic such as Covid-19, where the best trade-off of restrictions lies in terms of health benefits vs. economic costs. And which methods and timing for easing restrictions and getting back to a 'new normal' are the "best" way in different circumstances. PhD students in economics and health sciences (and sociology) will be using the data for their theses for decades to come.

Of course this isn't an experiment you'd choose to do, but it will put the world in a better position to be able to handle the next pandemic in a more informed and effective manner (hopefully).

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Tuesday 21 April 2020

Flattening the curve isn't the end of Covid-19, just the beginning

After initially being too blase about Covid-19 (thinking it was safely restricted to just China), countries swiftly ramped up a series of restrictions to try to prevent the spread of Covid-19 as it spread across the globe. At a huge economic and social cost. But now that several countries have succeeded in 'flattening the curve', many countries are already looking at easing restrictions (some prematurely - such as the US). That may be sensible in countries that are islands (or island continents) and have closed their borders (such as Australia and New Zealand) and have reduced the spread of Covid-19 to a handful of new cases per day (so 100% contact tracing may be feasible), but it seems a recipe for disaster in countries that are still detecting thousands of new cases each day, even it that rate of spread is constant and no longer increasing exponentially. After all, although the 2,314,621 confirmed Covid-19 cases reported in the WHO Sitrep 91 seems to be a large number, it is only 0.03% (!) of the world's population. Which means that the other 99.97% of people worldwide (essentially everyone) still has no immunity from Covid-19, and we are still months (or years) away from more effective treatments for those seriously ill from Covid-19, or a mass-produced (and effective and long-lasting) vaccine.

So, unless easing restrictions is done *very* carefully, and with massive amounts of continual testing and monitoring, and with governments ready and prepared to bring back restrictions as needed (which might be more difficult after the populace has been through one round of restrictions and was told things are getting better), things could go very bad (again) very quickly.

And don't forget that being tested and found negative simply means they were (probably) virus-free at the time of testing. They are still at risk of catching (and spreading) the virus after the test was done. Having tested negative last week doesn't mean you might not have been exposed since, and be currently asymptomatically spreading the virus...

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Is Donald Trump killing the people who voted for him?

The SMH reported today that some US States with Republican Governors are planning to reopen gyms, churches, bowling alleys, tattoo parlours, hairdressers and nail salons. Given that new Covid-19 cases are being detected at a great rate in the US, despite limited testing, and that Covid-19 is quite lethal to those that are older and male (ie. key Republican voter demographics) this would seem likely to kill off quite a few Trump supporters. Then again, as poor, black voters are also more at risk of dying from Covid-19 due to comorbidities than WASPs, it may kill off more Democrat voters than Republicans?

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Wednesday 15 April 2020

The joy of being an anti-social introvert during a pandemic

I've been somewhat bemused watching TV interviews of people complaining about the 'sacrifice' of staying at home, avoiding crowds and not having dinner parties. Personally I've always found socialising a bit of a chore and prefer watching a movie on TV or reading a book to eating out of going to a party. So being an an introvert and somewhat anti-social (in the sense of not feeling any great need to socialise) makes one perfectly suited to the current 'work from home' and 'social isolation' requirements. DW is a bit more social than me, so although she is enjoying working from home (enjoying working reduced hours - but not enjoying the reduced pay so much) four days a week, she's glad that she is still required to go in to the office one day per week (although I'm now driving her to and from work, so she doesn't need to catch public transport). I'm working from home five days a week (they've closed my office to all but a few essential staff that have to work on-site), and I'm quite content to sit at home with the boys (who spend most of the day in their rooms - DS1 doing uni assignments, and DS2 playing computer games and chatting with his school friends on discord).

In fact I've been enjoying working from home so much that I'll be disappointed when it's time to start commuting to work again every day.

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Tuesday 7 April 2020

Industry (Union) Super funds suddenly look a little bit less enticing

Over recent years ASIC has been busy trying to discourage people from putting their superannuation into a self-managed super fund (SMSF), even to the extent of running a dodgy 'education' campaign last year that presumed wildly inflated costs for running an SMSF (I think ASIC quoted a figure of around $10K pa to run an SMSF, while it is perfectly possible to run an SMSF for under $1Kpa - we do). At the same time, Industry (Trade Union based) superannuation funds have been spending copious amounts of their existing members money on TV advertising campaigns spruiking the safety, low cost, and 'not for profit' nature of their funds compared to the retail superannuation funds (mostly run by banks investment arms).

One of the worrying features of industry super funds was that they often invested in unlisted infrastructure assets, such as motorways, airports, etc. As these cannot be 'market priced' (as there is no liquid market for these assets - they get bought and sold in a single massive transaction from one investment fund to another), there was always some doubt about how realistically they were valued.  The fact that valuations were only 'estimates' often done on an annual basis meant that there also tended to be a lot of 'smoothing' of valuations taking place, which in turn meant that they appeared to have low price volatility, which then meant that they could be classified as 'conservative' investments (a bit of 'creative accounting' in some ways similar to the bundling of hoards of junk debt into a CDO with a better risk rating that occurred prior to the GFC debacle. Fund managers are always on the lookout for a way to turn a sow's ear into a silk purse).

The current Covid-19 crises has led to the government changing superannuation rules to allow members to make relatively modest 'early withdrawals' of their superannuation (prior to preservation age, which is normally close to pension age). This has obvious liquidity implications for funds that have made long term investments with limited liquidity on the assumption that most of the member's funds are 'locked in' until preservation age. An example is the recent announcement by Industry Fund Hostplus that they are amending the fund's rules to allow them to essentially suspend or delay member withdrawals. This seems quite similar to what property investment funds did (freeze withdrawals) during the GFC when they were unable to sell their investments (at a reasonable price) to satisfy the rate of withdrawals from the funds.

We'll see if and when Hostplus actually suspends member withdrawals, but it is certainly a potential downside to investing one's super in a low-cost, industry based superannuation fund. On the other hand, even an SMSF might have investments that prove to be illiquid in a crisis. While it is unlikely that a Vanguard Index fund would be unable to service withdrawal requests (as their investments are based on market prices), other investments (like property trusts) might suspend redemptions in a time of financial crisis. So SMSF trustees/members need to take liquidity into account when deciding their investment allocations.

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Monday 6 April 2020

Australia may be joining the elite club of countries that are significantly limiting Covid-19 spread

An interesting log-log plot of new cases in the past week, vs. accumulated cases seems to be a good indicator of when a country has 'flattened the curve' effectively. While it is impossibly to completely eradicate Covid-19 once it gets into a community/country (given that many infected people are essentially asymptomatic while contagious, so won't be detected as testing the entire population on a continuing basis is impossible), some countries have managed to reduce the number of new cases per day (the 'natural' trend is for infection rates to keep rising until most people are either infected or immune). Other countries still seem to be struggling to get on top of the spread while total cases are still small. Australia seems to be in the 'club' of countries that have managed to put in place measures to reduce infection rates at a fairly early stage (while total cases were still relatively small) - the other countries being Taiwan, Hong Kong, Japan(?) and South Korea.

Other countries seem to have also put effective controls in place (China), or have signs of progress (Spain and Italy) but at a much later stage (when case numbers and deaths had already escalated):

And other countrie have yet to show any sign of getting the situation under control:

However, Japan provides an example of where the infection appeared to be under control for a while, but then took off again. So, until a vaccine is available, efforts to minimise spread will have to be maintained, either continuously (at massive economic cost, but minimising deaths from Covid-19), or intermittently (or less stringently) so that either 'peaks and troughs' or infection (that the hospital capacity can manage) occur, or a steady, relatively low rate of infection is maintained.

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Sunday 5 April 2020

When experts are idiots

Reading an article in the SMH about the impacts of police having to issue warnings and in some cases fines for people continuing to ignore the social distancing and 'stay at home' instructions, I was struck by one reported quotation of an expert (who should know better):

"Peter Collignon, an infectious diseases physician and microbiologist at Canberra Hospital and a professor at the Australian National University, has made the same point, accusing authorities of overcooking the response for no genuine public health benefit. "You are safer outside than inside. I do not see how anyone's going to get this virus if they keep two metres away from someone and I don't see how anyone's going to get it if they sit on a park bench," Collignon told The Canberra Times."

I'm not an infectious diseases physician, but even I can imagine a highly probable scenario where Covid-19 could easily be passed via people sitting on a park bench. According to WHO:

"How long does COVID-19 last on surfaces?
According to the World Health Organization, it is not certain how long the virus that causes COVID-19 survives on surfaces, but it seems to behave like other coronaviruses. Studies suggest that coronaviruses (including preliminary information on the COVID-19 virus) may persist on surfaces for a few hours or up to several days. This may vary under different conditions (e.g. type of surface, temperature or humidity of the environment).
If you think a surface may be infected, clean it with a common household disinfectant to kill the virus and protect yourself and others. Clean your hands with an alcohol-based hand rub or wash them with soap and water. Avoid touching your eyes, mouth, or nose."
So, here's a scenario for Professor Collignon to get his mind around:
1. Person A (who is not in home isolation as they feel fine and don't know that they have Covid-19 and are infectious) goes our to buy a Kebab and sits on a park bench eating his lunch and enjoying the sun.
2. He has to cough and coughs into his hand - he'd normally cough into his elbow buy he has his hand full with a kebab so uses his free hand to mask his cough.
3. He finishes off his kebab and uses his free hand (that he coughed into) to push off the park bench, walks to the bin and throws his kebab waste away, then goes home.
4. Person B, a perfectly healthy 55 year old is out for a stroll with his partner decides to sit on the bench, carefully sitting 1.5m apart. When sitting there person B happens to put his hand on the bench where person A touched and left Covid-19 on the surface. He happens to touch his face while walking home with his partner.
5. A week later person B falls sick and soon after his partner also falls ill.
Still can't see how anyone can get the disease by going out and sitting on a park bench Prof. Collingnon?

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Thursday 2 April 2020

Industry Super Funds likely to have their 'creative accounting' exposed

For quite a while there has been some concern/criticism raised by retail super funds about the way Industry super funds have often made large investments in illiquid 'infrastructure' investments that have then been categorised as 'conservative' simply on the basis of infrequent asset revaluations and low price volatility (simply because these monolithic investments are not traded in any 'market' but tend to be bought and sold in single, off-market transactions).

If a large number of Industry super fund members take advantage of the new rules around being able to withdraw some of their superannuation if suffering economic difficulty due to the Covid-19 crisis. then some Industry funds may find they do not have sufficient 'liquid' investments to deal with a 'run' on early withdrawals. We'll see how it turns out.

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Net Worth: March 2020

This month my NW decreased by -$52,659 (-2.06%) which was a great result considering the state of the global markets. Our house price estimate actually increased, which offset most of the losses on my retirement savings and investment portfolio. I managed to time the switch of our SMSF investment from 100% Vanguard High Growth Fund into a 70:30 allocation to the Vanguard Conservative and Bond Funds, so our SMSF investments declined by 5.37% compared to the 20.54% loss we would have suffered if we had remained invested in the High Growth Fund. I had also sold off a large portion of my geared investment portfolio held outside of super, but bought a small tranche of Westpac shares in early March (which had lost considerable value by the end of March), and also bough some additional investments at the end of March which had gone down slightly in value as at 31 March.

Looking forward the property market may well cease to rise, given the likely increase in unemployment and general decrease in consumer confidence. However, this *might* be offset by a flight of investors from equities into property - as happened after the 1987 crash. The property market situation will also be affected by the ban on on-site auctions and 'open house' inspections in Australia, but although that will reduce volumes it may not directly impact prices.

I suspect the equity markets will continue to be highly volatile (obviously) and may well suffer further losses before reaching a 'bottom'. Covid-19 cases worldwide are heading towards $2MM+ and deaths over 100K during April, which is likely to erode any residual economic optimism fostered by the vast stimulus/support packages enacted by Central Banks and governments around the world during March. So for the moment I'm leaving out retirement savings with a conservative bias, and will cautious about increasing my equity investment portfolio too much while markets remain volatile and the economic outlook unclear.

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Wednesday 1 April 2020

Is Covid-19 spread being contained globally, or is testing providing misleading data?

My daily plots of WHO Sitrep data suggests that the rate of increase in global cases (excluding China) has finally started to drop below the previous exponential rate of increase. On the one hand this may indicate that social distancing and lock downs in Australia, Europe, the US and elsewhere are finally having an impact (by reducing the number of people each contagious, undiagnosed case can infect). Then again, the fact that the raw deaths/cases ratio had been increasing might suggest that the number of positive test results was falling behind the actual number of cases (either because of lack of testing capacity, or simply because you don't know who should be tested).

Hopefully the number of cases globally may be heading towards a plateau around of under 10 million, and deaths may stay below 250,000-500,000. Then again, that may simply be a plateau in the developed country cases (similar to the previous plateau achieved in China), and there may be a global 'third wave' once Covid-19 spreads throughout India and sub-Saharan Africa...

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Putting a foot into the water

Yesterday I decided to invest a bit more in the market, buying about $5K worth of each of the ETFs on my 'list' via my Commsec margin lending account. The total invested was less than the $50K I'd put into the Commsec ML account via a  drawn down on my St George portfolio loan, so there isn't any prospect of getting a margin call, regardless of how badly the market performs in future. So although I'm investing using borrowed funds, it isn't quite as risky as a straight out margin loan.

Anyhow, after the orders were filled yesterday, my current portfolio of securities held on my Commsec and Leveraged Equities ML accounts is:

This snapshot doesn't include the managed fund investments held on my St George ML account or the CFS Geared unlisted fund investment that is also on my Commsec ML account (those were included in an earlier post), as my yahoo portfolio tracker only includes my ETF and share investments.

I'll see how the local and US stock markets performs over the next few weeks/months before deciding whether to increase my investments. I still suspect that the markets have reacted to the various economic stimulus packages and rate cuts in a way that would be rational if this was a financial/economic crisis alone, but may not be applicable to the current situation. The medical aspect of this current crisis may well mean that people don't get back to 'business as normal' even after  governments ease the current 'lock down' style restrictions. After all, most of the 'social distancing' and other regulations that have had an immediate economic impact are intended to 'flatten the curve' and allow ICU capability/staffing in hospitals to be ramped up to cope with an influx of Covid-19 patients over a longer time period. When restrictions are eased there is likely to be a 'second peak' of even more cases and deaths than before, but at a time when hospitals are better prepared to cope with the need for ICU treatments. So, even if 'social distancing' rules have been eased, it may not restore economic and social activity to previous levels if the populace is still concerned about the levels of Covid-19 cases and risk of serious illness. After all, by the time restrictions are eased, while some people may be very keen to get back to 'normal life' and socialise, others may have got used to the 'new normal' and continue to work from home, avoid shopping and eating out, etc. So the economic recovery may be quite slow once the current 'lock down' period has passed. Still, one has to start investing again at some point, so when the market has rebounded about 10% from the recents lows, but is still about 35% below its February highs, it is probably a reasonable time to start making some investments for the 'long term'. After all, even the Great Depression was a 'buying opportunity' when one views market returns over the scale of decades rather than weeks, months or even years...

Then again, as John Maynard Keynes famously quipped "In the long run we are all dead", so this viewpoint is probably more applicable to DS1 and DS2 than myself ;)

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