Sunday 31 July 2022

Buying some WEAT and CORN

I decided to transfer another A$500 into my Superhero trading account and use the funds to buy some Teucrium WEAT and CORN ETF units. Global food shortages and price increases seem likely given inflation, population growth (still increasing despite there also being a problem with population decline and aging demographics in most developed countries, and even Russia and China), the impact of the Russia-Ukraine war on grain shipments this year, and grain production next year (due to impact on productivity (fertilizer availability and cost) and production (hard to focus on farming in Ukraine during a war)), and climate change impacts.

The Teucrium ETFs seem to be a reasonable way to gain some exposure to grain as a commodity. The Teucrium Wheat Fund (WEAT) provides investors an easy way to gain exposure to the price of wheat futures in a brokerage account, and the Teucrium Corn Fund (CORN) provides investors an easy way to gain exposure to the price of corn futures in a brokerage account.

I had no real reason to invest in both funds rather than invest twice as much in one of the two funds, aside from it being better to diversify than not, as a general rule. I placed the order on Sunday, so I don't think it will be filled until Monday (I'm not sure what the trading hours are for my time zone).

These ETFs have been in an uptrend for the past two years, and had spiked higher at the outbreak of the Ukraine war on 24 Feb, but have since dropped back to the long term trend line, so appear to offer reasonable value at current prices, assuming the long term price appreciation for grains continues.

There seems to be reasonable potential for more upside given previous high prices about a decade ago.

This isn't any sort of recommendation to invest in WEAT or CORN, just an update on a small trade I recently did 'for fun' (to be honest, a $500 investment won't have a noticeable impact on my NW whether it shows massive gains or losses).

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Wednesday 20 July 2022

Thinking of dabbling in unitized art investing

I had seen some online adverts and reviews for the  investment scheme, and Moomin had made some investments via Masterworks. I've recently added some regularly small investments into gold, silver and platinum to my overall asset allocation, and thought that also putting a small allocation of future investment funds into art might also be good idea (or at least no worse than my previous forays into agribusiness investments (that went bust), unlisted pre-IPO internet company GEM in 1999 (which went bust before getting to IPO stage, just before the boom), and various 'good story' small cap stocks (such as Aerodata, Holyman Ferries, etc.) that turned out to be not as good in reality as the company annual reports had anticipated). Due to the upcoming settlement of my off-the-plan apartment investment I might not have a large amount of free cashflow to invest, but I thought I might as well 'apply' to join Masterworks and find out some more about the process.

I filled in the online 'application' and, probably due to indicating I was thinking of investing up to $20,000 in the first 12 months, was 'fast tracked' to arrange an on-boarding 'interview' (aka 'sales pitch') later that evening (1am Sydney time was a convenient 10am local time appointment for the allocated Masterworks 'adviser').

The phone interview was reasonably low pressure (I wasn't pushed into making an initial investment straight away, although that was definitely suggested several times as a good way to 'get started'), and I clarified a few questions about the initial mark-up when artworks purchased by Masterworks are unitized and the investment processed via the SEC (the mark-up or "true up" as Masterworks calls it is around 5-8%, which doesn't seem too outrageous as there are costs involved in researching, selecting, acquiring the artwork and then setting up the investment offer). Ongoing annual fee is 1.5% (which is similar to many specialist active investment funds or niche investment funds), and Masterworks retains 20% of any realized profit when the Artwork is eventually sold (the remaining 80% of the profit is distributed to unit holders).

The 'normal' minimum investment amount is currently around $15K USD, but can be varied according to your situation (Masterworks wants to attract new investors, but reasonably affluent ones). In my case an initial $5K USD investment was suggested, which seems reasonable to 'get started'. At the moment I've deferred taking the initial plunge, as I want to digest the details of the current handful or artworks on offer (Masterworks brings on maybe 1-2 new artworks every month or two, and the units are available until the investment is fully subscribed - which can vary from a few days (or hours) for a 'hot' artist like Banksy, or be a few months).

One thing I'm slightly uncomfortably with is the fact that Masterworks decides when (and if) to eventually sell the artwork. The stated 'suitable' investment timeframe is 8-10 years (due to it being a volatile/risky asset class), but recently sales have often occurred after a holding period of only a few (2-3) years. My concern is that Masterworks, while always purchasing artworks that they expect to make a profit, would be tempted to sell artworks that rapidly appreciate as expected (as this will make investors happy, provide Masterworks with a healthy 20% of the profit, and provide great average annual return data to spruik and grow their AUM and annual fee revenues) and might hold onto poorly performing artworks indefinitely. That way mistakes and poorly performing (e.g. artists that fall out of fashion) art can be 'hidden' by never selling at a loss and realizing negative returns. While still proving Masterworks with an annual 1.5% management fee. Indeed one of the 'welcome emails' mentions "a low probability of any price declines over the last 25 years".

This is similar to the way active fund managers keep (and advertise) funds that perform well, but close down poorly performing funds (often citing lack of investor interest as the fund shrinks due to poor returns and investors making withdrawals from underperforming funds). Once a fund is closed the data no longer appears in fund managers 'available funds' performance charts, ratings etc.

In Masterworks case it would be the most successful investments would be sold fairly quickly, providing examples of great annualised returns, but 'dogs' would be left quietly sitting in investors accounts and never sold. The "Net Annualized Track Record" is for the overall 'portfolio' of 119 purchased artworks and is a mix of actual realized prices for sold artworks, and Masterworks estimates of the value of artworks still retained.

However, this isn't any worse than investing in artworks directly. You always have considerable holding expenses (if you insure your artworks) and considerable selling costs (if you sell via an auction) and uncertainty about the value of the 'investment' until it has been sold. And on the plus side, investing via Masterworks allows you to make a relatively small investment to get an interest in an artwork that would otherwise be out of one's price range.

I've yet to work out the technicalities of making the first investment - I'll setup another appointment when I feel ready to make my initial investment (you can't just transfer some funds into your 'account' and then make a unit purchase online. Apparently all investments are done with the assistance/via your investor relations manager). There will be some bank fees (and FX cost) to send the USD amount via a wire transfer. But it shouldn't be a huge cost - my bank charges $50 for an AUD transfer to a foreign currency, plus there will be an exchange rate 'spread' of up to 4% (I'll have to check what the actual costs will be - Moomin apparently used OSX for the money transfer). Sending $5,000 USD via Western Union would currently cost me around A$7,350.

I don't intend to make artworks a significant percentage of my overall asset allocation, so I've yet to decide if making a relatively small investment will actually be worth the time and bother compared to the likely impact on my overall NW performance. Another factor is that the investment is in USD, so you are also getting a currency speculation along with you underlying asset performance.

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Sunday 17 July 2022

Boredom 'Gig Economy' Job

As I don't have any tertiary studies at the moment (haven't applied to any other unis for a PhD candidature since WSU declined my application) and I haven't enrolled in the course I will need to do to qualify to sit the CFP exam, I decided to apply to become a Doordash delivery driver to do some part-time 'gig economy' work in my 'spare time'. I used to do some Ubereats deliveries (before the pandemic) and quite enjoyed driving around. Since I gave my old Ford Escape to DS1 as a 21st birthday present, I now only have the 2002 S-type Jag to drive around in (not that I've done much driving since I transitioned to working from home) and I only have limited km (10,000 pa) comprehensive insurance for that car (it was a lot cheaper than unlimited km coverage).

I applied to Doordash just before I came down with the 'flu, so only started driving yesterday evening for the first time. I did about 2.5 hrs from start to finish (a bit longer than the time I was logged into the DD app, as I had to drive home when I logged off) and earned $64.51 making 5 deliveries while logged in for 2hr 13 mins. Of course you have to allow for expenses (petrol and car running costs) and taxes, but it is still an OK casual job for time that I would be otherwise just spend sitting at home watching youtube or old movies on TV ;)

I didn't do another session today as I was feeling a bit 'off' after getting both my free 'flu vaccination and my 4th 'winter booster' for Covid yesterday afternoon (and I still have a slight cough from the 'flu I caught two weeks ago - probably a bit of a chest infection). I'll probably do another three-hour stint tomorrow night during the 6-9pm 'peak period'.

Using the Doordash App wasn't quite as intuitive as the UberEats App - you have to 'exit' out of the driving directions to see the pick and delivery details when arriving close to your destination - which made me park a bit further from the destination that I would have if I'd seen the street address while approaching the destination. And the delivery process also included taking a photo of where you left the delivery (although this may be a new requirement caused by most customers requesting their order be left at the door, rather than handed to them). I also only achieved 60% 'on time or early' rating, as the food wasn't ready to pick-up for 2 of the 5 locations (and apparently you can also get offered tasks after others have declined them, which means less time remaining when you accept the job). Overall the App was quite easy to use. Not sure about the 'scheduling' requirement though, as I currently have 'Top Dasher' status as a new driver for the first month (normally you have to have done 200+ deliveries and 100+ in the previous month, meeting various KPIs, to get 'Top Dasher' status. As a 'Top Dasher' you don't have to pre-schedule a time block to gain priority for available jobs, so you can just log in to 'Dash' at any time and should get some work (during peak times).

One nice feature of Doordash vs. UberEats is that you set a home location/area and the jobs will all be within that area (unless you choose to change area that you are logged in), so a sequence of jobs won't take you further and further away from your starting point (which sometimes happened when using UberEats, as it offers you jobs close to wherever your previous delivery took you).

One bad feature of Doordash is that the App seems a lot less mature and more 'buggy'. After my first session I had some Earnings accumulated, but the App required some 'additional information' before being able to make the weekly payment (due on Monday). I had to use to online 'chat' feature on my laptop to find out how to be able to enter my bank account details for payments (it required shutting down the App, uninstalling it, reinstalling it, and loggin back in before the 'bank details' icon would let me enter my details. The App's Earnings page is still showing that I need to etner more details -- although it then takes me to the banking details screen (which is now showing the bank account details I had entered). So I have no idea if I'll receive payment on Monday or will need to have another chat session with Doordash help...

I plan on doing up to three sessions (Fri, Sat and Sun nights) of 3 hours or so driving whenever I'm not busy (and it isn't raining!), and I expect to earn around $32/hr and travel around 54 km during a 3-hour session. I had previously logged my actual mileage, fuel and other vehicle expenses while doing UberEats deliveries and using my car for business use for my financial planning business, but it turned out that the pro-rata actual expenses method provided less of a deductible amount than simply using the ATO's standard 78c/km deduction for work-related car travel. So I will simply claim 78c/km for the mileage done doing Doordash deliveries.

I don't know how often I will actually end up doing evening deliveries, but the maximum would be 3x3-hr sessions (Fri,Sat,Sun) per week, and up to 50 weeks per year (allowing for a few rainy days where it isn't worth doing deliveries). So based on this maximum figure, the annual results might be:

Maximum 8,100 km pa = around $14,400 pa income

-$6,320 tax deduction for car expenses (at 78c/km)

= $8,080 taxable income, taxed at a marginal rate of perhaps 32.5c/$

= $2,630 additional income tax

Hence, maximum net income after taxes would be $11,770 if I do 3x3 hrs every week.

Petrol for my S-type Jag costs around 31c/km travelled, so fuel expenses would be $2,510 pa.

Hence, actual cash income (after tax and fuel) would be $9,260 (around $20.58 /hr).

I probably won't approach this maximum figure, but any amount will help fund the negative cashflow likely to result from my investment unit once I have settled at the end of this year and mortgage interest payments and expenses exceed rental income.

I'm also hoping to acquire some clients for my financial planning business this year, but but so far it has been a slow process to find any prospects or convert them into clients. I might start doing 'cold calling' of local residents for 3-hrs in the evenings that I'm not doing Doordash deliveries (the 'cold calling' regulations permit calls before 8pm on weekdays, so calling from 5-8pm Mon-Thu would be possible. I'm still working on extracting a listing of local phone numbers from the online 'white pages' phone directory and 'washing' it against the 'do not call' register. (DS1 wrote some software to automatically skim data for a list of surnames in local postcodes, but I need to get him to show me how to run it for myself as he wrote it in C# (my attempt in python didn't work) and I haven't used C# since I did my GradDipAppSc (Industrial Math & Computing) degree in 1995!

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Saturday 16 July 2022

A Tale of Two Bloggers

One of the PF bloggers I follow is Moomin as he is located in Australia and we met briefly when he was in Sydney when he returned to Australia from the US several years ago. It is interesting (to me) to compare our NW progress, as we both publicly track our NW using Networthshare (although he tracks combined household NW in USD terms, whereas I track my personal NW (excluding DWs NW) in AUD terms). I grabbed screenshots and did a simply offset to remove the impact of gifts/inheritance, and the result is quite similar - probably due to us both have a signficant exposure to AU and international stock markets as part of our asset allocations. Although Moomin is a professional economist and makes more exotic/sophisticated investments than me these days.

 Moomin is several years younger than myself, and has a younger family, so he is actually doing quite a bit better than myself an on age adjusted basis (and at the current USD-AUD exchange rate), but the general trend and impact of global events is quite similar. One difference is that I was making significant use of gearing via margin loans up until 2007, so the impact of the GFC was more obvious on my NW than on Moomins. On the other hand, I have stuck with simply index fund investing for my superannuation investment, whereas Moomin makes use of much more sophisticated investment vehicles (due to his expertise as an investor and economist) which has produced superior results compared to my basic approach in recent years, but appears to have been more exposed to the market decline in recent months.

Another difference is that I shifted our SMSF out of Vanguard High Growth Fund and into a mix of Vanguard Diversified and Conservative Funds in Feb 2018, so avoided the worst of the pandemic-induced market crash. I have a larger % of my NW tied up in real estate (our home and the lake house I was gifted), which probably accounts for Moomin's relative out-performance during 2019-2021.

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Sunday 10 July 2022

Boredom trading

I've had the 'flu for a week and didn't feel like doing much CPD study, my Kaplan assignment on SMSFs, or anything else of much purpose, so I've been watching some youtube miscellany. One of the channels I've quite enjoyed was Jack Broe, was has an interesting background (ESL teacher in S Korea, then USAF missile silo operator, and more recently left the USAF to pursue other interests. He does a bit of trading on the US stock market and recently bought put options on the Nasdaq in the expectation that the current market downtrend would continue for a while. Of course as soon as he had opened his short position the markets recovered a bit, so he's down a bit atm but hopeful he will end up 'in the black' before his options expire in a few months.

I thought I might similarly short the Nasdaq with a tiny bit of 'play money' so I transferred A$100 into my superhero trading app, converted into about USD$68 and placed a market order for about $68 worth of SQQQ (ProShares UltraPro Short QQQ ETF). The US market is currently closed, but latest bid/ask price was around $49.90. I'm not sure if there is fractional trading on this ticker, but I should end up with either 1 SQQQ share for around $50, or else whatever fractional amount of SQQQ my $68 buys.

Of course it won't matter much whether I make or lose money of this A$100 trade, but it is nice to have a bit of a 'flutter' (my version of gambling I suppose) now and then. The only other holding in my Superhero trading account is the 3.17305 units of iShares US Aerospace and Defence ETF (ITA.US) I had bought in early January. After initially rising for a few months it then dropped and recently recovered slightly, so overall I'm down by about -6.5% on that trade. If I make a small profit on the SQQQ position over the next 6-12 months I'll probably close out the SQQQ position and add the funds to my ITA holding for the long term. I'd probably dollar cost average more into my ITA investment via a regular savings plan, but I won't really have much 'spare' cashflow to invest once I settle the purchase of my off-the-plan investment apartment at the end of this year and need to fund mortgage repayments.

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Saturday 2 July 2022

Net Worth: JUN 2022

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

Stocks and managed fund investments suffered from significant US and local market declines during this past month, but as I had eliminated my geared shared investments my 'Stocks' figure was only down -$6,026 (-2.24%) with $262,781 net equity.

Our estimated house price for June (my half) was down (-$17,101) to $1,178,956 with the Northern Beaches area of Sydney finally starting to reflect the general weakness of the Sydney real estate market. Apparently units (apartments) are coming back into favour as the move towards suburban houses that was apparent during the Covid-19 epidemic and lock-downs starts to unwind. Hopefully this means that the value of my off-the-plan investment apartment will hold up reasonably well over coming years. Rents are also starting to rise, which should help offset rising mortgage interest rates (which will have a large impact on my cashflow position once the apartment construction is completed and I have to pay the balance of the purchase price using a $900K mortgage or my available home equity line of credit).

The value of my retirement savings decreased significantly during June (due to the increased local and international stock market weakness) to $1,333,899 (down -$87,994 or -6.19%)*. Looks like I won't be reaching the $1.7m TBC any time soon. Good thing I was already planning to keep working full-time until about 70, and then do another decade or so as a part-time financial planner.

Overall, my estimated NW decreased by roughly a year's salary to $3,112,727 over the past month - down by -$109,926 (-3.41%).

As I have completed my MFinPlan degree and my PhD enrolment application at WSU wasn't accepted (I'll try applying to some other local unis) and I don't have any clients for my part-time financial planning business yet, I have a bit of spare time these days in the evenings and on the weekend. I've joined a local gym to shed some of the excess weight I've put on while working from home, and yesterday I applied to become a 'Doordash' delivery driver (I used to do UberEats deliveries, which was quite fun, but they required a recent model car and comprehensive car insurance, whereas Doordash can be done using my 2002 S-type Jag with the basic insurance cover I have). I might do a few hours of 'Doordash' delivery driving on Friday and Saturday nights (peak period) to earn some extra $$$ to help boost my cashflow - at least until I see how the finances work out with my investment apartment next year (I'm not sure how 'negatively geared' and cashflow negative it will turn out to be). Having some extra regular income for the rest of 2022 might also help with my mortgage applications at the end of the year.

*edit: turned out our SMSF investment probably wasn't down quite as much in June as I initially calculated - there was a sizeable distribution paid out on 30 June which wasn't reinvested in additional units until 1 Jul. Although the unit price dropped on 1 Jul to reflect this, the actual unit price used for the reinvestment ($1.6855) doesn't seem to match any of the 1 Jul unit pricing:

01 Jul 2022 $1.7002 $1.6974 $1.6988
30 Jun 2022 $1.7666 $1.7636 $1.7651

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