ATAR fever

The NSW Secondary School final exam (HSC) results came out yesterday, and the related university entry ranking scores (ATAR) came out this morning. As my oldest son (DS1) is only in the first year of high school (Yr 7) the hoop-la surrounding the release of results seems rather amusing. [It may not seem so funny in five years time when DS1 will be getting his results.] It was nice to see that the selective high school DS1 attends has moved up the 'rankings' and is now well within the 'top 10' schools in the state. As it now consistently ranks higher than Sydney Grammar I'm glad we eventually decided not to send DS1 there.

A lot of the media commentary about the "stress" surrounding the HSC exams, ATAR results are so forth seems like a beat-up to me. After all, the UAC says 17 per cent of students will receive an ATAR of 90 or above, 33.5 per cent will get at least 80, 49.3 per cent at least 70, and 63.8 per cent at least 60.00. There are many uni courses you can get into with an ATAR of 65 (eg. the University of Western Sydney has a long list of courses with an ATAR cut-off of 65 for 2013, and some diploma course have an ATAR cut-off of 50!), and although some courses that are in high demand have ATAR cut-offs in the high 90s, there are many 'good' degree courses accessible to most of the students who received an ATAR score. For example, the cut-off ATAR for the Lineral Arts and Science course at Sydney Uni was 70.05 in 2012, which means around half the students getting ATAR results today would qualify for this course. I suspect a lot of the angst is caused by students 'picking' a course (or courses) with a high ATAR requirement for entry, knowing that they don't have much chance of achieving the required ATAR score. Selecting a range of possible courses, including some that would be interesting to do but have a lower ATAR cut-off, would greatly reduce stress-levels. It is much more fun waiting for an exam result knowing that you are highly likely to get into an interesting course, and just waiting to see which particular course(s) you qualify for.

It may seem odd that 17% of students qualifying for an ATAR score got a "ranking" in the "top 10%" (ie. 90 or above), but that is simply due to the way the ATAR is calculated (basically it works out a student's ranking compared to ALL the students that were in school at the end of Year 10 (the old 'school leaving certificate' age), and the lowest ATAR scores (if they were issued) would belong to students who dropped out during years 11 and 12, and those that did vocational courses that don't count towards an HSC mark. A lot of the students that now continue in secondary school until Year 12 are those that in times past would have left high school at the end of Year 10 to start working or commence an apprenticeship.

These days around 30% of young people go on to tertiary study, whereas "in my day" (the early 80s) less than 10% went on to university studies. So, despite the media beat-up, it would seem that there should be less stress surrounding the HSC these days, as a much higher proportion of students will go on the university (unless, of course, students that have no realistic chance of getting in to uni via their ATAR results have been conditioned to believe that unless they get into uni they have 'failed').

One consequence of the large numbers of students now proceeding on to university studies appears to be that the 'value' of a bachelors degree has been eroded. These days a basic university degree is often viewed as routine, and to stand out in your field you need to have also done some post-grad studies (at least a post-grad diploma, or better yet a Masters).

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Personal Budget for 2013

I've updated last year's budget to plan for 2013's expected income and expenses. Most expenses are reasonably predictable on an annual basis, but may vary considerably from month-to-month (such as annual care registration and insurance payments, quarterly utilites bills and so forth). The category 'Food etc.' is subject to the most uncertainty, and could either 'blow out' or (far less likely) come in 'under budget', as it includes many miscellaneous items such as household cleansers, medicines and eating out, and the weekly grocery shopping currently includes a substantial amount of unplanned discretionary spending on snack and junk foods, softdrinks and so on.

The planned budget just matches overall expenditure to my employment income, and assumes I can avoid unplanned spending on discretionary items such as electronics, holidays and so forth. Based on my track record for 'spur-of-the-moment' purchases of electronic gadgets, books and stuff for the kids, this may be an unrealistic plan. The budget may also come under pressure from above-CPI increase in petrol costs and utility bills, as any pay rise next July is likely to be only a CPI-adjustment.

The 'Housing' budget item only reflects my cashflow into our Joint account. It doesn't include DWs matching contributions into the Joint account, and the Joint account funds both our home loan payments, investment property loan payments, and childcare payments.

The budget doesn't include any investment income streams or other investment loan interest payments. Our rental income (assuming we get a new tenant early in 2013!) flows into the Joint account and helps fund the combined interest payments on our home and investment property loans. And my share and mutual fund dividends are either re-invested automatically, or is deposited into a bank account that is used to help fund the interest payments on my investment margin loans. If there is insufficient funds available to meet the margin loan interest payments I 'capitalise' the interest using funds from my 'portfolio loan' account. Over the next few years some of my capital guaranteed hedge fund investments (that don't pay dividends) will mature, and I will use to proceeds of their liquidation to reduce the balance of my margin loans. The medium-term goal is for the non-reinvested dividend income to be sufficient to fund the interest charged on my margin loans.

I'll start tracking actual income and expenses each week against the budget forecast from January onwards, either using a spreadsheet I've prepared, or possibly using the old version of Quicken I already have. If I have the time (and inclination) over the holiday break I will setup the budget categories and projections in Quicken, and also setup records for my current shareholdings. If I can get the purchase history of all my remaining stocks recorded in Quicken it will make capital gains calculations much easier for my future tax returns. Unfortunately there will be a fair amount of work involved, as many of my share holdings were built up over time through multiple purchases, dividend reinvestments and stock splits, and have been reduced at various times through sales of part of my holdings. Working out the true 'cost basis' of my current share holding for each stock therefore requires checking through all my past tax returns to see what lots were nominated as having been sold in previous capital gains calculations. The process is also complicated by a few instances where a company was 'taken over' by another company, and I was issued with a mixture of shares and cash (and sometimes in 'odd lots' of shares in several differnt 'spun off' companies!).

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A tale of two eBooks

Sometimes technology makes our lives easier and less expensive, while at other times it just seems like an excuse for price-gouging.

For example, I recently bought three ebook novels for my Nexus7 tablet. All were current paperback titles available for the usual (exhorbitant) 'hardcopy' price (around $16), but the ebook version was priced very reasonably (between $0.99 and $3.99) in comparison. Reading them on the tablet is generally a better experience than the harcopy (with the ebook providing automatic bookmarking, is easier to read in bed in dim light, and is lighter and smaller to carry around than a paperback) - the only problem is trying to read them in full sunlight. Considering the publisher's cost savings (no physical materials such as expensive paper, no shipping costs, and no storage cost), the price differential ($4 vs. $16) per book seems reasonable. And even I won't begrudge paying an author 1c per page for anything I'd want to read ;)

On the other hand, I also went shopping online for a text my uni supervisor recommended, thinking it might be cheaper as an eBook - wrong! The Australian 'co-op' bookshop lists only the Google eBook version (at A$109.12 for non-members, or A$103.66 for members), which seems a bit rich considering Google Books lists this eBook online for USD$94.66. And the kindle version available from Amazon.com is only slightly less expensive, at $93.92. These ebook prices might be reasonable if the text cost several hundred dollars in hardcopy, but these prices seem a total rip-off when compared to the hardcover version which has a list price of 'only' USD$98.86 (A$97.29) from Amazon.com.

In the end I decided to buy the hardcopy from Amazon.com for A$107.11 (including shipping to Australia). Getting a hardcover text to stick on my library shelf for only $3.45 seems a relative bargain, with the only downside being the estimated delivery date of 4 Feb.

I suppose textbook publishers would argue that selling eBook versions at a significantly lower price point that the hardcopy version would make it unprofitable to publish them. However, I would think that students would be more inclined to buy textbooks (rather than borrowing them from the library or buying older editions second-hand) if the eBook version was available at a more affordable price.

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Net Worth Updates: April-October 2012

With a bit of spare time between the end of my uni coursework degree and starting work on my research degree, I finally got around to checking the various monthly statements for my investment accounts and getting my 'net worth' spreadsheet calculations updated. Over the past six months my estimated new worth has increased by about 6% (or $50,897) to just over $900,000. The rise is mostly due to a recovery in the stock market since the EFC seems to have become 'old news'. This has boosted my stock investments, although I'm still "underwater" due to the substantial amount of margin loans I held going into the GFC. Because I had to sell off the better (least worst) stocks in my portfolio at the bottom of the GFC bear market in early 2008 in order to avoid margin calls, the subsequent recovery hasn't produced as much 'gain' as the previous 'pain'. The rising stock market has given my retirment fund (SMSF) a nice boost though, as we introduced some gearing within our SMSF post-GFC (by investing a small percentage of our capital in ASX200 CFDs "IQ") after the worst of the GFC had passed.

Unfortunately the Sydney real estate market hasn't improved much during 2012, after a weak 2011 -- at least not in our suburb. Judging by the lack of offers for our investment property since it was listed for sale a couple of months ago, and from the views expressed by our agent, my price 'estimate' (which is based on movements in the average sales price for houses in our suburb since we bought our property) may be 5-10% above what can be achieved in a weak market. With the property sitting vacant since our last tenant moved out in July, the lack of rental income is having a negative impact on my net worth. I am now having to borrow about $2,000 each month on my 'portfolio loan' to meet the interest-only payments on our mortgages.

The monthly movements in each asset class are shown below:

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