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.
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Tuesday, 3 March 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
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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
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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
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
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
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