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.
Subscribe to Enough Wealth. Copyright 2006-2020
Thursday, 2 April 2020
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.
Subscribe to Enough Wealth. Copyright 2006-2020
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.
Subscribe to Enough Wealth. Copyright 2006-2020
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...
Subscribe to Enough Wealth. Copyright 2006-2020
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...
Subscribe to Enough Wealth. Copyright 2006-2020
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 ;)
Subscribe to Enough Wealth. Copyright 2006-2020
Anyhow, after the orders were filled yesterday, my current portfolio of securities held on my Commsec and Leveraged Equities ML accounts is:
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 ;)
Subscribe to Enough Wealth. Copyright 2006-2020
Subscribe to:
Posts (Atom)