Tax Return Deadline Approaching Fast

I'm a bit busy at the moment working out all the figures I need in order to lodge my tax return by the 31st October deadline (as I do my own taxes and lodge online using eTax I have until midnight tomorrow). Working out dividend income, bank interest and salary is easy enough. Even the rental income and deductions for our rental property is relatively simple. What is always a pain in the neck is working out what capital gains were made on share transactions during 06/07. Some of the share holdings have been built up over 15-20 years, with periods where odd lots were added via dividend reinvestment plans, some portions were sold off (and particular "lots" earmarked as sold for GCT calculation purposes in those tax years), and sometimes stocks were added via stock splits or stock-based takeovers. I have already done some work on the required calculations, but chasing up the transactional details for the outstanding items will be a real pain. This is one of the reasons I no longer use DRPs to accumulate additional shares, and, if I sell a particular stock I sell the entire holding rather than just a part.

I'm also waiting on the tax return details for the farm partnership I'm in with my parents. Unfortunately my dad "takes care of" all the paperwork for the running of the farm, so it's always a last minute rush to get him to collect all the necessary records and get it to the accountant in time to get the final figures before my personal tax return is due.

Copyright Enough Wealth 2007

Strike While the Iron is Cold

Back on the 12th of August I posted my thought that it might be a good time to buy some stocks for DS2. At that time the All Ords Index had dropped sharply to 5,965.2 - since then it has rebounded at today was at a new all time high of 6,808.2 (a gain of 14%). Goes to show that you never can tell which way the market will move in the future, but you can be 100% certain where it has been. Looking at a long term plot of the stock market accumulation index, buying when the market had dropped 15% below its recent long-term trend line would almost always turn out to be a good buying opportunity.



However, there are a few problems with this as an investment strategy:
1. When the market has rapidly dropped more than 10-15% you're always worried that it's the start of a bear market that could last several years. As in this case - I delayed buying any stocks for DS1, and could very well never get another opportunity to buy in at those prices.
2. You have to have some spare cash to invest when such opportunities arise - this generally would either mean that you've been sitting on a large cash allocation during a bull market (which would have cost you significant profits), or you'll need to borrow more to invest. And increasing your margin loans when the market has dropped is often very difficult, as it the time when you are most likely to be close to getting a margin call.

Looking at the chart the other thing that comes to mind is that I need to buy some more XAO put options when my current ones expire in December! Although the p/e of the Australian stock isn't out of line with historic averages, and company profits are continuing to grow, the chart does look remarkably similar to previous bubbles - and even just thinking "this time it's different" sends a shudder down my spine.

Copyright Enough Wealth 2007

Rental Property Repairs

It's almost four months since the roof of our rental property was damaged by a falling tree. The insurance company took a couple of months to approve the repair quote from their builder, and then the builder wouldn't get started until we signed off on the list of work to be done and mailed a cheque for the $100 "excess". A week ago our tenant emailed to say that the repair work had finally commenced. Hopefully it will be completed this week - we had to agree to reduce the weekly rent from $400 to $300 until the rood repairs were done, so every extra delay in getting the repairs completed is costing us money. It was better to agree to the rent reduction than risk having the tenants moving out, as we couldn't have got any new tenants until the repairs were completed.

The outstanding repairs also make it impossible to do the annual rent review. The rent hasn't been increased for several years now, while Sydney rents have increased quite a lot. Although it's not worth raising the rent if it leads to a tenant moving out and not getting any rent while looking for new tenants, at some stage the gap between market rents and what we are charging makes it necessary to ask for a rent increase and hope for the best. If the repairs are completed soon I'll probably wait until the new year before sending the tenants a notice of rent increase.

Copyright Enough Wealth 2007

The Wealth of Nations: Part II - Net Wealth

Another way of comparing the wealth of nations is to look at how much of the world's total net wealth each country has and compare it to what percentage of the world's population lives in that country. If every country had equal shares of the world's wealth per person, then a country with 10% of the world's population would have 10% of the world's net wealth, a country with 1% of the world's population would own 1% of the world's wealth and so on. Therefore, if you simply divide each countries share of the world's net wealth by it's share of the world's total population you can see which countries have more than their "fair" share of the world's wealth, and which have less. I've drawn data on the net wealth and population of the fifty-two most populous countries from "The World Distribution of Household Wealth" by J. Davies, S. Sandstrom, A. Shorrocks, and E. Wolff and ranked them by the ration wealth/population (which I'll call "richness"). These 52 countries represent around 90% of the world's population and 90% of the world's net wealth.

             pcnt pop      pcnt wealth      richness
Japan        2.09          18.37            8.79
USA          4.67          32.65            6.99
UK           0.96          5.95             6.20
Italy        0.95          4.54             4.78
Germany      1.35          5.69             4.21
France       0.97          4.07             4.20
Canada       0.50          1.74             3.48
Australia    0.31          1.04             3.35
Spain        0.67          2.24             3.34
Israel       0.36          1.05             2.92
Korea South  0.77          1.11             1.44
Argentina    0.61          0.75             1.23
Saudi Arabia 0.35          0.28             0.80
Mexico       1.64          1.05             0.64
Iran         1.09          0.62             0.57
Venezuela    0.40          0.20             0.50
Poland       0.64          0.32             0.50
Brazil       2.86          1.33             0.47
Turkey       1.12          0.52             0.46
South Africa 0.75          0.22             0.29
Malaysia     0.38          0.11             0.29
Egypt        1.11          0.31             0.28
Peru         0.43          0.11             0.26
Romania      0.36          0.09             0.25
Colombia     0.69          0.16             0.23
Thailand     1.01          0.22             0.22
Morocco      0.48          0.09             0.19
Iraq         0.41          0.07             0.17
Philippines  1.25          0.21             0.17
Russian Fed. 2.41          0.36             0.15
China       20.57          2.62             0.13
Sri Lanka    0.33          0.04             0.12
Algeria      0.50          0.05             0.10
Indonesia    3.44          0.24             0.07
Ukraine      0.81          0.05             0.06
Bangladesh   2.12          0.13             0.06
Pakistan     2.34          0.14             0.06
Korea-North  0.36          0.02             0.06
Viet Nam     1.29          0.07             0.05
India       16.78          0.91             0.05
Afghanistan  0.39          0.02             0.05
Myanmar      0.78          0.04             0.05
Nepal        0.40          0.02             0.05
Uzbekistan   0.41          0.02             0.05
Kenya        0.50          0.02             0.04
Sudan        0.54          0.02             0.04
Tanzania     0.57          0.02             0.04
Ghana        0.33          0.01             0.03
Uganda       0.40          0.01             0.03
Nigeria      1.93          0.04             0.02
Congo DR     0.82          0.01             0.01
Ethiopia     1.13          0.01             0.01
TOTALS      88.33          89.98 

The richest 12 countries have more than their "fair share" of wealth, while the poorest 19 have less than 1/10th the share of an equitable share of the world's wealth. In an ideal world each nation would have roughly the share of the world's wealth that is due to their population. However, the best way to achieve this is build up the economies of the poorer (underdeveloped) nations, rather than to attempt to simply redistribute the existing wealth.

Copyright Enough Wealth 2007

Who is reading EnoughWealth.com ?

I added the Quantcast widget to my blog template last month. It has now gathered enough data to show some demographic information about the readers of this blog. According to Quantcast;
"This site that reaches over 1,842 monthly uniques, of which 1,094 (59%) are in the U.S. The site is popular among a largely male, mostly Caucasian, primarily older, highly educated, fairly wealthy crowd."

Gender and Age:



Income and Ethnicity:



Education and Children:



Copyright Enough Wealth 2007

The Wealth of Nations: Part I - GDP

I was helping out DW with a uni assignment and did some research on the GDP of countries vs. life expectancy at birth. As you might imagine, countries with a very low GDP per capita (less than US$10K pa) generally have lower life expectancies than the wealthier nations. Even so, there are some countries with a low GDP per capita that do better than others - I guess you're better off living on an impoverished tropical island than a war-torn part of northern africa! The chart below shows the relationship between GDP and life expectancy. One thing it does show is that increasing GDP per capita has little effect once you get above $10K-$15K pa.



Copyright Enough Wealth 2007

Lucky Break

A while ago I posted about how I'd missed the deadline for a non-renounceable stock issue by Newcrest Mining. I could have purchased 105 shares at $17.50, when the stock price was around $28.00, which would have resulted in a paper profit of around $1,000. It turns out that the entitlement of shareholders who didn't take up the offer were sold, and the "surplus" of the price realised has been paid out to those shareholders who didn't take up the offer. Today I got a cheque for $1,113 from Newcrest, so I ended up getting most of the profit from the stock issue anyhow!

Copyright Enough Wealth 2007

Property Portfolio Update: 24 Oct 2007

The lastest monthly sales figures (September) for the suburbs of our home and investment property have just come out. There continues to be a lot of "noise" in the data, with monthly average sales prices being affected by the mix of properties sold in the month, but the uptrend in prices seems to be continuing. The average rate of increase in house prices in Sydney has been around 6% pa over the past twenty or thirty years, and it looks like this rate may apply over the coming 5-10 years, after prices remained flat since 2002 (when the last property boom collapsed in Sydney). However, if there are a couple of 0.25% rises in home loan interest rates over the next 12 months this may dampen demand, and prices, for another year or two. If I didn't already have a large part of my investment portfolio in residential real estate, this would probably be a good time to look at switching some funds out of the booming stock market and into Sydney property.




Copyright Enough Wealth 2007

I rated a mention in the News.Com.Au story on NetWorthIQ

Kate Perry wrote a story about NetWorthIQ members that appeared in News.com.au's money section yesterday. The article "Web users put bottom lines online" included a quote from my interview-by-email, and even mentioned my pf blog (although unfortunately there was no link included).

Copyright Enough Wealth 2007

Buying Time to complete my Diploma of Financial Services

The four months period allowed for completing the coursework for the Diploma in Financial Services (Financial Planning) I enrolled in via ps146.com.au last June ends this week. As I'm only half-way through the second of the four subjects I decided to pay the extra $150 fee to obtain an "extension of time" of two more months to complete all the assessment items. I'll be busy filling our tax returns next weekend, and then I have to complete an assignment for the GradDipEd (Secondary)(Science) course I'm doing (due by mid November), so even with the extension I'll be fairly busy until the end of the year.

I'd like to then do the Advanced DFS course, but I'll be even more busy next year doing subjects for both the Master in IM course I'm enrolled in (I took a leave of absence this semester) and the GradDipEd. If I get the DFS assessment items completed before the end of December I may enrol in the Advanced DFS straight away so that I can work the assessment items during the two week vacation I have over the Christmas/New Year period (our work place shuts down for those two weeks, so everyone has to take annual leave during this time). If I get most of the advanced DFS course completed while on vacation I should be able to complete it before my uni semester starts at the end of February.

Copyright Enough Wealth 2007

My Overall Asset Allocation Update: 22 Oct 2007

Asset allocation has changed slightly since the last update due to the transfer of our retirement funds from our employer's superannuation fund into our own SMSF. The transfer resulted in a large cash balance, which is slowly reducing as we invest the funds into the Vanguard LifeStages High-Growth Index Fund over several months using dollar cost averaging.

According to my asset allocation records my net worth is currently $1,174,609 (this figures is slightly higher than my NetWorthIQ figure as it includes a small coin collection and some bullion that isn't counted in my monthly NetWorthIQ updates). This figure derives from a total asset valuation of $2,146,371 and debts of $971,762.

The debts can be broken down into $363,000 real estate mortgages, $229,491 in a "portfolio loan" used for some stock investments and secured against my real estate equity, $268,718 in margin loans, and $89,840 in miscellaneous debts (0% CC balance transfers, hedge fund investment loan etc.)

The overall Loan to Value Ration (LVR) is 45.3% (the ratio of debts to asset valuation), and the overall gearing level is 82.7% (debt:equity ration, or debt:NW ratio). My long term target is to maintain my LVR around 50% (ie. gearing around 100%) while working. This boosts overall ROI (provided investment total return (income + capital gains) exceeds borrowing costs), but also is a useful tax management tool via negative gearing (which effectively converts income into long term capital gains, which has a lower tax rate).



Copyright Enough Wealth 2007

Death of a Day Trader

Some initial setbacks when I started trading Forex (AUD vs USD) using Contracts for Difference (CFDs) saw my CMC account balance drop from $4,000 down to $1,200. A period of more careful trading during August and September saw me slowly claw back to around $2,400 and I had some hope of getting back to break-even by the end of the year. Then a sudden spike in the USD while I had a short USD$100,000 position open overnight saw my account balance plunge back down to $1,400. I didn't trade for a couple of weeks until the volatility seemed to have reduced and a general uptrend in the AUD seemed to have re-establised itself. For a while going long the AUD provided some gains, and I'd got back to an account balance of $2,400 briefly on Thursday. Then, on friday night the AUD plunged again and this morning a further decline in the Aussie dollar saw my position closed out by CMC Markets. My account balance is now down to only $190, too small to even make any further trades (unless I tipped more funds into my account), so I've decided to call it quits with trading forex. While I enjoyed trading it was too expensive a hobby, and 'paper' trading is more boring than watching grass grow. I may use the CMC account to trade S&P index CFDs or even to short Australian stocks that I have long positions in if I what to protect gains without having to sell the stock and realise capital gains tax liabilities. Losing nearly $4,000 dabbling at currency trading was an expensive lesson, but at least I was a faster learner than Debt Kid!



Copyright Enough Wealth 2007

Effect of Retirement Age on Retirement Savings

How would early (or delayed) retirement affect your retirement savings and retirement income? I had a play around with the figures for my situation, and it suggests that I could retire "early" at 57, assuming I keep adding to my retirement savings at the planned rate and achieve the expected investment returns. However, I'm not sure that I would retire early just because I could afford to - I'm contemplating changing career (again) in a few years time to try my hand as a high school science teacher. If that role suits me I'll keep working until it's no longer enjoyable.

Looking at the figures, if I retire at 57 I'd probably run out of funds in my SMSF account sometime in my mid 80's. That wouldn't really be a problem as I also would have some other stock and real estate investments to draw upon if necessary.

If I continue working until "normal" retirement age of 65 I would probably never exhaust the SMSF, although the tax law requires a pension payment rate that would shift all the funds out of that account before I hit 100, so the extra pension amounts would be reinvested outside the superannuation system.

If I change careers and enjoy teaching enough to keep working until 70 (a nice thought, but modern teaching isn't quite like "Goodbye, Mr Chips") I'd end up with around $3.4m balance (in today's $) still unused at age 94 (I've used 94 as the limit to my projections as my paternal grandparent's lived to that age).

The calculations are based on the following assumptions:
current SMSF balance: $330,000
annual retirement savings: $19,250 (9% SGL + 13% salary sacrifice)
real ROI in SMSF account: 5%
SMSF pension in retirement (PV): $52,000



Copyright Enough Wealth 2007

Why you need to Double Check everything that Payroll does

For some reason our payroll department has a hard time getting things right the first time. In the past couple of years I've been emailing a request for making salary sacrifice into my superannuation each year before the new financial year, and each year the change has either been forgotten or that amount taken out of my pay was incorrect. This year there was the added complication of changing from our employer's superannuation fund (BT) to our new SMSF. The first monthly payment (from July) when through to our SMSF bank account with ANZ correctly by the middle of August, but the August contribution didn't arrive in September, and there's been no payment made in October yet either.

I'm sure that payroll will eventually clear things up with BT and the money will flow through to the SMSF bank account, but, in the meantime, we're not receiving any interest on these monthly contributions. As DW and I are both salary sacrificing large amounts into super this year, we miss out on around $22.50 for each month that a monthly contribution is delayed. Not a huge amount, but it would help offset the admin costs of maintaining our SMSF. Our most recent fortnightly pay was processed last Wednesday, and I heard payroll discussing superannuation payment processing at that time. If our contributions for August and September haven't arrived in our ANZ bank account by the middle of next week I'll have to chase it up (again) with payroll.

Copyright Enough Wealth 2007

Site Review: BadCreditOffers.com

BadCreditOffers.com is a website offering information to U.S. consumers with "bad credit" on how to find the best available credit offers. While this sort of information is helpful for those who need to rebuild their credit rating by obtaining credit, using it responsibly (ie. only charge normal monthly expenditure), and paying it off in full each month. there is always the danger that those with "bad credit" would continue to misuse any credit they did obtain, and thereby just dig themselves deeper into debt. The main page prominently features images of a big house and a fast, red sportscar - hardly the images of sensible use of credit by those in debt! However, the site does offer some useful content for those with "bad credit" issues - such as credit counselling services and how to obtain a report of current credit ratings. All in all, this site is dynamite. While it offers information and resources that can be extremely valuable to connsumers with bad credit, it could also lead to further debt problems if used unwisely. Handle with care.s

Copyright Enough Wealth 2007

Election Down Under - End of Week 1

One week down, six to go. After initially saying that they wouldn't release their tax policy until close to the election date, the Labour opposition today announced their tax policy. It looks identical to the Liberal party policy announced on the first day of the election campaign, except, as I predicted, it delays (probably forever) the reduction in the top tax rate from 45% to 40%. The Labour policy uses this saving to fund an education tax rebate for low-middle income families (those that can qualify for the existing family tax benefit 'A').

The Prime Minister also seems to have had a small victory by getting the opposition leader to agree to a single debate on Sunday, rather than the series of three debates Mr Rudd had wanted. Opinion polls out today show a slight improvement in the Liberals primary vote, but they're still well behind on a two-party preferred basis, due to the supporters of the Green and Democrat parties (around 10% of the vote all together) mostly giving their second preference votes to Labour rather than Liberal.

It still looks like Labour will win this election, but the government is running a good campaign so far. There are still a few aspects of the campaigning that I don't understand. For example, the government's greatest weakness is the unpopularity of the "Work Choices" legislation (that makes it easier for employers to remove such costs as penalty rates for weekend and evening work). Labour has stock line that the government's Work Choices is unfair. I just don't get why the standard Liberal response isn't to say that Work Choices IS fair, and, with unemployment at the lowest level for more than 30 years and the aging workforce, it is necessary to avoid a wages break out that would rekindle inflation and workers wage rises would be lost in higher living costs.

On the other hand, the government is running a "fear" campaign targetting the fact that most of the Labour party front bench (shadow ministers) are ex Union officials. The Labour party is simply decrying the use of such "negative" campaigning by the Liberals, which seems to be a tacit admission that having so many ex-Union officials in the Labour party is a bad thing. Go figure.

Copyright Enough Wealth 2007

Save Money on your Superannuation Investments

There is an interesting new service available from a recently launched company All My Funds which has potential to save considerable amounts of money. There are many hidden costs that can be associated with superannuation investments and insurance. For a set fee of $275 you can get a SOA (statement of advice) that compares your particular superannuation fund with other similar superannuation funds. Although the comparison funds are not specific recommendations, the information would indicate if your fund is costing you too much in fees and charges. A sample of how this report would look is provided on the AllMyFunds.com website.

The other way that All My Funds could save you money is via their subscription service of $385 pa. For this annual fee you will get a rebate of contribution fees (up to 5%), annual trailing commisions (up to 1% per annum) and life insurance commissions (30+% of premiums). Often a superannuation fund will either pay fees and annual trails to a 'financial advisor' that was nominated when you joined the fund (even if you get no follow-up advice), or whill keep this fee themselves if you invested directly with a superannuation fund and don't have an advisor. By using the rebate service you could get rebates worth more than the annual fee paid to All My Funds.

Copyright Enough Wealth 2007

IPE stock purchased

I decided to buy the 124,000 IPE shares available at $1.00 each via my IPEO options. This will mean that my total holding of ING Private Equity is around 130,000 shares with a total cost base around $132,600 (I haven't worked out the exact cost based on my previous IPE stock purchases and IPEO option purchases. Based on the current annual dividend of 7c per share, and the max and min stock price for IPE over the past 12 months, I estimate my range of likely outcomes over the next 12 months lies between:
max $145,600 (130,000 shares @ $1.12) + $9100 dividend = $154,700 16.7% ROI
min $118,300 (130,000 shares @ $0.91) + $9100 dividend = $127,400 -3.9% ROI

The average of these extremes is an ROI of 6.4%, slightly less than the interest rate on the $124,000 I borrowed using my St George "Portfolio Loan" to pay for the IPEO stock issue. There is a dividend of 5.4c already declared that will be paid on 22 Nov, so I think there is upside potential to the dividend payment over the next 12 months. As the NAV of IPE is around $1.18 (if all options are taken up) there is also a good chance of the stock going above $1.10 in 12 months time (when any capital gain would be taxed at 50% of my marginal income tax rate, rather than 100%).
As the IPE stock price is currently around $1.01 I suspect that there may be less than 100% take up of stock available via the IPEO options. If so, the dilution of NAV will be reduced, supporting the stock price. In the short term there might be some weakness in the stock price as any "stags" of the IPEO stock issue cash out their short term gains. There might also be some short term investors who hold on until the 5.4c dividend is paid out on 22 Nov. The stock price at the end of November should give a good indication if $1.00 per IPE share was expensive or a bargain.

My 12 months target for this investment is total dividend income of 7.5c (I'm not sure how much franking credit will apply) and a stock price in Nov '08 of $1.15. This would give me a total ROI of 22.5% on my $124,000 investment, and a profit of around $18,000 after interest on the borrowed funds is deducted. After 12 months I will review whether I should sell this holding or retain it as a medium term investment. Having around 10% of my Net Worth invested in a private equity "fund of funds" would be a reasonable asset allocation.

Aside from my existing investment in CDF (Commonwealth Bank Diversified Share Fund - which in invests in around 200 Australian stocks in order to closely replicate the All Ords Index) this is now my largest single stock holding. If all IPEO options are paid up I will own around 0.328% of IPE, which is a significant position for a small investor. My overall portfolio performance over the coming year will be greatly influenced by how well this particular stock performs.

Copyright Enough Wealth 2007

Electioneering Down Under

The incumbent (Liberal) party started off the six week election campaign with a bang, announcing that the mid-year budget review had revealed a bigger than expected surplus, which allowed them to promise massive income tax cuts over the next three years - if they retain office. Currently my taxable income is around $50K, which means at current 2007-8 tax rates I'd pay $9,600 federal tax (19.2% of taxable income). The proposed tax cuts would reduce the tax on $50K income by $1000 in 08-09, by $1300 in 09-10, and $1750 by 2010-11. This would mean that the federal income tax bite out of a $50,000 pa income would decrease from 19.2% to only 15.7% (a reduction in the amount of tax paid of 18.2%) over three years.

This announcement seems to have caught the Labour opposition somewhat unprepared. Although they didn't have the same advance access to the mid-year budget review figures as the government, they should have been able to prepare a range of tax policy positions to suit the likely range of outcomes. It seems that they want to announce their tax policy as close to the election date as possible, probably to minimise the chance of the Liberals finding fiscal holes in their funding figures.

One funny thing is that a lot of the "public" interviewed for sound-bites on the six o'clock news were unimpressed by the size of the announced tax cuts, and preferred the budget surplus be spent on public health and education. It seems that swinging voters are more generally more comfortable with higher taxation being used to fund public services, than with reducing taxes and moving to a more "user pays" system with increased reliance on private hospitals, schools and universities. Personally I prefer lower taxes, but I'm also not convinced that privatisation of education and health is as beneficial as the conservative end of the political spectrum believes. Although public spending is prone to inefficiencies, bloat and waste, privatised services tend to cost the consumer just as much, via excessive profit margins. The reality is that competition doesn't work terribly well for education or health services, as they require large fixed investments of capital (in a university or hospital) and thereby become a local monopoly with considerable pricing power.

Anyhow, it will be interesting to see what, if any, the tax policy announcement has on the opinion polls. And it will be interesting to see if the Labour party eventually endorses the proposed tax cuts ("me too"!) or proposes smaller tax cuts (predictably at the top end) and redirects more of the projected budget surpluses on health and education.

Copyright Enough Wealth 2007

Raising Frugal Kids

Yesterday we saw an ad for a Cyndi Lauper concert (next Feb/Mar in Sydney) and DW and I were discussing maybe buying tickets for the concert. DS1 asked how much the tickets would cost and I said around $80 each for averaged seats and maybe $200 each for good seats (it turns out the pricing is actually $99 and $135). He straight away asked how much our Cyndi Lauper CDs cost! We had to explain that, yes, it's usually more economical to just buy the CD and listen to it many times rather than buy a concert ticket, but it's OK to treat yourself on occasion, if it's something you really enjoy. There's a fine line between being frugal and being a cheapskate who gets no pleasure out of life and ends up the richest person in the cemetary.

Copyright Enough Wealth 2007

Australia's in Election Mode

After several months of faux campaigning on both sides, the government announced the federal election would be held in six weeks time. It will be interesting to see what each side offers during the campaign. Generally neither side is all that wonderful for the aspiring middle classes - Labor tends to offers expansion of social services, which sounds great in theory but unfortunately leads to some combination of higher federal deficits, increasing unemployment and higher inflation/interest rates. The Liberal party tends towards user-pays and less support for welfare and public serivce, and reduces unemployment, but at the expense of lower real wage increases for the lower income workers.

Those in the middle tend to miss out from both parties - paying higher taxes than they get in benefits (due to means and income testing of benefits) from the left, and not earning enough to benefit from flattening the tax scales by the right, while having to pay more for required services under the user-pays systems.

I'll be watching closely to see what specific promises are made during the campaign that would be of benefit to my specific situation. But it's all rather academic anyhow - whichever party wins office will probably break a large number of the 'non-core' promises made during the election campaign, and many of the nasty surprises (eg. tax increases or service cuts needed to fund the promises that are kept) tend to only come to light after the election is over. The only good thing is that both parties have tended more towards the centre in order to woo the swinging voters, so there isn't such a great difference between them as there used to be.

Copyright Enough Wealth 2007

AU Shares - portfolio update: 13 Oct 2007

Here's the latest monthly update of what stocks are in my Australian Stock Portfolio. The only changes since the last update are due to a takeover.

Current holdings:

Leveraged Equities Account (loan balance $154,805.15, value $331,085.72). AAN stock was taken over with a stock and cash offer resulting in small holdings of APA, BBI, BBP, BBW and BEPPA stock.

stock   qty   price   mkt value  margin
AEO   1,405   $2.62   $3,681.10   65%
AGK     510  $15.63   $7,971.30   70%
AMP     750  $10.72   $8,040.00   75%
ANN     480  $12.20   $5,856.00   70%
ANZ   1,107  $31.47  $34,837.29   75%
APA      88   $3.77     $331.86   70%
BBI     222   $1.69     $375.18   70%
BBP     197   $3.11     $612.67   60%
BBW      77   $1.78     $137.06   60%
BEPPA   472   $0.895    $422.44   70%
BHP     748  $46.20  $34,557.60   75%
BSL     781  $11.34   $8,856.54   70%
CDF   7,650   $1.918 $14,672.70   70%
CHB     118  $56.61   $6,679.98   70%
DJS   2,000   $4.99   $9,980.00   70%
FGL   3,751   $6.62  $24,831.62   80%
LLC     481  $19.48   $9,543.04   75%
NAB     323  $41.76  $13,488.48   75%
QBE   1,000  $33.68  $33,680.00   75%
SGM     830  $29.87  $24,792.10   70%
SUN     963  $21.35  $20,560.05   75%
SYB   2,880   $4.14  $11,923.20   70%
TLS   5,000   $4.56  $22,800.00   80%
TLSCA 3,000   $3.07   $9,210.00   80%
VRL   1,500   $2.98   $4,470.00   60%
WDC     851  $22.05  $18,764.55   80%

Comsec Account (loan balance $111,908.99, value $215,371.61). AAN stock was taken over with a stock and cash offer resulting in small holdings of APA, BBI, BBP, BBW and BEPPA stock.
                                       
stock   qty   price   mkt value  margin
AGK     240  $15.63   $3,751.20   70%
APA   4,685   $3.77  $17,662.45   70%
ASX     200  $54.41  $10,882.00   70%
BBI     105   $1.69     $177.45   70%
BBP      93   $3.11     $289.23   70%
BBW      36   $1.78      $64.08   60%
BEPPA   222   $0.895    $198.69   70%
CBA     130  $59.79   $7,772.70   75%
CDF  43,997   $1.918 $84,386.25   70%
IPEO124,000   $0.005    $620.00    0%
IPE   8,000   $1.01   $8,080.00   60% 
IFL   1,300  $10.90  $13,117.00   60%
LDW   1,350   $7.03   $9,490.50    0%
NCM     300  $28.09   $8,427.00   60%
OST   2,000   $7.02  $14,040.00   70%
QBE     607  $33.68  $20,443.76   75%
RIO      60 $111.70   $6,702.00   75%
THG   4,000   $1.125  $4,500.00   50%
WBC     300  $29.66   $8,898.00   75%
WPL     220  $53.95  $11,869.00   75%

Copyright Enough Wealth 2007

Sign of the Times

It used to be that you could only borrow money if you were able to prove you didn't really need it. These days it seems that anyone with a pulse that can legally sign a contract is getting "credit" thrown at them, and so more and more people are getting in debt over their heads. An article in today's Sydney Morning Herald states that over 80% of the Australians surveyed that were already in debt feared that they would be unable to make repayments over the next 12 months and would end up further in debt. This at a time when unemployment is at it's lowest level for 33 years, and when real wages have been increasing for the past decade. With many pundits expecting a couple more interest rate rises over the next year, one can only wonder what will happen when the next recession bites.

Copyright Enough Wealth 2007

Venture Capitalist

Although I invest largely in index funds these days (I started out investing in individual stock and actively managed but the results were not particularly impressive) I also have a small amount invested in a private equity fund (IPE), and I will probably take up the 124,000 $1 options I have that expire at the end of this month. This is my first dabble in the field of venture capital - a type of private equity capital provided by professional, outside investors to new, small businesses that are deemed to have potential. Venture capital is generally made as a cash contribution made in exchange for unlisted (private) shares in the investee company. Such investments are usually high risk, but offer the potential for above-average returns.

A venture capitalist (VC) is a person who makes such investments on a large scale. I was interested to find out that the site www.spock.com has several pages listing venture capitalists. Here you can browse through the details of some of these risk-taking private investors, such as Josh Kopelman, Joichi Ito and Roelof Botha. You can find out where they got their money from, and, in some cases, what sort of investments they are making. It's funny and kind of sad that most of the venture capitalists listed are male, and that the few women listed don't list their age!


Copyright Enough Wealth 2007

Retirement Age

There seems to be something afoot regarding the "retirement age" in Australia at the moment. On the news there was mention of a "push" towards increasing the retirement age, and in today's Sydney Morning Herald there was an article by Ross Gittins espousing the virtues of gradually increasing the age at which the aged pension becomes available from 65 to 67 (or 68). There is some validity to the argument that since people are living considerably longer than when the "normal" retirement age was set at 65, it could be increased somewhat. It's also true the people are generally healthier in their elder years - if 40 is the new 30, then 70 must be the new 60. And increasing the retirement age will certainly help reduce the impact of the aging population on overall workforce numbers and the ratio of tax payers to state funded retirees.

The question of equity doesn't seem to have received much attention - those who are in a position to become "self-funded" retirees would still be able to retire at 65, while those relying entirely on the aged pension will be unable to retire until they reach the official retirement age. However, I don't think this is a huge issue - while equity of opportunity is an important principle, this is often confused with equity of outcome. If person A saves diligently for their retirement while person B doesn't save, there's no reason person A shouldn't benefit from this "deferred gratification" when they get to 65. Anyhow, this issue already exists to some extent with the aged pension cutting in at 65 - affluent workers are often in a position to take "early retirement" before they reach that age. Then again, even those on modest wage will have accumulated a reasonable superannuation balance by the time they reach preservation age (currently 55 for those born before 1 July 1960, and increasing with DOB until it hits 60). This means that many workers of relatively modest means will be able to retire at age 60, and consume their superannuation savings by the time they reach 67 or 68 and can move onto the aged pension.

Copyright Enough Wealth 2007

The Opportunity Cost of Blogging.

I received some company information packs for share purchase plans, stock entitlements, and share buy backs over the past few weeks and they were sitting at home waiting to be read and actioned. I'd flicked through them when they first arrived, but I'd put them aside, meaning to study them in detail closer to the "due date". Some were getting close to the deadline for action by last week, but, as I was feeling a bit run down, I only managed to spend time with kids, watching TV and do some blogging after work. I finally got around to reading through the paperwork at lunchtime today. It turned out that the stock entitlement offer from Newcrest Mining was to buy 105 shares at $17.50. As the current price of NCM is around $28, buying these shares would net a quick and practically risk-free gain of around $1,000. Unfortunately the offer expired last Thursday! Perhaps if I hadn't spent my "spare" time blogging I'd have got around to reading through this before the offer period ended. Ah well, if I hadn't been blogging it's likely I would have been reading a book or something else, and still not got around to this paperwork in time. But it's still annoying to think that the lack of spending 30 minutes reading through this paper last week cost me more than I'll probably ever get from blogging.

Copyright Enough Wealth 2007

I think they need another form letter.

My employer's superannuation fund just sent me a letter stating that they'd been notified that I had left my employer, and that I had 45 days to notify them of which superannuation fund to roll my fund balance into, otherwise it would automatically switch into their retail fund. I guess that now my employer is paying my superannuation contributions (SGL and salary sacrifice) into my self-managed super fund, I can't stay in the BT employer fund. I don't mind being automatically switched into the retail fund as I can keep my current life insurance policy, which is why I left a small balance in this fund anyhow. But since I haven't actually changed jobs (just super funds) the letter they sent out isn't really suitable.

You'd think that since "choice of superannuation fund" legislation came into effect many months ago they'd have a suitable form letter arranged by now. Perhaps they do, and my employer just sent them the wrong info. It wouldn't surprise me - the employer contributions for September still haven't been transferred into my SMSF yet, and when I asked payroll about it they admitted that they'd been some sort of snafu.

Copyright Enough Wealth 2007

Site Review: MortgageFit

MortgageFit Community has over 24,000 members who provide personalized knowledge and guidance on mortgage and related issues via the many community discussions. Recent discussion topics include foreclosure, quit claim deeds, refinancing and more. The site also has forty calculators available to help you work out simple calculations and make smarter decisions. If nothing else, the site's discussions provide interesting reading. It's amazing how people can get into absolutely desperate financial positions and don't try to investigate the situation and their options until it is too late. For example, there's a post by a member whose home is getting foreclosed on 11th October, and is only now trying to find out (via on online forum!) how this will affect the 2nd mortgage, how long after the foreclosure they have to move out, and if filing bankruptcy would 'stop everything'. Another post is from a member asking about whether paying 12 years of taxes owed on a property would enable his family to reclaim title to a property they were 'swindled' out of back in 1960. I'd be a bit cautious about some of the advice being bandied about though, as many people are willing to give an opinion without having relevant qualifications or expert knowledge.

Copyright Enough Wealth 2007

Time to Knuckle Down and Study

After getting halfway through the second of the four Diploma of Financial Services (Financial Planning) subject by the start of last month, I haven't made any progress since. I'd fallen behind in my assignments for the Grad Dip of Education subjects I'm enrolled in this term, mostly due to having three different bouts of the 'flu this winter. I finally got the first assignment for one of the GradDipEd courses sent off two week ago (a bit overdue) and have decided to drop the other course for this term. The second (and final) assignment for the GradDipEd course isn't due for over a month, so I'll try to make some more progress on the remaining DFS(FP) subjects this week and finish them all off next weekend. If I don't get the four subject for the DFS(FP) completed by the end of this month I'd have to pay an extra $150 for a two month extension of time time to complete the course. Time to crack open the books ;)

Copyright Enough Wealth 2007

Net Worth of Pf Bloggers September, 2007 - Updated

Here's the latest round-up on how the various PF (Personal Finance) bloggers who post their Net Worth each month are progressing.

Monthly Net Worth of PF Bloggers for August 2007:

Blogger                   Age       Net Worth      $ Change  % Change   
Amateurist Fin. Journey   23      -$37,328.00       $329.00     N/A     
An English Major's Money  23       $18,813.00       $884.00      N/A     
Blogging Away Debt        2x      -$39,625.00     $1,376.00      N/A     
Blunt Money               40      $229,226.15     $3,360.14      1.5%      
Consumerism Commentary    30      $116,475.00    $10,002.00      9.4%      
Crazy Money               27      N/A             N/A            N/A  
Debt Free 4 Ever          39       $55,794.00     $1,187.00      2.2%     
Enough Wealth             46    $1,162,495.00    $30,681.00      2.7%     
Financial ladder          xx      $175,636.87    $10,835.43      6.6%     
Finance Journey           25      $165,183.00    -$1,373.00     -0.8%     
Lazy Man and Money        2x      $210,770.00     $4,819.00      2.4%     
Make love, not debt       2x      N/A             N/A            N/A  
Mapgirl                   3x       $49,558.00      -$753.00      N/A
Moomin Valley             42      $467,765.00     $8,803.00      1.9%     
My Money Blog             28      $171,667.00    $15,267.00      9.5%     
Savvy Saver               27      $223,904.00    $12,308.00      5.8%