It’s been a couple of months since the last update. I happily got distracted preparing and going on an epic surf trip to the Maldives with my brother and some friends.   

 

Tuesday 2 May 2023

The RBA lifted interest rates 0.25% today, marking their 11th rate rise in the last 12 months. 

 

Thursday 4 May 2023

Overnight the FED raised their interest rates another 0.25%, which was their 10th consecutive rate rise bringing their rates to a 16 year high of 5 - 5.25%. 

 

Saturday 6th May 2023

Both NAB and ANZ banks reported half year earnings recently. NAB had a great profit but the share price was down around 6% for the day because it missed ‘expectations’. While ANZ essentially met ‘expectations’ so the market was kinder to its share price that day. 

I don’t don’t monitor share prices these days, but the NAB response was brought to my attention and a great example of emotional reactions to the inevitable fluctuations of the phenomenal world or in this case market to quote Yogananda. 

Apple in the US also reported a stronger than expected quarter overnight. Interestingly the annual Berkshire Hathaway shareholders meeting was today in Omaha. There’s a great clip online of Buffett and Munger talking about why Apple is a better business than other businesses they own. This doesn’t mean it’s great value at its current price. I am just sharing an observation that Buffett and Munger spoke about. 

There’s a stack of fantastic video clips from the meeting on YouTube if you enjoy their views. I’m forever circling back to them. 

Howard Marks of Oaktree Capital recently wrote about a ‘sea change’ happening in the market globally. It’s worth checking out.   

https://www.oaktreecapital.com/insights/memo/sea-change 

The gist of it could be summed up as the long tail of 4 decades of low interest rates that resulted in cheaper money and incredible asset price growth has changed. We do not have another 4 decades of a 2000 basis points drop in interest rates ahead of us. Therefore fundamentally this will be different. 

It’s a valid hypothesis and because the future is unknown, it’s impossible to know anything with certainty. It’s one of those things to file in the back of my mind. 

For the remainder of May I got lost in coaching, my own training and getting prepared for our surf trip to the Maldives. It’s one of the things I love most about the way I invest. I don’t need to be ‘attending’ to my investments all the time. 

So for the month of May and most of June I wasn’t paying much attention to the market, outside of my monthly purchases.  

  

Tuesday 6th June 2023

The RBA upped interest rates again this month by another 0.25% taking the Australian cash rate to 4.10%

If you follow this stuff at all, the media’s response is like a circus. I could be wrong but real interest rates are still actually negative and historically low at 4.10%. 

I’m not endorsing anything the RBA does or has done - go back and listen to previous updates and you’ll pick up my thoughts on the RBA’s handling of interest rates this past few years. 

I do wonder if the last 15 years of asset price inflation thanks to Quantitative Easing may unwind and cash flow and savings from our occupations may have a larger role to play for a while.  

 

Wednesday 7th June 2023

Data released today showing the Australian economy is growing at 0.2% as productivity is down. 

 

Thursday 15th June 2023

A mate who's been investing for around 30 years shared his current investing strategy with me recently. Got to say I'm impressed. He's figured it out based on his circumstances.

It's an active strategy that requires discipline. I've been learning more about it as he's been happy to share his views and experiences.

Its nothing like I'm documenting here, but it works great for him. Plus it's fun and educational learning different ways people use their capital.

 

Friday 16th June 2023

A couple of weeks ago Robert F Kennedy Jr was on the All In podcast. Today I heard his episode with Joe Rogan on Spotify. To me he appears honest, healthy, articulate and intelligent. I can see why the mainstream media and politicians are doing their best to put misleading labels on him. 

He’s the opposite to politicians running most Western countries. I hope he does well. 

 

Saturday 17th June 2023

The FED decided to hold their interest rates steady but did comment they’ll likely increase rates again at some point. It was a little confusing but like always time will tell. 

I decided to sell some shares to reduce debt levels and monthly interest rate payments as interest rates have been rising. 

I’ll share the story with you. 

In early late February 2020 I used some debt via NAB’s Equity Builder product to buy a parcel of shares. Within a week or two of this purchase a little thing called covid started being mentioned… At the time I had no idea what was about to unfold, like the rest of the world, outside anyone linked to the laboratory leak at Wuhan. Remember when that was ‘fact checked’ as misinformation?! 

Isn’t it interesting how ‘facts’ can suddenly change… Anyway I’m getting off track.  

Fast forward nearly three and a half years later and interest rates have jumped. My principal and interest repayments have also jumped. My purchase price was top of the market for this tranche of shares. While it’s recovered it’s not keeping up with inflation from a returns perspective so I moved them on and removed the debt associated with them. 

During peak covid fear I used cash and my Equity Builder loan to buy more shares in different holdings. I’ve kept these (and continued adding to them regularly) while paying the principal and interest off monthly. I plan on holding onto these indefinitely and continue adding to them regularly.  

 

Thursday 22nd June 2023

Two days ago the ASX 200 was at a 3 month high Today the business section of the online Australian reads ‘ASX in $40 Billion Dollar Wipeout. Worst day since March’. 

The media loves a good headline! As they say ‘if it bleeds it leads!’.

 

Friday 23rd June 2023

The Bank of England increased interest rates by 0.5% overnight thanks to sticky inflation over there. 

 

Wednesday 28th June 2023

Annual Australian inflation to May 2023 was 5.6% according to the ABS released today. While headline inflation appears to be coming down it’s the underlying inflation that’s robbing us of our purchasing power. 

 

Thursday 29th June 2023

VAS (Vanguard Australian Share fund) ETF announced its June distribution of $0.88904131 cents/unit.  

VAS is currently trading at $89.73 (at the time of me updating this 13th July 2023) while the DRP price for them is $88.1810. VAS holders receive their distribution later this month so we’ll see on payment day if the DRP price has worked in our favour or not. 

Either way, the last couple have been favourable so it all works out in the wash. 

 

Friday 30th June 2023

Being the last day of the financial year here in Australia (our financial years start 1st July and end the 30 June the following calendar year) its tax time and also asset tracking time for anyone following along. 

Australia shares (ASX 200) returned 14.5% for the 2023 financial year. Not bad for a passive return considering the interest rate rises and inflation we’re all experiencing. That said the share market is forward looking so the -6.1% returns in the 2022 financial year probably priced in what we’re experiencing now.

I’ve mentioned this before and will mention it again now. It’s no secret inflation is running hot. Inflation robs us of our purchasing power over time, because we need more dollars to buy something that cost less a year ago.

As far as I know there are two solutions to this. One is to grow our income faster than inflation. The other is to have assets that grow (in terms of capital growth and income) faster than inflation (If you know of any others let me know). 

This way we are building wealth as opposed to going backwards financially. As an example, inflation is currently reported as 5.6% here in Australia, while Australian shares returned 14.5% for the most recent financial year. If you owned Aussie shares you’ve done ok. If you owned US shares you'd done even better. I have no idea of future returns so this is not advice, just an example. 

The other point is none of this is linear. Aussie shares returned -6.1% in 2022 while inflation was 6.1%. Not a great year, but I saw it as a great year to accumulate. If we go back to the 2021 financial year Aussie shares returned around 25% while inflation was 3.8%. 

You can see one swallow doesn’t make a summer. One year isn’t the be all and end all. The way I see it is about compounding over the years and decades.

Time to update the quarterly spreadsheet.