Saturday 4^th September 2021

Over night the S&P 500 hit its 54^th record high close of the year. Imagine having sold out after it’s first all time high this year. You’d have missed the further 53 record closes so far and the dividends paid since the first one.

Peter Thornhill explains it this way. We’re investing in human endeavour, when we invest in shares. It’s people and their ideas, skills, innovation and vision who create and run businesses all around the world. This is what investors are investing in.

If you believe that human endeavour is on the decline, best stay away from it. If you believe human endeavour is on the rise, you can own a piece of it.

Human endeavour is what got us from how we used to live in the past to how we live now. Transportation via foot and horse back in the day, to cars and planes today. Communication via letters sent by boat to instant video calls on our phones 24/7. From candlelight to solar energy we can pump excess electricity back into the grid and generate income from it.

While no progress is linear, especially when plotted daily, over a long enough time frame a direction emerges. Buffett said ‘in the short term the market is a voting machine, but in the long term it’s a weighting machine’.

Personally, I’m backing human endeavour. I’m not only happy, but also grateful to give some of the sharpest minds in the world, my capital to put to work, partner with them in the process and get a piece of the upside.

This is all easier said than done though, when crashes happen. However it’s at these exact times, our true conviction is revealed. And knowing exactly what I’m investing in AND why is of paramount importance. Personally, I couldn’t skimp on doing this work/research/investigation and suggest anyone listening puts in the time they need, for however long and however deep you need to go, to be clear on your convictions. If you cannot get clear, perhaps figure out an asset allocation that helps you sleep at night or another asset class entirely. Life is ultimately a single player game. You do you.

On the subject of investing, the value of being financially independent has just increased even further in my view. A few people I know are being ‘directed’ to sign a ‘voluntary consent’ form in their employment otherwise they basically won’t be able to perform their employment as is. This doesn’t sound too voluntary to me…

 

Monday 6^th September 2021

xxx messaged me his second crypto coin has hit $100,000USD over night from a $1000 initial investment. His average buy in price is $0.0115cents and the coin is now over $1.20/coin.

His other coin that first hit $100,000USD got as high at $350,000USD is now sitting at $250,000USD.

He feels this is a one in one thousand year opportunity not to be missed with a buy and hold mentality that’s widely diversified. So far, it’s hard to disagree with him. He’s an astute guy and is putting some of his money where his mouth is. I’m stoked for him and grateful he keeps me abreast of what he’s doing and how it’s going.

Again, this is not investment advice!

 

Tuesday 7^th September 2021

The RBA met today and surprise, surprise left cash rates on hold at 0.01% and announced they would begin winding back their ‘extraordinary level of monetary stimulus’.

 

Wednesday 8^th September 2021

I cannot remember if I’ve discussed the Rule of 72. Here it is again in case I haven’t.

The rule of 72 is a simple formula that calculates how long it takes for an investment to double in value, based on it’s rate of return. It looks like this:

72 / rate of return = Years to double

25% return = 2.88 years to double

20 % return = 3.6 years to double

15% return = 4.8 years to double

10% return = 7.2 years to double

5% return = 14.4 years to double

2.5% return = 28.8 years to double

1% return = 72 years to double

0.5% return = 144 years to double

0.1% return = 720 years to double

It’s a great visual and reminder as well.

 

Monday 13^th September 2021

One of the goals with Project Passive is year on year growth of the portfolio’s passive income (dividend income). Buying more shares, reinvesting all the income and companies increasing their dividends/distributions are the key to this happening.

The only parts I can control are the buying of more shares (which is largely dependent on my income/expenses) and reinvesting all the dividends. So that’s my focus.

While this is the game I focus on that keep me on track, the real goal is the larger game of total returns investing, which is capital growth + dividend/distributions income.

In reality, selling down 3%-4% of the portfolio annually or living off the natural dividends/distributions of the portfolio are one and the same. So while I enjoy my own single player game of pushing up the natural cash flow of the portfolio, I’m not attached to it. It’s just a personal bias I’m aware of and use to my advantage.

And for anyone wondering, I stay away from high yield shares. As an example, 100% of the time I opt for VAS (Vanguard Australian Share fund) over VHY (Vanguard High Yield Share fund). The % yield a portfolio is of little importance to the actual (ideally increasing) cash flow produces over the years.

As a general rule, if you’re chasing high yield, you’ve got a high probability of a poor outcome. But this lesson can be difficult to understand on first exposure. This video on the ‘Yield Trap’ is a good introduction https://www.youtube.com/watch?v=cpVSmgZRHA8

 

Monday 20^th September 2021

Got a text today from xxx today ‘bloodbath today did something happen. You hear anything?’

The market closed down 2% today…

This from the SMH:

If you thought dividends have caused a bit of market turbulence in recent weeks, hold on to your hat. According to Commsec, distributions to investors is about to hit its peak. The broker says ASX 200 companies paid about $5.5 billion in dividends to investors between mid-August and September 17, but the distributions will reach a peak starting next week with more than $15 billion cash handed to investors.

CommSec estimates that more than $41 billion in dividends will be paid in coming weeks compared to just $25.8 billion for the interim reporting season in February and $21.6 billion during the 2020 reporting season. In the February 2020 season, the last season untainted by COVID concerns, it was $27.5 billion. “Some analysts are forecasting record annual dividend growth of around 17 per cent, more than triple the average annual growth rate,” Commsec’s chief economist Craig James said.”

While both property and shares are currently booming, I’ve got to admit not much about investing in property excites me personally. Properties themselves are great, especially in fantastic locations, with cool features. It’s the processes involved with investing in them I don’t enjoy.

Looking, inspections, putting in offers, dealing with agents or others at auctions, the process of financing, all the bullshit fees, prequalifying tenants, property maintenance, tenants and so on. It’s time consuming and akin to running another business, part time or full time depending your ones portfolio.

For anyone reading this from outside of Australia, property investing here is basically a religion. All that said this is a personal bias of mine. I fully understand the reasons it’s so popular here and that most people love it.

Personally, I like not having to talk to anyone to make an investment, the buying process of equities takes 30 seconds and I do it all from an app on my phone. Done and dusted.

The ability to use leverage in property is a key point for many investors, but these days we can do the same with equities too. Using things like non-margin loans or internally geared funds do the same thing.

The argument to that is, what about volatility? Well, volatility is a reflection of liquidity, not a reflection of risk. Property prices move around enormously too, but because their prices are not displayed for 8 hours a day, we don’t notice it. That said, if you are not psychologically prepared for drawdowns of 50-90% in values then equities are probably not the asset class for you long term.

It’s this variety, in this case asset classes that makes life interesting. We’ve all got unique psychological make-ups and biases. The better we understand them, the better the decisions we can make.

It’s at this point I feel the need to plug Morgan Housel’s book The Psychology of Money again. It’s that good and he covers some of these topics incredibly well.

Another podcast episode that dives into these areas is episode 167 of the Rational Reminder podcast with Professor Hersh Shefrin. It’s a fantastic listen.

https://open.spotify.com/episode/62Bud2p3yKOR4AAKYBQjlG?si=bbjF4cbCSpCKkHXPT4V7Ng&dl_branch=1

 

Thursday 23^rd September 2021

Received this email this morning from xxx.

“I wasn’t going to get into the property market again, but my neighbour out of nowhere put her farm on the market, so I waited and when all offers were in, I bought it. Exchanged the contract yesterday mate. Lots I can do by now having the 2 farms together and have added a beautiful home and another 30 acres to my 25. The value in this, over someone just coming in and buying is some much more to me.

In the drone pictures you can see my new house being built at the end of the road near the lake. When I build the other main home on the hill that will be 3 homes and hopefully my legacy for my kids and grand kids is now in place with 3 homes on the 55 acres.

See the pics below

Take care brother”.

I’m so pumped for him. This is farmland 7mins from some of the best beaches in Australia. It’s an incredible part of Australia and an incredible achievement for him too.

In other news, some DRP’s executed today too. Sometimes the DRP prices go your way, other times they don’t. This time they didn’t. For example, one of the companies DRP price was $5.21/share while I could buy it on market for around $5.10/share today. But, in the scheme of things, it’s nothing and evens out over the decades.

Personally it’s not worth mentioning, but I know some people read/listen to this to understand some basics and DRP’s and their prices are part of the fundamentals of long term investing.

 

Friday September 24^th 2021

Received a ‘Significant Event Notice’ from my Superannuation fund today, basically saying they’re downgrading their expected returns from various asset classes as of July 1^st 2021. For example, Australian shares down to CPI plus 4.5% from CPI plus 5% previously. International shares now CPI plus 2% down from CPI plus 2.5%.

Bottom line, they’re most bullish on Australian shares and Australian small cap shares. But, looking backwards, they’ve been way off on international and Australia shares.

Just goes to show, if I’d have cherry picked data I could have created a story around a bias I have…

 

Monday September 27^th 2021

USANA announced a fantastic incentive recently for their affiliates at no cost to our customers. For the next 6 months, affiliates will receive 20% of the dollar value (excluding taxes) of all new customers’ orders for all their orders for the next 6 months. This is for all new customers in Australia, New Zealand, Canada, the United States, Mexico and Columbia.

This is probably one of the best incentives USANA has ever offered in my view. I see USANA as a multi-generation asset and incentivising affiliate behaviour around customers is fantastic from a permissionless leverage point of view and also a regulatory point of view.

If you’re keen to give any of the products a go check out: https://www.kdmhealth.com/shop/

 

Wednesday 29^th September 2021

The past few days’ citizens in Melbourne Victoria have been protesting the lockdowns and forced virus vaccination mandates. The mainstream media continue their bias and blatant lying. It’s so out of control there’s not enough hours in the day to tabulate it all here.

After 15 months people have understandably had enough. Businesses and lives have been destroyed. It’s difficult to believe this is happening in Australia in the year 2021, but it is.

I’ll provide one example of double standards. The ‘protestors’ (a large group of people gathering in public, illegally in these times) are arrested and shot by police with rubber bullets for wanting their basic freedoms returned. While on Monday just gone, Melbourne Demon’s AFL fans gather in Melbourne (a large group of people gathering in public illegally in this times) to celebrate their team willing the grand final yesterday. Not a police officer, rubber bullet or arrest in sight.

I guess their signs saying, ‘Demons’ are more appropriate than the ‘Freedom’ signs being shot down…

In other news, the Vanguard ETF’s released their estimated distributions today. While it’s a mixed bag as usual, Australian company earnings appear to be rising.

 

Thursday 30^th September 2021

Yesterday newspaper headlines were ‘Shares lowest prices in 4 months’ while today the headline in the Australian is ‘ASX jumps 1.7% best day in 10 months’.

Weather or not I know of these happenings or am ignorant of them makes no difference in what the market does. If I’m at all influenced but the media or it’s headlines, today and yesterday alone demonstrates the emotional rollercoaster I’d be on daily. What a terrible way to live…

I learnt long ago, to ignore the media and this extends beyond just their investing commentary!