Monthly Updates | Slack Investor

Colin Nicholson – A Great Australian Investor … and February 2021 – End of Month Update

I have a few people that have greatly influenced my investing life – One such figure is Colin Nicholson. I have never met him, but he has taught me a vast amount through his long running website “Building Wealth Through Shares” (bwts.com.au).

This great Australian investor Colin Nicholson, has been investing for over 50 years and documenting his adventures with shares since 2001 on his site. Colin has only stopped actively contributing at the end of 2019. Fortunately, this website is still running and his knowledge and experience keeps on giving. As well as education material on technical and fundamental analysis, he often discusses the psychology necessary to be a successful investor.

We tend to have an impulse to snatch profits quickly and to let losses run, hoping things will come good if we hold on. This natural impulse is the exact opposite to what a successful investor must do.
Colin Nicholson

Colin started bwts.com.au when financial blogs were in their infancy and Australian contributors were rare. Colin is a private investor, an author, and educator. He has been contributing to his site for over 20 years and answered hundreds of questions from other investors. His site is an incredibly detailed knowledge base covering all aspects of owning a share portfolio. His Investing – Twelve Key Lessons is essential reading to anyone thinking of entering this fascinating world. His results over a 20-yr period are very impressive. Colin has retired from active contributions to his website but has hinted that he would maintain his website for the education of future investors.

There are countless bits of wisdom as Colin relentlessly tackles investment according to a defined, well-tested, and logical plan. No matter what the investing subject, search his site, and Colin Nicholson will offer some useful and reasoned discussion.

The source of most frustration in investors is that they are expecting the impossible. They want to sell at the top. I repeat that it simply cannot be done except by sheer luck.
Colin Nicholson – Take Profits or Wait for the Stop-Loss?

My first introduction to his site was through his meticulous documentation on how he calculated his end of financial year performance returns. Year after year he would list his portfolio and investment returns.

This image has an empty alt attribute; its file name is ColNichReturn.png — Colin Nicholson’s documented returns over 20 years comparing his returns(red) and the ASX 200 accumulation index (green). A 12.01% Compound Annual Growth Rate (CAGR) is very impressive over a 20-yr period and has enabled Colin to have a hopefully financially carefree retirement.

… I do not wish to advise people or to manage their money. Rather, my focus is on my own investments and passing on what I have learned to others.
Colin Nicholson

In addition to his website and public speaking, Colin has also authored Building Wealth in the Stock Market and Think Like the Great Investors. Like another of Slack Investor heroes, Warren Buffet, Colin has a plan for “retirement mode” and intends to become more passive with his investments and half of his portfolio is now in LICs and index funds.

I am not retired – I am a full-time investor
Colin Nicholson

Colin Nicholson, Slack Investor salutes you for your enormous contribution to my investment life and for helping countless others with your education materials and your disciplined and methodical approach to investing in shares. Dive deep and long into bwts.com.au and you will be a better investor.

February 2021 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

When having a look at the end of month charts, I noticed that all index trackers were well above their stop losses (>16%). My Mum (and Kath and Kim) would say that she could “feel it in her waters” when she had a premonition about something. My index rules allow the end of month stock price to be up to 20% above the stop loss. However, in a tip of the hat to Mr Nicholson, who is far more disciplined than Slack Investor in the investing arts, some action this month. As “new highs” have been established, I decided that now wouldn’t be a bad time to adjust the stop loss levels upwards.

I place my stops below the low of the last trough in the uptrend and move it up to just under the next trough every time a new high is made for the trend.
Colin Nicholson

Weekly Chart of the ASX 200 Index – incrediblecharts.com

For February 2021, there were falls in the growth oriented Slack Portfolio due to rising long-term bond yields. But stock prices have always fluctuated above or below a “fair price” – for one reason or another. Slack Investor is still on the couch.

Tech stocks are susceptible to rising yields because their value rests most heavily on future earnings, which get discounted more negatively when bond yields go up.
From The Bull

Despite the end of month sell off, there were modest rises in all followed index funds (ASX 200 +1. 0%, S&P 500 +2.6%, and the FTSE 100 +1.2%). All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

SMSF is it a superpower OR Kryptonite? … and January 2021 – End of Month Update

Slack Investor hasn’t written much about Self Managed Super Funds (SMSF’s) despite his love affair with his own fund. SMSF’s are only found in Australia and represent a “hands on” way to accumulate, nurture, and eventually release your super funds as a pension or lump sum. They have the same status as a normal retail or industry super fund (e.g. Australian Super) but they are “self managed” and give the trustees (members of the fund) power over where the fund is invested. This control is a double edged sword, as it is also possible to destroy your super wealth with a SMSF by making unwise investments.

SMSF’s offer

Control
Flexibility in investments – But this can be dangerous!
Estate Planning and Taxation advantages

There are nearly 600,000 SMSFs in Australia with over a million member (March 2020). Although this represents less than 5% of Australia’s population, about 25% of the $2.7 trillion invested in superannuation is invested in SMSF’s. The average member balance for an SMSF was a whopping $678,621 (ATO Data 2018).

It is possible to structure an SMSF so that the investment fees are very low. A surprising finding from a SuperConcepts study was that the average annual expense ratio for SMSF’s was 2.8% for the over 20000 funds surveyed. This seems particularly high when compared to the Slack Investor SMSF portfolio expense ratio of 0.12% through a “no advice” online SMSF services provider like e-superfund. This suggests that most of the funds surveyed used the relatively high cost route of engaging an accountant to administer the fund. There are many SMSF providers – Slack Investor uses e-superfund which provides the legal structure and web-based audits and education. The yearly operating expenses are an amazingly low $999. The SMSF is so integral to Slack Investor’s strategy that I have set aside an SMSF page on the Slack Investor site – Alas, there is not much on there yet … but it will come!

Rainmaker are producing monthly comparisons of SMSF’s with the larger low cost My Super products offered by Industry and Retail Super Funds. The analysis can be found on their Superguard360 site.

SG360Jun17_2 — A comparison of the Asset mix of SMSF funds (left column) with MySuper funds – From Superguard360

SMSF funds (above left) traditionally hold more cash, property and less international shares than the larger Industry/Retail funds (My Super – above right). SMSF’s have outperformed MySuper since the GFC (see below, SMSF’s Blue line, My Super Red block). However, with the recovery of equities, the MySuper funds have been catching up and as at June 2017, 10-year returns from both types of funds are near identical at 4.2%. Under current asset allocations, the more diversified Industry and retail funds should overtake SMSF performance – on average.

SG360Jun17_1 — Comparison of how SMSF’s (Blue Line) have done , on average, against the default My Super Fund Index (Red Block) – From Superguard360

Self Managed Super is NOT for Everyone

“… That a little knowledge is apt to puff up, and make men giddy, but a greater share of it will set them right, and bring them to low and humble thoughts of themselves.”
From an anonymous author, published in 1698 as “The Mystery of Phanaticism”

Running a SMSF takes time and I wouldn’t recommend it to anyone that doesn’t want to be fully engaged with their financial future. Luckily, Slack Investor finds the whole finance and ATO compliance scene most interesting. Trustees of SMSF’s are held responsible for compliance with super and tax laws and there are many other risks in running a SMSF fund. A long term study of SMSF data by SuperConcepts, “When Size Matters” found that that SMSF’s below $200000 in total funds generally underperformed. However, the larger SMSF’s were comparable in performance with industry funds.

Over 10 years, there’s hardly any difference between the performance of not-for-profit funds, such as industry funds, and DIY (SMSF) funds.
SMH article (2017) summarising Rainmaker data from the ATO

Despite how well an SMSF style really suits Slack Investor – The large majority of people should not get into an SMSF – but stick with a good performing Industry Fund. Unless you are justifiably confident in your investing abilities, most people will be better of with a well diversified industry fund for long-term Super performance. It is always better to “have low and humble thoughts of ourselves” – it is too easy to destroy the value of your hard earned super.

January 2021 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

Some tested COVID-19 vaccinations have started to be rolled out internationally – but uncertainty prevails. Slack Investor followed markets all fluctuated but, overall, remained pretty flat this month. For January 2021, the Australian ASX 200 rose 0.3%, the S&P 500 fell 1.1%, and the FTSE 100 down 0.8%.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Golden Triangle of Happiness … and December 2020 – End of Month Update

After just going through a Christmas period where, in these COVID-19 times, I was lucky enough to spend time with some family – I was struck with an unusual contentment. It is easy to get bogged down with the day to day challenges of life, but Slack Investor occasionally gets self reflective and has long realised that he is a happy bloke. This state is much sought after and it often doesn’t naturally happen. A recent publication that has lodged in my tiny brain is the Australian Wellbeing Index. This research has been conducted twice a year over the last 15 years and involves more than 60,000 participants.

Personal wellbeing appears to increase with age, with some of the happiest Australians aged 65 and over.
Australian Wellbeing Index – 2019 Joint Research between Deakin University and Australian Unity.

The latest instalment of one of Australia’s largest wellbeing surveys has found that, besides genetics, there are three simple indicators of a happy life. Financial security, a sense of purpose in life, and good personal relationships make up the “golden triangle” of happiness. The full report can be found here.

well-being2 — Source: thenewdaily.com.au

Financial Security

This is really what this blog posts mostly about – so I wont expand too much here. But if you feel that you are in control of your money then you can avoid many of the financial stresses. While having money does not make you happy, if you don’t have any, it can make you miserable. Not surprisingly, the survey found that the feeling of wellbeing gradually rises for household earnings up to about $100,000 a year. Surprisingly, earnings over this point found the relationship between happiness and wealth drops off dramatically.

Relationships

… the people who fared the best were the people who leaned into relationships, with family, with friends, with community,”
Dr. Robert Waldinger , Harvard University

We are humans and (mostly) social creatures – a sharing of your life and having someone who cares about you makes you feel better about yourself. A Harvard study that has been going for 80 years found that people who are more socially connected to family, friends, or community are “happier, they’re physically healthier and they live longer than people who are less well connected,”

“It doesn’t need to be a sexual relationship, but it needs to be an emotionally intimate relationship where you can share troubles and sorrows and joys,”
Prof Bob Cummins, Deakin University

Sense of Purpose

Something to do … your get up in the morning and you have a project, part time job, volunteering, exercise, a hobby – but it is something! People are happier when they are active.

But, beyond the “golden triangle” of happiness, there are other approaches – Rather than take on each corner of the triangle, just try to just make little micro changes to your life – Perhaps a little more exercise, or contact an old friend …

An older friend once pointed out to me that we were lucky enough to have choices with our lives. He stressed our limited life span and suggested I make a list of the things that I really liked doing – and then try to engineer my life to maximise these good things and then minimise the other, less enjoyable. but necessary stuff. When you collect all the moments that make you happy … you might just … be happy!

Spend more time with people you like, get outdoors a bit more, listen to some music, have some new experiences, help other people …
“Happiness thinker” Professor Paul Dolan

December 2020 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. All Slack Investor followed overseas markets this month had rises (ASX 200 +1.1%; FTSE 100 +3.1%; S&P 500 +3.7%).

I still remain nervous about the US market with its high valuations. The closing value of the S&P 500 (3756) is now 18% above the current stop loss at 3200. If the margin gets to 20% (UPR LIMIT 3840)), then I will find a place to move my stop loss upward. In these uncertain times, I will monitor my index funds weekly and if, at the end of the week my Index funds are below the stop loss, then I will put a post on the blog and sell at the next opportunity. All Stop Losses are Live.

S&P 500 Monthly chart December31 2020- From incrediblecharts.com

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been completed.

Tales from the Bizarrro World and September 2020 – End of Month Update

Bizarro World

Back in the last century when I was a big fan of Superman, DC Comics released a specialty series called “Tales from the Bizarro World”. Bizarro World was a square planet inhabited by imperfect copies of earth dwellers and they do the opposite of all earthly things. Little did I know that I would be living in Bizarro World in 2020.

As of last month, every advanced economy and all emerging economies are in a recession. Unemployment rates have increased rapidly and, due to COVID-19, over a third of the world has been in lockdown. Yet, in the worlds largest economy, on the day the US fell into recession in February, the S&P 500 overcame the COVID crash and rose above where it began the year!

Some governments are going through heroic efforts to inject cash into these flailing economies with some unforeseen results.

In this Bizarro Universe, with empty CBD’s and flourishing suburban strips, Australian retailer Harvey Norman reports its sales for July to September were up 30.6% on the previous year.

“People can’t spend their money on other things anymore, so they are spending time upgrading their home,” he said. “And that’s happening right across the world.”
“There’s also been so much money thrown into these economies, and because they can’t spend it [elsewhere], we’re getting the advantage of that. We’re in a very fortunate position.”
Gerry Harvey, founder of Harvey Norman – from the Sydney Morning Herald

It is not only furniture, but food expenditure has also increased in the 12 months to June 2020. Naturally, there has been reduced spending in lockdown crushed areas like health, transport, restaurants and accommodation.

Quarterly changes in Household Spending for the 12 months to June 2020 – From Auscap Asset Management – Click to Enlarge

It is probably due to fear about the future, but these troubled times have also modified the savings behaviour of Australians. In June 2020, credit card debt has been reduced by 20% (still $22.4bn though!). Savings as a percentage of income have increased from the paltry long term average of 5% to 20%.

Australian quarterly savings have rocketed up *From* Auscap Asset Management – Click to Enlarge

But there is also evidence of increased spending. Australians were recently given the chance to access up to $20000 of their retirement savings. In an illion survey of 10000 people, almost two-thirds (64%) of this additional spending was on discretionary items such as clothing, furniture, restaurants and alcohol.

In July 2020, the 2nd tranche of government stimulus and early access super caused big changes in household weekly expenditure. Although the actual dollar amounts were not reported, looking at bank data from 250 000 Australian consumers, the biggest spending changes were found in the allocation to Online Gambling (+95%) and Food Delivery (+342%)!

“Financial comfort levels are up for now, but many households
are on the cliff’s edge. They’ve lost income, their jobs and entire
livelihoods, … and government support is the main action stopping them from falling over.”
ME Bank Household financial comfort report 2020

Slack Investor feels that things are precarious in Bizarro World – government spending is just holding things together. As of July 2020, according to the AFR, the Australian government has spent 10.6% of GDP on COVID-19 stimulus (+1.6% Loans). In the UK it is 3.1% (+15.7% Loans) and the US 6.9% (+4.2% Loans). This spending will not go on for ever and the Bizarro World party may end badly for households that, through the lottery of occupation, are stressed.

September 2020 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. All Slack Investor followed overseas markets this month slumped (ASX 200 -4.0%; FTSE 100 -1.6%; S&P 500 -3.9%).

I am very nervous about the US market with its high valuations, forthcoming election and, what pushed me over the edge, was the beautifully described “S*%tshow” of a debate. Slack Investor has had to act and adjust his Stop loss for the S&P 500.

When pushing up stop loss levels, it is always about finding a sensible place to leave the level at a “higher low”. I couldn’t really find one on the monthly or weekly chart. The Daily chart below revealed a higher low of 3200 in July 2020 that wasn’t breached in late September. So this is my new stop loss.

Daily chart for the S&P 500 – From Incrediblecharts.com

In the real world, the US economy entered a recession in February 2020 and Slack Investor has his stop losses live for all Index funds.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been attended to.

Stocks for the “Long Run” and August 2020 – End of Month Update

This image has an empty alt attribute; its file name is virgin-ground.jpg

… It’s going to rain and it’s going to blow
But it’ll be all right, it’ll be all right, it’ll be all right in the long run …
Excerpt from the “Long Run” lyrics by Redgum (John Schuman) released in 1980.

Slack Investor looks at the shares that he owns occasionally and has a bit of a tinker. Earlier this year I had a portfolio review that saw a dumping of managed funds and high fee ETF’s. I also made an attempt to exit shares that I thought might be severely affected by gloomy economic times. However, sometimes it is good to lift the sights to the horizon and forget about the short term pricing of the market.

“Over the 210 years I have examined stock returns, the real return on a broadly diversified portfolio of stocks has averaged 6.6 percent per year.”
Jeremy J. Siegel, Stocks for the Long Run

Although the last financial year was a bit bleak for the median of super growth funds (-0.5%), Slack Investor has been around long enough to know that the gloomy times are periodic, and that, “In the Long Run” shares are a very good investment – as can be seen on the 28-year performance chart below.

This image has an empty alt attribute; its file name is 2020GrothFundsChart-4-MR-Jul20.png — *The Performance of the median Australian Superannuation Growth Fund over the past 28 years. A “Growth Fund” is defined to have between 60 – 80% of Growth Assets – From* Chant West

During my portfolio review I realised that over half my portfolio is in several companies that I would never sell – unless circumstances changed greatly! These companies usually have great management, a plan for growth, and an established track record in increasing Earnings per Share (EPS). Prices may go up and down, but great companies ride though all this and figure out a way to keep growing.

Coles (COL)

COL (2022 ROE 36%, 2022 PE 23) – With around 30% of all supermarket sales, Coles is one of the lucky retailers classified as essential and is getting a boost from COVID-19. This boost wont last forever, and, I cant see any big growth ahead. But, I can’t see myself selling this company as I visit it twice a week to “kick the tyres” and they are doing a good job. There is also the perverse satisfaction of knowing that if I am waiting at the checkout for a time … that it must be good for the bottom line!

Altium (ALU)

ALU (2022 ROE 32%, 2022 PE 56). The PE ratio of Altium has it priced for big future growth and it would be a stretch to buy it now. But this printed circuit board designer is a company for the times and it has a well defined, and so far achievable, global growth strategy.

Although relatively expensive (Forecast PE 56), Altium has no debt, a decent cash balance and keeps growing its profit margin and market share. In 2019, Altium spend 14% of its revenue on Research and Development – This is a commitment to growth in a changing industry.

Commonwealth Serum Laboratory (CSL)

CSL (2022 ROE 29%, 2022 PE 38) – Slack investor first bought into this company 10 years ago at around $30 and I have had the good fortune to add to my holding (at much higher prices!) along the way. CSL is expensive at a forecast PE of 38, but I can remember at my initial purchase in 2010, I thought it was expensive then! With great companies, sometimes you just have to hold your nose and jump in – they are rarely cheap! If it wasn’t already such a large part of my portfolio, Slack Investor would buy more CSL if I could get it below $300. The price chart below is reassuring.

Weekly chart of CSL over 5 years – From Incredible charts.com

Alphabet – (GOOGL)

(GOOGL – 2022 ROE 18%, 2022 PE 24). Alphabet is listed on the US-based NASDAQ exchange and needs an International Broker to invest directly (Commsec will set you up for a cost of 0.31% for trades above USD $10,000). For a growth company, Alphabet is not outrageously expensive with a forecast Price to Earnings Ratio of 24.

One of the first charts I look at before buying a stock is how its income has evolved – Thank you Market Screener. The GOOGL income chart below is typical of how I like to see them. A steady track record of 3 years growth of sales/income, and then a plan to grow income over the next 3 years.

Income and Forecast Income for Alphabet (GOOGL) – from marketscreener.com

A common theme amongst companies that I am reluctant to sell is their willingness to invest in new projects that might feed back into the earnings of the company. Alphabet spent a staggering US$ 16.2 Billion on research and development – 14.6 % of its revenue in 2018

BetaShares NASDAQ 100 ETF – (NDQ)

(NASDAQ Index – Current ROE 14%, Current PE 23) – Australian exposure to this index comes at a cost (MER of 0.48%) through the NDQ Betashares ETF, but Slack Investor thinks this is well worth it – my costs in owning GOOGL directly are around 0.43%. This ETF is Slack Investors favourite way to own International Tech stocks. With NDQ, you get exposure to 100 of the world’s best tech companies. The NASDAQ Index is a collection of growing household tech names e.g. Apple 13.9%, Microsoft 11.2%, Amazon 10.9%, Alphabet 7.2%, Facebook 4.5%. With a forecast PE of around 23, it still looks reasonably priced if tech world keeps growing.

August 2020 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. Rises all round for Slack Investor followed overseas markets this month ( ASX 200 +2.2%; FTSE 100 +1.1%) In Crazy Brave USA, the S&P 500 had a monthly rise of an astonishing 7.0%.

At the end of August, the US S&P 500 had a 12-month trailing PE Ratio of 30.09 . The mean and median values are 15.81 and 14.83.

In the real world, the US economy entered a recession in February 2020 and Slack Investor has his stop losses live for all Index funds.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

FY2020 Nuggets and Stinkers and July 2020 – End of Month Update

“Just get things mostly right“
Slack Investor 2020 –

Not that I think Slack Investor is worth quoting – but I searched high and low for a quote that expressed the Slack aim. The great Warren Buffet got closest to the sentiment with “You only have to do a very few things right in your life so long as you don’t do too many things wrong.” – but I used this quote last year!

It is good for me to have a yearly display of my failures. It reminds me of the bumbling path of Slack Investor in the pursuit of financial independence. As for the nuggets, just get the foundations right … and luck might intervene.

“You can never be a first class human being, until you have learnt to have some regard for human frailty.”
Abhijit Naskar, Conscience over Nonsense

The percentage yearly returns quoted in this post include costs (brokerage) but are before tax. This raw figure can then be compared with other investment returns.

Slack Investor Stinkers – FY 2020

The Slack Investor Portfolio comprises of (mostly) high Return on Equity (ROE>15%) and high Price to Earnings (PE) ratio stocks. Historically, these companies are quite volatile as they are priced to account for future growth. If there is an earnings revision … or a change that would affect future earnings, then the price of the share usually plummets. Slack investor accepts that stinkers are just part of life when dealing with growth stocks.

Slack Investor has a look at his stocks on a chart (Thanks Incredible Charts!) every weekend – and, I eventually get the message if a stock price is moving lower and take the exit.

Rhipe (RHP) -22%

After being a star performer last year … this software technology company took a dive in share price this time last year. Slack investor bailed out in February 2020 – but not before taking a few licks.

Treasury Wine Estate (TWE) -13%

In Wine is Truth .. and this became evident at the start of this year as the global wine oversupply made it difficult for Treasury to raise prices. Their attempts to break into the US market were floundering and the stock price took a tumble. Slack investor “cleared the decks” in February 2020.

Centuria Industrial REIT (CIP) -11%

Centuria invests in industrial properties and was a victim of my COVID-19 portfolio trim. I sold out in April 2020 on my fears that the virus would affect tenancies. It seems that I took flight a little early as the stock price has rebounded 17% since I sold – Ah well … that’s investing!

Costa Group (CGC) -11%

Costa is agricultural company that grows and distributes mushrooms, berries, tomatoes, citrus, avocados and heaps more. My involvement with this company unfortunately coincided with a 2-year price slide due to a series of farming misfortunes. I parted ways with Costa in October 2019. Slack Investor held this stock for far too long. However, owning this stock taught me a lesson – avoid business that are “price takers” – where the cost of goods is set by seasonal factors or competitors. The best businesses have an exclusive product that people want and there are barriers to entry for other competitors.

Slack Investor Gold Nuggets – FY 2020

The other side of investing in companies that have a high Return on Equity, and with a track record of increasing earnings, is that you can sometimes expose yourself to some pleasant surprises. The Return on Equity (ROE) and forward Price Earnings (PE) ratio values quoted below are “forward looking” and are analyst predictions for the year 2022. They were extracted from the excellent Market Screener site. These ratios are just predictions, but Slack Investor finds them very useful.

Appen (APX) +58%

APX (2022 ROE 19%, 2022 PE 32) remains a company that I don’t really understand but after taking profits and selling last year, I bought back in during November 2019 after a price fall and then a breakout from a “falling wedge”. Another excellent year for this machine learning and artificial intelligence company – Ignorance can be bliss!

Commonwealth Serum Laboratory (CSL) +31%

CSL (2022 ROE 31%, 2022 PE 32) is now the largest company on the ASX. Their blood products and expertise in gene therapy and vaccinations are used worldwide and there are projected increasing sales. Driving this fabulous company is a commitment to innovation. Spending on Research and Development is in the target range of 10 to 11 per cent of turnover – in an environment where a typical manufacturer will spend 2%. It is no coincidence that this company is doing well.

Alphabet (GOOGL) +30%

The Alphabet list of products is large … and getting larger. Everyday I use Google, GoogleMaps, gmail, android devices and YouTube. Alphabet (GOOGL – 2022 ROE 19%, 2022 PE 32) has just announced a quarterly rise in profits of 22% as it moves deeper into peoples lives. Alphabet and the other FAANG Stocks have been acting a bit like pirates in the multinational tax world. There are some regulatory risks on the horizon though. Nations are rightfully demanding a share of these tech giants revenue as taxation. There is also a bit of “pushback” by governments and media companies who want a fair share of revenue generated by their content. However, on the plus side, profits should continue to grow as advertisers are spending more to reach an expanding number of customers that are engrossed with their smartphones and YouTube.

A2 Milk (A2M) +26%

A2M (2022 ROE 28%, 2022 PE 29) sells A2 protein type branded milk, infant formula and other related products to the world. The actual benefits of the A2 only protein have been indicated in small studies but longer-term studies with larger sample sizes are needed. However, in the mean time, sales are increasing and the share price is still going north.

Honourable mentions for Slack Investor Portfolio stocks BetaShares NASDAQ Index NDQ, Integral Diagnostics IDX and BetaShares RBTZ that increased more than 15% in this financial year.

Slack Investor Total SMSF performance – FY 2020 and July 2020 end of Month Update

A tough financial year for shares through the COVID-19 financial crisis. Chant West reports the median of “growth” super funds struggled to a small loss of 0.5%. The FY 2020 Slack Investor preliminary total SMSF performance looks like coming in around 9%. The 5-yr performance is a more useful benchmark to me. At the end of FY 2020, the Slack Portfolio has a compounding annual 5-yr return of over 19%.

My wise mother used to say to me that “Self praise is no recommendation” So Slack Investor will meekly slink back to the couch and get prepared for what might be a tough time ahead in the share market. The full FY 2020 results and benchmarks will be expanded on next post.

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. A mixed bag for Slack Investor followed overseas markets this month ( ASX 200 +0.5%; FTSE100 -4.4%; S&P500 +5.5%).

The US S&P 500 has shown more resistance to gravity than the Trump hairstyle – but all parties must end some time. As the S&P 500 has moved more than 20% higher than its stop loss, I have adjusted the stop loss to 2965 from 2721.

The US economy entered a recession in February 2020 and Slack Investor has his stop losses live for all Index funds.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

My House … and June 2020 End of Month Update

… Welcome to my house, Baby take control now, We can’t even slow down, We don’t like to go out, Welcome to my house …
Flo Rida “My House”

Slack Investor’s taste may not be quite as “gangsta” as Flo Rida – check out his full video to get a flavour of what I mean – But, both Flo Rida and I share a genuine passion for the joys of household ownership.

In my last post, I had a bit of a rant about the exorbitant transaction costs of buying a house. Despite the costs, I hope that I didn’t mislead about the absolute joy that Slack Investor feels about house ownership. A Slack Investor pillar for financial independence is to own your own place before you retire – as the cost of housing keeps rising for retired renters. The typical homeowner aged over 65 spends just 5% of their income on housing, this compares to nearly 30% for renters.

Flo Rida and I are enamoured with owning our surroundings:

The Serenity – Ownership gives stability and control – You can do what you like in your own house and are immune from sudden evictions.
Access to aged pension and taxation benefits – the home is treated differently than other assets. However, Slack Investor thinks that these concessions are too generous and will probably be capped in the future – Currently in Australia, $6 billion in pension payments go to people with homes worth more than $1 million.
Flexibility – No need to ask the landlord to make changes – If you go on an extended adventure, then why not rent your house out for the dates that you are away – to help pay for the holiday – Or, House swap to an exotic location!

Slack Investor understands that owning a home may seem an impossible dream to some – and, sadly, ownership rates are decreasing . But do not give up hope – Many real estate pundits are expecting prices to fall from their current eye-watering levels. This fall should be accelerated by COVID-19 factors.

Home Ownership rates are on the decline for all age groups. – Grattan Institute

A home does not have to be large and, it could be out of a capital city. There seems to be a trend already for millennials (and older folk 60-69) to be moving from cities to the regions according to the Regional Australia Institute. They suggest that equitable access to housing is one of the pull factors for this move to the regions. Slack Investor has spent most of his working career outside of big cities and can highly recommend the simplicity of life away from the capitals.

More than 400,000 Australians moved from capital cities to regional destinations between 2011 and 2016
Regional Australia Institute report – February 2019

June 2020 – End of Month Update

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Slack Investor admits to being only an amateur economist and finds the current situation in the US confusing – Stock market up, economy down! These are wild times … but I am back to all IN for my Index funds!

US Data keepers, the National Bureau of Economic Research (NBER) have now determined that the US economy entered a recession in February 2020 “with different characteristics and dynamics than prior recessions”. The Federal Reserve bank of Cleveland strangely have their forecast of a recession in the next year at 19.2% (below Slack Investors threshold of 20%). However, reality always beats forecasts and Slack Investor has his stop losses live again for all Index funds.

Monthly rises in all followed markets ASX200 +2.5%, FTSE100 +1.5% and S&P500 +1.8%.

COVID-19 problems go up … stock markets go up? I know stock markets are usually forward thinking and obviously see an end to COVID problems soon. Slack Investor is not so sure … but the charts have him invested in all markets. My portfolio is trimmed to industries that should be OK( I Hope?)

All Index pages and charts have been updated to reflect the monthly changes – ASX Index, UK Index, US Index. The quarterly updates to the Slack Portfolio have also been recalculated.

Is it safe to come out now … and May 2020 End of Month Update

Viktor Bulla’s photograph of the “Pioneers of Leningrad” in a defense drill, 1937, showing the well equipped youth ready for anything … taken 4 years before the horrific Siege of Leningrad– From rarehistoricalphotos.com

This striking image of Leningrad children in their gasmasks has left a haunting impression on Slack Investor. The 900-day siege of the Russian city during WW2 claimed the lives of 800000 civilians – Many of the photographed children would have been involved.

Not trying to draw any parallels, but it is true to say that we are all a bit apprehensive about how to deal with this new post-lockdown world in Australia.

The number of fatalities for COVID-19 is still shocking and it is causing great hardship in many lives. In perspective though, the “big Daddy” virus is the 1918 Influenza where nearly a 1/3 of the world’s population was infected and global deaths amounted to almost 50 million people.

Given sufficient leadership (are you listening Donald and Boris!) the world will eventually see this COVID-19 off – like it has with all previous past viral outbreaks.

Slack Investor does have a furrowed brow about the whole world economy thing. Even bevore COVID-19, China’s economy was shrinking – and has now tanked.

Although China is expected to recover later this year, things don’t seem so good for the moment. The International Monetary Fund (IMF) are describing it as the worst economic downturn since the Great Depression. It is tough to provide forecasts for this event and, as a retired meteorologist, I feel for my economy forecasting brothers and sisters. They predict both advanced and developing economies are expected to show signs of life in 2021.

World economic growth projections by the International Monetary Fund (IMF) World Economic Outlook April 2020

No country is spared in this global crisis, in particular, nations with weak health systems, and more limited funds to provide support will struggle.

Slack Investor will leave the big world predictions to others and continue tinkering in a small way with his portfolio. What is obvious is that companies reliant on tourism, travel, hospitality, and entertainment for their growth are in big trouble. Emerging market and developing economies face additional challenges as they will find it harder to find investors to fund their projects in this climate.

This is not advice, but I will sell off my shares in emerging market ETF VGE and the Malaysian property trust UOS and buy some ETF’s such as NDQ or QLTY. I have had second thoughts about selling down my overweight position on CSL . This company continues to grow – and I just love owning it. – I would have topped up my holding this week as it is currently slipping in price to below $280 – but it is already a big chunk of my Portfolio.

May 2020 – End of Month Update

Governments around the world have been mostly doing their job responsibly and adding stimulus to the world economies in these troubled times. In response to this, the Federal Reserve bank of Cleveland have stabilized the probability of a US recession within the next year at 19.4% (below Slack Investors threshold of 20% – so stop losses on index stocks are in hibernation). There has been some real optimism in the markets with further big monthly rises in all followed markets ASX200 +4.2%, FTSE100 +5.4% and S&P500 +7.6%.

The rise in the ASX200 has Slack Investor back into the market with a weekly change in momentum of the weekly charts signaling a BUY. It’s all a little bit crazy … but I am back to all IN! The 11-Period Directional Movement Index (ADX) change of greater than 0.6 is used as the momentum indicator for entry with the complexities of this process explained on the Resources page.

Weekly chart of the ASX200 Index showing the weekly price ranges and the three lines of the directional movement system for momentum trades below – incrediblecharts.com

All Index pages and charts have been updated to reflect the monthly changes – ASX Index, UK Index, US Index.

April 2020 – End of Month Update … The Real Cost of Early Super withdrawl

In relaxed lock down through the courtesy of COVID-19. But the stockmarkets never sleep.

The Federal Reserve bank of Cleveland have the probability of a US recession within the next year at 20.0% but there has been some optimism in the markets that there might be an eventual end to this wicked virus crisis. Rises in all followed markets ASX200 +8.8%, FTSE100 +4.0% and S&P500 +12.7%.

The rises in the UK and US have got Slack Investor back into the market with a change in momentum on the weekly charts signaling a re-entry. But it is with much trepidation – the rapid recovery seems to have been priced in a bit early!

Slack Investor has outlined in many posts about how to get out of trades with stop losses. But has been a bit lacking in detail on when to get back IN. When trend trading, my main tool for finding a buy signal is a trend following (or momentum) system called the Directional Movement Index. There are many ways of setting up this system. Slack Investor likes the “smoothing” that is enabled by a system that looks back over the previous 11 periods – but the complexities are best left for the Resources page.

UK Index weekly chart showing the weekly price ranges at the top and Average Directional Movement Index (ADX) patterns below – From Incredible Charts

I am quite comfortable with the re-entry into the UK Index shown above, but the rapid swings for the US charts have the Slack method back IN, but so far, performing worse than the “buy and hold” method. I will continue this index market timing experiment for another 4 years (to make it a 20-year trial).

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Super Withdrawal … should you?

“A Run On the bank” an etching from the 1930’s – from sutori.com

The Australian Government has gone into real governing mode and set up some measures to help people get through this COVID -19 crisis. They have established “JobKeeper” payments ($1500 per fortnight), doubled “JobSeeker” payments (up to $1100 per fortnight), and allowed the unemployed and people whose hours have been cut by 20 per cent to access up to $20000 of their super early. There are some rules.

Slack Investor understands that times are tough for the many who have lost their jobs, but is disturbed that 881,600 people had registered with the government for early superannuation access – and this could blow out to 1.5 million people. Unfortunately (particularly if you have credit card debt), this will be a necessary step for some. Slack investor implores those affected to exhaust all other options first – an early superannuation withdrawal does have repercussions further down the track.

Comparing potential withdrawal impacts at different ages

Investor’s current age	Years to retirement	Value of $10,000 at retirement	Value of $20,000 at retirement
67	0	$10,000	$20,000
57	10	$17,908	$35,817
47	20	$32,071	$64,143
37	30	$57,435	$114,870
27	40	$102,857	$205,714

Source: Vanguard calculations – These calculations show a significant projected eventual cost of super withdrawal. However, these raw figures do not allow for inflation. A projection allowing for inflation (2%) using the smartasset inflation calculator shows that the $10 000 withdrawal after 40 years will grow to a still significant $46578 in 2020 dollars ($102857 in 2060 dollars).

Slack Investor knows that accessing cash like this has consequences and that people should make an informed choice between their short term financial need and their long term financial position.

There is also the effect on your insurance with the withdrawal of super … if you go to a zero balance, your super-related death and disability insurance will cease. Even if you return to work, it will not automatically reinstated until your account balance reaches $6000.

A real-life example from the Slack Investor chronicles. A long long time ago in 1982, a 25-year old Slack Investor wanted to travel overseas for the first time. Funds were a bit short and he had saved some money … but not enough for a whole year travelling. I had a superannuation balance of $3500 (This would be worth almost $10000 in 2020 dollars using the smartasset inflation calculator).

Back in those days, prior to compulsory super, you were allowed to cash your super in – and I stupidly did. To save up this kind on money would have taken another 3 months of saving and working – I chose the instant gratification.

Slack Investor is a great believer in the “tried and true” problem solving method of

Research – Weigh up the pros and cons …
Make a decision
Move On … No Regrets – you have made the decision with the available facts.

However, the pulling out of my super when I was in my twenties is one of the few things that brings me just a tinge of regret.

The Hesta Retirement Balance Projection Calculator shows that my $3500 would have grown to nearly $31000 at my 62-year old retirement date (Assumptions: at 8% growth and 2% inflation). Slack Investor likes this calculator as it allows you to set assumptions that help account for inflation as well as growth.

Perhaps if I had just delayed my trip by a few months and worked a bit longer, I might have been able to retire just a little bit earlier. Ah well … we make our decisions and … such is life.

Be safe, be kind … and make an informed decision about releasing your super early.

March 2020 – End of Month Update … Keep Calm – and stay in the Bunker

Ooooh … COVID-19, that is some virus! Well, the world seems a changed place now as we stay in our homes and contemplate obscure recipes for hand sanitizer. Slack Investor reaches out (from a safe distance!) to all who have lost their job or know someone who is badly affected by this pandemic. Investing seems like a peripheral activity in these times.

In the bubble world of share markets, an official Bear market (Fall of over 20% from a peak) has been established in a remarkable two weeks! There have been wild swings in both directions. This crash, in value and volatility, is unlike previous share crashes

” Rates of transacting (velocity) across global markets has been high and a good deal higher than in previous crises. Electronic systems provide a catalyst to embed the panic (uncertainly) into the pricing. We’ve seen huge swings in prices, at increased transaction rates.”
Kylie-Anne Richards from The Conversation

In these crazy times, I am not sure if this number means much, but the Federal Reserve bank of Cleveland have the probability of a US recession within the next year at 20.6% on their latest figures – but next months update should account more for Coronovirus effects. The current value exceeds the Slack Investor threshold of 20% and my monthly stop losses for Index funds are “switched ON”.

Last month, Slack Investor bailed on the UK FTSE and now is pulling the cord on Australian index shares (ASX200 down 21.2% this month) and the US Index S&P 500 (down 12.5%). So I’m now OUT for all my index funds.

*Monthly chart of the ASX200. The latest cycle is showing a buy at 5252 and a sell at 5076 – a loss of 3.4% – From Incredible Charts*

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been recalculated.

Keep Calm and stay in the Bunker

Nuclear Bunker at Broadway Tower, The Cotswalds

Slack Investor has been told to stay in his home to avoid becoming a vector for virus COVID-19 (a shortened form of “coronavirus disease of 2019″). Hurrah for Big Picture government – All well and good. The governments are at last acting like “Grown Ups” and governing. Similar advice should apply to managing your exposure to shares – Just stay in your Bunker!

In the last post, Slack investor outlined he has two systems going with his shares. For the past 16 years I have been running an experiment in trying to time the market with index funds with decisions made on a monthly basis. The results so far indicate that there is an advantage in “timing the market” – but that advantage is relatively slim. The yearly gain for the Slack Monthly method over the ASX Index, UK Index, and the US Index, respectively is 2.7%, 2.3% and 0.3%. These relatively low outperformance figures might have been outweighed by share dividends if I had held the shares instead of trading out to cash.

The main part of Slack Investor’s portfolio is in growing companies with good management that have had a good track record of increasing dividends. These companies are still held in the Slack fund and should recover when the world resumes a more normal footing.

My experimental index funds portfolio is only 3% of my total investment funds. 96% of my portfolio is still in shares. The time to muck around with your long term investments is not now!

For most people, Superannuation is a long term investment that involves (for good reason) share exposure. There has been some panic moving of superannuation funds to cash. According to Industry Super Australia, members who moved their money from an average balanced industry fund into cash after the global financial crisis were $4000 worse off after three months and $34,800 worse off after five years. To echo Mr Buffet from the last post,

“People avoid selling their house during a property market slump because they are worried about making a loss [and] the same principle should be applied to changing your super fund or investment option immediately after a market drop,”
ISA chief executive Bernie Dean, from The Financial Review

In another move, The Australian government has allowed access up to $20000 of your super. This should be an absolute last resort as the effect of COVID-19 will be around for a few months – and superannuation, for your retirement phase, should hopefully last for decades.

“… before you cash out part of your retirement savings, make sure you have exhausted every last option available to you (including eating baked beans for a few months).
Scott Pape from The Barefoot Investor

As terrible as this current crisis is – some modelling suggests it may not reach its world peak till August. Like previous epidemics and pandemics, it will eventually be over. Until then, Slack Investor will get onto the couch and wait this one out.