# Where are you parking your cash?



## MovingAverage (13 January 2020)

Spoke to a few banks today about parking a chunk of cash in a 6-12 mth term deposit...how bloody depressing. Curious to hear what opinions you might be considering for your cash in relation to chasing a “reasonable” interest rate?


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## fergee (13 January 2020)

MovingAverage said:


> Spoke to a few banks today about parking a chunk of cash in a 6-12 mth term deposit...how bloody depressing. Curious to hear what opinions you might be considering for your cash in relation to chasing a “reasonable” interest rate?



Here in Japan a lot of people keep their money in a safe at home as the interest rates are so low its barely worth having it in the bank once you factor in the extremely high banking fees and a lack of trust in the regional banks.


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## Dona Ferentes (13 January 2020)

MovingAverage said:


> Curious to hear what opinions you might be considering for your cash in relation to chasing a “reasonable” interest rate?



Anything in an ADI that has a + in front of it?


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## Zaxon (13 January 2020)

MovingAverage said:


> Curious to hear what opinions you might be considering for your cash in relation to chasing a “reasonable” interest rate?



We keep our cash in a High Interest Savings Account - an account, often from your regular bank, that may have some "hoops" attached to it.  Typical hoops are: depositing your wage, doing x number of CC transactions, etc.


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## aus_trader (13 January 2020)

I am keeping the bulk of the % allocated to cash in a HISA same as @Zaxon, since backed by the Government guarantee for deposits in Australia. Also got a small % (~5%) in a Rate Setter account that offers higher interest rate but you need to be comfortable with not having a bank guarantee etc on the principal amount on that, although they do have a Provision Fund that may provide some safety.


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## sptrawler (14 January 2020)

I'm in a term deposit, but will be re alocating more to LIC's and ETF's, when it matures in June. Also might give ratesetters a whirl.
What's the worst that can happen? I end up on a pension.


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## aus_trader (14 January 2020)

sptrawler said:


> I'm in a term deposit, but will be re alocating more to LIC's and ETF's, when it matures in June. Also might give ratesetters a whirl.
> What's the worst that can happen? I end up on a pension.




I think you are managing your money well sptrawler, from what I have seen from your posts.

Whatever you do keep doing the same and continue being cautious, because the Government Pension in it's current form is not guaranteed into the future unlike the 250k for Bank Deposits. I think a small % in Rate Setter is OK but be very vary of any privately managed firms asking you to invest with them (remember Storm Financial etc) or any Farmland/Wine/Managed Real Estate (Resorts etc) schemes. You've worked hard to be Self Funded, you don't want to lose your nest egg and rely on unpredictable Government handouts in the Golden years.


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## Belli (14 January 2020)

Don't have "spare" cash.  Any in excess of my annual expenses (on a rolling 12 month basis) is placed in the share market.  Apart from SOL, no direct shares.  Invest only through LICs and ETFs.


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## againsthegrain (14 January 2020)

the 250k bank guarantee is only guaranteed until those funds are available,  its like musical chairs if something was to happen there wouldn't be enough to pay every single person out


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## mangojoe (14 January 2020)

What do you think of parking money in bond etfs? E.g. iShares Ultrashort Bond UCITS (not sure though if available in AUD). It has a TER of 0.09% 
I could not find a history of dividend payouts though.


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## qldfrog (14 January 2020)

I somehow and probably mistakenly believe that if a crash happen, money eill be safer under a chess holding than on a bank account
I see bank accounts frozen whereas you could still trade your etfs or at least not seized by gov


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## Dona Ferentes (14 January 2020)

I thought there was another version of this, not so long ago:
https://www.aussiestockforums.com/threads/vanguard-etfs-for-dividends.35125/

Seems to me the responses are usually well meaning but could be more focused if initial outline of aims, timeline, attitude to risk, amount of the stake, etc are mentioned.

Only thing we can all agree on: even with $1 million, it's likely there won't be enough to live on. Get 2% as a typical return, and that's $20,000pa. No wonder investors are pushing out the risk curve!


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## sptrawler (14 January 2020)

qldfrog said:


> I somehow and probably mistakenly believe that if a crash happen, money eill be safer under a chess holding than on a bank account
> I see bank accounts frozen whereas you could still trade your etfs or at least not seized by gov



I personally think if another major crash happens, due to the fact Australia hasn't joined the quantitive easing band wagon, there will still be a degree of confidence in the integrity of the $A and as happened last time there will be a rush to it.
The biggest problem I see ATM, is the lack of confidence in Countries underlying currency valuations and this is one of the reasons the U.K left the EU IMO.
There hasn't been any structural changes in a lot of the Countries, that were 'bailed out', yet there currency hasn't weakened.
Therefore I don't see there being a problem with the $A, or our economy collapsing as the more people in the World the more materials required, just the  change over to renewables, EV's etc will require a massive amount of materials.
More the issue for Australia IMO, is the steady decline in living standards, being brought about by the lack of technically based work be that physical or mental.
Just my opinion.


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## aus_trader (14 January 2020)

qldfrog said:


> I somehow and probably mistakenly believe that if a crash happen, money eill be safer under a chess holding than on a bank account
> I see bank accounts frozen whereas you could still trade your etfs or at least not seized by gov




You have brought up a very interesting point qldfrog. That's what I initially thought also, that whatever cash in your brokerage account should be safe in a collapse.

But I think if you really look into the details of the brokerage account cash holding, it is actually held in a bank, and there lies the same risk as any other bank held deposit. For example CMC markets brokerage accounts sends the excess cash in its brokerage account into a Bankwest interest saver account.


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## aus_trader (14 January 2020)

sptrawler said:


> I personally think if another major crash happens, due to the fact Australia hasn't joined the quantitive easing band wagon, there will still be a degree of confidence in the integrity of the $A and as happened last time there will be a rush to it.
> The biggest problem I see ATM, is the lack of confidence in Countries underlying currency valuations and this is one of the reasons the U.K left the EU IMO.
> There hasn't been any structural changes in a lot of the Countries, that were 'bailed out', yet there currency hasn't weakened.
> Therefore I don't see there being a problem with the $A, or our economy collapsing as the more people in the World the more materials required, just the  change over to renewables, EV's etc will require a massive amount of materials.
> ...




I generally agree with the bulk of your comments but I think you may be a bit biased in your opinion of Aussie Dollar. I think they have joined the band wagon and continue to cut rates down to zero and perhaps may go into the -ve following the rest of the developed world. If that wasn't the case our $A would be at either parity or higher than the other developed world currencies such as the $US, Euro etc, not down in a ditch as it stands:


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## aus_trader (14 January 2020)

againsthegrain said:


> the 250k bank guarantee is only guaranteed until those funds are available,  its like musical chairs if something was to happen there wouldn't be enough to pay every single person out



I could be wrong, but I think if your money is held in a major financial institution then the Government may step into bailing them out in collapse scenario as they don't want the four pillars to tumble. So in that case the Government may print the required money to shore up those banks and in the process may protect the smallish depositors who have up to 250k.

This is what I understand by the bank Guarantee and therefore may not apply to non-Aussie banks and international entities, as the Aussie Government may not come to the rescue of every single bank under the sun that goes under or has to take a significant cut to their savings/deposits should they find themselves in a credit defaulting tornado. For example when US banks such as Lehman Bros, Freddi & Fannie started defaulting during GFC, credit froze around the world and banks went into turmoil not even lending to each other.


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## sptrawler (14 January 2020)

aus_trader said:


> You have brought up a very interesting point qldfrog. That's what I initially thought also, that whatever cash in your brokerage account should be safe in a collapse.
> 
> But I think if you really look into the details of the brokerage account cash holding, it is actually held in a bank, and there lies the same risk as any other bank held deposit. For example CMC markets brokerage accounts sends the excess cash in its brokerage account into a Bankwest interest saver account.



I would think the money would have to be held in a trust account, if it wasn't held in a bank account, because they in reality are holding YOUR money and they may not have a banking license. In reality you are just giving them permission, to withdraw funds to purchase shares, that you requested in your name. Just my thoughts.


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## sptrawler (14 January 2020)

aus_trader said:


> I generally agree with the bulk of your comments but I think you may be a bit biased in your opinion of Aussie Dollar. I think they have joined the band wagon and continue to cut rates down to zero and perhaps may go into the -ve following the rest of the developed world. If that wasn't the case our $A would be at either parity or higher than the other developed world currencies such as the $US, Euro etc, not down in a ditch as it stands:



That is true, the interest rates also have a lot to do with it, as many things do. But the EU has a huge problem due to single currency, no one has addressed it yet, but IMO the problem is still growing. I think there is a big difference, between cutting interest rates to devalue the currency and reduce inward flows.
As opposed to constantly inventing more currency, valued on the productive component eg Germany, to prop up other Countries who are basket cases. Sooner or later, there has to be a re valution to reflect the whole not just the best performing sector.
Just my musings


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## Smurf1976 (14 January 2020)

Small banks have an aspect that if they did fail then government could actually afford to make good on the deposit guarantee.

If someone like Mystate goes broke well then that's a minor adjustment to the federal budget to pay out the depositors. If CBA, NAB etc went bust then in practice it's going to be rather hard for government to come up with the money at least in a prompt manner.

Also companies like BHP aren't going to become worthless in a hurry. Even in a major crash their value isn't going to zero at least not overnight. You might find you can't sell the shares or at least not for a decent price but there's still a real business there, there's still real physical assets that can't possibly simply disappear into thin air (unlike financial companies where that is indeed possible), and your share of it will have value at some point.


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## aus_trader (14 January 2020)

sptrawler said:


> That is true, the interest rates also have a lot to do with it, as many things do. But the EU has a huge problem due to single currency, no one has addressed it yet, but IMO the problem is still growing. I think there is a big difference, between cutting interest rates to devalue the currency and reduce inward flows.
> As opposed to constantly inventing more currency, valued on the productive component eg Germany, to prop up other Countries who are basket cases. Sooner or later, there has to be a re valution to reflect the whole not just the best performing sector.
> Just my musings




Agree, I think they are higher up the risk curve than us.


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## aus_trader (14 January 2020)

Smurf1976 said:


> Small banks have an aspect that if they did fail then government could actually afford to make good on the deposit guarantee.
> 
> If someone like Mystate goes broke well then that's a minor adjustment to the federal budget to pay out the depositors. If CBA, NAB etc went bust then in practice it's going to be rather hard for government to come up with the money at least in a prompt manner.
> 
> Also companies like BHP aren't going to become worthless in a hurry. Even in a major crash their value isn't going to zero at least not overnight. You might find you can't sell the shares or at least not for a decent price but there's still a real business there, there's still real physical assets that can't possibly simply disappear into thin air (unlike financial companies where that is indeed possible), and your share of it will have value at some point.




Very good points smurf. There is always risk the Government may not do a full rescue and everyone including the small depositors have to take a hit on their savings in an financial Armageddon scenario.

I've got a small position in BHP publicly displayed in my Speculative Stock Portfolio. May add to it privately or to it's smaller diversified cousin South32 Ltd (S32), if I feel the economy is headed south, as you said that is a genuine business of selling raw materials to manufacturers who need them.

Although I like also buying basket ETF's that include good companies like BHP, one of the draw backs is you end up with the good and the bad all mixed in and when the economy and share market is doing well. In other words the good, the bad and the ugly all get to dance along while the music lasts (from a musical chairs point of view).


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## Logique (14 January 2020)

Interesting and very relevant thread MovingAverage.

In an Australian context, as _Dona Ferentes_ has said already, anything with an interest rate with a "+" in front, or "capital guaranteed" or similar.

Otherwise put it onto the market (Direct /ETF / Managed Fund /Superann /listed or unlisted Property) and above all, be _nimble_.

In 2020, a horrible interest rate market for low risk investors such as retirees


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## Sharkman (15 January 2020)

not sure if my answer's totally relevant to the question, as i don't actively seek to maintain a cash component, but i keep the bulk of my cash (when i actually _have_ any cash above and beyond the next few months' living expenses) in an NAB high interest account

at 1.25% it's not the best rate in town, and certainly it can't match any of those honeymoon rates or rates that you only get if you meet some kind of condition (like depositing X amount per month) which tend to start with a 2

but the interest rate is only a secondary consideration for me, if it's decent enough relative to the RBA cash rate, it's good enough. i generally aim to be fully invested almost all the time, with a floating 0-10% cash weighting to allow for limited market timing/buying on dips. so instant availability for trading is more important, and this account lets me do an instant transfer to NABtrade if i want to buy something, so i don't risk missing the dip whilst waiting for the transfer to arrive


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## Value Collector (15 January 2020)

As I have mentioned a few times.

Rate setter is a great place to park funds, they have and you can earn up to 8% depending on the time frame.

monthly deposits start at around 3%.

Use my referral code when you loan $1000 and you will get a $100 bonus, and I will receive $50.

Use this link https://mbsy.co/ratesetter/49795346


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## MovingAverage (15 January 2020)

Dona Ferentes said:


> Seems to me the responses are usually well meaning but could be more focused if initial outline of aims, timeline, attitude to risk, amount of the stake, etc are mentioned.




That's a reasonable point, but I had assumed (probably incorrectly) that my aims, timeline etc were clear from my OP - "cash in a term deposit for 6-12 months". Meaning, relatively short term, low risk but an interest rate that is a bit more competitive compared to a standard saving/transaction account. I already have a reasonable amount tied up in equities, but always keep a cash component and it is this I'm looking at.


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## trading_rookie (15 January 2020)

*I could be wrong, but I think if your money is held in a major financial institution then the Government may step into bailing them out in collapse scenario as they don't want the four pillars to tumble. So in that case the Government may print the required money to shore up those banks and in the process may protect the smallish depositors who have up to 250k.*

Is the bank guarantee of $250K per bank account (eg: $1M invested in 4 x $250K accts – you are guaranteed your $1M) or $250K is all you are guaranteed regardless of how much you have (eg: $1M invested in 4 x $250K accts – you are guaranteed $250K but lose $750K).

I have heard and read conflicting views.

*If CBA, NAB etc went bust then in practice it's going to be rather hard for government to come up with the money at least in a prompt manner.

Also companies like BHP aren't going to become worthless in a hurry. Even in a major crash their value isn't going to zero at least not overnight. You might find you can't sell the shares or at least not for a decent price but there's still a real business there, there's still real physical assets that can't possibly simply disappear into thin air (unlike financial companies where that is indeed possible), and your share of it will have value at some point.*

If the major banks happen to bust, where is BHP going to get its funding for new projects? Money becomes more expensive and a crash will be as devastating as the one last century.

Fingers crossed that doesn’t eventuate…


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## aus_trader (15 January 2020)

trading_rookie said:


> *I could be wrong, but I think if your money is held in a major financial institution then the Government may step into bailing them out in collapse scenario as they don't want the four pillars to tumble. So in that case the Government may print the required money to shore up those banks and in the process may protect the smallish depositors who have up to 250k.*
> 
> Is the bank guarantee of $250K per bank account (eg: $1M invested in 4 x $250K accts – you are guaranteed your $1M) or $250K is all you are guaranteed regardless of how much you have (eg: $1M invested in 4 x $250K accts – you are guaranteed $250K but lose $750K).
> 
> ...




OK a couple of points to add for the above questions. Again only as far as I know, so don't hold me accountable:

The bank guarantee is per bank account held in a person's name. So in theory it is possible to have multiple accounts across different banks that could still be protected up to the 250k in each as guaranteed currently (was only guaranteed up to 100k per account till not so long ago, but have increased the amount probably to encourage savers to ensure there is sufficient bank savings from depositors. Note: Banks actually need money held as deposits before they can lend out, it's called 'Fractional Lending').

It's highly unlikely that any of the four banks are allowed to go bust as the 2nd highlighted/bold paragraph suggests. I have seen how protective the Government is of the banks are when the GFC hit, they banned the shorting of the Aussie banks to prevent them getting into any financial trouble and provided plenty of liquidity and stimulus as required so the banks don't freeze up. So to answer your question, BHP will probably not have trouble funding it's future projects as long as their balance sheet is credit worthy.

What is more probable is to have the loan defaults increase due to a sluggish economy sometime in the future where a portion of the bank's loan book may become worthless (in default). If the bank's reserves are insufficient to cover these bad debts, only then there is a likelihood that the bank may need to shave off a % from the savings deposits to repair the write-down. This is where the Government guarantee would likely to come into play. So in this situation, the Government can lend the money to the bank(s) by running the RBA printing press day and night till the required sum to cover the bad debts are printed. Hence avoiding the % cut to the savings accounts or people's bank deposits, ensuring the promise of the Government guarantee to the smaller depositors is kept. The guarantee may not apply in theory the larger deposits and millionaire bank accounts, so they may still get a % taken out of their accounts to help the Government with the bank bailout.

Once again this is my best guess based on what has happened in the past especially based on the bailouts that happened in the US during the GFC. Past events does not guarantee how the future scenarios will play out. Hopefully my few cents worth will get people thinking to plan for the future.


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## tinhat (15 January 2020)

If economic circumstances are such that any of the big four banks go bust then you will probably need to be more worried about your neighbourhood turning to cannibalism than your bank balance.


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## Bill M (16 January 2020)

For safe savings (ADI's), UBank 2.1%, ING Savings Maximiser 1.95% and RAMS 2%. All online savings accounts with a few simple hoops to jump through but you will get these amounts.

One that hasn't been mentioned is the Australian Enhanced Income Fund "AYF". Distributions every 3 Months and a fairly stable stock price. I've held this one in my portfolio for many years.

---
"Over 3 years the Fund’s rolling annual net return, which excludes the benefit of franking but is net of all fees, for the period ending 31 December was 5.02%."
More info here: https://www.eiml.com.au/listed.php/53/212
---

And as mentioned, everyday ETF's are paying between 4 to 6% in distributions.

RateSetter between 3 to 8% depending on the term, this is not an ADI.

**~* Side note*~**
Does anyone ever get the feeling that we are being lured into more risky investments and then once set the markets will just collapse/drop 50% or more and wipe out half our assets? I know I do so I am playing it very cautiously. >Probably to my detriment.<


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## qldfrog (16 January 2020)

Bill M said:


> For safe savings (ADI's), UBank 2.1%, ING Savings Maximiser 1.95% and RAMS 2%. All online savings accounts with a few simple hoops to jump through but you will get these amounts.
> 
> One that hasn't been mentioned is the Australian Enhanced Income Fund "AYF". Distributions every 3 Months and a fairly stable stock price. I've held this one in my portfolio for many years.
> 
> ...



It could be, everyone knows we need a reset at some stage
And central banks can not possibly be so dumb so there must be a goal somewhere


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## Logique (16 January 2020)

Nulla Nulla's A-REIT thread has some useful info, note the ROE and Distributions columns. A low interest rate environment enhances the appeal of this category:
https://www.aussiestockforums.com/threads/a-reit-valuation-model.19776/page-27


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## Value Collector (16 January 2020)

Bill M said:


> For safe savings (ADI's), UBank 2.1%, ING Savings Maximiser 1.95% and RAMS 2%. All online savings accounts with a few simple hoops to jump through but you will get these amounts.
> 
> One that hasn't been mentioned is the Australian Enhanced Income Fund "AYF". Distributions every 3 Months and a fairly stable stock price. I've held this one in my portfolio for many years.
> 
> ...




I am not sure if we are being “lured”, But I think the world is awash with “safe capital”, mainly from central banks and pension funds, and that has squashed returns, so much so that the only way to actually make some money is to move up The capital structure in securities that have some risk.

However, I do think this has a massive benefit in that those of us who take the marginally higher risk are being compensated very well for it, so I don’t think a crash is imminent.

A crash will happen when the opposite situation occurs, eg risk assets are over priced compared to safe ones.

At the moment this isn’t true, risk assets are cheap and safe assets are expensive.


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## aus_trader (16 January 2020)

Bill M said:


> One that hasn't been mentioned is the Australian Enhanced Income Fund "AYF". Distributions every 3 Months and a fairly stable stock price. I've held this one in my portfolio for many years.




Looks interesting, thanks Bill. What is the management fee charged by the Fund manager for this product, I couldn't find it. Also I couldn't find if they offer a DRP for the distributions.


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## Dona Ferentes (16 January 2020)

aus_trader said:


> What is the management fee charged by the Fund manager for this product, I couldn't find it. Also I couldn't find if they offer a DRP for the distributions.



as both AYF and the Elstree fund consist of a "_portfolio of up to 35 ASX listed debt equity hybrid securities", _you need to be aware these carry risk.  Most hybrids are designed to support bank capitalisation levels and carry a conversion clause if certain percentages are triggered  IE when a bank is in strife, or the market is on the nose in a big way, then the debt assumed in a hybrid can be converted to underpin equity levels. Risk-adjusted Capital, CET1, Basel III, Basel IV, etc. This will be done at the worst time and will destroy invested capital. During and after the GFC, when hybrid terms were more generous, conversion didn't occur. This won't be the case next time around.

On the other side, pricing of listed debt received a big boost recently:


> In Sept 2019, S&P upgraded Australia’s “economic risk score”, which it downgraded in May 2017 on housing bubble fears. This has the consequence of reducing the risk weightings S&P assumes when estimating the major banks’ “risk-adjusted capital” (RAC) ratios, which in turn boosts them above a critical 10 per cent threshold. APRA’s boss Wayne Byres had previously stated that securing RAC ratios over 10 per cent was a valuable goal for the big banks, because it would lift their stand-alone credit profiles (SACPs) from “*a-*” to “*a*”.





> The higher SACP automatically raises the credit ratings on the major banks’ hybrids and subordinated bonds by one notch (_*hybrids go to BBB- while sub debt jumps to BBB+*_). It also reduces the government support assumption underpinning the majors’ AA- senior bond ratings from three notches to two, which is positive for these assets.



Just be aware of what you're getting into.


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## Bill M (16 January 2020)

aus_trader said:


> Looks interesting, thanks Bill. What is the management fee charged by the Fund manager for this product, I couldn't find it. Also I couldn't find if they offer a DRP for the distributions.



The management fee is a bit on the high side. From it's last available PDS dated in 2013 it states:

:Management Costs 1.35%* For every $50,000 you have in the fund you will be charged approximately $675 each year:

On the same PDS there is a DRP election on the application form, so there is one. I do not use it though, cheers.


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## Bill M (16 January 2020)

Dona Ferentes said:


> as both AYF and the Elstree fund consist of a "_portfolio of up to 35 ASX listed debt equity hybrid securities", _you need to be aware these carry risk. Most hybrids are designed to support bank capitalisation levels and carry a conversion clause if certain percentages are triggered IE when a bank is in strife, or the market is on the nose in a big way, then the debt assumed in a hybrid can be converted to underpin equity levels. Risk-adjusted Capital, CET1, Basel III, Basel IV, etc. This will be done at the worst time and will destroy invested capital. During and after the GFC, when hybrid terms were more generous, conversion didn't occur. This won't be the case next time around.



That's all true but to put things in context it is important to know that most hybrids/capital notes/preference shares rank higher than ordinary shareholders. So in other words if a company that issues the hybrid goes under, then the hybrid owner is more likely to get some money back. But in reality probably both the hybrid and the ordinary shareholder will lose all their money should the parent company collapse.


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## Dona Ferentes (16 January 2020)

not true, Bill. It's all about *capital structure.* First equity is wiped out (completely) then hybrids (partially or completely) then subordinated debt (partially and then completely) the higher rated but unsecured debt all way up to secured (in worst case scenario)

RISK = REWARD

PS if you are mentioning funds, the Macquarie Income Opportunities Fund will give a similar return with a 0.49%pa management fee


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## Bill M (16 January 2020)

Dona Ferentes said:


> *First equity is wiped out (completely) then hybrids (partially or completely)* then subordinated debt (partially and then completely) the higher rated but unsecured debt all way up to secured (in worst case scenario)
> 
> RISK = REWARD



That is what I said, the hybrid is ranked higher than the ordinary stock holder which is what you are saying too. But in reality both will get wiped out in a collapse. I fully understand the RISK = REWARD.
Also I understand that if a a bank experiences financial difficulty, hybrids can be converted into bank shares, which may be worth less than your initial investment, or written off completely, meaning you could lose all your capital. I am willing to take this risk. Essentially not all of AYF's holdings are going to blow up at once, there are quite a few non bank holdings in there too. There are risks in all investments.


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## Frankieplus (16 January 2020)

MovingAverage said:


> Spoke to a few banks today about parking a chunk of cash in a 6-12 mth term deposit...how bloody depressing. Curious to hear what opinions you might be considering for your cash in relation to chasing a “reasonable” interest rate?




St George has an account they call 'Incentive Saver' where they pay just over 2% if you keep money in there for 1 month and make a deposit of at least $50.. To get the 2% I think you need to have $250k in there. 


-Frank


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## Smurf1976 (16 January 2020)

Value Collector said:


> A crash will happen when the opposite situation occurs, eg risk assets are over priced compared to safe ones.
> 
> At the moment this isn’t true, risk assets are cheap and safe assets are expensive.



An interesting perspective.

Not sure if I agree, disagree or neutral, will have to think about it, but an interesting perspective on it.


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## Bill M (16 January 2020)

Value Collector said:


> A crash will happen when the opposite situation occurs, eg risk assets are over priced compared to safe ones.
> 
> At the moment this isn’t true, risk assets are cheap and safe assets are expensive.




Warren Buffett said something along those lines. Watch the video at the 5.40 mark.

*Warren Buffett: Stocks are 'ridiculously cheap' if interest rates stay at current levels*
**


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## trading_rookie (17 January 2020)

*OK a couple of points to add for the above questions. Again only as far as I know, so don't hold me accountable*
Lol so no real “guarantee” on what the guarantee really is…I guess the government prefers confusion over this.

*So to answer your question, BHP will probably not have trouble funding it's future projects as long as their balance sheet is credit worthy.*
Maybe, but what will it be costing them to borrow funds from the banks, if interest rates prove to be exorbitant.

Infact, the intelligent corporations would probably bypass the banks altogether like they did post-GFC and borrow cheaper funds from savvy investors.

A more pressing point is even if they qualify for funding, who will buy their wares?

Remember during the depression, how many sheep were shorn for export, yet the wool remained on the docks rotting and smelling in bails as no buyers could afford it, or wanted it.

Less demand would also mean decreased pricing for minerals, leads to mines and tenements potentially closing down or reducing output and job cuts…affecting share prices and the economy overall.

I’m gonna quit here, as it sounds too depressing for me to contemplate.

*What is more probable is to have the loan defaults increase due to a sluggish economy sometime in the future where a portion of the bank's loan book may become worthless (in default).*
I’m of the opinion the banks mathematical modelling has this all factored in re: whatever the economic situations maybe.

*Once again this is my best guess based on what has happened in the past especially based on the bailouts that happened in the US during the GFC. Past events does not guarantee how the future scenarios will play out. Hopefully my few cents worth will get people thinking to plan for the future.
*
Agree, as history doesn't repeat, but it does rhyme.


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## MovingAverage (17 January 2020)

Bill M said:


> **~* Side note*~**
> Does anyone ever get the feeling that we are being lured into more risky investments and then once set the markets will just collapse/drop 50% or more and wipe out half our assets? I know I do so I am playing it very cautiously. >Probably to my detriment.<




Absolutely...the current low interest environment will undoubtedly lure a lot of people into risker investments in their chase for a greater return. My fear is that many of these people will not have time on their side to recover from a major wipe out.


----------



## aus_trader (17 January 2020)

MovingAverage said:


> Absolutely...the current low interest environment will undoubtedly lure a lot of people into risker investments in their chase for a greater return. My fear is that many of these people will not have time on their side to recover from a major wipe out.




Have to agree. It's a really interesting time that we are living in. Looks like we are being screwed from both ends:

From Front: Currency devaluation is running rampant and as a result holding low risk assets like Cash and Bonds means we are effectively going backwards against inflation as the yield on these are near zero.

From Back: Being forced to invest in risky assets means there is a risk of having large losses on these riskier investments if the markets tumble. As you said some of us may be turning in the graves waiting for the market to recover if another GFC like event were to happen.


----------



## Miner (17 January 2020)

On a side note, I was not fully convinced on this but for last one year, I have put money (yes, there are some good looses on the stock side )  on few ETF, investment companies like MHH, BFG, index like NDQ, IVV, and property trust - *averaged* more than 25% against stocks have *averaged* less than 10%. I wished not to have invested in stocks at all would give stability and good sleep .
So a conclusion from my side that it is better to park cash on ETF, Investment companies and indexes for a much better return.


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## aus_trader (18 January 2020)

Miner said:


> On a side note, I was not fully convinced on this but for last one year, I have put money (yes, there are some good looses on the stock side )  on few ETF, investment companies like MHH, BFG, index like NDQ, IVV, and property trust - *averaged* more than 25% against stocks have *averaged* less than 10%. I wished not to have invested in stocks at all would give stability and good sleep .
> So a conclusion from my side that it is better to park cash on ETF, Investment companies and indexes for a much better return.




Also having good open profits on BFG as can be seen in my Speculative Stock Portfolio. Haven't really gone into index/ETF investing yet, but may be time to look into some of these as well, although the buying will be at much higher prices now...


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## peter2 (18 January 2020)

Excellent selection.


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## Zaxon (18 January 2020)

aus_trader said:


> Looks like we are being screwed from both ends



I hear some people are into that.


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## basilio (18 January 2020)

Really wonder just how "safe and stable" our  current economic system.  In my view there is a ton of smoke and mirrors with lost of music and dancing  and only a few chairs for when the music stops.

Dana Ferrantes highlighted an excellent  (IMV) online analyst on the risks of our current systems. There is a similar warning from the hear of the  IMF.

* IMF boss says global economy risks return of Great Depression *
Kristalina Georgieva compares today with “roaring 1920s” and criticises UK wealth gap

Phillip Inman

 @phillipinman 
Sat 18 Jan 2020 06.01 AEDT   Last modified on Sat 18 Jan 2020 10.44 AEDT

Shares
470
* Comments*
 367 

Speaking in Washington, Kristalina Georgieva singled out the UK for its growing inequality gap. Photograph: Jim Watson/AFP via Getty Images
The head of the International Monetary Fund has warned that the global economy risks a return of the Great Depression, driven by inequality and financial sector instability.
https://www.theguardian.com/busines...obal-economy-risks-return-of-great-depression
Speaking at the Peterson Institute of International Economics in Washington, Kristalina Georgieva said new IMF research, which compares the current economy to the “roaring 1920s” that culminated in the great market crash of 1929, revealed that a similar trend was already under way.


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## basilio (18 January 2020)

More detailed analysis of the risks  facing us.

*Decade of Living Dangerously, Part 1*
By John Mauldin

January 3, 2020
https://www.mauldineconomics.com/frontlinethoughts/decade-of-living-dangerously-part-1


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## lusk (20 January 2020)

basilio said:


> Really wonder just how "safe and stable" our current economic system. In my view there is a ton of smoke and mirrors with lost of music and dancing and only a few chairs for when the music stops.




But while the music is still playing you need to get up and dance


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## Dona Ferentes (9 October 2022)

basilio said:


> Really wonder just how "safe and stable" our  current economic system.
> 
> Dana Ferangi highlighted an excellent  (IMV) online analyst on the risks of our current systems.



My head hurts


----------



## JohnDe (9 October 2022)

Property.

I’ve been pruning my share portfolio, looking at a property purchase in popular beach location s for quite a while, and took a bite not long ago. So far it’s been good. Still pruning my share portfolio, but also looking at opportunities and made a buy last week.

Looking at another property.


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## divs4ever (9 October 2022)

JohnDe said:


> Property.
> 
> I’ve been pruning my share portfolio, looking at a property purchase in popular beach location s for quite a while, and took a bite not long ago. So far it’s been good. Still pruning my share portfolio, but also looking at opportunities and made a buy last week.
> 
> Looking at another property.



 the caveat with property will be rising costs ( and taxes )  am not saying  don't , but be careful you don't over-pay

 have thought about some ( properties ) but will they find another excuse for rent freezes or moratoriums


----------



## Value Collector (9 October 2022)

Bill M said:


> Warren Buffett said something along those lines. Watch the video at the 5.40 mark.
> 
> *Warren Buffett: Stocks are 'ridiculously cheap' if interest rates stay at current levels
> *




Can I just point out how right Buffett was in his comments in that video, this is just another example of why he is an investment master, such clear rational thinking.

I think this video in mandatory considering what is happening with interest rate right now.


----------



## Value Collector (9 October 2022)

Smurf1976 said:


> An interesting perspective.
> 
> Not sure if I agree, disagree or neutral, will have to think about it, but an interesting perspective on it.



What is happening now is exactly what I was describing in that comment 2.5 years ago.

Safe assets like bonds are going up in value because their income returns are rising, this makes the riskier assets start to look over valued in comparison.


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## wayneL (9 October 2022)

Value Collector said:


> What is happening now is exactly what I was describing in that comment 2.5 years ago.
> 
> Safe assets like bonds are going up in value because their income returns are rising, this makes the riskier assets start to look over valued in comparison.



¿Que?

Bonds are going up in value?


----------



## wayneL (9 October 2022)

Worst year in history to be a bond investor:


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## wayneL (9 October 2022)

BTW @Value Collector 

Bond *yields are indeed rising, but this is a function of collapsing bond *price. The relationship between price and yield is inverse.


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## Value Collector (9 October 2022)

wayneL said:


> ¿Que?
> 
> Bonds are going up in value?
> 
> View attachment 147854



I don’t think I chose my words well, and can see how I have confused you.

What I was trying to point out is that as interest rates on bonds rise, It has the affect of making equities less attractive in comparison. 

For example, when interest rates on bonds are 3% a business that earns 12% on its capital base is a very attractive thing to own, but when interest rates on government guaranteed bonds are 15% that same business earning 12% on its invested capital suddenly looks inferior.

That’s what I was trying to say,

Of course if you bought 30 year $100 bond with a 3% interest rate last year, and today the Government is selling 30 year $100 Bonds with a 5% interest rate, your old bond is going to crash in value, because it’s now inferior to the new bonds. I wasn’t trying to say buying bonds was a good idea.


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## Value Collector (9 October 2022)

Value Collector said:


> I am not sure if we are being “lured”, But I think the world is awash with “safe capital”, mainly from central banks and pension funds, and that has squashed returns, so much so that the only way to actually make some money is to move up The capital structure in securities that have some risk.
> 
> However, I do think this has a massive benefit in that those of us who take the marginally higher risk are being compensated very well for it, so I don’t think a crash is imminent.
> 
> ...




@wayneL

The quote above is what I wrote 2.5 years ago. I think if you read it you will understand what I was trying to say in context.

If you look at the last paragraph, you will see that I was saying safe assets are expensive, this is what has lead to the bond price crash, because they we over priced before, and rising interest has been the trigger to caused their market price to fall.

—————
Off course a benefit with US government bonds is that even if the market price suffers a huge drop below its face value, the holder is pretty much guaranteed of making this loss back and receiving there full capital and income that they signed up for at the start.

As the bond ages and gets closer to the maturity date, any difference between the market price and the face value will close, and of course the income would have been paid.


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## Value Collector (9 October 2022)

JohnDe said:


> Property.
> 
> I’ve been pruning my share portfolio, looking at a property purchase in popular beach location s for quite a while, and took a bite not long ago. So far it’s been good. Still pruning my share portfolio, but also looking at opportunities and made a buy last week.
> 
> Looking at another property.



There is some very cheap property on the share market at the moment.

CLW for example has about $6 in real estate per share and is selling for about $4.10 paying a 7.3% dividend, not many properties out there are earning a net return after all outgoings of 7.3%.


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## eskys (9 October 2022)

New Freehold KFC in Booming Growth Corridor, 20 Ashburn Road, Ipswich....Investment Portfolio Auction by Burgess Rawson, Hilton, Brisbane 27th October 2020....in reply to John De if interested. I'm not associated with Burgess Rawson. This information landed in my inbox.......please do your own DD


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## divs4ever (9 October 2022)

Value Collector said:


> Can I just point out how right Buffett was in his comments in that video, this is just another example of why he is an investment master, such clear rational thinking.
> 
> I think this video in mandatory considering what is happening with interest rate right now.



 in January 2020 i was carefully  ( and selectively ) reducing   it was March 2020 and later  i was carefully buying ( having already stock-piled a handy amount of cash  ,  and off loaded some BEAR, BBUS and BBOZ in the down-trend  to add a bit more to the cash reserves )


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## divs4ever (9 October 2022)

wayneL said:


> Worst year in history to be a bond investor:




 the truth has BROKEN , that is what it is broken , when trust goes ( kaput )

 watch out 

 a lot of  data is just manufactured


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## wayneL (9 October 2022)

Value Collector said:


> @wayneL
> 
> The quote above is what I wrote 2.5 years ago. I think if you read it you will understand what I was trying to say in context.
> 
> ...



The bond market, _in toto_, is far more complex than you represent, especially with regards to near expiry govt bonds.

While I in no way purport to be an expert, I do keenly following what experts such as Bianco shown above have to say.

With regards to those near expiry govt bonds, yes you will receive the face value and the cumulative coupon, but you also have to contend with that face value having been debased throughout the term, which is greater than the coupon in most instances.

Not the best way to play that market.

We've previously discussed the possibility of the debt market blowing up... Well it certainly got smoked this year and there is still the possibility of much worse.


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## divs4ever (9 October 2022)

wayneL said:


> The bond market, _in toto_, is far more complex than you represent, especially with regards to near expiry govt bonds.
> 
> While I in no way purport to be an expert, I do keenly following what experts such as Bianco shown above have to say.
> 
> ...



 i am expecting  various  sovereign bond to have their maturity date extended ( to maybe even perpetual  , but probably 50 and 100 years )

 maybe not everyone  but some nations are looking a real mess , and it isn't even Christmas


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## Value Collector (9 October 2022)

wayneL said:


> The bond market, _in toto_, is far more complex than you represent, especially with regards to near expiry govt bonds.
> 
> While I in no way purport to be an expert, I do keenly following what experts such as Bianco shown above have to say.
> 
> ...



Things are always going to be more complex than can be explained a forum post.

However, I think it’s pretty clear that as interest rates rise, down ward pressure of equites is applied.

As Buffett says, interest rates are like gravity for stocks, if you dial up the interest rate (or the markets interest rate expectations) stock prices come down.

———————

Your comments on the debasement of the currency off setting the interest rate coupon are kind of irrelevant to my point. (All though of course most investors tdo think about inflation, for some institutions it’s not top priority)

———————

Speculators attempting to trade bonds might suffer capital losses, but those who hold them until maturity will not suffer a capital loss. 

(If you want to discuss inflation that’s a different thing to a capital loss, because obviously that affects you whether you buy the bond or not, eg if you just hold the $100 note you will still suffer the same inflation affect as holding the $100 bond, as you would holding a $100 share that doesn’t rise in value)


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## Value Collector (9 October 2022)

divs4ever said:


> i am expecting  various  sovereign bond to have their maturity date extended ( to maybe even perpetual  , but probably 50 and 100 years )
> 
> maybe not everyone  but some nations are looking a real mess , and it isn't even Christmas




I wouldn’t be worried about any nation that controls their own printing presses and tax rates.


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## wayneL (9 October 2022)

@Value Collector 

Re institutions not worried?  

You are ignoring the implications of massive leverage...which is also mentioned in the vid I posted above.

This hasn't been a problem for decades, in the interest rate downtrend. But now with the biggest blow up of interest rates in history (in relative terms), it's a problem.

Or did we all just imagine it when BoE bailed out the pension industry?









						Bank confirms pension funds almost collapsed amid market meltdown
					

Official explains how promise to buy up to £65bn of government debt staved off destructive UK financial spiral




					www.theguardian.com


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## Value Collector (9 October 2022)

wayneL said:


> @Value Collector
> 
> Re institutions not worried?
> 
> ...



Long term bonds are a sensible investment for some institutions or even personal investors where they are holding capital in reserve for costs that are some what fixed.

For example if you are an insurance company that has to set aside capital to pay out a fixed amount to a car accident victim over the next 50 years, and a 3% 30 year bond will cover the payments, it doesn’t bother you if the market price of that bond fluctuates.

Same goes for a pension or annuity fund making fixed payments, or payments with a fixed annual increase of say 3%, you can take the capital set aside for that customer split it between bonds with various maturities say 5, 10, 15, 20, 25, 30 year etc. and the interest and maturity payments will cover your payments you promised plus your profit margin.

There are many other examples of institutions that will accept inflation risk for the capital security, some are even mandated by law to hold bonds long term.

—————
If by implications of leverage you are talking about companies and people that have become over leveraged at lower interest rates and will blow themselves up as rates rise, again that’s another completely different topic to what I was discussing.

—————
If a pension fund got into trouble because it over allocated into bonds with longer maturities than their weighted average upcoming payments allowed for, well that’s just them making bad investment decisions.

No doubt they did that to try and earn a higher interest rate, and their plan was to sell the bond to finance their pension payments at a later date, of course this can lead to trouble, and puts them into the category of a bond trader rather than bond holder imo


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## wayneL (10 October 2022)

Value Collector said:


> Long term bonds are a sensible investment for some institutions or even personal investors where they are holding capital in reserve for costs that are some what fixed.
> 
> For example if you are an insurance company that has to set aside capital to pay out a fixed amount to a car accident victim over the next 50 years, and a 3% 30 year bond will cover the payments, it doesn’t bother you if the market price of that bond fluctuates.
> 
> ...



None of that will stop what I'm talking about.


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## Value Collector (10 October 2022)

wayneL said:


> None of that will stop what I'm talking about.



That’s cool, but none of what you are talking about is related to my original point.


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## gartley (10 October 2022)

Cash probably should have been parked 12 months ago.
Between now and end of of November my bets are on a capitulation move down to end this leg down that started last year and ASX may well test pandemic low.
So will that be the buying opportunity of a lifetime if it eventuates?
Probably not, although it will be a great buying opportunity nevertheless and resultant rally would be quite long in duratio but not see new highs.


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## divs4ever (10 October 2022)

gartley said:


> Cash probably should have been parked 12 months ago.
> Between now and end of of November my bets are on a capitulation move down to end this leg down that started last year and ASX may well test pandemic low.
> So will that be the buying opportunity of a lifetime if it eventuates?
> Probably not, although it will be a great buying opportunity nevertheless and resultant rally would be quite long in duratio but not see new highs.



 i prefer to keep some liquid  , parked two days away ( or a week away ) doesn't suit my plan to snatch small opportunities as they appear  , and YES that means inflation is gnawing away at that cash ( but i am over 90% invested  just not exclusively in the market )


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## conwy (2 January 2023)

Interesting discussion. Agree with the points made earlier about the inverse relationship between bond prices and yields.

My "fixed income" allocation:

25% - High interest savings account; ~4%
25% - Term deposit ladder; 5yr, 4yr, 3yr and 2yr; 4 - 4.8%
50% - Inflation-linked bond (eTIB); maturity 2027; 0.75%
The term deposits lock in higher-than-usual interest rates; the laddering diversifies across durations.

The high interest savings account serves a dual purpose of both taking advantage of rising rates and allowing total liquidity in case I need funds quickly (e.g. for an emergency).

The eTIB protects half my money from inflation (CPI). This effectively limits the impact of inflation on my money to the spread between CPI and my average interest rate, a little over 4%, divided by 2. So, e.g. if inflation is 8% per year, I'm only feeling 2% inflation (8% / 2 / 2).

I've tried to engineer the portfolio to give me a bit of everything: liquidity, inflation protection, high interest and practically zero downside risk to nominal principle.

For the reason of principle protection, I'm steering clear of bond funds. If I wanted to accept risk to principle, I'd invest in low-cost globally diversified stock index funds – which I already have most of my net worth invested in.


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## Value Collector (2 January 2023)

conwy said:


> Interesting discussion. Agree with the points made earlier about the inverse relationship between bond prices and yields.
> 
> My "fixed income" allocation:
> 
> ...



Plenti is currently offering 9.2% on 3 year notes. It might be worth looking into that as an extension of your “all round” strategy.


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## conwy (2 January 2023)

Value Collector said:


> Plenti is currently offering 9.2% on 3 year notes. It might be worth looking into that as an extension of your “all round” strategy.



Ok, I haven't looked into Plenti much, but from a quick search, it looks like peer-to-peer lending. I believe that would entail some risk of losing principle.

Don't get me wrong – I'd happily consider adding peer-to-peer lending to my risk asset allocation. But for the risk-free, stable part of my portfolio, I'm not sure that there is any debt security that could match a government bond in the home country.

What do you think?


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## divs4ever (2 January 2023)

conwy said:


> I'm not sure that there is any debt security that could match a government bond in the home country.




 i disagree ,  most nations can not maintain a balanced budget ( or a surplus ) , therefore i cannot  feel secure owning debt of an entity that shows little fiscal responsibility ( if your quote was sarcasm , i guess i missed it completely )

currently split ( unevenly ) between  a ( higher interest ) saver's account , and a holding account at one of my trading platforms , in theory , ready for quick deployment into the stock market 

 in 2019/early 2020  the bulk of my 'cash ' was in BEAR , BBOZ , BBUS ETFs  ( which was mostly successful) and used  to exploit opportunities  in mid/late 2020 , i chose not to use that tactic in 2022


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## Dona Ferentes (2 January 2023)

Value Collector said:


> Plenti is currently offering 9.2% on 3 year notes. It might be worth looking into that as an extension of your “all round” strategy.



And a similar rate from another player in the market, this one a floating rate note :

*Pepper Money* Limited is a non-bank financial institution in the Australian and New Zealand mortgage market. It was established in 2000 and is listed on the ASX (as PPM). It has a market capitalisation of ~AUD642m as at 14 December 2022.
Pepper provides a range of lending services across Australia and New Zealand, primarily mortgages (72% of assets) and asset finance (~22%).

_The Note:
Subordinated , Unsecured
Coupon  3M BBSW + 6.00% 
Coupon Paid Quarterly
First call 13 Oct 2023
Maturity 13 Oct 2025_


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## Value Collector (2 January 2023)

conwy said:


> Ok, I haven't looked into Plenti much, but from a quick search, it looks like peer-to-peer lending. I believe that would entail some risk of losing principle.
> 
> Don't get me wrong – I'd happily consider adding peer-to-peer lending to my risk asset allocation. But for the risk-free, stable part of my portfolio, I'm not sure that there is any debt security that could match a government bond in the home country.
> 
> What do you think?



After taxes and inflation the government bond is guaranteed to lose.

In the last 10 years since Plenti started not a single investor has lost $1 in Plenti, they have a provision fund that covers losses if someone doesn’t pay their loan, there is currently $13 Million dollars in the provision fund, which is more than twice what is needed to pay the expected losses. 

Even then if the provision fund was wiped out your loans are diversified across many many loans, so even then the higher interest paid on the good loans would cover the losses on the bad ones eg is if wiped out some of your interest you just end up with the lower return as you would get in a government bond.


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## conwy (2 January 2023)

Thanks for this interesting perspective.

Can I ask you some questions to try and understand this line of reasoning better?



divs4ever said:


> i disagree ,  most nations can not maintain a balanced budget ( or a surplus ) , therefore i cannot  feel secure owning debt of an entity that shows little fiscal responsibility ( if your quote was sarcasm , i guess i missed it completely )




Suppose Australia cannot maintain a balanced budget, and for this reason, eventually defaults on its bond-holders.

In that case, do you think they might also be forced to liquidate all superannuation accounts?
Do you think they might also be forced to eliminate the pension?
And do you think this would cause the country's currency to plummet?
Finally, in this kind of severe crisis, could the government even be forced to expropriate some of the wealth of its citizens, including peer-to-peer lending accounts such as Plenti?

I'm trying to picture in my mind the scenario in which Australian bonds are defaulted on, but all else stays the same, and I confess I have difficulty. I have even more difficulty imagining a scenario in which bonds, cash and index funds all plummet but only peer-to-peer lending accounts survive.

I don't mean to make a caricature or straw-man of this argument. Maybe it has merit and I'm just lacking some insight.

Also I suppose anything might happen, so diversification is generally a good idea, so probably to be fully diversified I should have a bit of wealth in peer-to-peer accounts such as Plenti and in various individual indeces and stocks as well as in Crypto, etc. just in case.

To be honest sometimes I worry I've been duped by academic research. Though a lot of good comes out of academia, I can't help but worry that there's also a truck load of political bias, and also that the data on which their "evidence" is drawn is always backward-looking and might not be a reliable guide to predicting the future.

Do I sound conspiratorial? 
Do you have any general thoughts on the above?



divs4ever said:


> currently split ( unevenly ) between  a ( higher interest ) saver's account , and a holding account at one of my trading platforms , in theory , ready for quick deployment into the stock market




Cool - I forgot to mention but I also have small amounts in my trading platform for the same purpose, and also in multiple currencies.


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## conwy (2 January 2023)

Value Collector said:


> After taxes and inflation the government bond is guaranteed to lose.




I did some calculations and it I believe that particular bond, GSIU27, at its current price of ~$113.28 and adjusted face value of ~$115.52 would not lose in terms of nominal value + CPI, if held to maturity, and assuming tax rate of 40% on both the coupons and principle adjustment (the highest tax bracket). In fact it would gain a small amount.

That said...



Value Collector said:


> In the last 10 years since Plenti started not a single investor has lost $1 in Plenti, they have a provision fund that covers losses if someone doesn’t pay their loan, there is currently $13 Million dollars in the provision fund, which is more than twice what is needed to pay the expected losses.




This sounds very reliable the way you put it. Perhaps I should look to diversify into Plenti as well.


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## againsthegrain (2 January 2023)

I have been doing alot of thinking on plenti since VC has been mentioning it to me a few times. 9% is a great rate, perhaps if I had more capital parking 100k there would be a nice little stash fund but the indicitive term kind of puts me off,  Oct-Dec 25.  

If I had money in a TD then plenti would be a no brainer but I hold alot of my cash just in liquid savings accounts at 3-4%.  

I regret not picking up more fmg when it was 14.8 not too long ago and I got too cocky with throwing orders at 13.  Since then I have been thinking alot to pick up some more serious parcel of fmg ~100k figure so in my case I need to be liquid.  Putting 10k into plenti for 2 years would be fine but the returns would not be so favourable as 100k.


----------



## Value Collector (2 January 2023)

againsthegrain said:


> I have been doing alot of thinking on plenti since VC has been mentioning it to me a few times. 9% is a great rate, perhaps if I had more capital parking 100k there would be a nice little stash fund but the indicitive term kind of puts me off,  Oct-Dec 25.
> 
> If I had money in a TD then plenti would be a no brainer but I hold alot of my cash just in liquid savings accounts at 3-4%.
> 
> I regret not picking up more fmg when it was 14.8 not too long ago and I got too cocky with throwing orders at 13.  Since then I have been thinking alot to pick up some more serious parcel of fmg ~100k figure so in my case I need to be liquid.  Putting 10k into plenti for 2 years would be fine but the returns would not be so favourable as 100k.



Plenti does have other shorter term markets, but the interest rate is lower.

One thing to consider though is that the plus market can contain loans up to 5 years, the monthly repayments are principle and interest, so you don’t have to wait the full five years to get your cash back, the capital is paid back over the 5 years.

Also, a lot of borrowers make additional payments or pay their loans off early, so it’s not like a term deposit where your full capital amount is locked away for 5 years.

(The 9.2% note market is locked away for the full 3 years though, although interest is paid monthly).


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## divs4ever (2 January 2023)

conwy said:


> Thanks for this interesting perspective.
> 
> Can I ask you some questions to try and understand this line of reasoning better?
> 
> ...



not if the Australian Government  ( or some State Governments ) were  in  a default situation  ( the non-repayment of due debt ) i would think  they would arbitrarily  extend the maturity date ( maybe even to 100 years , which is effectively 'perpetual' )  they might do that selectively  ( capture cheap debt for extended terms but repay the expensive  debt ) or do that across the board , because if normal bond-buyers suspect a potential default , they are unlikely to buy enough bonds to cover the due redemptions

 i THINK the Australian ( or State ) government are less likely  to get themselves into a situation  where they can no longer repay interest commitments  ( unlike some nations  , who need to borrow to service the outstanding debt )

 now corporate and peer-to-peer   debt NEED a credit-worthy  reputation  ( or a very messy restructure process is coming ) so if CAREFULLY chosen  corporate debt  ( at it's higher interest ) can be an interesting choice 

now let's go down a potential rabbit hole  and cash disappears  ( and turns into a CBDC  ) your credit ( currency ) system , is controlled microscopically by a fiscally irresponsible entity whose associate ( the Reserve Bank ) can't reliably predict the economic data despite having the ability to manipulate the said data  .

AND they still need to borrow YOUR credits ( along with your taxes ) to keep the system  afloat , do YOU still trust them enough to lend them your productivity ( credits )

 to extend that further do you let the Government  repay existing  debt obligations ( to YOU ) in CBDCs  after all they will just  create them on a server like SBF did

 the Pension ??

 the pension  has been planned to disappear , now for a L-O-N-G time ( since at least the '80's )  ( according to former Government insiders ), HOWEVER there is a problem  , how do you kill pensions but leave politicians  and government fat-cats on the 'gravy-train for life '

 jealousy can be VERY dangerous ,

 Keating devised  the compulsory superannuation  ( to replace the pension .. in time ) 

 however  as a former State MP once told me  , ' NEVER get between a politician and a pile of money' ( and super looks just like a pile of cash ... outside of the reach of the rightful recipient )

so in 2010 , i liquidated  my Super ( as pathetic as it was after fees and charges )

since then i have watched aghast as various entities urged the plundering  of managed super funds , including investing in the US and a lesser extent of the EU ( easier to blame than fee-gouging ) ( not to mention the traditional 'safety net' of sovereign bonds )

 add in a dash of inflation , and let's see who has a usable nest-egg left in super ( assuming we haven't switched to CBDCs )

diversification into WHAT ?? is the question , what will be safe ( or even profitable  , in the future )

  ** Do I sound conspiratorial?   **

the more important question is  ... are you right ??

 your financial future depends on that

 cheers

 ( question everything )


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## Value Collector (5 January 2023)

againsthegrain said:


> I have been doing alot of thinking on plenti since VC has been mentioning it to me a few times. 9% is a great rate, perhaps if I had more capital parking 100k there would be a nice little stash fund but the indicitive term kind of puts me off,  Oct-Dec 25.
> 
> If I had money in a TD then plenti would be a no brainer but I hold alot of my cash just in liquid savings accounts at 3-4%.
> 
> I regret not picking up more fmg when it was 14.8 not too long ago and I got too cocky with throwing orders at 13.  Since then I have been thinking alot to pick up some more serious parcel of fmg ~100k figure so in my case I need to be liquid.  Putting 10k into plenti for 2 years would be fine but the returns would not be so favourable as 100k.


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## againsthegrain (5 January 2023)

Value Collector said:


>




I actually got rejected when applying for note market doing the questionnaire. I think it was the question which asked do I see it as high risk or medium risk, obviously having shares pm some crypto I see the note market as no more then medium risk, or maybe answering I would devote less then 25% of my worth into the investment as they want larger investors?  who knows I only applied to have the option there not really jump on it atm


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## Value Collector (5 January 2023)

againsthegrain said:


> I actually got rejected when applying for note market doing the questionnaire. I think it was the question which asked do I see it as high risk or medium risk, obviously having shares pm some crypto I see the note market as no more then medium risk, or maybe answering I would devote less then 25% of my worth into the investment as they want larger investors?  who knows I only applied to have the option there not really jump on it atm



I think the questions are worded in a way that they are trying to attract certain types of investors to the notes market.

But, but reading the PDS I think I got enough clues into what answers they were looking for in the questionaire.

The notes seem to be targeted to people that would qualify for sophisticated investor status, I think that’s what they are trying to gauge with the questions.


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## againsthegrain (5 January 2023)

Value Collector said:


> I think the questions are worded in a way that they are trying to attract certain types of investors to the notes market.
> 
> But, but reading the PDS I think I got enough clues into what answers they were looking for in the questionaire.
> 
> The notes seem to be targeted to people that would qualify for sophisticated investor status, I think that’s what they are trying to gauge with the questions.



Yeah obviously they don't want mums and dads that will lose life savings, I thought I gave them all the right answers.  The medium/high risk question was one that stood out to me. Either you come off as a gambler with appetite for risk or willing to take on medium risk as part of a calculated investment strategy.. I guess I didn't take the gamble and chose the high risk option 😂


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