August 2011 Net Worth - $174,000 (+36%)

Assets: $542,000

Liabilities: $368,000

Net worth: $174,000

The significant increase in my net worth for August was due to my work bonus getting paid into my bank account as well as a small inheritance which I received.

Both of these amounts are still in cash though I am looking to increase my equity market exposure as my investments (net of any gearing) are still 50% property, 30% interest bearing securities and 20% equities.

I'm expecting a small bump to my net worth next month when I (finally) get around to doing my taxes.

Discounts on financial products

One the weekend I realised that I needed to renew my landlords protection and house insurance. Looking at the renewal amount I was surprised at how high the insurance cost was (~$840 which was a 30% increase from 2010).

I was not surprised that there was an increase given how hard insurers got hit with the floods that affected Queensland however 30% seemed outrageous especially given that I live in a area which never has flood problems etc. I therefore got a quote from another insurer and then took it back to my insurer who lowered the cost significantly.

This got me thinking about where else I was paying fees or costs that were too high. Since then I have renegotiated my bank account keeping fees (now paying nothing instead of $5 a month - same account - same everything...just no fees) and will be getting onto my phone next.

The moral of the story is that you can get significant savings (i'm already above $150 p.a.) for very little effort - just have to get out there and ask.

Market volatility - Buy, sell or hold?

With the unprecedented amount of volatility in the market many people are torn about whether to buy more in the market, to sell or just to stay on the sidelines and see what happens.

So far I have stayed on the sidelines though if the market gets down to the levels it was at on Monday / Tuesday last week I will start to buy. My (relatively conservative) picks are

1. Commonwealth Bank of Australia (ASX:CBA): A bank with almost no international exposure or funding requirements and with a pure exposure to the resilient Australian economy. Based on the current share price of A$47.10 this implies an LTM dividend yield of 6.79% this bank is returning more than most high yield accounts and just reported a record net profit of A$6.4 billion (US$6.7 billion). CBA fell to ~A$43.50 last week which implied a yield of 7.4% and if it gets down to those levels again I will buy in for sure
2. S&P 500 Index (ASX: IVV): You may wonder why I've put the ASX version of the S&P500 instead of just the regular US verison. The answer is simply the Australian exchange rate (which benefits me as an Australian). The S&P500 in A$ terms is now close to 10 year lows. When the price of the ETF dipped below $110 last week this was the all time low reached by the index. If you have any faith at all in the US economy this is a great buy for Australians. There is an in built protection as well in the exchange rate which is trading well above the long run average of 0.80 (currently 1.04).

Given how strongly the markets are recovering there are not the same options as last week. I may stay on the sidelines a little bit longer until the crazy volatility hits the market again and I can pick up stocks on the cheap.

July 2011 Net Worth - 128,000 (+3%)

Assets: 485,000

Liabilities: 357,000

Net worth: 128,000

The increase in net worth was less than expected due to negative movements in the value of my stock portfolio (especially from my U.S. holdings which now make up ~50 - 60% of my portfolio).

Credit card debt as also up after a trip overseas however cash spend was down during the same period which allowed for a greater than expected level of investment.

Tax returns and bonus payment next month should significantly increase August's net worth.

Are the first cracks in China starting to appear?

China in recent years has been the country that has underpinned much of the economic growth around the world. It's seemingly unstoppable growth has led to one of the biggest commodity booms ever seen. The demand out of China probably saved several commodity driven countries from really feeling the impact of the GFC (notably Australia and Canada).

Most of what we hear from China continues to paint this rosy picture - with growth still forecast at levels that the developed world could only dream of. However recently some factors have caused me to re-think the China growth story (and importantly what my asset allocation should be)

1. I was recently in Hong Kong and got the South China Morning Post delivered to my room. Out of general curiosity I browsed the newspaper and was mildly shocked to see the number of articles dealing with failing factories in the manufacturing heart of China. These factors have been failing due to several factors including rising wages and rising rents
2. Getting accurate data out of China is notoriously difficult. The propoganda and government controls make it had to seperate fact from fiction.
3. Many factories in China cater exclusively for the U.S. With the problems the US is having at the moment how is the Chinese manufacturing sector going to survive?
4. China's projected growth is already factored into the stock prices of many entities so there is only downside risk inherent in companies that have a significant exposure to China.

The dilemma in the above is finding stocks (especially global blue chip companies) that are not in some way dependant in China even through several degrees of separation.

Search for a broker - continued

After further digging I've narrowed my broker search to 2

1. Interactive Brokers - Cheapest broker around by a long way and offers access to more markets than any other provider. Downside is that you require 10k minimum initial deposit AND US$120 of trading costs per annum which isn't great for buy and hold investors like myself.
2. OptionsXpress - Not cheap relative to other online brokers but a very very intuitive system which has customer service in my area (and more importantly time zone). Downside is that it only offers access to US markets. Upside is that it is a super intuitive system to use.

I'm leaning towards optionsxpress. I don't trade often enough for trading costs to really factor into my decision. Given that I am expanding my effort into the international arena - I think the US market will offer enough diversity to me.

The broker dilemma

Until now I have been quite happy trading using Commsec, the brokerage division of Commonwealth Bank of Australia.

Recently, however, I have been looking offshore for investment opportunities as everything is so expensive on the Australian Stock Exchange due to the commodities boom. I have been looking at stocks listed on exchanges from the NYSE to the HKSE and the Frankfurt exchange. I then checked out how much the brokerage would be through my Commsec account and found that they would be ~$100 per trade (US$107)!!!!!!!!!

After looking around I found the following brokers which are open to international investors (i.e. not US only) and will post what I think about each of them as I research more:

• Interactive brokers: http://www.interactivebrokers.com/ibg/main.php
• Optionsxpress: https://onlineint.optionsxpress.com/login.asp?r=1
• MB Trading: http://www.mbtrading.com/
• Choice Trade: http://www.choicetrade.com/public/why_choicetrade/why_us.php
• Zecco: https://www.zecco.com/explore/online-stock-trading.aspx

The more I look the more I find (for unbelievably cheap rates)...will update once I have researched some more.