Gold Priced in USD – March 2010 Update

Within my Retirement Investing Strategy I currently hold 3.5% (up from 3.2% at the last USD gold update) of my portfolio in gold with a targeted holding of 5%. Gold is the only portion of my portfolio that does not provide a yield (dividends, interest etc).

UK Property Market – March 2010 Update

I am still yet to buy myself a flat or house even though the ownership of one is important to my retirement investing strategy in the longer term. As I mentioned last month I have now also even stopped looking on the internet at house prices in the area that I am interested as I still think that UK house prices are still overvalued by a huge margin. Today the Nationwide reported that average house prices had risen from £161,320 to £164,519, a monthly rise of £3,199 or 2.0%. On an annualised basis house prices in absolute terms are up by 9.0% and if I look at real (after inflation) returns they are still up by 4.5%. When you live in a society where average assets are increasing at £3,199 per month I ask myself why go to work. Why not just leverage up, buy a few buy to lets and sit at home using your house price increases as a cash machine [sic].

Australian house price anecdotal

My dataset for Logan City which is just south of Brisbane shows that over the last 3 months house prices have risen 4.6% in this part of the world. This seems outrageous to me given the credit crunch that the world has just been through. However I now have a story that I wouldn’t have believed if somebody had told me but that demonstrates just how crazy the property market still is in this part of the world.

UK Inflation – March 2010 Update

The Office for National Statistics has reported the February 2010 UK Consumer Price Index (CPI) as 3.0% down from 3.5% and the UK Retail Price Index (RPI) as 3.7% which is identical to last month.

My first chart is tracking the CHAW Index which is the RPI including All Items. I focus on the RPI as my National Savings and Investments Index Linked Savings Certificates use the RPI to index from. The current level of the Index remains above the trend line and now appears to be diverging further from trend.

Investing to minimise fees and taxes

Two key elements of my retirement investing strategy are to minimise fees and taxes. This is due to the fact that small changes in annual returns make large differences when compound interest works its magic over many years. Fees and taxes greatly affect those annual returns. For example if I invest a lump sum of £1,000 and achieve an annual investment return of 6% over 30 years I will end up with £5,743. Change that return to 6.5% and I achieve £6,614. So by saving 0.5% annually, which is easily done for most people in my opinion, you can end up with an additional 15% in your pocket. Not bad for taking an active interest in your own investment portfolio and doing a little shopping around and research.

US Consumer Price Index (CPI) Inflation – March 2010 Update

The above chart shows the US Consumer Price Index (CPI-U) to February 2010 courtesy of the US Bureau of Labor Statistics. Year on year US CPI inflation has fallen from 2.6% in January ’10 to 2.1% in February ‘10. Annualising the last 3 months and inflation is running at 0.8% and annualising the last 6 months has inflation at 0.8% also. It looks like the US continues to have their deflation ‘problems’ under control for now.

Buying Gilts, Property, International Equities and UK Equities

As an employee of a company I have the option to contribute to a pension scheme. I have made the choice as part of my retirement investing strategy to contribute to the pension scheme for the reasons laid out here.

Australia, UK and US government bond yields – March update

I continue to monitor the 10 year government bond yields of three countries (Australia, United Kingdom and the United States) to try and understand when interest rates on savings and mortgages may start to rise with my datasets shown in today’s chart.

Australian Stock Market – March 2010 Update

To try and squeeze some more performance out of a retirement investing strategy that is heavily focused on asset allocation I am using a cyclically adjusted PE ratio (known as the PE10 or CAPE) for the ASX 200 to attempt to value the Australian Stock Market. The method used is based on that developed by Yale Professor Robert Shiller for the S&P 500. I will call it the ASX 200 PE10 and it is the ratio of Real (ie after inflation) Monthly Prices and the 10 Year Real (ie after inflation) Average Earnings. For my Australian Equities I will use a nominal ASX 200 PE10 value of 16 to equate to when I hold 21% Australian Equities. On a linear scale I will target 30% less stocks when the ASX 200 PE10 = 26 and will own 30% more stocks when the ASX 200 PE10 = 6.

Can the British pound fall any further?

At the time of writing sterling today had risen by 0.6% to be 1.5344 against the US dollar. Part of the contributor to this was a fall in UK unemployment of 33,000 for the 3 months to January 2010 putting unemployment at 2.45 million or 7.8% today. Now I don’t watch this indicator regularly however if you read into the figures a little deeper it doesn’t look all rosy to me.

Gold Priced in GBP – March 2010 Update

In absolute terms gold continues to reach new levels of expensiveness in GBP terms when looking back over historic average monthly data since 1979. However there has been a lot of inflation over this period and so as always I will look at the real (inflation) adjusted price of gold over this period which is my first chart today. The inflation dataset that I will use is the UK retail prices index (RPI).

Average UK interest rates for savers – March Update

My chart today shows that for those that are looking to save it isn’t getting any better out there. Average interest rates on cash savings are declining if you are prepared to lock your money up for any period of time and if you want instant access the average increase is a miserly 0.07%. Let’s analyse the data in more detail.

A History of Severe Real S&P 500 Stock Bear Markets – March Update

Looking at the first chart which shows the real (inflation adjusted) S&P 500 (or its predecessor) stock market I have identified three historic severe stock bear markets. These I am defining as stock markets where from the stock market reaching a new high, they then proceeded to lose in excess of 60% of their real (inflation adjusted) value. These are best demonstrated by the second chart which shows each of these stock bear markets and the fall in percentage terms from the peak. So briefly what were these bear markets (full details here).

US (S&P 500) Stock Market – March 2010 Update

To try and squeeze some more performance out of a retirement investing strategy that is heavily focused on buy & hold and asset allocation I am using a Cyclically Adjusted Price / Average 10 Year Earnings (PE10 or CAPE) ratio for the S&P 500 to value the US (specifically the S&P 500) stock market. The method used is that developed by Yale Professor Robert Shiller however I also incorporate earnings estimates up to the PE10 month of interest. Background information here.

Tax efficient investing – 2009/2010 Individual Savings Accounts (ISA) year end fast approaching

This post is a reminder that the 2009/2010 individual savings account (ISA) 05 April 2010 year end is fast approaching. If you haven’t already taken full advantage of your annual ISA allowance then you may want to investigate now before it’s too late. Once the year ends the opportunity is lost forever. As a mid 30’s investor I have taken full use of my allowance of £7,200 already this year by investing within a stocks and shares ISA.

My Current Low Charge Portfolio – March 2010

Buying (New money): Since my last post I have saved 83% of my net earnings. In addition some more good news was that significant earnings that I had been waiting on for the past year were paid to me this month meaning my total savings amount was also very large at 6.1% of my Low Charge Portfolio assets. These were allocated as follows: 84.7% to cash, 2.3% to UK equities, 3.2% to international equities, 0.6% to index linked gilts and 9.2% to UK commercial property. This money was invested both outside of any tax wrappers and also within a pension. Unfortunately no investment was made into my stocks and shares ISA as I have already made my £7,200 worth of contributions. I am eagerly waiting for the new ISA year starting on the 06 April 2010.

Australian Property Market (Alternate Data) – February 2010 Update

The Brisbane and Australian Eight Cities (Sydney, Melbourne, Brisbane, Adelaide, Perth, Hobart, Darwin & Canberra) House Price Index published by the Australian Bureau of Statistics (ABS) catalogue 6416.0 suits my requirement to track Australian house prices as part of my retirement investing strategy.  It however seems to have two flaws. Firstly the housing data is only published quarterly and secondly this housing data is then published over a month after the quarter ends.

Frugal living – pay yourself first and the lowest price grocery bill

I am trying to achieve retirement within 7 years. I’m defining retirement as work becoming optional. To do this I am generally saving 60% of my gross earnings every month. How have I managed to get to this high level? Well I think it’s a high level, if you’re doing better or similar I’d love to hear your methods. In fact I’d like to hear anyone’s suggestions for methods to save money. Please feel free to comment.

Average UK interest rates for savers

Previously I described how I was struggling to find a home for cash that could generate a real return after inflation and tax. The best rate I could find for a basic no frills easy access account was 2.5% but my chart today shows how bad it really is out there.

Are pensions a good retirement planning tool? (Full text)

Where is the best place to put your money for retirement? Ask a lot of people and the automatic response is that you should put your money in a pension to get a bigger retirement pot which comes from the tax advantages given by HMRC. I however am not convinced and in fact believe the government and the pensions industry is actually close to misleading the public as to the advantages of pensions.

Are pensions a good retirement planning tool? (Part 1 of 2)

Where is the best place to put your money for retirement? Ask a lot of people and the automatic response is that you should put your money in a pension to get a bigger retirement pot which comes from the tax advantages given by HMRC. I however am not convinced and in fact believe the government and the pensions industry is actually close to misleading the public as to the advantages of pensions.

UK Bank Rate held at 0.5% while McDonald’s is deemed safer than UK government debt

Today’s chart must be the most boring I have ever posted. This is because the Bank of England held interest rates at 0.5% for the thirteenth month in a row. I can’t say that I’m surprised by this decision but I still think it irresponsible when you have a Monetary Policy Framework that you are supposed to operate within which includes the Government’s inflation target of 2%. Meanwhile back in the real world the Retail Prices Index (RPI) is running at 3.7% and the Consumer Price Index (CPI) is running at 2.8%. The Bank of England are making excuses like inflation in the short term is high due to the reinstatement of increased VAT and falls in the pound. I won’t go on about this as I’ve talked about all this before except I will say when these factors were moving in the other direction the Bank of England were quick to lower rates.

Winners and losers of recent government and Bank of England decisions – workers and homeowners

Picking up on Monday’s theme I’d like to have a look at two further winners or losers of the current governments and Bank of England’s decisions. This time is workers and homeowners. One is a winner and the other is a loser. Can you guess who is who? My chart today reveals all.
Firstly let me just benchmark inflation. The retail prices index – RPI, which is represented by the olive line, is current year on year running at 3.7% and since 1991 the arithmetic average of the monthly year on year percentages has been 3.5%. Of interest also is that the inflation trendline is heading in a downwards direction.

UK Mortgage Rates and Approvals – March 2010 Update

Two in my opinion very interesting and somewhat conflicting charts today. The first picks up on yesterday’s theme by showing the monthly interest rate of UK resident banks and building societies sterling standard variable rate mortgage to households (not seasonally adjusted) and highlights that for this data set rates remain at near record lows at 3.97% (actual low was 3.82% in April 2009). Compare this with CPI of 3.4% and RPI of 3.7% and my comments of yesterday.

Winners and losers of recent government and Bank of England decisions – Two B’s

On Thursday of this week the Bank of England makes another Bank Rate decision which I fear will be a repeat of the last year which is a hold at 0.5%. Additionally, we are now getting close to an election so I thought it a good time to stop, take a step back and just look at who the winners and losers are of the current government and Bank of England decisions in the lead up to Thursday.