Insights for 2023
Surprisingly, both the AU and US markets are hitting their 52WHs, and it’s around the Christmas Holidays. Although there’s no correlation between the Christmas Holidays and an uptrend in stock prices, and there is no correlation between the AU and US markets, it’s in a economic environment where it doesn’t make sense.
Regarding Property, our Mortgage Interest Rate is currently at 6.79% as of to-date, and our Property Value increased by 12% in 2 years since 2021. That’s annualized at 6%. Most apartments increases by an average of 3.5% annually. That’s almost doubled!
Regarding our Superannuation, the Cash Investment Yield in the Cash Transaction account is currently at 5.15%. Our EFI/KFI-BInvT Cash Yields with Westpac and Macquarie are currently at 3%.
You would think that with the increase in Mortgage Interest Rate near 7%, the Property Values should have an inverse effect and decrease, but that’s not the case. Is it possible that because the Rent Yields are so high as well, that renters have decided to purchase the property instead? Is it also possible that home owners and investors who have a lower mortgage loan aren’t materially impacted? I’m wondering if there are in influx of foreigners who are buying up as well?
Although the USD FX rate has decreased, it still hasn’t decreased enough for us to consider exchanging for more to invest back to the US market. We’ve sold all of our US Equities since VOO and SPHD/SCHD are reaching its highs. This is where I would say it’s greed territory if I were to DCA more, but I’m not. Instead, I’m selling as the current prices are above my TPPs by more than 10%. Experienced investors states to not time the market, but it’s time in the market as the saying goes. I’m a contrarian and I trade on volatility as well as DCA our purchases and sells. We’re in greed territory now. Be fearful when others are greedy is a famous quote. I’m still trading in the tax free range based on my tax bracket, so there are no tax liability. I’ve also offset with a few positions in the red, but those can be carried over for future years depending on how this fiscal year finishes.
To start our 2024, we already have about 150K in our ING Offset Account. Since the AU market is still hot, I’ve already transferred another 100K to our ING Offset Account. Since the Mortgage Interest Rate is currently at 6.79%, I expect interest cost savings of about 250Kx6.79%=17K, or about 652 fortnightly. A penny saved is a penny earned right? If we calculate Kathy at 30% Tax Rate, the 6.79% at the pre-tax rate is at 9.7%, if we were to pay interest with no offset. There’s never a guarantee with our Investments for next year, especially since 2023 is a hot market, and a 6.79%-to-9.7% with the market risk compared to 6.79% with no risk having guaranteed cost savings with our interest is more feasible at this point.
