I'm not sure if this is the right area, but I am wondering if any Australians on the forum would like to check in on this thread?
It would be good to talk to other Aussies on this path, perhaps one day we could organise a meet up.
I am 26 and in NSW, near enough to Sydney, though not in Sydney. Fairly new to ERE.
Hi Stark,
I'm a 32 year old brit guy who's been living in Sydney for nearly 3 years now. I don't know if that counts.
I havent decided where i will eventually spend most of my ERE time, Aus, UK or somewhere else but i have been keeping my expenses low for some time now as i have cranked up my efforts to achieve ERE. or at least semi ERE ASAP.
If there is a meet up i would definitely try to come along.
Melbourne, right here.
Three amigos, eh? :)
I'd post something more substantive, but I'm in a serious transition period before writing my own journal.
However, do you guys often find that advice/opinions/strategies from the US are hard to apply here? I mean, we've got government-guaranteed banks offering 6.51% interest, for a lot of investors, 6% growth is pretty good, I think.
Also, I found this ( http://www.australianpublictrustees.com.au/index.html), this morning. What do you guys think, risky? 7-8.75 interest is pretty good!
Make that four amigos! - Aussie from Canberra/Sydney here.
"However, do you guys often find that advice/opinions/strategies from the US are hard to apply here?"
Totally agree, LonerMatt. Australia is the 'last man standing' of the western economies. As such, our ERE environment is totally different to that of the US.
Bank deposits there earn near zero. Bank deposits here earn 6.5.
Property there has tanked and rental yields are strong. Sydney property is second most expensive in the world after Hong Kong. And rental yields are crap (but ok ish if you are negative gearing and pick the right property).
They don't have compulsory super. We have our employers chucking in at least 9% pa toward retirement without even thinking about ERE. 15%+ if you are in the public service or university sector.
They have 9% unemployment. We have 5%.
Those are the biggest differences I can think of for now.
As for Australian Public Trustees, this would be a property play. Australian property is the one asset class I wouldn't be in right now.
Those differences are profound. So for people like myself, I can grasp the overall process of ERE, or the Permanent Portfolio, for example, the implementation is currently doing my head in.
...and then comparing any investments against those bank interest rates and the opportunity cost of NOT having money there is obnoxious. I could buy bonds, for example, but 4/5% is still 1.5% off what I could be getting!
In any case, I'll steer clear of the APT, although I'm personally hoping the property bubble busts (I'm 22 ;)).
Yeah, I have wanted to pull the trigger on the PP also, but the implementation is a bitch.
Sounds like we are on the same page right now - I have all of my savings in a Ubank account paying 6.51% pa (the effective annual rate is more like 6.7% before tax when you take account of the fact that interest is paid monthly on this account).
Arguments in favour of holding cash instead of the PP:
* The Australian govt has one of the best bank deposit guarantees in the world - any bank deposit up to $250k is guaranteed.
* Our yields on cash are high (6.7%)
* Cash is liquid. You can deploy capital quickly if the all ords falls to 3500 and you want to get into equities dirt cheap.
* The enemy of holding cash is inflation. The RBA (in my opinion) have their heads screwed on better than their US counterparts. They aren't printing cash left right and centre. Inflation risk is lower here.
* If we move into a deflationary period, cash would have been a smart move.
Arguments against holding cash:
* Missing the boat on gold (If gold suddenly rallies, it could hit $2500 by the time you have set up a bullion account and received approval to trade).
* You are not protected against higher than expected inflation.
* You could miss out on 30-40% returns in equities if the all ords has found a bottom and equity markets perform a post GFC style rebound (unlikely in my opinion)
* The AUD could be on the way (further) down. Buying gold would lock in AUD strength.
Exactly.
...and the bonds part, we don't have 30 year bonds (though there is a 20/25 year one offered at the moment), so that needs to be modified.
It seems, basically, as soon as modification starts, things need to be altered to re-balance the portfolio's aim (to minimse potential loss, and gain conservatively, IMO).
One other thing that affects Australia more is the international market. For example, we hold reserves in AUD (we being you and I), but international situations can cause the AUD to lose power, which shouldn't matter, except that it correlates to the ASX as well. Dollar's down, so are shares, shares are up, so is the dollar.
At least, that's been my observation in the past few months.
Hence, I'm thinking about holding some currency in a non-AUD figure (Swiss Francs, or the USD, or the Yuan) - but then, that only protects me from smaller problems, and doesn't let me get the 6.5-6.7% growth I could achieve.
Personally, I'm unsure of how to move on gold. I can see there's a solid argument for holding some gold, but at the moment it doesn't seem to be a great time to buy. I don't have the capital (nor will I for a year or two) to implement the PP, so I'm considering waiting for gold to drop (if it does) before buying. At the moment, though, the price of entry is quite high!
Then trying to work out how to fit super in is ungodly. Should I treat it separately? Should I go for SMSF? Should I treat it as part of the stocks portfolio? Gah!
Honestly, the past year (really the only time I've been paying attention) has been doing my head in. Growth has slowed, but most sectors are still growing, yet everyone's acting like the Australian economy is on the brink of complete collapse! Housing is still strong, the mining boom is predicted to last another decade, or more, the agricultural sector has had some problems this year (floods and cyclones), but all in all things seem 'fine'.
Although, my girlfriend tells me Westpac offers her 7% or so interest, so there might be a better vessel.
Are there any blogs, forums, or people you guys read about (apart from ERE?). The ASX forum is a joke, anyone whose been there will understand why!
This is great LonerMatt - it sounds like you have been thinking about the exact same issues that I have been mulling over for the last year or so.
"Personally, I'm unsure of how to move on gold. I can see there's a solid argument for holding some gold, but at the moment it doesn't seem to be a great time to buy."
On the brink of recession, I think it's a great time to buy gold. In nominal terms, gold seems to be hovering near all time highs. In real terms and in various ratio terms, it is not at an all time high. For example, the Dow/Gold ratio is currently at 6.6 (http://www.sharelynx.com/chartstemp/DowGoldRatio.php). At the very least, hold some gold as an insurance policy against a possible global recession/(depression?)
I count superannuation in my ERE calculations. Why? If I was to ERE and somehow exhausted my (early) retirement fund, the Aust government would let me use superannuation funds under the 'hardship' provisions.
It is possible to hold gold through superannuation without setting up a SMSF. If you don't feel good about buying gold with your hard earned non-super cash, then consider buying gold with your 'deferred' superannuation capital.
"Growth has slowed, but most sectors are still growing, yet everyone's acting like the Australian economy is on the brink of complete collapse!"
Interesting. The people I meet seem to be acting like everything is completely fine. That said, I do live in Canberra :p
Public Service?
@LonerMatt and others,
> However, do you guys often find that
> advice/opinions/strategies from the US are
> hard to apply here?
I am an Indian, but I am so glad you brought it up here! I am having similar difficulties. The devil, as they say, is definitely in the details. I am actually in the 6th re-write of a blog post on this difference between strategy and implementation. My excuse: I've got only 24 hours and there is only so much of it I can spare ;-)
@ADD, LonerMAtt,
I was having a similar discussion on PP with JAcob elsewhere.... I too feel the PP is somewhat US-centric.
Just wanted to pitch in with these thoughts for now. Anyway, we will compare notes in detail later on after I've read the points in detail.
And a big Hello to all you aussies. :-)
@stark, @fiddle, @ADD @lonermatt:
hey, could you guys tell me what are the larger banks in Australia? Thanks a ton!
You know, what they say... about AUD being the closest to gold backed currency b/c the gold is on the ground :)
In Canada there are the "big 5" such as CIBC, RBC, SBC, TD, BMO... Wondering if there are similarities in Austrialia. I only know of perth mint and the perth mint certificate hehehe...
Yup, agreed that no real estates until the bubble bursts, unless you have a real need for it...!
You guys are on another level of knowledge to me.
@bluepearl
I would say National Australia Bank, the Commonwealth Bank, St George, ANZ and Westpac are the major ones...
Someone jump in if they disagree or think of more...
On buying gold - I have seen it referred to as paying a premium price for insurance. If you can afford it, good, but if you do not have enough cash it may be better to keep your assets liquid. This is in the context of deflation... not something I know a lot about.
@Surio
Mmm, if you are an Indian residing in India, then something that approximates the PP without being expensive is going to be tough on an ERE amount of capital. The 30 year US treasury will be tricky. I remember reading somewhere that you need to be a non resident Indian to legally invest in Indian bonds.
I am going to compromise and initiate an 'Australian Edition' of the PP that has a suitably low expense ratio and a correlation matrix as close as possible to the 'true' permanent portfolio.
@ LonerMatt
Higher education
@ Stark
Gold is actually quite liquid. You can have it converted into cash within hours!
@ Surio: cool. We should start a 'non-US investing' thread! Link us to your blog, mate, let's have a read?
@bluepearl: your journal says you're from Hong Kong, ever been down Australia way?
Those banks Stark mentioned are spot on, the higher interest rate we're (ADD and I) talking about is from Ubank (which is National Australia Bank's 'youth' marketed online only bank). The Australian branch of HSBC (I'm assuming you know what that stands for) also has higher-than-US-by-lots interest rates, although probably around 4.75%.
FWIW, Non-Australians can own and maintain bank accounts in Australia, and I think (I don't know) that the government backs all finances up to $250,000. By that I mean, if a bank collapses, the government steps in to make sure that, up to 250k, people keep their cash.
@ ADD: only non-Indians can buy Indian bonds? That would SUCK, and it's not like there's an ever-more-emergent Indian middle/upper class to invest in them either ;).
In the sharing mood about the adjustments you're making to the PP?
Any of you Australians read Steven Keen's stuff?
make that 5. I live up in Townsville.
Not a regular visitor to ERE since Jacob stopped posting original articles and had the reposting of old articles automated.
Loved his book. is a good read for anyone planing ERE.
Spend most of my time reading http://www.mrmoneymustache.com/
like Jacob but just not as extreme.
Enjoy
Ademac
@stark @lonermatt
Thanks for the info on australian banks. I plan to diversify into AUD soon. Not now, as right now it feels like a repeat of 2008 so USD will strengthen for months... (both AUD and CAD lost their parity this month, for example).
But once AUD goes down some more, I will move to AUD as a proxy hedge to CAD (I work in the states now, so drawing USD income but I have CAD expenses and I plan to retire in Canada). What frustrated me in the last few years was the super low CAD interest rate (I am so jealous about 6-7% interest rates you guys are getting). The Bank of Canada keeps interest rate low on purpose as the geog proximity means that Canadian economy is very much influenced by the US.
On other currencies to diversify to, I actually think USD is a good short term move (flight to safety in a repeat 2008 scenario), and then gold is a good long term move. All currencies are managed and it looks like everyone wants to devaluate. Personally I wouldn't touch explicitly managed currencies meaning CNY and CHF (sadly).
On gold, in a repeat 2008 scenario it could drop by 30%, but since we don't know if it would drop this much or perhaps it would drop more, an average down approach is what I would suggest. Also remember, in a repeat 2008 scenario USD would go up, meaning there are two force at work (gold drop, good, but aud drop meaning gold price goes up in aud terms)... I am facing that exact scenario right now since I want to convert some CAD into gold...
Oh I have never been to Australia. I learn most of my cooking from a chinese-australian homemaker/ blogger and it's through her that I develop a fondness for australia. Hehehe...
Bluepearl: For whatever reason, whenever I have looked at the AUD/CAD they seem to buy comparable levels of USD. That's just a small observation, but it's been a decent rough guide for me. In other words, more often than not, the AUD and CAD are close to parity (within 5 cents). At least, that's been my observation over the past 5 years (which doesn't mean much).
Correct me if I'm wrong, but are you saying that managed currencies (more specifically the Swiss Franc) are moving to devalue? Why might they do that?
Since we can buy gold mined in Australia, from Australia, it's difficult for me to know how the gold price dropping when the USD rising would effect things, especially because depending on Australian confidence/strength, the drops might not be parallel (gold could drop by 30%, but I doubt the AUD will drop to 70 cents! The AUD just doesn't move that fast, IME).
Surely there's a way to have your cake and eat it too: for example if the real value of CAD drops, and gold drops, why not buy gold in USD (which would be have better purchasing power)?
Most of my questions aren't suggestions, I'm very new to this, so I'm just thinking out loud, feel free to show/explain how wrong I am :).
@LonerMAtt,
A quick hello and the link to blog:
http://sawbonessurio.wordpress.com (It is on my profile too).
Got to rush right now. More later.
@ADD/LonerMatt,
"I remember reading somewhere that you need to be a non resident Indian to legally invest in Indian bonds."
You got that one right:
"Under the FEMA Regulations, only NRIs and SEBI registered FIIs are permitted to purchase Government Securities/Treasury bills and Corporate debt."
That one sucks! Big time! I've never figured that one out!
These are the only bonds around at this time:
https://www.sbicapsec.com/Bonds.aspx
With the currency volatility we are facing, 8% over a 10 year period looks like a loooong time away!
@Lonermatt:
For CHF, check out the CHF-EUR exchange rate on Sep 6 and thereafter. I saw a 8% drop in two days!
<http://www.zerohedge.com/news/guest-post-immediate-effect>
While CHF was one of the few last standing safe haven currencies, the swiss national bank decided to peg it to EUR...devaluating it significantly in a short period of time.
Basically I think this means no currencies are safe and that all central banks can technically take this kind of stance...
For AUD vs USD vs Gold
http://www.kitco.com/gold_currency/charts.htm?AUD
(select the 5 year graph)
you can see that during the 2008-2009 crisis the AUD line goes above USD - it's more expensive to buy gold in aud just during that short period. In all other periods, since AUD was stronger you are in a good position (just compared to holding USD at a minimum)
I actually like talking FX with people. Since I work with Americans who are clueless about FX. I am thinking that I'm making a bunch of assumptions that won't necessarily materialize - such as us being in a repeat of 2008 and our respective currencies will move in the exact same manner in late 2008/ early 2009. I want to hear your views too thanks!
hi
another aussie here. not on topic per se, but I realised during the week that about 10% of what i spend ends up going to the government. Since i'm not a fan of forfeiting money to the govt, this serves as great motivation not to buy stuff. Also, in Oz unprocessed goods dont attract the GST so one way of knowing you've got a good diet is if you don't pay much/any GST...
I've got to start my journal next year. I'm currently in transition, but hopefully the Australian regulars will check in.
I'm moving to a more ERE friendly area (Mildura, VIC), so we'll see how that goes, and I'll try a few different investment vehicles.
Also, broadly what I've been thinking about, with regards to an Australian PP is:
25% Gold - Perth Mint, easy, plus maybe some non-physical gold, too.
25% shares - I'd probably begin just with ASX 200/500, then expand to, say, some US/Asian shares.
25% cash - Either term deposits, or the 6.5%+ bank accounts (several paying 7% at the moment). Later buying some UDS/Yuan/CHF.
25% bonds - since we don't have 30 years, I'd try to get some around 10-15 years.
The bonds part is still confusing me a bit, it seems to lock me into below average returns (although they are more stable), if I buy a bond, does its price ever rise, or is the 'rise' more a lack of fall in a market downturn??
Hello everyone from oz, I'm still new to the blog, and haven't been able to stop reading since I discovered it a week ago. I have always been frugal because of wanting to be FI as soon as possible, but have no idea at all about investing in shares. Some idea regarding real estate, but even there, not at all enough. I'll be reading your posts and hopefully will be able to educate myself more. Good day to all!
So to turn the tables a bit... any tips for us yanks to get in on the 6.5% bank returns?
I can't help with the investing side of things, partly because I don't really have to invest and partly because whatever I've done over the years has turned to crap :)
Despite that I retired at 45 and hit the road two years later. That was 10 years ago now and as they say, I started with nothing and still have most of it left.
We owned 3 houses, sold them and gave the bank a fair swag of the proceeds. Since then I've worked for 6 months plus made small amounts writing articles an selling the odd photo.
We have a great life and live on bugger-all, most of our time is spent lazing near a river somewhere photographing birds, tweaking my website or designing electronic gadgets. All those hobbies are essentially free.
ERE does work, I did the settle down and get a job thing for roughly 20 years, about 25 less than most people but 10 more than I should have.
If you want to have a sticky beak at the lifestyle have look at
We're in WA at present but heading back east, plan to be Canberra way in the new year then back up on our land near Bundaberg after that.
Chilly - Ubank, Bankwest and Westpac are all worth a look. AFAIK you don't have to be an Australian citizen to get those returns, just desposit some every month.
Otherwise returns are a mere 6%!
Ubank is who I am with, but Westpac has had a long and successful history, I don't know much about BankWest.
Ah, just checked, for UBank applicants need an Australian residential address!
@GrayNomad,
*Japanese Bow* and *Applause* Naaaah!
I am going to go all ethnic and give you the *Indian BOW*! Now if you were wondering what that is, then here's a picture of the bow
(And it is the same in Buddhism and Christianity too ;-))
What a life you have been leading! And your lifestyle, and your life experiences! And the skills you've picked up! And of course, your truck is a marvel!
Impressed! Truly impressed!
Surio!
Thanks Surio, no need to bow though, just throw money :)
It's certainly been a good run so far, a few downs but mostly ups.
This sort of lifestyle is pretty easy to achieve in OZ, we just seem to have the right combination of political stability, land area, climate etc to make it work.
Plus we have pensions and health plans provided by the government, there are arguments about the wisdom of not having private health insurance but at least there is a system in place for those that don't. And anecdotal information suggests that sometimes you're better of without insurance.
Yes, sometimes you are better of without healthcare, too.
Anyway, now that I'm reading this: I also read through your diaries this morning and loved it. I wish you many more happy travels and I'll drop by now and then to enjoy the stories and pictures :-)
@DutchGirl, thanks for your comments, hopefully you'll find something interesting each time you drop in.
Anybody ever tried to buy/bought Australian Treasuries? There's a bit of info on the RBA website.
Another question - Is it "possible" to live on under $6K AUD in Australia? I have my doubts but I guess it depends on where you live etc. It's an exciting prospect nonetheless.
>Is it "possible" to live on under $6K AUD in Australia?
I think it is IF you own land or a house or a motorhome. In other words somewhere to live that doesn't cost much/anything.
A year or so back I calculated that my wife could live on $2500 I think it was. I was dumbfounded and I still can't believe it so must revisit the figures one day.
But certainly $6k should be doable as long as you have a pastime that doesn't cost, like bushwalking.
Update:
I said I couldn't believe that amount and I don't know where it came from. So I quickly redid the figures.
Now bear this is for my missus to live on our land in the motorhome, but the motorhome is just used as a house, it's never driven (no rego) and not insured. She eats like a sparrow and is happy just walking around the bush, looking at the birds and reading. All of which cost nothing.
Once a month she'll drive into town (car fuel and rego included) to buy food.
The new figure is $4300.
Now that's still pretty cheap, but here's the kicker. The ONLY real difference between 1 person and 2 people is food. Add my food and the total is $7300.
That's $3650 each a year.
In Australia the single pension is about $14000 and married around $24000 and everybody moans about it. What the hell is their problem?
I admit that if you're elderly and have to rent in a town and/or get lots of medicine that makes a HUGE difference. But as long as you're fit it's very easy to live on bugger all.
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