Letters of the Week

Thanks for the warning, Alan. Insuring valuable coins. First Mac’s High Livez Fund.

A vote of appreciation

In March 2008, it struck me how candid Alan Kohler was with sharing his own investment decisions, when he said that he was greatly reducing his share holdings. His decision was vindicated and I've been following his lead ever since.

Over that time, there have been many, many "mode" statements from Alan, plus the occasional "motherhood" call, like the one he shared with us on December 17 (that he will reduce his share holding, perhaps even to zero, because he can sense another correction on the horizon).

I've not kept an exact record of the accuracy of Alan's sensing of what's ahead but it’s definitely better than two correct calls for each one false alarm. I'd like to make two comments: the first is a vote of appreciation to Alan; and the second is that having an adviser that doesn't follow their own advice would make me think it’s time for a new one.

– B Meaney

Editor’s response: Thanks indeed, and no doubt you’ll note Alan has followed his own advice again (with reference to today’s email note) where he details his reduction of share holdings in his DIY fund from 70% to 30% of his total asset allocation.

Insuring coins

PG was asking about insuring his coin collection. I recently asked a prominent dealer about this, and he replied that the ANDA (Australasian Numismatic Dealer's Association) are working on an insurance scheme in conjunction with the underwriters who cover the dealers' own stock. I don't believe insurance coverage is law yet, so no need to panic. One problem with the safety deposit boxes in bank vaults is the damage that could be caused to silver and copper coins by a flood.

– Name and address withheld

High Livez

I have issue with many of the points made by Tony Rumble is his highly supportive review of the First Mac High Livez Income Fund. For example, Tony suggests: “High Livez fund offers exposure to Australian residential property without the risks attached to specific properties.”

This fund offers no direct exposures to housing at all – it is simply a mortgage trust, like all the other mortgage trusts that froze during the GFC. As an investor, you get no access to the capital growth or rental returns associated with residential property. It is very misleading to compare the two investments. I am also concerned that First Mac is a small, Queensland-based lender with a history of operating in the riskier end of the home loan spectrum. Moreover, it is simply incorrect to say “First Mac limits the 'loan to value’ ratio for its originated mortgages to no more than 80%”. On First Mac’s website you will see that they offer 95% LVRs on their standard home loans.

– Name and address withheld

To read this week’s letters, click here.

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