Monday, November 16, 2015

Short exam break.

It's exam time in SMU again and this time the mugging is much more intense than the first two semesters of law school so this blog will go offline for about 2-3 weeks.

Hopefully by then I would have some interesting ideas to share with everyone as right now my mind is occupied by my studies.

So I'll catch you in all in early December !!!

Tuesday, November 10, 2015

How to be a financial troll ?

Some financial bloggers met yesterday and we discussed how a financial blogger can theoretically turn troll and earn Ad sense revenue by engaging with pissed off readers.

I am trying to distill the discussion into something more concise for the benefit of other financial bloggers. While most are not trolls by my standards, a bit of trolling can make the blog livelier and expand the audience to include people who tune in just to find out what you are going to say next.

So here are some ideas :

a) Be young and 'inexperienced'

Some bloggers who might be creating a persona may wish to consider youth and inexperience as fairly effective flame-bait on the internet. I realised that some bloggers who sound reasonable get flamed for being young and inexperienced but it builds traffic for them anyway. I think this is a good strategy as it taps into the insecurity of Gen-X who is facing their 40s and job losses.

I think Jeraldine Phneah managed to strike gold lately with this strategy. Love her or hate her, I bet she has respectable traffic.

b) Be Female

I was talking to Budget Babe about the flame mails she gets from male fans and realises that she gets a large share of brick-bats simple because of her gender. I think her analysis of the economy is not better or worse than any one of us because no one has a firm grip on the future anyway.

Looking my demographics, financial blogger readership is typically 75% male and I can sort of imagine the effect Budget Babe has on the insecure 20-something male who has yet gotten any sexual access. The affront is very fundamental to a young male's sexual identity because Budget Babe is exactly what she is - a smart, self-assured female who can look after herself financially.

Anyway, I think she should just say what she thinks is a good investment and let the markets be the judge.

c) Eschew Frugality

If you are neither young nor female, one guaranteed approach to turn the entire financial blogosphere against you, get angry readers to scold you everyday but read all your articles is to publicly eschew frugality completely.

Robert Kiyosaki started this maneuver and wrote a best-seller by elevating this into an art-form. To Kiyosaki, saving money is so middle class - this is a very attractive message to the masses.  There will always be a majority who wants to know how to make it rich without being frugal and openly eschewing frugality gives a blogger magical powers and it makes wealth creation effortless.

The psychological power of eschewing frugality comes from 'sprezzatura' or studied carelessness which is documented heavily in Robert Greene's 48 Laws of Power.

[ If you think about it, Singapore university students are masters of this technique, pretending to drink and party while studying hard for the exams to shift the curve. ]

One way of reading a financial blogger or new entrant in Me and My Money when someone eschews frugality is to investigate the person's source of wealth :

a) Did the person come from a rich family ?
b) Did the person marry into money ?
c) Did the person have credentials which gave them above average earning power.
d) Common in Singapore : Person employed leverage on property markets in Singapore during the era of massive immigration.

The investigation can lead to interesting insights if done in the right spirit.

But unless you are really special, it helps your case to remain frugal regardless of circumstances.

Friday, November 06, 2015

When it rains, it pours !

Unlike the other financial bloggers who active talk about their investments, I do not usually share my portfolio positions on this blog.

The reason is that if I do so, I was concerned that some readers might latch onto the idea of dividends investing so fanatically that they might suffer serious losses or miss out on something more tried and tested being offered by, in my view, better informed financial bloggers out there like Investment Moats or the mighty AK71.

But I think sharing my investment bloopers is quite fine because it is educational and demonstrates to readers that high yield investors do experience the occasional failures. 8% dividends is great while the money goes into your pockets but moments like this would give the neurotics some cause for concern before they jump into this investment style.

So this week has been a really bad week for me :

a) Rickmers Maritime has suspended their dividends.

A detailed technical discussion on Rickmer's fundamentals are already highlighted in Investment Moats here. I shall not go into the details here but the shipping trust has suspended their dividends although it remains profitable.

Rickmers is a classic yield trap which I have a tendency to fall into in spite of all my experience. It was very seductive as it offered 15% a year in yields. I knew that owning this counter would burn me one day but I could not predict when that day would be, so I kept my exposure to about 2% of my portfolio and intended to bail out when dividend starts running out.

Lo and behold, I had to get out really quickly yesterday and managed to escape at a price of 17.4cts. It is currently trading about 15+cts.

As I was an investor in Macarthurcook properties securities fund, First Shipping Trust and Babcock and Brown, I knew that in such a situation, the best thing to do is to just run. As exposure is small, I normally could get out with small scratch wounds.

b) Neratel's nasty Q3 results.

I did not see this one coming at all so I was blind-sided by these results, the details can be found in AK71's blog here.

Neratel is an important part of my portfolio because I wanted REIT-like yields but I also wanted equity holdings to give me ample diversification away from real estate. Finding consistent yielding stocks above 8% is very hard and my strategy is to buy many such counters and hope that in any year I can get about 6.5% from companies which do well in that particular year.  Neratel also has nice NETS terminals being installed in many retail outlets. I always thought that this was a stock with very steady earnings which made many investors rich in the past.

Neratel had a nasty 6.25% fall today but I am hesitant to let it go. I am still in the process of hunting for a portfolio of high-yielding equity stocks, so I am still not willing to let go of a counter which still pays out a dividend this year.

How long Neratel would be in a funk is something none of us can answer although AK71's analysis seems quite comforting. I am reeling from quite an amount of pain as Neratel is about 5% of my portfolio.

Generally speaking equities need to be held with more patience than business trusts. Equities generate high returns because they are subject to the vagaries of economic cycles but their behaviour is very different from REITs ! The best way to cope with volatility is to buy many such stocks and keep your exposure low.

c) Things might get worse from here.

I think China's GDP growth is dipping below 7%  and the Fed will raise interest rates soon.

This will not be great for the markets but we did have quite a long era of growth in the stock markets.

I don't see myself dipping into my capital soon but the odds of emerging from Law School with a lower portfolio size from market movements is now a realistic possibility because after all, I paid $70k in school fees. If that happens, I have to suspend my retirement and really buckle down to get some real work done.

In the meantime, I will be farming my excess dividends back into the markets to increase my income moving forward.

Tuesday, November 03, 2015

Are you a One Punch Investor ?

If you are a fan of Japanese Anime, you might have watched a few episodes of One Punch Man.

In spite of the fact that Saitama can kill any Kaiju Monster with just one punch, this is an eminently human story of how a person can cope with ennui and boredom when he finally attains god-like powers. I can definitely relate to that, being somewhat having no income for the past 22 months but being  able to hold out as a SMU student.

As  a student, my expenses have become really small and most of my time is spent reading my cases and managing this blog that I really don't have the time to really get into expensive hobbies. Consequently, with the exception of wanting more time, I have little wants and so have a life which would be boring compared to my friends who are always sharing a pic on their travels on Facebook. I have not even listened to some music I bought from iTunes.

But I digress.

The notion of the One Punch Investor is an interesting one.

When I was growing up, my dad always told me a story of his friend who was not a professional and did not know anything about investing. All he knew was that SIA was a company with a great future, so he bought lots and lots of SIA with his salary and inheritance starting in the 1960s. He also ate his dividends and reinvested it into SIA.

According to my dad, when his friend retired in the 1990s, he had about 500,000 shares of SIA. Currently worth over $5 million dollars today.

Naturally, I did not confirm this with my dad's friend who regularly visited my home when I was a JC student. And in spite of the story, I took a lot of steps to diversify my dad's portfolio and took the opposite approach - I diversified aggressively and focused on yields from multiple sources.

Here is what I think about this notion of the One Punch Investor

a) Highly dangerous to invest in only one stock.

Investing in one stock also makes the investor lose out on the benefits of diversification.

I can accept that there are many One Punch Investors in Singapore. At least one prominent financial blogger is almost single-mindedly invested in Keppel Corp which I do respect.

If Wharton professor Jeremy Siegel could invest in one stock, I would be that the counter would be Philip Morris although I would doubt that Prof Siegel would own only one counter his entire life. But investing is a marathon and stocks fall in and out of favour. Sometimes, a conglomerate with a sustainable competitive advantage can be run by managers who destroy value. Phillip Morris is constantly worried about lawsuits.

It might be better to look for about 8 growth stocks if you wish to emulate the investing greats like Warren Buffett.

b) You might be a One Punch Investor without knowing it.

While its fun to make fun of One Stock Investors. Many of us might be one without knowing it.

Some of us invest in Employee Stock Ownership programs which is practically investing in one stock. Worse, since you also work for the same company, you are also investing your entire human capital on that one company. May be wise to consider diversification if you fall into this category.

You will get a nasty double whammy if the stock tumbles and you get retrenched at the same time.

c) What would I do if I can only invest in one counter in SGX ?

If I have no choice but to invest in only one counter from SGX, only an ETF investing in global markets would make the cut. I would place all my eggs in the Lyxor World ETF that is currently being traded in SGX. This gives me the benefit of buying different exposure to stocks around the world.

Of course, if I had made such a choice I would have to pay for the ETF manager's expenses and expect a lower return from the index itself.

d) 100 sit ups, 100 push ups. 

Of course, the anime has some nuggets of wisdom. Whether you are a One Punch Investor or a highly diversified yield pig like me, we should never avoid the constant and never-ending improvement that all investors would need to subject themselves.

I do this by maintaining this blog, reading what my fellow bloggers have to say about investing and going through the Edge and the Economist every week - All that on top of my case load.

Of course, it would be very interesting if readers would share what stock they would buy if they were limited to one counter throughout their entire lives....

Sunday, November 01, 2015

Almost 22 months since I left the workforce !

Time really flies...

Thought a quick update is in order.

a) Financial update

It's quite scary to think that I've not had a pay check from a company for 22 months. Even more interesting is that I've yet to draw on my investment portfolio capital since the last day I left the workforce.

Some sales did take place to reposition my stocks and some monies were returned when MIIF was taken off SGX. But all on all, I was able to farm part of my dividends back into the markets and a couple of P2P lending campaigns.

But overall, my portfolio was still down due to the slowdown in the Chinese economy, I expect my overall dividend flow in 2015 to be lower than 2014 but the year is not over yet and I normally assess my annual income in January when the summary statements arrive.

This month is particularly important because I finally paid up for Law school ( Yayyy! ). Accelerated payments by SMU was financially quite stressful for me and I had to hold back on investing in the stock markets when the bear market was making everything seem so attractive to dividend investors. Hopefully the November batch of dividends will see me playing more actively in the markets to boost my income further before I graduate.

2016 is going to be financially challenging year for all of us. I am likely to face dwindling dividends from lower rents but I  have to maintain a mortgage loan with higher loan payments. My CPF can probably last me another 4 years of mortgage payments, but there's no way of predicting what would happen in China over the next few years - one slip in my asset allocation, and I will have to get a job as lawyer in 2017 because I have to, not because I want to.

I find myself combing the China section on the Economist carefully for any investment insight, but so far it's anyone's guess as to what will happen next.

b) Studies update

For this semester, I had a lucky streak of being able to finish all my presentations early which meant more time for my exams. I was so happy last Friday after my last presentation that I spent 24 hours not touching my books and case readings.

More importantly, it feels good to be let out of my cage.

I concluded my pro-bono and community service requirements for my program and have more time in my hands to possibly read some non-law school writings.

This semester I am starting to really stretch the envelope of what it truly means to be JD student. I have started coming up with more innovative ways to render the legal knowledge taught in school. This means really leveraging on my 15 years as an IT guy in class.

This semester, I was able to hack a prototype on Google Forms to advise lawyers on Non-Exclusive Jurisdictional clauses without declaring a single variable.

The class is also warming up to the idea of employing computer flowcharts to elucidate certain areas of the law. The following is a computer flowchart I hacked for a Corporate Law presentation. I learnt flowcharting when I was a JC student doing Computer Science, it's getting a fair amount of attention in class these days because it is simple and useful.

Maybe the folks in Singapore Academy of Law will create some diagramming standards because expressing everything in prose is so 19th Century. ( For that to happen lawyers must believe that they can learn something from IT guys. )

c) Reading list and hobbies

To preserve my sanity I play a Dungeons & Dragons 5th Edition game every week. Every Saturday, I play a polearm wielding schizophrenic human paladin whose is a real beast in combat. At 3rd level, I took out an elite boss with a 42 damage smite attack.

Otherwise I am reading some newer RPG products like the Sword Coast Adventurer's Guide and Primeval Thule.

For financial books, top on my list to read next are all of Teh Hooi Ling's Show me the Money Books and this highly recommended work called Asian Financial Statement Analysis by Tan Chin Hwee.

I've been really deprived when it comes to movies lately, I had to miss out on really good ones like The Martian but I was really grateful to be able to catch the Last Witch Hunter which stars Vin Diesel who is another D&D player.

Next week, I hope to catch James Bond : Spectre.

Saturday, October 31, 2015

Thosainomics for fun and prosperity !

Somehow I know that you like my Thosai postings...

Last week was intense but I just completed all my group presentations. We're going to start slow but over the next few weeks I should be able to come up with more postings for investors. I might book a Bloomberg terminal again and I would share my results with you guys.

SMU has changed quite a this year which I suspect was probably due to a larger student intake. Because of the increase in student volume, it became a lot more challenging to find seats at the basement Koufu canteen.

Because of high rents, the price of food has become ridiculous expensive. In the Indian stall, I ordered two samosa and a piece of tandoori chicken and it cost me $6.90. ( As I am quite an old fart, when I was in primary four, the price of a Set Lunch which includes a steak at the restaurant The Ship at Shaw Centre costs $6.90. )

As a consequence of that, I have been eating quite a fair bit at uber-hipster cafe Kickstart where for about a dollar more, I get fairly high quality fusion food ( The kong pao pork belly is awesome ! ) .

But prices had become fairly ridiculous, as I would expect that not all SMU students are well to do.

So one morning I decided to stray further from campus early in the morning at 7am and went to Waterloo Street, and found an Indian stall which sold Thosai.

The result was a nice Onion Thosai with Vadai at $2.60 shown above. With my standard Kopi-O kosong, I was able to have breakfast for $3.60. Not bad by price standards in town.

So I call my set of insights from this simple lesson Thosainomics :

a) Experiment with your hunger

You need to experiment with your hunger. When I started out, I went for a plain Thosai which was not filling enough but two Thosais or a Thosai Masala made me sleepy after the meal.

The sweet spot is an Onion Thosai at  a median price point which would last me until 12pm lunch break.

b) Go Vegetarian

The price of local food has discontinuities.

The price of economic rice or zhi char goes up quite a bit when you move from standard meat to fish to prawns and to crabs. Similarly it goes down by a fair amount when you downgrade from meat to vegetables. Tofu and beans provide proteins at a fraction of the price of meat.

You can reach your budget easily if you train yourself to downgrade accordingly.

c) Go Indian

Not sure if readers agree, but Indian food is the cheapest among all the races.

While a roti kosong is about $1, it has to be made fresh and requires a lot of labour. Chinese economic rice is hardly economic these days but the effort is made prior to the sale and the work can be batched early in the morning.

In second place is Malay food as I can't eat Thosai everyday. I look for Bee Hoon Soto Ayam every morning as well but as it is not filling enough, normally supplement my meal with a Begedil.

I am avoiding Chinese food these days due to price. A bowl of Wan Ton Noodles is actually cheap compared to Economic Bee Hoon. Just try supplementing your economic bee hoon with a chicken wing and it stops being economic fairly quickly.

The only cheap option is the industrially manufactured Chee Cheong Fun from the drink stall.

But I say yucks to that !

Sunday, October 25, 2015

Prosperity should be a technique, not a theology !

If you have been following the news and social media, you might come to the conclusion that the problems which arise in our society is that people tend to conflate technique with theology when it comes to material prosperity.

a) What is the theology of Prosperity ?

Prosperity as a theology is dangerous idea. It means that belief and faith becomes a sufficient condition to attain material prosperity in this world. It comes in many guises, not necessarily in the form of a religious group. Some authors like to sell the idea that by simply thinking and locking yourself mentally to the idea of abundance, you will achieve material wealth.

This is the a very misleading but sophisticated manifestation of wishful thinking.

It's not just faith that creates the idea that God will make you rich. We adopt faith in projecting the returns of unit trusts, that some of life insurance will make our children rich after we leave this world. That buying a Brazilian property would result in yields and passive income exceeding 15%.

In my personal world of engineering, finance and increasing law - faith is almost worthless. You can make an iron-clad will and your crafty children may find ways around it, challenging your mental capacity if it suits their case. Laws need to changed to protect husbands who get incapacitated during their marriages, worse, some feminists on social are attacking the idea quite aggressively.

And faith in easy answers is getting stronger. Easy answers sell better than complex ones.

Most of us don't want complicated answers because it gets into our way of living the lives we enjoy.

b) What is the technique of Prosperity ?

Not everyone is ready to pay the price to learn a new technique. It requires time, energy and most who understand the technique would not part with that knowledge so readily.

Techniques are hard truths which an investor needs to confront. Many of these are economic or mathematical in nature and requires decades of study.

The risk-free rate is 2.7% about exemplified by returns of the Singapore Savers Bonds. Buy anything with lower yields and you might end up looking like an idiot. Anything which offers higher yields will contain hidden risks such as shifts in markets or the default in the provider.

Buying many different assets generally would not make your richer but can keep your performance closer to the average, but it certainly prevents you from looking like an idiot when the market starts to turns against you.

c) Separate your spiritual and material desires.

You may share your spiritual desires with God, but you are better off trying to meet your material needs via Science/Social Science. It's not the easiest path in the modern world, but it's worth putting effort into studying marketing and scams just to find out how to react when "well-meaning" people present their ideas to you.

20 years ago, I fought a pitched battle against evangelists in NUS on the bulletin board systems, and I held the record of being sent to the NUS Office of Student Affairs thrice in during my undergraduate days.

Today, I celebrate being alive, financially independent and finally getting vindicated.

Keep the Faith Against Faith, because Reason will win over the long term.

Keep the fires burning !

Flame on !