Thursday, October 27, 2016

Death of the IT Project Manager

I was one of the early adopters of the Project Management Professional qualification and held it for nine years from 2003 to 2012. I was reading about the PMETs who are losing their jobs and wanted to understand why there is such a wide gap between the skills desired by the markets and the skills which middle-aged PMETs like me have.

I also read a really badly written book called the Neo-Generalist by Kenneth Mikelsen, one of the worse books ever written in support of a generalist career which paints the picture of a polymath as someone who is a trickster, hipster, and has few practical skills. The book was a horrible experience but it gave some insights into how the modern economy is changing.

For a start, lets look at the typical engineering/IT career path for Generation Xers.

In your 20s, you start out with a Bachelor's in Engineering and is highly specialised in one discipline. It easily lands you a solid job with an above average pay because you can do what you are paid to do. But your knowledge is "I" shaped, it is narrowly focused in one discipline.

In your 30s, you branch into project management. Some guys get MBAs but project management is the only way to maintain a high salary glide-path in your 30s. At this stage, with a certain amount of maturity, your knowledge becomes "T" shaped because you have to develop some organisational and business skills which are fairly broad and general in nature.

At this stage, a lot of people don't realise that becoming a PM has a hidden cost.

The broadening of skill sets comes at a sacrifice on technical skill sets, so it become rusty after a while. The introduction of cloud computing was a hint as to what was to come. And paradigm shifts like functional programming, DevOps and data analytics represent a knowledge hurdle which a technology professional needs to overcome but companies will generally not invest in their workers in Singapore.

So in your 40s, your knowledge is "T" shaped with a broader horizontal line but shorter vertical line and the next paradigm shift eventually kills your career. The older generation of IT Project Managers can talk about servers, routers and switches, but we have since moved into the cloud and are running projects to analyse datasets owned by the company.

The bulk of us in our 40s ask ourselves why are we jobless in spite of having an engineering degree and MBA. Can't really blame the industry as I've attended talks on Blockchains where the Senior staff of some local firms are plugging security solutions which are over a decade old for a technology which isn't even centralised and controlled by one party.

It gets even more exciting if you hit your 50s. If you survive, you will be just those director level staff with no real technical skills whose only job is to keep costs low and retrench staff. At this stage, your knowledge flatlines into a "-". I do not have kind words for senior IT staff as they are quite obstructive and do not add any value to the business. A skill-set is to repeated cut costs through outsourcing and hollowing out of the IT department until they do not even have a team to manage anymore. This explains why Gen-X has some real beef against the Boomers. What skills do Boomers have that Gen-X don't which entitles them to a salary of $250k -$350k. Worse, they are the ones with the hiring and firing power. And don't get me started on how the Boomers benefitted the most from the asset inflation throughout the 90s which Gen-X did no fully get to subscribe to. 

An IT professionals only recourse now is to become "π" shaped. Project managers in their 40s have to literally kill their careers to function as a technical specialist again in a radically different field so that they can continue to be taken seriously. Data Analytics requires a statistics foundation which very few 40-something year old IT professionals can handle. Alternatively, an IT PM may have to take a qualification in a vertical like a "HR qualification" to remain relevant. 

But for the bulk of 40-something year olds, the key question is whether you can accumulate enough wealth to survive a long winter. 

The IT industry with government policies on immigration has basically allowed many engineers to climb a ladder in their 20s but in their 40s they find these ladders got taken away by a combination of policy and technological change. 

They suddenly have no valuable skills and no capability to develop new ones which are in high demand in Singapore today. 

I expect that the same will happen to the elite Computer Science graduate today. 

Hope they can resist the lure of project management career track for as long as they can.

Monday, October 24, 2016

Life-hacks for the money-conscious.

We had to send our kids to the hospital due to both getting high fever over the weekend. Things have only settled down today, so the weekend post has been slightly delayed.

Here are three life-hacks for the money conscious.

a) Roti Banjir Arbitrage 

I read about a variant method to eat roti prata the other day, so I tried ordering two roti kosongs and then poured the curry all over it. I then bought two soft boiled eggs from the drinks seller and place it over my new creation. The result is light years better than any egg prata in Singapore.

However, the creation costs about $3.20 instead of the $3.00 cost of egg prata. So it would seem more expensive.

Fortunately, my wife reminded me that folks normally order soft-boiled eggs as a breakfast set meal so it may be actually cheaper if I ordered kopi, kaya toast and soft-boiled eggs along with my roti kosong instead.

b) Hacking Sheng Siong payment kiosks

One problem I've been facing is that I have always been  collecting the spare change that I have accumulated over the day in a bowl in my living room but I was not very conscientious in spending these coins I have accumulated in the past. POSB coin deposits systems actually levy a fee when you use them which does not give anyone an incentive to deposit their coins in their bank account.

For the past few days, I have been putting coins in this pouch I bought from Action City at City Square Malaysia. Every time I visit Sheng Siong, I would take this pouch with me and make sure that I pay for my groceries at the self-service kiosks which allows me to deposit my coins as payment.

The Sheng Siong machine is so amazing, I can scoop a handful of coins, drop it into the machine and the machine will count the coins precisely and will even provide me change in notes if I had paid excessively in coins. The machine was even able to spit out Malaysian coins which I have mixed in by accident.

This way I can systematically reduce my coin hoard which has reached hundreds of dollars over a years of accumulation and I now try to shop at Sheng Siong as much as possible.

It's no wonder that the Sheng Siong stock price has rocketed over the months.

c) Designer style from Little India

The last hack is simply my latest designer bag purchase which resembles a Balenciaga bag:

Ok, it's not an exact match.

But I paid $3.50 from a pasar malam stall in Little India.

The difference in prices, I am farming back into the stock markets which is currently at the lowest PE value compared to all major markets worldwide.

Things are going to get worse before they better, so its best to be economise before shit really hits the fan.

Wednesday, October 19, 2016

Beyond Sex in Confined Spaces.

I am late to the game to write about the comments made by Josephine Teo that you do not need a lot of space to have sex. While I think she has probably been quoted out of context, it's refreshing to have politicians being so direct on this topic. Josephine Teo herself is a mother of three making her eminently qualified to discuss this topic.

It's not like our TFR can get any worse so it is an area which we can be more candid about.

Beyond sex in confined spaces, it might be useful to look at social science research on the spending patterns of US families to determine whether Singaporeans are indeed stressed out by the economics of starting families.

Let's look at information on "The Magnitude of Scale Economy in Households Size" table found in the book The Five Life Decisions by R T Michael.

Suppose you are single and live alone, we will normalise your expenditure per unit time as 1x.

A married couple will typically spend 1.62x.

A family of three will spend 2.16x

A family of four will spend 2.64x

A family of five will spend 3.09x

In Western societies, the case for marriage is relatively strong. You can expect a married couple to economise and save about 20% more by division of labor, splitting of rental payments and specialisation. Even better is the possibility of having incomes uncorrelated with each other to survive an economic downturn. As such, the case to start a family is strong as it create a unit which becomes more optimal and efficient as time goes by.

The problem arises when we look at Singapore families.

Most singles already live with their parents in a family of four, so instead of a discount when starting a family, a single person can expect spending about 33% more when he splits off from his parents and starts a new household.

Marriages are, thus, very long term investments where it takes decades to create an efficient economic unit.

Here are some possible conclusions from this data :

a) You really need to learn how to practice sex in confined spaces.

I lived with my parents only when my daughter was three years old. It just made more sense to have more members in a household. Life was much better when I did not have a mortgage and our joint families only paid for one broadband account. If there is a possibility of harmonious existence ( which is rare and this makes my wife even more awesome ), then the first few years of building up a war chest towards your first mortgage makes sense.

But as Chan Chun Sing is not sex police, I am not a sex blogger.

More advice will have to come from some other website ( like Xhamster ).

b) Only conscientious people should ever get married.

Once sociological data confirms that marriage requires such long term planning, it rules out all the flakes and "in the moment" people. People who have problems sticking to plan, showing up on time and seeing themselves as spontaneous unique snowflakes needs to get out of the marriage game or end up at Family Court.

Now the good news is that some folks become more reliable as they get older.

But there's a bigger problem...

c) There is a shelf life for both men and women. 

It's no use knowing that men do not have a real biological clock.

From a purely cold and calculated economic point of view, you need children for a family unit to achieve economic efficiency so the best time to settle down is earlier rather than later.  While there is a biological clock for women and I will not belabor the point here, but as it turns out men have a socio-economic clock as well as they need to be economically vigorous to have the resources to afford and raise children and create productive family units.

I think this reality is truly what gives Josephine Teo nightmares - once men find starting families no longer economic in spite of being biologically viable and that they can't go through the increase or hump in family expenses at the first stage of marriage, they will just stay in Tinder and be fuck-boys forever.

Of course, reader might take offence at such a cold calculated way of looking at formation of families.

If you want a romantic blog that justifies your touchy-feeliess, go read Tree of Sexuality.

Tree of Prosperity is for cold, calculating people.

Friday, October 14, 2016

Personal thoughts on Phillip SGX APAC Dividend Leaders REIT ETF

The folks at Phillip Capital Management invited financial bloggers to a session where they introduced us to this ETF which just ended its offering period yesterday to quite a red-hot reception from investors. Many other bloggers are talking about this ETF, so I will just say a few words about this new product.

Let's start with the negatives :

a) Dividend yield of 4.5-5% does not make my heart sing.

The fund is not really attractive for high yield investors in a market where a REIT like Fraser Hospitality Trust can give more than 8%  when bought directly from SGX. However, management has asserted that it is reasonable to expect about 5% growth in dividends over time, which makes this REIT more attractive to investors who are not so much looking at dividend yields but dividends growth.

b) Expense ratio of 0.65%is on the high side for an ETF.

The fund expects an expense ratio of 0.65% which is more than double that of the STI ETF. But the management is not completely passive because the manager needs to react to the occasional rights issues which come about by every now and they promised that they will subscribe to issues which would be advantageous for the investor.

Management has assured us that expense ratios of ETFs can drop as the size gets larger and operations become more efficient. My skeptical nature believes that expense ratios will drop when there is more competition in the markets from other REIT ETFs.

c) 60% allocation to the Australian market introduces some country risk.

As the fund is fundamentally indexed via net dividends declared, the REITs with the largest dividend payouts tend to be clustered in Australia. This makes the fund less diverse and introduces more AUD forex risk. Personally, it's not so much of a big deal because most of my REITs are local so I would benefit from more diversification if I introduce this into my portfolio.

d) At least for the Singapore REITS component in the ETF, you lose the tax benefits from investing directly in them.

This revelation actually makes me angry, but my anger is not directed at the ETF manager. Basically when you buy a local REIT, you are not taxed at a personal level. If the REIT declares 90% income as dividends, it is not taxed at the corporate level as well. When you buy a basket of local REITs through an ETF, it attracts corporate taxation of 17% at the fund level which really sucks for the folks who need more diversification.

However, the asset allocation to Singapore is not particularly high, so it may not be such a big concern.

Now we've gone through the negatives. At least from my point of view, the ETF launch is a net positive for Singapore. Fund managers cannot sustain themselves through active investing funds because the costs is too damn high. This REIT ETF is one of the first ETFs that bring fundamental indexation and Smart beta to Singapore markets which is great because it allows a new kind of tactical asset allocator to emerge amongst retail investors.

I can definitely see who would be best suited to this product :

a) You are into the Permanent Portfolio investment strategy.

You can now build an Equity, Bond, REIT and Commodities portfolio using a combination of the STI ETF, Asian Bond ETF, this REIT ETF and Lyxor Commodities ETF to create a portfolio to weather any possible economic situation.

I think this REIT plays best to investors who like this strategy.

b) You already have a fairly decent local REIT portfolio and want to reach overseas.

If a person already has a fairly sizeable local REIT portfolio, this product gives you some amount of diversification towards international REITS. And you only need to hold one counter to start diversifying your holdings to Australia and Hong Kong.

c) You want to arbitrage the ETF against its constituent counters.

Right now I am not sure whether this would work. A REIT ETF might be valued at an amount lower than the underlying net assets value. Phillip says that the NAV would be published on their website soon enough so there is a distinct possibility of buying $1 worth of REITS with 99 cents, but I'm not sure whether Phillips will also play the role of a market maker in the markets to prevent arbitrage from taking place.

d) You keep pestering financial bloggers which is the best REIT to buy

This ETF certainly provides a better answer from me in the past which is "Buy as many small positions for all the REIT counters in SGX. This will eliminate the need to micromanage your investments."

If you are too lazy to read up on the prospects of individual REIT counters, paying an expense ratio of 0.6% for a nice 5% yield is reasonable price to pay because you can spend your time on more profitable pursuits.

Anyway, I will be putting my money where my mouth is and will buy at least one small lot at least to keep this ETF in my radar.

[ This REIT is the first of a new kind of Smart Beta ETF which I wrote about months age here ]

Tuesday, October 11, 2016

A perfect storm for REIT investors.

Another point which was keyed off the meeting we had with some fans is the idea of the perfect storm for REITs.

Just to summarise REITs are the perfect instrument for the investor who is gunning for financial independence.

REITs are Collective Investment Schemes so come under moderate scrutiny by the Singapore Government. Issuing REITs require a high level of compliance to prospectus requirements. Investors then get rewarded with be able to diversify their holdings among multiple pieces of property. REITs are also held by back with a gearing limit of 45% and a 25% on development property. The most important feature is that REITs must pay out 90% of their income to retain their benefits.

A combination of these investor friendly restrictions and tax benefits has resulted in a huge growth in the REITs market and many investors who are financially independent today count REITs as a mainstay in their dividend portfolio.

But what can go wrong ?

A perfect storm for REITs investors looks like this :

a) Rising interest rates

One fear is Janet Yellen after achieving a level of comfort in jobs growth in the US, decides to raise interest rates. This will create ripples on SIBOR which would affect interest payments for the highly geared REITs investments.

In this scenario, investors should expect getting less dividends on their investments.

b) Lower rents due to oversupply.

The second fear is oversupply. This is likely to be felt in industrials before the end of the year. I imagine retail property to be hit badly over the next two years because of changes in consumption patterns. Singaporeans have always been buying online for their goods and now I always make it a point to search Carousell if I really want something badly.

In this scenario, tenants are willing to pay less for shop or factory space, hurting investors further.

c) Removal/reduction of tax benefits.

Currently, if REITS pay out at least 90% of the income they receive, they will not be taxed at the corporate level. This was done to promote the asset class and promote the Singapore markets. Since its inception, the government has been slowly scaling back some benefits for REITs. In 2015, REITs no longer have stamp duty concession.

The next time the government will review this tax concession will be in 2020. It's too early to guess whether this will taken away but investors should be aware that these concessions can be taken away once the rationale for them ceases to exist.

Not only will investors be entitled to less dividends, REITs no longer need to provide a 90% payout to obtain tax breaks.

If (a),(b) and (c) occur at the same time, we will have a perfect storm for REITs investors and I expect the damage to be quite significant for most of our portfolios.

The only defence against this is to promote diversification and limit REITs to smaller part of your portfolio.

The problem is that high-yielding equities are quite rare in Singapore markets and you will need to lower your expected yield to around 5% to have a decent non-REIT equity portfolio.

Saturday, October 08, 2016

My Cinderella Story.

One interesting notion I learnt from the AAR of our talk is idea of a Cinderella Story.

Here is an example of a Cinderella story of fictional finance guru Ah Huat :

" Born to a single mum, Ah Huat grew up in a one room flat. Partially blind from a birth defect, Ah Huat joined successive gangs, first extorting money from cardboard aunties, and then dealing with lifestyle drugs after dropping out of primary school. Ah Huat's life changed when he was thrown in jail. Upon his release, he dabbled in multiple businesses but was cheated by someone and became a bankrupt at age 22.

At this time, Ah Huat decided to turn his life around. Ah Huat discovered (Forex / No money down property techniques / Internet Marketing / Insurance sales ) and has been making $10M every year from age 24.

Today Professor Ah Huat, age 32, now holds 3 Phds from different countries, has a great and loving family, and lives in a GCB.

Now, you too can become like Ah Huat if you have pay $6,000 for a money making seminar !"

People like Cinderella stories when they are told by investment gurus.

I always thought that one of our biggest weaknesses (and strength) as a coalition of financial bloggers is our lack of a Cinderella story.

For our sessions, we wanted to persuade the audience that value and dividends investing is a strategic move that is best undertaken from a position of strength. You must have a steady job and has to take on a lower standard of living. There are no short cuts in life.

We don't have any of the following stories to share which would be familiar to you if you attended a lot of finance sales-driven talks :

a) We don't brag about dropping out of school. 

I suspect that we are all quite academically inclined and we were well above average in Maths. After having had deeper conversations with 15WW, I realised that he may be a superior investor because he somehow managed to internalise the Kelly Criterion, which is an intuitive tendency to up the bets when the odds gives him the largest edge.

b) We don't have very heroic tales about being abused or retrenched at work. 

I made some career mistakes in the past which explains why I went into Law School immediately after being able to replace my income with my dividends, but they were never catastrophic.

None of us were ever retrenched. As a consequence, we never felt any need to stick it to Man.

The Man was actually quite nice to us with REIT tax holidays, hawker centres, etc....

c) We were never bankrupt. 

Personally, I don't understand why folks dig the bankruptcy story. When someone becomes insolvent it is often at the expense of their creditors who are the folks who made a sacrifice to lend them money in the first place.

My starting position will always be that bankrupts are untrustworthy folks. Unless it is medically or circumstantially driven, it hints a lack conscientiousness in money management skills and an inability to plan for the future.

While I think we need to be more forgiving of bankrupts so that we can achieve a risk-taking culture, it's an entirely different thing to celebrate it altogether.

d) Our personal family circumstances are fairly average when we were growing up.

We never joined a gang as youths. Never really took drugs. Our parents never beat us. We did not come from single-parent families. Or parents were never compulsive gamblers.

Our circumstances are quite average and the same as our audience.

e) Generally we never under-performed in most of the stuff we did.

I did repeatedly fail my CL2 exams and IPPT but it was never fatal to my academic and working life. I also missed out on some scholarships in my youth which still upset me today. If you googled my name, I was in Singapore's first International Informatics Olympiad training squad in NUS  but I was too young and foolish to cherish this opportunity and was dropped out of my Olympiad squad. This is one of the biggest regrets in my entire life. I think my life would be completely different had I qualified.

Hardly a heroic story because I was never in ITE. I also never got less than 180 for my PSLE T-score. No teacher ever told me that I would amount to nothing (except my Chinese teacher who spent more time vomiting blood from reading my essay submissions) .

So no Cinderella story there too....

But plot twist !

Kyith shocked me when he told me that I actually told the audience a Cinderella story during the session...

I was replying to a question how to deal with an economic downturn.

I related a story about my time in Singapore Mercantile Exchange where we were insulated from the Great Recession of 2009. My portfolio was down and I had easily had an entry-level BMW worth of paper losses. Most investors were going through a tough period in their life.

From 2008 to 2010, I invested every single cent of my earned income into the financial markets and lived only my dividends scraps. I had the confidence to do that because I read a research paper on how long recessions typically last, which is around 18 months on average and I was already a year into the recession when I read the paper. In those days, Cambridge REITs  was yielding 12% and a portfolio of REITs can deliver 10%+ yields.

You can guess the rest of the story. Without the Great Recession of 2009, I doubt I would be where I am today.

Ok, it's still hardly a Cinderella story.

But it's the closest one I know of so far.

Friday, October 07, 2016

Session with Financial Bloggers : After Action Review

Today's session was a blast. For a maiden effort, it was a good attempt. After all, we did sell out within 24 hours. Our event's unique selling proposition was that it had ample substance, and we do not use this session as an attempt to get more sales from the audience.

With this event, what you see is what you get.

Content-wise, I was especially surprised at what Brian bought to the table in today's session - it really changed the way I looked at REITs. This idea alone makes the session worth the price tag we charge for. As we only saw each other's slides and did not rehearse our presentation together, some of the content was also very refreshing to me.

I am pretty sure each of us had a different take on what happened just now, but I want to be candid about our performance today because we are definitely trying to sustain our momentum with these blogger meet-up sessions in the near future.

Here are some areas of improvement we discussed on after the session ended. This should give fans an assurance that our event would be even better.

a) I thought the readers of financial blogs were a very punctual bunch, we should have catered for some snacks and allocated the first 30 minutes to fellowship so that we can break the ice with the audience before we start.

b) On hindsight, our panel was a little too long and too formal. We prepared too many questions and one thing we will change is that we will be more spontaneous in future events and not prepare too much and just answer the questions to the best of our ability. We do have the capabilities and knowledge to handle the Q&A but we should not have scared each other by designing hypothetical questions for each other. Perhaps the session should be half an hour shorter.

c)  In the future, if we can anticipate a common question in the audience, we should address this in our presentation slides with written notes and diagrams. Answering a complicated finance question without powerpoint to supplement our answers will cause the audience to lose their train of thought.

d) Finally, as you can tell from the picture, the lawyer look does not go well with a fun and engaging finance talk so expect me to ditch my 'armor' in future sessions as well. I was also told that I handled one Q&A with insufficient pathos, details which I may turn into a longer blog posting in the future as it concerns the lost of human capital in a recessionary economy.

So whether you are a paid customer, a reader of this blog or someone who missed our event, do share with us what kind of event that you'd like to attend in the future and actually be willing to pay money for.