Friday, April 29, 2016

Cherish the slackers in your life !

Yesterday, my network of law students and lawyer friends are spreading news about the suicide of a legal trainee who was recently not retained by a reputable law firm and dumped by his girlfriend. Beyond this piece of news, I am unable to verify the information further because if it were true, it should have been all over the mainstream media by now.

One question I ask myself about my law school experience in SMU is that why is it so different from my time in NUS Engineering and Business school.

In Engineering school, we were generally left alone to pursue our own interests, the biggest problem is that there is too little drama so most of us have little to talk about beyond circuit diagrams and equations. To seek trouble I did public speaking and hung out with the bohemians from the other faculties.  In Finance school, there was no academic pressure because we all worshipped money. Grade were secondary to passing the levels of the CFA.

Law school is a new beast. The experience is overwhelmingly negative and I think we cope by becoming sociopaths. Group work has plenty of politics and, without providing details, some people I know do stupid things which may affect their reputation after they leave.

There is too much drama in Law School and I want to propose a reason for this.

There are insufficient slackers in Law School ! The folks who drink and party from Law School are not real slackers. They are well read in their cases and can argue even in a drunken state.

In Engineering and Business school in the 90s, there will always be a bunch of students who do not prioritise Engineering in their lives. Often they might spend a lot of time on CCAs. Others party and drink. Slackers, if anything, are probably more intelligent than the hard workers like me during my undergraduate days. It's not easy to get into University by slacking off when only 15% of the population could get into NUS in those days. So I believe that slackers just have other priorities in life.

In the modern University, slackers matter a lot.

For the folks who put in decent effort in school, we occasionally get bad grades but because of the existence of slackers, we don't really fall very far down the curve. A friend even claimed that his academic achievements were not by virtue of his brilliance, but by the fact that his peers were so bad.

The situation changes in a place like Law School. There is no room for error. Put in 99% of effort as opposed to 100% of everything you have, you may slip from 75% percentile to the 40% percentile because everyone has already figured out how to do well.

This is not a healthy environment.

People become neurotic and anxious. In SMU, there are rumours that  some students conceal red-spot textbooks in the libraries.

Perhaps the anxiety is the reason why the trainee just decided to off himself. From his perspective, his world has ended. There are so many folks who can't even get into a local University. Some can't even get into a Secondary school. Being a parent myself, I am very sad for his parents.

While I have yet to get a training contract, I will avoid that rumoured law firm. Once a life is at stake, I cannot but wonder as to the kind of corporate culture which can lead to this tragedy.

For the folks who are in University like me but in other faculties, I hope that you would cherish the slackers amongst you. Don't write them off. They are probably just as smart and capable as you are but subscribe to a different life philosophy than you do.

Without them, your lives are going to be a lot more dramatic with no room for error.

This can warp your perspective.

And it can cost you your life.













Wednesday, April 27, 2016

We are better off being a Transactional Society !

This week is a good week.

Some dividends showed up in my bank account and it was running dry after I overspent during the 5 days between my last exam paper and the start of summer term. I set aside all my family expenses during the early parts of a three month dividend cycle. What remains in my bank account is a bare minimum I have to pay for my personal entertainment, food and transport.

I have spent over 30 months without a pay check and managed to do this without touching my capital and living entirely on dividend pay-checks. My family has no earned income. In the process, I have also paid 30 months of my mortgages and my entire school fees.

No other society can make it so easy for someone to able this with only 15 years of working life in IT.

But I'm also not a romantic about our society.

The low income and non-existent dividend taxes I needed to build up my portfolio is almost unique to Singapore. The price we pay is that there is no welfare. Every negative externality like cars and alcohol are taxed aggressively. The primary stance towards a person who is seeking help is for them to engage in self-help. Compared to Socialist Europe and all those countries Singaporeans flee to, we can be harsh indeed.

It becomes disturbing that there are now calls for Singapore to become less transactional, to be less kiasu, and to be less optimised with our policies thinking that it would make our society better.

What do 'Social Democrats' and liberal brownshirts want to achieve when what they truly desire is to tax everyone to pay off a smaller proportion of the population which might consist of some needy fellow citizens, but would in reality consist of mostly citizens who are trying to game the system.

If they succeed, I expect the investment community to be the first to suffer.

Liberals in attempting to get rid of the "no free lunch" approach in Singapore will, in the process, eliminate the "cheap lunches" we've had for the past 50 years.

Let me illustrate with an example of unemployment insurance, a hot by-election topic which, ironically,  would have benefitted me greatly when I transitioned into law school.

We can actually create a very rough estimate of the cost of unemployment insurance to the tax-payer. Suppose there are about 3.5m citizens drawing $3770 as median income. Suppose this policy will increase the number of folks leaving work to about 5% of our population every year. If each instance of unemployment will result in a total pay-off of about 6 months of salary in total, the price tag to the tax-payer will be close to $4b, about half of our personal income tax collections in 2014. And this does not include the cost of hiring social workers to administer this payment.

The income tax of everyone working here must increase by 50% to cover the price tag of this unemployment insurance !

Now suppose you create this insurance yourself as a median income salaried worker, all you need to do is to save about $23,000. If you can save $500 of your earned income every month,  4 years of work will secure a contingency plan for your unemployment, not to mention a small investment income stream if you were to keep working.

Of course, my solution cannot cover the weakest members of our society. I wrote this article to illustrate to everyone is that there is a communal solution or an individual solution to every problem.

I've done my small part and have overclocked my community service hours in 2015 to help one disadvantaged family by giving math tuition to their two kids. It remains my most cherished memory in SMU. I see more pro bono hours ahead when I return to the workforce in 2017.

I propose that liberals do the same so that they can assist and gain exposure to the weakest members of our society using their own personal time and resources instead of harping on why Singapore is such a cold, transactional society.















Sunday, April 24, 2016

Why IT engineers are similar to cleaners in Singapore ?

Do not let the title distract you from the central message which I will bring to you today - There is no better time for a A level graduate to go for an engineering degree with the recent reforms announced by the government.

Before I get to that, I will first answer the question as to why IT engineers and cleaners have quite a bit in common. If you read the article in Labourbeat by MP Zainal Sapari, one of the key reasons cleaners did not enjoy an increment for a decade was due to outsourcing. Outsourcing was then led by the government which made the decision to hire cleaning services from private sector providers. This cut-throat competition forced these private sector providers to make "suicide bids", bids which forced unskilled and uneducated workers to take on work at a lower price. This was the primary reason why cleaners enjoyed a lower standard of living over the years.

At least IT Engineers were in a similar situation for the past decade. Outsourcing and a liberal foreign talent policy basically meant that engineering work could be done at lower and lower prices. Outsourcing MNCs eventually tried to sell their services also at cut-throat prices but if you really examine the kind of labour they deploy in IT departments of most of their customers, it was mainly staffed by engineers with the barest qualifications. An NCC diploma can be assigned a senior systems engineering role and then deployed to support a statutory board. If you fire him a decade ago for his attitude problem, he resurfaces under another statutory board with another MNC because no one wants to do tech support. The net effect is that engineers don't get no respect because we are support staff and people who meet us just spit on us when systems are down.

But engineers are not unskilled labor. We can fight back. We just reinvent ourselves as bankers and investors. During the boom town years in banking, a Masters in Engineering can easily stop doing engineering work and get a starting pay at $5,000 in a bank.

Singapore is now facing the consequences of this mistreatment of technical talent. Trains are breaking down and startups cannot find the skilled programming workforce to create the apps which can change the world. Worse, the oil and finance sectors are not doing too well these days.

Which brings us to the new policy of paying engineering talent $4,000 a month for fresh graduates.

I think this is a powerful game changer for the whole industry. Given that our GDP growth is struggling to reach 2% a year going forward, a 20% increase in engineering salaries can be seen as 10 years of progress. Kudos to the government for doing something significant for a change to preserve technical talent in Singapore !

A  promising engineering student now has a $4,000 baseline to look forward to upon graduation. SMEs who cannot pay top dollar for engineers now has to work with the polytechnics to provide apprenticeships to build a talent pool for themselves. The Silicon Valley startups are unaffected because engineers cost about $120,000/yr in the US and Singapore remains fairly competitive in this arena.

Now is the perfect time to do engineering and computer science.

But here's some more advice :

a) Time to beat the Budget Babe ! Better save at least $30,000 a year from your excess income.

My friend Budget Babe became viral because she claims to save $20,000 a year. A fresh engineering graduate with a $3,600 take home pay with a 1-2 month bonus should target a $30,000 savings in his first year of work. The great thing about engineering as a career is that its unpretentious and your career progress will not be impeded if you do not dress well or spend lavishly. Just carry on living like a final year university student.

b) Your second degree can be something that does not depreciate so quickly.

Moving forward, I actually think that engineers have a bright future for at least a decade. But with $30,000 savings a year, it only takes 2-3 years to save enough to consider an advanced degree like the MBA, MPA or JD which provide alternative career paths. But that's only if engineering stops being fun by then.

Even better, you can continue with the CPA or CFA without really quitting your day job.

Domain skills can be used to complement your technical skills. The difference is that now you can actually afford it at a younger age.

c) In the worse case, you can just treat your engineering career as bonded slavery for 10 years by learning how to invest well.

I won't go as far to say that engineering work is slavery but some of you might be unfortunate enough to be doing government procurement. In that case, saving $30,000 for ten years can still net you a portfolio of at least $300,000. This will produce $2,000 a month at 8%.

You can then look at different options later. If you remain single at age 35, there are many career options available to you in the private sector or other countries. Good news is that under this government guarantee, you can limit your bondage to 10 years which is great compared to engineers in my generation !

But I think a true technical professional should just say no to a career in government procurement. Trust me on this one !!!

d) You are still likely to be "betrayed" within 15 years.

Betrayal is a very strong word but when that happens, I doubt Singaporeans will become angry with the government for systematically eliminating your technical jobs when you reach your 40s. Both oil and gas, law and finance had its heyday with smart guys getting high salaries by joining these sectors. If anything our government is likely to be overly compassionate compared to the private sector.

No career path will survive prosperity for too long.

Establishing Singapore as a Smart City will take about 10-15 years of effort and engineers will experience rising standards of living compared to other professions. As in the past, the cost structure to sustain this hierarchy of technical talent will become too high and when you reach 40-something years old, the young 20-somethings then will want to know why you are so special and why are you put in this pedestal. You will become a burden to the tax-payer who will consider you a "jiak liao bee".

This is the ultimate advice, if you want to see how society will treat you when you hit your 40s. Just look at how society treats the 40 year olds now. But hopefully, you would have done something to reinvent yourself before the government reinvents Singapore decades down the road.

In summary, while my generation of engineers would probably not be able to benefit from this development, Millenials now have a pretty solid reason to study engineering or computer science. Imagine a career where you get to play with all sorts of toys, hang out with other geeks, dress badly, and still take home $3,600 a month on your first year. If the work does not suit you, the higher starting salaries effective nets you an option for a career change within 3 years.

I can see definitely see the smart geeks moving back from Law and Medicine now.

See, this is an optimistic post !








Thursday, April 21, 2016

Introducing BigScribe and the Crowdfunding e-book.

As a single personal finance author and blogger, my capabilities are limited.

However, as a coalition of financial bloggers in Singapore, our potential is limitless.

A few of us financial bloggers have pooled our expertise, effort, and a small amount of capital together to form BigScribe Pte Ltd. The aim is to create products of higher quality for the Singapore investing public and find modest means of revenue through advertising.

Our next product is on crowdfunding which has taken the financial world by storm. Through crowdfunding platforms, regular investors can invest small amounts of money money to SMEs which can have very attractive returns of up to 30%p.a.

But there is no free lunch in Singapore.

Local banks may avoid providing loans to risky small businesses for valid reasons. To ensure that investors do not get burnt too badly from a default event, we've prepared a guide on how to participate in this financial revolution.

This e-book is free, you may download it by clicking the link below :




http://www.bigscribe.com/crowdfunding-demystifying-the-investing-frontier-for-retail-investors/




Tuesday, April 19, 2016

Exams are over ! Quick update !

Just a quick update.

a) Exams are over

I am glad that my most intense semester is over. It should be smooth sailing towards my graduation in 2017.

b) Secured 6 weeks worth of internships

I was actually  interviewing with law firms while preparing for the exams, while there still some anxiety as I have yet to obtain a Training Contract, at least I can say that I have met my graduation requirements. I will be spending the next few days hunting for work after graduation.

c) Financial markets recovery is still intact

While I am less optimistic about the Singapore economy, the markets are doing ok. Will have a more detailed update in a few days time.

d) Readings

It might be mind boggling to some but I actually finished reading the Path. This is a page turner and I finished it in two days while preparing for my Equity and Trust exams. This is a fascinating exploration of Chinese philosophy which has become the third most popular course in the Harvard campus.

The authors took a lot of pain to distill Chinese philosophy into its essence and made it relevant for millenials and knowledge workers. Of course, to make it happen, certain aspects of Confucianism and Taoism would be ignored.

I wish I could explain personal finance that well.

e) Recreation

The problem with me is that summer term starts next week and I will be back having nine hour lectures a week. This makes recreation a serious priority until Sunday.

I can't play a very intense game like XCOM 2 until next week and will probably be installing Mortal Kombat X into my PC for some fun. I would also be completing Gundam Iron Blooded orphans over the weekend.

I will be talking about the reforms to Engineering salaries in my next post...

Today is my daughter's birthday and I should focus on celebrations instead.






Saturday, March 26, 2016

Personal update and short break from blogging.

Here's a personal update from me just before I begin exam preparations.

a) Financial markets

I think my financial situation is much better than a couple of months ago. Markets have recovered a bit, but may dip downwards over the short term. The end of March would see a round of dividends coming in which would be applied to my next three months of living expenses, with all the medical emergencies behind me, I should be able to park some money back into the markets.

But the better news for folks with home mortgages is that SIBOR is flat. My belief is that the Fed would not raise interest rates as much as what the pundits would like. China remains the biggest risk for investors.

Of interesting note is that the financial media is starting to talk about this thing called Smart Beta ETFs which have yet to appear on the local scene, maybe I will get to talk about it in further detail after my exams.

Another piece of good news is that Singapore just launched two equity crowdfunding portals. Unfortunately, I do not qualify as an accredited investor yet so perhaps one reason to get back to the workforce would be to work towards that second million in investment assets.  My position is that its high time regulators stop protecting retail investors and allow perhaps us to invest $50,000 into an equity crowdfunding platform - some investing is emotional and aspirational and some folks just wanna own a tiny slice of an aquarium. ( Even I wanna own a game-shop one day but don't want to hang out with smelly Magic Players. )

I do hope to do one more research paper on this topic.

b) Law School 

I was very lucky to clinched one internship for the holidays so I was at least able to fend off some anxiety over graduation requirements but my studies this semester is a huge mess as the subjects I've taken are perhaps one of the hardest in the JD program (Equity and Trusts is giving me a headache).

So I started preparing for examinations early and have been spending some time mugging in the library. This is perhaps the lowest point of my JD experience with nothing working out for me so far.

If I survive this episode, things will start looking up for me.

c) Books

Beyond the usual periodicals like The Economist, I am stuck in the middle of Humans are Underrated by Geoff Colvin. So far, I am not really convinced that it has any useful insights. Books have been talking about creativity, empathy and design for decades but sky rocketing salaries are still reserved for software engineers in the US and the hardcore professions elsewhere. At best, books of this genre can convince me that all professionals would need to develop soft skills to thrive.

But then why are 40-50 year olds with experience and soft-skills driving Uber taxis instead of keeping their jobs in the corporate world?

d) Hobbies

I just watched Batman v Superman and almost wanted to put in a full posting about taste. Critics panned the movie, but many of my friends found it entertaining. There were some unnecessary slo-mo scenes but overall I had a good time and the movie did not seem boring at all. I really look forward to the Justice League movie now.

Growing Your Tree of Prosperity remains my best-selling and most embarrassing product on this blog. It was not edited because I let the publisher convince me that it was not necessary and some money could be saved. Some folks slammed my poor grammar ten years ago. But book sales remain high and more importantly, folks are accumulating $100,000 on the advice from the book. My other works never made the best-seller lists despite solid editing and more sophisticated advice. Maybe the poor grammar allowed me to click with fellow Singaporeans.

Perhaps I am not a beautiful "English Literature person" who insist that every movie must be a rarefied experience with a fabulous plot ( I am the kind of guy who enjoyed The Mermaid and White Chicks ). I carefully cultivate my indifference to good taste in wine, movies or fiction because when you juggle law, an investment portfolio and keeping up with technology, you need to enjoy any crap that is being shown in the cinemas with the limited time you have.

Of course, "numerical people" often have to endure being labelled with bad taste by people who are more sensitive to aesthetics.

This is not the fight we should be striving to win.

Perhaps in between mugging sessions I can catch the Brothers Grimsby.

Catch you guys in about 3-4 weeks when the exams are over.









Wednesday, March 23, 2016

How to think about a basic income in Singapore.

Some societies are starting to think about implementing a basic income. A basic income is a form of unconditional welfare that gives everyone a basic salary to live regardless of whether he has a job or not.

This idea is attractive to both sides of the political spectrum. The left obviously want some more ways to narrow the rich-poor gap. The political right thinks that it is a form of welfare which does not require a lot of social workers so it keeps the government lean and mean - everyone gets a small wage so long as he is alive and kicking.

Singaporeans are probably not at the stage to consider a full basic income because it would rob Singaporeans of the will to go out and do some solid work for the country. But done at a very small scale, a fixed amount of funds going into every citizen's spending account every month may possibly incentivise someone to take bigger entrepreneurial risks. It also provides home-makers a small allowance. It would certainly benefit the folks in my age bracket who is facing structural unemployment.

Suppose we start at a very reasonable $100 a week or $400 a month for all citizens. There are 3.27M Singapore citizens here, so the price tag will be $15.7B a year. To put a perspective on how much that is, the value is twice that of the Pioneer Generation Package. For the entire FY2014, personal taxes collected is equal to only $8.9b with GST collections being about $10.2b ( From here ). As part of this mental exercise, everyone must be willing to double their income taxes and GST to put $400 into every citizen's pocket every month. Of course, in this exercise I did not cover changes to corporate taxes because the whole point is to get Singaporeans to become more entrepreneurial.

This arithmetic exercise can result in different conclusions. Some readers will interpret this as the Singapore government being able to afford a $400 basic income - just increase personal, GST and corporate taxes. Others will argue that it's not worth levying so much taxes on the middle class so that everyone can get a pittance every month, it is more effective to use the money to improve the transport or education system which has a better impact on citizens.

Of course, you can roll your own basic income. To generate $4,800 of income a year, you would just need $60,000 invested at 8% yields or $70,000 at slightly less than 7%.

But perhaps subtle change will allow all Singaporeans to attain this without levying a cost on tax-payers.

There is still no such thing as a SG-REIT ETF. It's such a simple idea that I'm sure some folks have thought about doing this.

If SGX can approve a simple product which is a fund consisting of equal-weighted REITs listed in the Singapore stock exchange, everyone will have access to a highly diversified real-estate portfolio which currently yields 7.3%. Singaporeans don't have to be very sophisticated to get their basic income of $400, they just need to accumulate $70,000 and have an account with a local broker.

But I can imagine why this would be a nightmare scenario for professional fund managers.