Wednesday, July 15, 2020

事前孔明, 事后曹操

Calvin Cheng has said on his Facebook that a lot of social media commenters are "事后孔明", basically acting as hindsight 20-20 election strategists telling PAP to wake up their ideas and start soul searching because the electorate no longer tolerates bullying tactics. Others have been very liberal in sharing conspiracy strategies. Calvin was mocking keyboard warriors for being hindsight 孔明s, brilliant at strategy but only after the fact.

That is fine and good. I think Calvin Cheng's got a good point, but what is the alternative to that?

What I want to explore in today's article are possible alternatives to being armchair hindsight psephologists, so put my D7 in AO-level Chinese to good use and I inverted "事后孔明" and added a little bit of Three Kingdoms flair into the title of the article shown above.

This is a better alternative to being hindsight strategists this GE2020.

a) We should be brilliant strategists before the event - 事前孔明

孔明 was one of the most brilliant military strategists who served Liu Bei during the Three Kingdoms Era. An artistic  representation of Kong Ming is as follows:

Shokatsuryō Kōmei | Koihime Musou Wiki | Fandom

The simple alternative is to make your predictions before the fact.

One actual tool is the premortem, something we always try to do in investing, since our best-laid plans tend to fail quite often. It is useful to consider every scenario where the retirement plan fails and figure out what needs to be done before the fact. One of the things we have to do is to ask ourselves " If PAP fails in Seng Kang, what would the probable reason be?". Unfortunately, this has to be asked prior to the voting and I was more too fixated on the US elections to care about what happened in Singapore. But in five years time, WP supporters can ask themselves "If WP fails to hold Seng Kang, what would the probable reason be?"

In finance, we already know that one way a good plan can fail due to "sequence of return" risk. The best practice would be to build 2 years of cash reserves before quitting their day jobs.

a) After the fact, we should brutally execute our plans - 事后曹操

曹操 or Cao Cao was the tyrant and main antagonist of the Three Kingdoms storyline. My favourite artistic  representation of Cao Cao is as follows:

Sousou Moutoku (Koihime Musou) - Koihime†Musou - Zerochan Anime ...

Once all the strategizing is done, the only thing left to do after the fact is brutal execution. Cao Cao executed entire villages to meet his agenda. If you look at the behaviour of keyboard warriors, their mode of execution was limited to asking PAP to do some soul searching and stop bullying tactics.

One area where brutal execution can possibly work is where the keyboard warrior does his own soul searching. Parties don't have souls but people do regardless of party affiliation.

In finance, we adjust our Bayesian indicators. WP is gaining traction. This has to change our portfolio mix. At a personal level,  I immediately adjusted my greater portfolio to be more defensive because I believe that PAP ( and not Jamus Lim or WP ) will enact their own policies to increase labour's income share. It will not be called minimum wages or universal basic income, but it will shift the balance of labour over capital.

At a more brutal personal level, I felt that I misread Seng Kang because I was personally alienated from my own kind. I can see Millenials being angry at being underemployed, but I underestimated Gen X's resolve to teach PAP a lesson. 

But what is the source of this alienation?

I feel that I have fewer friends than the average Gen Xer because I find conversation between most  40-something-year-olds really boring. My secondary school chat group were swapping pictures of luxury watches this week. I think whoever started this was really tone-deaf and not everyone in the cohort did well in life to own a Rolex so this was very cruel. I also have nothing in common with my peers. Case in point, I refuse to attend any U2 concert. Instead, I prefer watching anime like Kono Suba and Rise of Shield Hero.

Brutal execution for me would be to double down my engagement with Millenials and Gen Z who I feel much in tune with because they are still hustling and doing their best to find their place in this world. I still see my life as a work in progress.

I think if keyboard warriors do their own soul searching, they probably could benefit from having a greater sense of urgency in the brutal execution of their life plans.

Suppose you are happy and Seng Kang has to the Worker's Party, has your life situation changed? PAP still has more 66% and you need another 5 five years to give another GRC to the Worker's Party.

But those who are unemployed remain unemployed.

Those who are underemployed remain underemployed.

Those who are BBFA remain BBFA ( although I suspect they remain happy to be that way ).

If your political convictions were driven by your personal situation, I fail to see how your personal situation has gotten better.

Sunday, July 12, 2020

I was wrong about GE2020.

capitalist pig | Tumblr

I like to celebrate being wrong. This is because in the financial markets, being right is overrated.

My training program has value because it is also a historical record about pretty epic mistakes we made as a class, from judging the Indian elections wrongly and missing out on a 40% gain and misreading SPH's pivot to nursing homes as an astute gamble instead of a horrible mistake.

First off, I totally misread GE2020 and failed to anticipate an upset in Seng Kang. I genuinely thought that PAP's attack on Raesah would polarise Chinese voters and nullify Jamus' star power.

Secondly, I actually told my students that PAP would win with a margin of over 70% because of flight to quality that happens in REIT and Bond markets in a recession. That was also an epic mistake.

That being said, even though I voted PAP at Holland-Bukit Timah,  I am fairly pleased with the outcome. PAP cannot be seen as a free ticket to a comfortable life in politics, politicians need to have skin in the game. After GE2020, each vote has to be won individually and the WP is not a party to be trifled with.

As an investor, I am more vested in what GE2020 mean for the financial markets.

We know that over the short term, the status quo can only be good for us capitalists. Over the long term, however, the results may shift further towards the left and we should see greater curbs on foreign labour over the net few years - not too bad if you are a Singapore employee, but if this kills local businesses and SME bosses, unemployment is going to become higher anyway.

I am particularly interested in the concept of labour income share which is the total compensation of workers divided by the GDP as alluded to by Jamus Lim during his debate with Vivian Balakrishnan. Jamus Lim argues that some sort of balance must be made.

Based on a quick google, labour income share has been declining in almost every single OECD country of late, which sorts of begs the question as to what Jamus would like to see if he's in charge of the economy.  A rapid decline in labour income share results in income inequality, so this can be an economist's way to silently giving a head nod to the ideas of Teo You Yenn.

So here's my prediction. During the election, WP is PAP-Lite.

After the defeat of Seng Kang, it is the PAP that will pivot towards becoming WP-lite.

PAP may have already figured out what Jamus wants for the Singapore economy and tilt Singapore in that direction before the opposition can start protesting for change. Furthermore, my speculation is that Jamus would like labour income share decline to be slowed or even reversed.

So all that remains is how to increase labour income share and how investors can brace themselves for this.

As I am no labour economist, I can only google for some answers and it turns out that there is an article that says that Malaysia's labour income share has been going up in 2005 !

I think the investment community would not like to hear about what Malaysia did to raise labour income share since 2005. One paper I googled said that labour share can increase when traditional sub-sectors and SMEs grow in importance.

So how the fuck can we do that in Singapore? I doubt that even th staunchest leftist in WP would want Singapore to emulate Malaysia.

I think attempts to grow labour income share may be the opposite of what Singapore has been doing for the past 50 years, we are still trying to make Singapore a great place for MNCs to set up business headquarters. We also want to see whether we can benefit from the shift in supply chains from China. I suspect even WP with its increasingly PMET profile would not want to torpedo our economic prosperity in an attempt to raise labour share.

But slowing the decline may still be feasible. This can start with more tax-breaks for SMEs and local businesses, even going as far as to give more government tenders to SMEs knowing that local capabilities may not be as strong as MNCs.

If we take the path of giving more support to SMEs using tax-payer monies, public servants will have to start playing God to decide which local firms to support. I can imagine allegations of unfairness will arise if the quality of product or delivery has to be subordinated to the SME status of the vendor. It will also create a mass of lobbying SME bosses - I know because a lot of them tried to befriend me when I joined an agency years ago! Done without the right compliance frameworks, we may even see more corruption in the future!

Even though I am hardly progressive, like many progressive voters I am eagerly awaiting WP's suggestions on how labour income share can be moderated in the next five years.

This idea will join part of the discussion of what we would like Singapore to be over the next five years.

Wednesday, July 08, 2020

Personal Update - Waiting for things to get back to normal.

Unlike other fellow citizens, I am starting to tune out of the local political news to focus on investment matters and leisure.

a) Training business

My personal theory is that the recession has just started for the training business. It has been harder to conduct previews as we are really competing against mainstream news events. I am eagerly waiting to see whether things will get back to normal next week. Fortunately, I also got a break from conducting previews so that I can relax and focus on improving my course materials and doing more exploration of financial markets.

b) Coding shenanigans

Once your programs start to mature, you just need to make some tweaks to them to answer some of the questions you have in the markets, so I have yet to do up any new programs as of now.  My code to visualise stock prices now has semivariance information and what we're seeing the ABF Bond Fund interposed on STI ETF. Sadly, even the safest Bond ETFs do not have semivariance of 0.

I am supposed to start coding up some web-apps this week depending on whether I get some time to do this. I will be using the Python Streamlit framework to get this done. My aim is to share simple tools with my community.

c) Books I am reading The Joys of Compounding: The Passionate Pursuit of ...

Some friends have been asking me to read The Joys of Compounding by Gautam Baid. Actually, I am already halfway through the book. The book is part self-help and part investing.

The self-help component summarises core ideas on lifelong learning and model thinking into a convenient volume, but the investment component of the book misses the mark as it was done somewhat in haste and lacks detailed worked examples. This is not Baid's fault as value investing can be quite subjective and a lot of experts are unable to create a unified framework and run readers across one working example.

I expect many investment blogs to gush about this book over the next few months, but for me, the real winner is not Gautam Baid.

The Art of Doing Science and Engineering: Learning to Learn ...

I read only one chapter of Richard Hamming's The Art of Doing Science and Engineering and it freaking blew my mind!

This is one of those rare books that is missing from a good engineering program. Engineers and scientists do have a style at work that is hard to capture in the text but explains why engineers are so highly sought after in the business world for often non-engineering reasons.

My regret is that read this book too late. I think if this were published 20 years ago, I would not have to go through years of suffering thinking that engineers are doomed to a lower socioeconomic status because of IT outsourcing in the 2000s. A lot of mental frameworks taught in science and engineering can shift through different domains and I certainly did not have to pay for two degrees to find that out.

Hamming does not shy from using equations to illustrate how common sense has a firm mathematical foundation. Chapter 1 requires a basic understanding of Integration and Calculus.

d) Leisure and Hobbies

I stopped painting miniatures as I expect a second lockdown maybe in a month or two so I now have lot of paint and lots of miniatures. There will be plenty of time to paint then.

The Rising of the Shield Hero Season 2 and 3: Are the Heroes Ready ...

For anime, I am going deep into Isekai genre rabbit-hole. I watched The Rising of Shield Hero and thoroughly enjoyed it.

Konosuba Finally Has An English Dub, And Here's Where You Can ...

For reasons known only to anime fans who read my blog, I am ashamed to say that I also enjoyed Kono Suba. It was probably written by a troll.

My favourite character is Darkness.

Anyway, I will see you guys over the weekend after the elections are over. For those who miss my financial write-ups, you can expect a pretty decent article maybe this weekend on the Dr Wealth blog.