Monday, February 08, 2016

Year of the Monkey - Unbent, unbowed and unbroken...

First off, a Happy Lunar New Year to all the readers of this blog.

Regulars might know that the previous year of the Goat had been a bitter-sweet experience. My mother was diagnosed with breast cancer but I was also blessed with the birth of my son. I was hyper alert during the last few days of the year of the Goat because somehow I felt vulnerable after everything which happened to my family. A consequence of that was I pre-poned work on my research paper in anticipation that troubles would not allow me to finish them in March.

Turns out the paranoia was justified.

Just this afternoon, my dad fell down and had a nasty gash above his right eye and I spent about 7 hours at A&E at Khoo Teck Puat. My dad is ok now and resting at home, but I only finished my reunion dinner at about 10.30pm. It is actually fortunate that my wife was also not present today as she is confined at my in-law's place with my two kids. So, technically I had reunion dinner alone at the Subway when I had a sandwich waiting for the doctor's report.

The Year of the Goat would have been on balance good for Tigers. But it did not turn out as optimistic as I had thought. The year of the Monkey is supposed to be bad, but I guess it's something which would unfold over the next few months.

Nevertheless, it's great to survive a tough year and move on.

I am grateful for what I have.

Strange that this year is the one which I anticipate the least awkward questioning from all the relatives.

When I was single, people asked me when will I get a girlfriend.
When I got a girlfriend, people asked me when I will get married.
After I got married, people wanted to know when I would have kids.
After I had my daughter, people wanted to know whether I should try for a son.
Now I have a son and a daughter, the only question is whether I will get a job but I think I would not get so many questions in that area as I am quite public about my retirement and I have three semesters left of school.

Actually, I am not out of the woods because relatives react to life situations, I would have to endure questions about my HBA1C readings this year.

The truth about me is that I wrote off the Western notion of happiness quite a while ago. The Western notion of happiness is about following your passion. You find it on Facebook with the smiling faces of the folks who wanted to dodge the bullet and decided to travel somewhere else to avoid the inquisition from relatives. Western psychology has all the answers - buy experiential goods instead of material goods. Fake a smile to feel good inside. Hang out with folks who are relatively less wealthy than you are and you will be happy.

The Eastern notion is not an easy pill to swallow. Xing4 Fu2  or  is happiness in the Eastern context and beyond the individual's control. Your relative's conception of is the formation of the nuclear family with at lease one son and one daughter, they get to declare whether you are  or not. is also beyond the reach of a "selfish single".

I guess I am fortunate to be an only child. There is no sibling out there to carry out the proper duties of a son so I don't get to dodge the bullet. Over the years, I ticked every single box to make it less embarrassing to face relatives during the Lunar New Year.

But this year, at age 41, there is a slight change to the rules of the game.

This year, I get to ask the embarassing questions.

But I will be kind and use my newfound powers judicially...

恭喜发财 ! 万事如意 !

Friday, February 05, 2016

#1 Peak Prosperity - The Poverty Simulation angle.

Sometimes, getting an article for this blog is so easy it is as if the Gods conspire to help you with your next posting.

This week, news started to spread about Singapore Island Country Club members conducting a poverty simulation for their members. Of course the news attracted a fair share of brickbats and I'm not going to go about making things worse.

My stand is that a poverty simulation is good thing even though there might be a better way to go about doing it.

It can be argued that my life as a law student is some sort of poverty simulation, I have to feed my growing family without touching my investment capital for a minimum of 3 years without rejoining the workforce. After three years, I will review my portfolio to figure out whether my financial independence is for real. If it is not real, then my retirement would have to end and I would have to accumulate more capital for the next stress test. (Likely a passive income of $10k/month with no more mortgage, so it would be a tough target to meet.)

Poverty simulation is only a symptom of Singapore's problem and not the root cause.

The root cause is the decline in social porousness of Singapore society. The rich is losing touch with the rest of Singapore society.

The section on Edinburgh in the book Geography of Genius  tries to explain the rise of the Scottish intellectuals like David Hume. Scotland's intellectuals are particularly interesting to me because they are known to be quite scrappy and like to find practical applications to their theories so they appeal to my engineering nature. One section I find particularly relevant to Singapore is that the city of Edinburgh which spawned the development of medical and intellectual advancements had great social porousness during its peak of its intellectual prowess. Particularly interesting is that social spaces were areas where a blacksmith and intellectual can trade and argue at as equals.

I would argue that social porousness was present when Singapore first gained independence. We lived in the same kampongs, students in top schools had very few economic advantages over ordinary students. Some ministers had degrees and some, like S Rajaratnam, don't. By contrast, the modern education system in Singapore focuses more on sorting individuals based on intellectual capacity and then confining them to different silos so that they can learn at their own pace. SAP education makes it worse by some form of government-approved racial segregation. One bright spark is National Service where people of different castes and strata could get together to fight as a unit.

From the lens of social porousness, it would be hard to fault the poverty simulators. You spend your youth ensconced in your parent's Maseratis and having all your wishes fulfilled by domestic help. It alienates you from the common man, but you remain human, so you fear falling from grace.

Why not simulate poverty first to cope with your fear and anxiety?

Let's not judge poverty simulators too harshly.

Instead, we can consider turning Poverty into a CCA in our middle-class infested secondary schools.

A Poverty Society can be fun and enriching.

Kids from upper class elite schools learn about the rich-poor gap, the GINI index and then have poverty camps to simulate perhaps a life in the HDB heartlands or a pocket money of working class families. They can have field camps to neighborhood secondary schools and maybe role-play a perfect for a day. For fun and recreation, they can role-play the Beggar Sect from Chinese Wuxia drama.

Done correctly, the rich can be shamed or guilt-tripped into wanting to create decent jobs for fellow Singaporeans.

Monday, February 01, 2016

[Prologue] Peak Prosperity : How do we know that Singapore is in decline ?

I've got less than an hour before my lectures begin so this is going to be a short post.

Right now I am in the process of researching the concept which has the working title of "Peak Prosperity" which sounds so interesting, it may warrant a new book from me in the future.

In my previous books, I would pull out bad news and events from thin air to conclude that the Singapore Dream is being threatened by external forces. This time round, I hope to be more methodical so I would have to read more deeply before forming my conclusions. The biggest problem right now is that technology is displacing jobs faster than we can retrain but this problem affects the whole world and we are actually better equipped than most countries to deal with this problem.

So, the book I am reading is The Geography of Genius by Eric Wiener which may shed light on societies which reach its peak in the past and then declined with the times. My progress is quite slow and have covered only Athens and Hangzhou so far but on casual observation, city states reach their peak when they are the most open minded. Athens accepted foreign traders and had a great marketplace and only began its downward spiral when its citizens began to closed their minds to new ideas. Hangzhou was also the kind of place where people were encouraged to experiment and synthesise new ideas - Su Dongpo was a poet and an engineer.

Similarly Singapore is thinking twice about its foreign talent policy, I guess to prevent a decline, Singapore would need to continue to admit talented individuals but at a pace which is acceptable by the electorate. I think the government may need to, once again, pursue an unpopular FT policy once our transport woes are resolved.

But this research continues because I have to figure out what metrics can be used as a leading indicator to predict a decline in Singapore.

Right now I have no hints on which numbers to look at.

Any feedback or suggestions are welcome.

Wednesday, January 27, 2016

Thoughts on being a father a second time.

Last night, my son Durendal Ng Mun Khoi, was born. It was a happy day for me and my missus and right now, mother and son are doing well.

There is some excitement over why I chose such a strange name for my son. Durendal from what I gathered from the web is also a card in some collectible card game. If it is spelled Durandal, it's  the name of a kind of bomb which is used to penetrate airport runways. So on first inspection, it's quite a ferocious name.

For our case, Durendal is named after a holy sword wielded by an Ancient Frankish knight called Roland who served as one of the paladins under Charlemagne, the first Holy Roman Emperor and the founder of Carolingian empire in Western Europe. If you play a lot of RPGs, this is the origin of the Paladin class.

But more importantly, embedded in my son's name is the french verb "durer" which is "to endure" or "to last".

Most fathers can write about their hopes and dreams of their newborn son and how optimistic they are about the future. I have decided to take the opposite stance and share with readers the doubts I have about Singapore society that Durendal and his elder sister Clio ( who is named after the Muse of History ) would have to navigate in the future.

Naturally as a father, I will do everything in my power to help them thrive, but I doubt that the world that Durendal and Clio will live in would be better than ours.

The future of Singapore may not be lived by its citizens, it may have to be endured.

a) Children always revert to the mean through generations

Without even seeing my kids in school, I can sort of predict my children's IQ.

If a solid lawyer-doctor couple with 150 IQ each. Their kid's average IQ would not be 150 but 125 - The mean of father and mother's IQ then averaged against 100. That's why you may hear of ministers being somewhat disappointed with their progeny. It's actually built into our genetic code. Things always revert to the mean. Without even taking an IQ test, parents are better off assuming that their children are average and start planning for it.

And as it turns out, thing don't look bright for average Singaporeans.

b) Average is Over - Actually being average downright sucks !

I used to write about the three kinds of work following the ideas developed by Robert Reich over 10 years ago. Manufacturing, Service-oriented and Symbolic analytical work. Things will shift even more dramatically against manufacturing in the future. And services jobs are being automated even faster - we are not even sure if taxi drivers would even exist in 20 years time with driverless cars being tested right now. Worse, symbolic analysts are losing their jobs at a rapid rate because of huge paradigm shifts and the rise of artificial intelligence. Server support administrators used to be able to support 16 machines per head count with solid pay. These days, thousands of clustered virtual machines can run a business conglomerate in a cloud.

As of now, the sexiest jobs go to those who manipulate machines to manipulate symbols. Being a strong programmer is not enough, you need solid statistical skills and enough domain knowledge to solve business problems in your industry. Look at what Fintech is doing to our banks. It's only a matter of time that someone comes up with some sort of Lawtech to disrupt the legal industry  ( and if no one does, I am going to just do it myself. )

Perhaps only 1% of the human population can do the work required to manipulate these machines because they require so much logical and mathematical proficiency. After that, in order to succeed in solving a useful problem they must also achieve mastery in a business domain. Then you have to manage the different specialists at both ends, programmers and salesmen to accomplish your vision.

The average Singaporean cannot do this.

c) Educational pathway for the average Singaporean is still inadequate.

Average generally means someone who cannot qualify for a non-local degree. The 50th percentile would need to settle for a Polytechnic diploma. The good news is that while I was in charge of, I was aware that the Government was already investing $1000 more a year on the Poly student compared to his or her JC counterparts. The question is whether the investment is bearing fruit for the Nation ?

From this very brutal but logical posting from Limpeh, the pathway for Poly graduates is not world class yet. Paying for a private degree will signal to gatekeeper that you are not good enough for a decent job and it costs a bomb compared to a local degree. But what Limpeh hints at is much darker. If a parent pays for private degree, the kid would go through it and thinking that they are superstars in their own degree programs, which really isn't as competitive as the course administrators claims to be, graduate with a sense of entitlement.

There are a lot of admirers for the German apprenticeship system. But the German economy has a network of Mittelstands or family-owned world-beating SMEs who can give craftsman a decent career.

We don't. We just have SMEs who want to stick their hands out and ask for government help to bring more foreign workers who can tolerate being underpaid and abused.

d) We are a yardstick society

Regardless of the well-meaning words of our politicians, Singapore has always been a yardstick society.

But it's not the government's fault.

If women continue to see men as a pillar for financial support, then the yardstick will always be about income and wealth. The men who are likely to start families with the most good looking women would always be the pilot, lawyer, doctor or accountant. Economic growth in Shanghai was rapid because Shanghainese women do not care whether you are short, tall, ugly or handsome. To get Shanghainese women to say yes,  give her an apartment. Even now China is expecting more than 5% growth in a horrific year.

The solution is not to get rid of the yardstick but finding space for different yardsticks.

And we did try that too ! Resulting in the DSA program which led to RI being shamed even though they remain an elite Tier 1 institution.

In Conclusion - What does it mean for baby Durendal ?

It means daddy may not bring you into a better world which was promised to daddy when he himself was born in.

We will not know whether you will become the sword of your father's ambition, but you must endure.

There is a genuine possibility of Peak Singapore - a point of prosperity which heralds a golden period for us and then it's downwards all the way. Problem is that we may have reached Peak Singapore 2 years ago.

But as of now these are the plans for my kids :

a) I spare my kids form enrichment classes except perhaps swimming and cycling. Kids need to play to develop their imagination. I had Dungeons and Dragons which defined a huge portion of my life.

b) Tuition money is invested into a portfolio to be compounded and released until they start working. My kids need to enjoy learning to  have hope of becoming the top 1% of knowledge workers. Tuition may not be best approach unless they reason with me that they need it but they need to learn independently. I will be personally very hands-on in this area as I expect to cover the Science and Arts subjects with ease by then.

c) If they cannot get into the JC track, they are expected to start work unless a local university admits them. If they are not academically inclined, why force them ? If my plan works, my kids would be able to tap into any online course material to pick up the skills they need.

d) They will all learn to manage money. Money management is where average folks have a great advantage over the sophisticated intellectuals. This is where there is plenty of evidence that active managers underperform passive ETFs.

Saturday, January 23, 2016

Personal Update : Two years have passed since my last paycheck !

It's time for a another update.

It's been two years since I had a pay-check, if this were a disaster recovery exercise, I would say that it has been rather successful so far as I still did not draw upon my capital.

a) My son is not here yet.

At the personal level, I am waiting for the birth of my son. It can happen any day now. Right now I am more afraid than my wife who seems to be quite calm.

b) Financial markets

For all the doom and gloom, the markets did not faze me at all.Maybe I have more urgent priorities balancing school work with families.

Results wise, like most of you I continued to lose money since the new year. However, as my portfolio is defensive in nature with a beta around 0.5, I tend to lose about half of what the STI would lose. I will recover a bit every three months when dividends get issued but I can only farm back about $2000 a month this year as I should be focused on my family expenses.  As my savings are humble as a student, I would be putting it to reinforce some of my heavily beaten down small cap dividend positions.

But this is a great time to have a job and savings !

The STI ETF is yielding a big fat 4.2% and trading around a P/E of 12, so stock selection is not really required to get a good price from the markets. It might be time to start hankering for a SG-REIT index ETF, at a time like this passively holding such an index fund would lock in about 7% yields, not bad at all if you are planning for retirement,

Yes, the main thesis is  doom and gloom and this would have to run its course.

But are things that bad ?

Chinese manufacturing may be contracting but China might counteract it with a growing services sector. A lot of consolidation may stem from corrupt officials curtailing their spending. The economy may well become even less corrupt and the Chinese economy might become cleaner and more transparent over the long term.

Oil prices are low and oil firms are suffering. Sure, this is bad for oil firms, but households can now have more income for other things after spending less on gasoline and petrol. I imagine a GDP surge in some economies which are dependent on oil. I can also imagine companies making quite a bit on the re-opening of the Iranian economy.

Singapore real estate is heavily regulated. Prices will hit a low but the government can remove some cooling measures and things may rebound after that. Real estate prices are something that's never out of the government's control. Nevertheless, if you are betting on real estate going up indefinitely, you might be wrong over the long term as SIBOR is not going your way at all. ( I bought an EC. I was  betting on price gap narrowing between my EC and private condos around the area over a period of 10 years which is different kind of gamble. )

At this stage, I don't think things will be as bad as painted in the media. My bet is that markets may be down slightly, up slightly or up by a lot. But markets are unlikely to be down by a lot in 2016. One upside is the TPP although the consensus is that SG would not benefit from it that much at first.

As in all bear markets, there are market neurotics who say that the sky is falling, these are the buggers who have no business buying any stocks. There are also non-investors who are spreading gloom because they have no skin in the game abetting the neurotics to further depths of despair.

My job is to stay calm, keep in touch with the news and continue collecting my dividends and use my new found legal skills as a fall back plan. Markets will recover eventually and it's good to come up with a plan to exploit that after all the neurotics have fled and their homes have been foreclosed.

c) School - Finally started to look for an internship / training contract !

I've been procrastinating in this area. I spent my first year clearing my community service requirements and the last holiday was spent worrying over my mum's health problems. But I can't procrastinate anymore as I fear that my grades would drop to a point where I would not be welcome in the better firms in Singapore.

There is also the shadow of ageism lurking in the corner as I know of seniors my age who have not scored a TC yet. So today, I seem to be the only Year 2 in a Legal Career fair for students to find training contracts and internships. I left my resume with some firms and one fairly large firm is already showing interest in my profile. I'm crossing my fingers that I can get a TC by this semester.

Anyway, this semester seems more ridiculous than the last one, some of us get out of lecture rooms visibly confused. There is now no attempt to systematize or build a framework around the course material anymore. We are at the deep end. Everything is a just a stream of consciousness, not unlike the last two David Bowie music videos....

d) Books I an reading

I am actually going to stop my Economist and Edge subscriptions to clear my backlog of books. I am reading a very amazing book by Cal Newport called Deep Work.This books has interesting insights which fundamentally change some of the ideas in my own line of books.

This will be discussed in another posting soon enough...

Monday, January 18, 2016

Does nobody really owe you a living ?

Mr. Chan Chun Sing, in my humble opinion, may well be the best Secretary General in NTUC we would ever have. He gave a talk in NTUC while I was still an IT Assistant Director there and to get the ball rolling, I tried to corner him with a tough question on social mobility. I felt he handled the question well and from a rhetorical perspective, balanced logos with pathos. He had to bridge the elite-union gap which was not easily done. On the whole,  he was logical but also connected with the union leaders and explained assortative mating in simple terms which I felt was very impressive.

It was no accident that he soon become the Sec Gen of the organisation because he, too, came from humble beginnings.

I would like to welcome Mr. Chan into the blogosphere. You can find his first article here.

Now, that being said, I do not wholly agree with his first article.

The idea that "No one owes Singapore a Living" has been with us for 50 years. We have been using it to exhort our workers to work harder and smarter. Economies have been changing and we continue to use the same battle-cry over and over again.

I think after 50 years, Singaporeans know damn well that as a non-welfare society no one owes us a living. Advancements in the modern economy actually demonstrates that in the case of investors like us, quite a lot of folks owe us a living.

If you own a bond, the debtor is contractually required to pay you interest. A REIT holder is entitled to 90% of dividends paid to the trust to maintain tax benefits. While dividends are not assured for equity holders, minority shareholder have the legal recourse to fight shareholder oppression and in some cases, may even sue on behalf of the companies against the directors.

Play the game of finance well, and you might even be able to set up a trust for your loved ones in the future. Beneficiaries of a trust can take legal action against a trustees. There are the ultimate guys who are owed a living from their trustees.

Another words, quite a few parties owe capitalists a decent living.

The problem of course is that few workers are capitalists and in such a case, nobody owes workers a living.

I doubt NTUC has a plan to help us survive the Second Machine Age where society gets run by algorithms, my personal defense is to used these algorithms in industries which do not expect to be disrupted by them,

Now that being said, NTUC needs to confront the narrative which has led to Singapore's state today :

Religion is not the opiate of the masses.

The opiate of the Singapore masses are jobs !!!

Maybe authorities need to consider some ideas I have shared in this blog :

a) Push financial education into a Life Skills module for secondary school students and more flexibility for CPF investors.

Modules need to cover some basic financial planning and office automation skills. If Singaporeans retire early via investment income, it frees up jobs to be taken by others. Understanding financial independence starts at a young age. We should also allow Singaporeans more access to our CPF savings. nothing manifestly unfair if CPF account holders be allowed to invest 100% of their OA beyond $50,000 and be entitled to excess dividends beyond the 2.5%.

b) As a society we need to inflict a moral burden on the top 5% that they need to start businesses and create jobs for the rest of the 95%.

The rich can survive business failure and owning a successful enterprise can be a  badge of honor. This means retooling the scholarship system to recognize rich students without bonding them or subsidizing their studies. Put them in a special programs to grant them access to venture capital and business networks.

c) More government jobs of last resort which provide some shock therapy to older workers. 

No matter how you look at the problem, there will always be worker in their 40s and 50s who cannot develop new skills and no longer have taxis to drive because cars would be driverless soon. And the hard truth is that your mind closes at middle age and you no longer as fast as your younger colleagues - olders workers can be stubborn, dogmatic, and very annoying.

To plug the gap, a drastic solution involving an employer of last resort needs to arise from our uniformed services. Of course defence is rapidly modernising and becoming knowledge driven by the state needs to consider 6 hour a day jobs at small wages for middle agers. We are too slow in creating School administrator and low level health care workers within the system. Some of these jobs may be transitionary jobs which allow older workers to rejoin the private sector.

Sometimes, as a middle-ager myself who directly competes with Millenials for class-room distinctions, the government and some companies may need to seriously slap some of us around. A life spent making money in 20s till our 30s and raising kids gives some of us a mindset of entitlement. If we did not train our mental muscle to save money and pick up new skills when we were younger, a system of employment needs to be built to initiate that shock therapy to get olders to wake up their ideas. Behavioural economists are best placed to generate these transitionary shock therapy jobs to zap older workers to become productive for the economy.

All in all, I am very glad that the Sec Gen of NTUC finally has s blog. I consider myself a dissenting ally who can look into each blog posting and find ways to build on his ideas.

The idea that "Nobody owes us a living" has had a good run. Singapore has accumulated reserves over 50 years and own many bonds. The bond issues do owe us a living.

When thousands of workers and unionists start learning and earning  to become capitalists and shareholders, we can move beyond this slogan !

Friday, January 15, 2016

Net Present Value of Suffering.

This post is inspired by the large number of articles in response to the release of the O level results. Well meaning educators start to assist readers in choosing between a Polytechnic and a JC. One of the ideas which has been around since I was 16 years old is the idea that if a person is academically inclined, he should go JC and if he is practically oriented, he should go to a Polytechnic. Throughout the 90s, the same argument was used to help A level students choose between NUS and NTU.

Before I begin, I'd like to say that even if you are an elite super-scholar married to a medical professor, policies concerning Polytechnics are important to you. Reversion to the mean in IQ means that while IQ is heritable, children of elites will be on average only slightly smarter than the median population. The median Singapore is unlikely to have a degree given that about only 25% of the population are entitled to get degrees. This means that even elites benefit from government policies which reinforce Polytechnic education and apprenticeship programs.

Back to the usual advice to O level kids, I don't think this advice is helpful at all.

70% of JC students get to go to a local University and get a ticket to the middle class. A local university graduate starts at $3300 - $3600 a month. In contrast, 20% of Poly students get into a local University but they get to develop useful industrial skills which net them $2100 starting pay if they start work after getting a diploma.  The argument about academic or pragmatic inclination melts in the face of national income data. Everything boils down to whether you are confident as to whether your child can be top 70% in a JC or top 20% in a Poly. If not, a Poly should be chosen regardless of your child's inclination because it guarantees a set of industrial skills.

I will propose a different question :

Instead ask yourself, can your child suffer ?

Unlike Polytechnic educators, JC educators have KPIs tied to A level results. JCs whie being cheerful on the outside can be quite cruel to their weaker students. Weak students are "counselled" to drop subjects so that the numbers of the JC looks good. Strong students who take H3 or S paper get to enjoy a more collegiate relationship with their lecturers. Worse, the workload of a JC student is 40 hours a week compared to 25 hours a week for polytechnic students. JC students need to hit the ground running. I suspect a lot of humanity is lost in those 2 years and I suspect makes JC students more Machiavellian and narcissistic.

This question reflects a broader truth about Singapore as hinted by the Buddha eons ago.

Life is suffering.

Suffering is spread over the lifetime of an individual but suffering can brought forward similar to a discounting mechanism.

The choice of the JC brings suffering forward but slightly discounted. If you fall into the 70% you stand to get a quick ticket to the middle class and enjoy a salary 50% above diploma holders.

The choice of a Poly is not an inferior choice. You can get into the top 20%, you maintain your momentum. But if you fail to get into a local University, your route would be more circuitous. You can still make a lot of money becoming  a top salesman or an entrepreneur but each option has its own hardship and requisite amount of suffering.

Where government policy comes into the picture, tweaks need to be made to Polytechnic programs to balance the option against JC's ease into the middle class. This means creating apprenticeship programs which also allow skilled workers to have a good life. This is in effect, increasing the discount rate of suffering when students pick the Poly route.

So in balance, if you have just received your O level results and contemplating JC or Polytechnic, the proper question to ask yourself is :

Can you suffer ?