Letter to Batch 33 of the Early Retirement Masterclass

Dear Students of Batch 33,

It's been a great honour and privilege to conduct a 5-Day Early Retirement Workshop for you.

Teaching this batch of students has been much more challenging than teaching earlier batches because we decided to transition to Quants Café as our back-testing tool. The tool is less than six months old, and I decided to transition into this when I can adequately perform the backtests to create stock screens for the program. Today's exercise raised some inadequacies in the new training materials, including more video materials and explanatory notes over the next few weeks. I will prioritise training videos and a lab sheet to make training future batches much easier.

Beyond the training in using the tools, the class has also created a very tight portfolio consisting of only 14 stocks. It brutally rejects most blue chips in favour of small caps and REITs. The final yield is exceptionally high at 7.48%.

The situation for the ERM portfolio will improve beginning around Q3 2024. It does not make sense that such a well-run city-state has its equities priced at a PE of around 10. For another, the situation involving REITs will likely turn around once the Fed begins lowering interest rates.

The conversation with the students is also something that keeps me going. I was unaware that the tourism momentum in Singapore has legs because Bruno Mars will be conducting a concert here in a few months. Discussing what authorities and companies are doing about scalpers is fascinating. As mundane as such discussions might seem, they paint a bullish picture of our local economy that justifies our tight portfolio that made two hospitality trust picks.

Lastly, I hope Batch 33 will participate actively in the FB group. I look forward to seeing you in the following community seminar slated for Q2 2024.

Hope to see you then!

Christopher Ng Wai Chung

Three improvements I hope to see for the CPF system

 

Now that the chatter about the CPF changes has died down, it's time for me to develop a wish list for the CPF Board. I have tried to make it as reasonable for the CPF Board to do this, given that the disappearance of the CPF-SA after age 55 would free up some fiscal room to give more for CPF members.

Here's my wish list :

a) Make CPF-Life scale linearly with premiums.

There is a progressive element to CPF-Life payouts that discourages folks from putting more money into the CPF-RA. The CPF-Life payouts per unit premium paid are higher for lower sums committed to the program. This is to provide more retirement assistance to those with less savings.

This policy will no longer be necessary if we provide more top-ups to lower-income groups. ITE graduates who enter Poly already get increased amounts in their accounts. 

The middle-income groups need to feel they are getting a fair amount from participating in CPF Life; otherwise, they will think they are subsidising other citizens when they engage in risk-pooling.

b) End the hypocrisy around the Retirement Sum Top-Up Scheme. Give us something we can use.

The RSTU is a powerful avenue to reduce personal income taxes for high-earning professionals. However, the government will disable RSTU once the member accumulates the FRS to curb too many advantages to the wealthy. But that's not the end of the story; at age 55, RSTU makes a comeback, and you can do it until your CPF-RA reaches the ERS. 

This whole system is dumb because the significant earning years do not entitle most professionals to benefit from RSTU. Thanks to completing CPF-OA transfers every year, I personally reached FRS in my CPF-SA in my early 30s. For the folks who can use RSTU again at age 55, they may no longer have a career that can benefit from tax benefits anymore. CPFB folks seem real niggardly to enact a policy like this. 

With such a high bar to reach 4xBRS, the CPFB may throw a dog a bone and allow RSTU to keep accumulating until ERS. A maximum contribution of $8,000 is a little every year, and CPFB should also have a policy that benefits PMETs, given that we're throwing money at ITE grads to enter Polytechnics. 

c) Have a CPF-Life scheme that pays married couples until both pass away.

 

With so much emphasis on marriage, starting families and having children, it's ludicrous that the CPF-Life scheme does not have an annuity program that continues paying to support the other spouse after the member spouse passes away. 

Of course, if an annuity is designed to pay until both spouses die, the monthly payouts can be calculated to be much smaller by design. Still, I would undoubtedly prefer a fixed payout, at least for my wife, after I pass away. 

Do note that folks with young spouses will get tiny payouts in such a case. This is all set by actuarial tables anyway. 

I want this so much that I'd happily sacrifice that stupid political compromise, the Basic Plan, to make it happen. An alternative would be to allow CPF-RA transfers between spouses. 

Anyway, these are my suggestions to the policymakers. 

Feel free to discuss how feasible they are. 

Update on my crypto positions

 

I have written several crypto articles on this blog over the past year. You can find them here and here.

This morning, as ETH hit over $4,000, I decided to exit all positions in ETH as I've managed to derive a significant amount of returns since I have a leveraged position in ETH in Compound V2. I clumsily closed my leveraged positions since I owed some DAI, then moved the ETH off-ramp on the Gemini exchange and converted the money to SGD. The losses from transaction fees were high, and I lost about $1k in the process, but the money is safely back in my bank account in SGD, and I made some excess funds for my trouble.

When the Terra Luna ecosystem broke down, I could round up some spare change to buy LUNC when it was selling for around $0.000027. You can find a historical record of my thought processes then here. While LUNC is now trading at about 7x my original value, I have previously farmed my LUNC and UST into the Mirror protocol and took in as much spare LUNC and USTC that it could spin off. I currently have about $8,000+ in the Terra ecosystem, but my money is not mobile, as I need 21 days to unstake most of my LUNC.

As far as I was concerned, while I was now sitting on some gains, the most enormous damage I suffered at that time was the effort lost in designing a cryptocurrency course. I can now escape with my course fees and some extra pocket money for the March holidays while keeping my millions of LUNA classics as funny money in the improbable event of a re-pegging of USTC.

As for where the funds are now, I've farmed it into the portfolio I manage under the All-Weather Portfolio, where just 8% is put into GBTC and ETHE. ETFs will be how I will take a position in crypto. There is now a more systemic approach to shift the funds out of crypto when the momentum slows down and becomes overtaken by another asset class. 

Here are some of the thoughts I have about cryptocurrency investing:

• I still think I left ETH early, but I am uncomfortable about some Dua Kang Cryptobros returning on the forums. They can have all the fun getting rich. 
• The gas fees in the ETH ecosystem are brutal in a bull market. This will force many investors to trade ETFs as trading fees are lower, and there is no need to manage wallets. 
• The regulatory regime is also tighter, and I can't withdraw my funds from Coinbase as DBS keeps flagging an error when I try depositing $1 to link it to the exchange. I off-ramped my funds in Geminii and lost a lot to transaction fees. 
• There's plenty of money to be made from regulatory arbitrage. As crypto ETFs slowly get approved, you can take positions to exploit the upswing. There's no real need to buy crypto and store it in your wallet anymore. A brokerage will do, but you must be an AI and enable complex leveraged products.

Finally, I currently have about $8,000+ in LUNC and USTC, but I am already sitting on fairly substantial gains. If the price remains high in 21 days, I might liquidate and farm the funds into the next LUNA-like investment. 

The closest trading idea I have is Keppel Pacific Oak REIT. It stopped paying dividends but still has a high tenancy rate. This could be a multi-bagger, but you must be patient and hold it until 2026. The odds of dividends returning from KORE are higher than USTC pegging. 

From Languishing to Flourishing

 

In this second part of my series on languishing, I focus on some of the remedies that can turn someone who is languishing into someone who is flourishing. 

First of all, I'd like to talk about two possible paths to flourishing :

• The external path is where we keep score and become good at something, like our jobs. We take the external approach when we do something to improve our social status. The external pathway is objectively rewarding, but you get diminishing returns as you age. 
• The internal path is all about meaningful personal change and ethics. As you get older, there are more opportunities to follow it, at least because the nosy relatives who judge you during the New Year family gatherings begin to disappear one by one.

I find the internal path harder to walk than the external one because I can keep score and compare with other people. But I am also aware that post-FIRE, there is now lower-hanging fruit for the internal path.

After that, the steps to flourish all seem like another self-help guide. I wish that future research could dive into more granular detail, but readers can look at the following for now.

• Learn something new - This is too easy thanks to Skills Futures, but my emphasis is to teach something new because the Feynman Techniques shows us that we can reach much higher levels of mastery when we teach something.
• Building Relationships - While the book says that quality matters more than quantity, I wish different personality types could use different strategies. As folks get older, they become better at ending relationships. If only there was more direction on how to do this. 
• Spiritual Practices - Another valuable opportunity, but this world is full of cults and scams. The question for non-religious folks like me is whether we can come up with ideas that go beyond meditation or yoga. 
• Finding Purpose in Life - Philosophy has relatively good answers to address the problem of finding meaning in life. 
• Play—The funniest thing I realised about this section is that play is supposed to allow a person to practice their imagination and break away from an obsession with achievement. But I've been gaming for so many years that I see long-time gamers flouting this rule continuously because competitive games give them that feeling of success that has eluded them in real life. 

I'm incredibly interested in learning new things for folks who read my blog. I'm also okay at building relationships and finding a purpose in life. I suck at Spiritual practices as I lack patience and have attempted meditation and yoga with almost no results in many stages of my life. I've reduced the amount of Play in my life as many gamers find inauthentic means of Flow and building fake achievements. 

Of course, the whole point of this self-audit is to open my mind again to previous failed attempts and try to do better, but with a different approach.

Finally, you can observe how every single point about flourishing does not involve much money at all, but FIRE can be an enabler as it gives folks time to figure out how to flourish. 

On the issue of languishing

 

I'm still on my journey of figuring out what life will be like for me post-50, so right now, I'm trying to understand the state of languishing that a lot of folks I know might be going through. I'm going to dedicate a few articles to this topic over the next few days, as it's useful as a reference as I hit the big 5-0.

Languishing is a state of low-grade mental weariness that counts indifference as one of its symptoms. The checklist of someone languishing is extensive and covers things like feeling that your job no longer matters in the grander scheme of things or losing the motivation to catch up with friends and family. 

The symptom that affects me the most is that more and more things seem irrelevant, superficial, and uninteresting. Last week, I mustered some time to spend $30 on one hour of vinyl record listening and found the experience a significant waste of my time. In fact, the album I picked, Adele's 21, sounded exactly like the one I listen to on Spotify, with some static sound in the background. 

So much about hipsters' claims that analogue music is superior to digital music. 

There are three aspects of well-being that can be used to fight languishing. 

• Emotional well-being measures how happy and satisfied you are with life.
• Social well-being measures how well-integrated you are into society, 
• Psychological well-being measures how much you like about your own personality.

While languishing is very mild and does not require medication, if we do not have a system to cope with this, it can lead to delinquent behaviours and even suicide. It even increases inflammation and decreases antibody production. 

Finally, FIRE can both be a cause and a cure for languishing. 

If you retire just because you can live on your passive income cash flow, you might shut yourself away and stop growing from the day you complete the buildup of your fuck you money. The person being fucked is ultimately yourself. 

But if you are languishing because of a ho-hum job, financial independence can give you the power to reinvent your career or find your calling. 

In the following article, I will discuss some preventive measures that you can take to prevent languishing in life.