Sunday, July 15, 2018

After Action Review : Investors Exchange 2018

Yesterday was a blast !

I remember some familiar faces and I am quite happy that some of the folks who showed up a year ago showed up again to give us support.

Here are some deeper thoughts on yesterday's event :

a) We should have staggered the fluffier talks with the hardcore ones 

I think there was only one major area of improvement that all the organisers agreed with after the event. We should have ensured that a fluffier talk always followed through a technical discussion on investment. This way the audience will not lose their concentration in the middle of the conference.

b)  The general knowledge of the audience was quite impressive

Organisers commented that my quizzes were very hard. It was quite a big risk to put up a picture of Arthur Schopenhauer and ask the audience who he is - after all, you are mostly finance folks. But I was pleasantly surprised that this audience could not only tell their German philosophers apart, but were also able to identify Sigmund Freud and Victor Frankl as well.

The point I wanted to make from this exercise is that personal finance is a broad field and you can find nuggets of wisdom to fields as far as psychotherapy and philosophy.

c) Clarifications on the STI ETF and the equal weighted STI portfolio

Shifting from a capitalisation weighted strategy to an equal-weighted strategy results in superior performance. This was the reason why the folks in the US created an equal weighted strategy involving the S&P 500 stock counters (Code : EWI).

The STI ETF is not a diversified portfolio because it is a capitalisation weighted index.  Larger companies are given a higher weightage. The banks together form about 40% of the ETF. Because of herding behaviour of STI ETF investors, more money will be poured into banks due to the way the ETF is being structured. This may be one of the reasons why the STI ETF's 10 year annualised performance was only 4.44%.

If instead of buying the ETF, you divide your money into 30 parts and you buy each of the STI ETF component stocks in equal parts, you are no longer biased toward the larger blue chips. Your allocation to banks would be limited to only 10% of the your portfolio. Backtested results of this strategy show a 3% improvement over the STI ETF annually.

Also, if you adopt an equal weighted strategy, expect to lose 20-25% of our portfolio in a particularly bad year. (1 in 40 years) This is a reasonable risk to take.

The broad concepts like bullshit jobs and life-energy exchange shared in yesterday's event will be mentioned again in future blog articles.

So do keep a lookout on this blog.

Friday, July 13, 2018

Are diploma holders too "well-rounded" ?

It all started with Unintelligent Nerd who wrote to inform me about an online rant from an investor, whom I thoroughly respect, called ThumbTackInvestor who had gotten sick of people who complain about the stock market so he wrote something to rebuke them.

You can find a link to that statement here. It is a super-entertaining read.

I thoroughly enjoyed this rant.  

But in it, TTI made an obscure statement saying that if you have a diploma, you might be too "well-rounded". I felt that this statement could be expanded into something more comprehensive so that readers can have be given more food for thought. When TTI made the statement he took great pains to make it more politically correct, so I went out to try to figure out what he meant.

In my new "unemployed hobo" state, some strange people write to me to invite me to ask to hang out, often just for fun. Yesterday, I was invited by a fairly successful Fintech company to Ayer Rajah crescent to have lunch with their employees and share some of my ideas on investing and attaining financial independence. 

Beyond just taking about personal finance, I tried to ask the Fintech company some pointed questions about the hiring of engineers. I asked their engineers why are there no diploma holders in their company. There are definitely polytechnic graduates with solid computer science degrees, but why don't they have any median polytechnic graduates because they are so much cheaper and this can dramatically reduce their burn rate.

The answers were fast, furious and brutally honest. 

One engineer, a polytechnic alumni himself, gave me possibly the most brutal answer. 

The median polytechnic graduate often comes from a lower income family and has to balance part time work with their studies. They will not graduate with solid programming skills to survive in a fast-paced engineering environment. If they are paired with an engineer to do programming in a startup, they are more likely to get in the way and slow them down.

I can corroborate this point. I witnessed the difference between an internship application from SMU and Temasek polytechnic in a boutique law firm. The TP candidates often worked part-time, many were proud to share that stint in MacDonalds. When I was a trainee myself, I found myself impressed with their resilience. And they are a lot more work-ready than U grads.

In my opinion, this is kind of festering inequality that may be worth addressing not by governments, but by the private sector. Startups are the most egalitarian organisations in Singapore, if they are not willing to take in the average diploma holder, we can't expect out elitist government organisations to do that.

I came to ask myself what I can strive to do if I ever transition into entrepreneurship. My cash flow is adequately taken care of by my dividend income, so can I do something meaningful as a business man and make a profit at the same time ? After all, diploma and ITE holders have much lower salary expectations. 

So in this post, I'm talking about helping the most discriminated person in the future Singapore economy - the non-degree holder. Look at Parliaments worldwide today, how many politicians actually lack degrees compared to the proportion of non-degree holders in society ? 

( Singapore is actually ok in that regard, MP Charles Chong does not have a degree ! )

This is not completely altruistic. I believe that a businessman that can build non-bullshit jobs for non-degree holders in the future will be solving a serious problem and can make a huge profit at the same time. 

The question is how do we do this ?

This weekend, I will be talking about the Bullshit Jobs phenomenon by channeling a book by anthropologist David Graeber. Formal definitions will be shared this weekend.

At this stage, I'm not better than an academic sociologist - I only have a well defined problem. The solution can only come later after I incorporate.

Perhaps readers who are bosses can share with us what is it like to engage in job design and how to keep the spirits of non-degree workers up in an era of massive disruption.

Remember, it's not mere job creation. 

This has to be non-bullshit jobs for non-degree holders. That's a hard problem.

Wednesday, July 11, 2018

Another personal update

Look like there's still room for another personal update from the time I completed my training contract.

a) Investors Conference 2018

I'll be seeing you folks this Saturday on Investors Conference 2018 and once again we've managed to sell out all tickets. My rehearsals for this Saturday's event is more or less done and to reward customers, I will be giving out four books if you can answer my quizzes during my talk, so keep a look-out for my event "F.U. Money" this weekend.

I promise an F'ing great time !

b) No time for leisure !

I've been keeping myself busy since leaving my TC. The bulk of my work is to refine the talk I'll be giving this weekend. The rest of it is aggressively keeping up with the news and my readings. To my personal disappointment (or pride for that matter), I can't even start binge watching TV shows or play any games on my PC. It's just nothing but research, doing up slides and monologues in my room.

Particularly sad is that I have yet to have a single D&D game so far.

And I've yet to even give myself a short a trip to KL just to unwind.

c) Workshop with Dr Wealth

A large centrepiece of my work over the next six months is to scale my talks into a fully blown workshop under Dr Wealth on the topic of financial independence and it's been a really exciting learning curve so far.

Yesterday I came out from a meeting where my draft preview was "torn to shreds" (in a good way) where I am learning from veterans how to craft a compelling product. The trick is to combine my research and voluminous training slides from previous talks to gain ultimate validation from market forces. I'm glad my futures partners are willing to coach me using a "Agile" approach as we work towards a credible MVP.

More details over the next month.

d) Personal Finances 

One of the things I picked up during my TC is discipline. I've tuned out distractions from social media after 4 years of getting quite addicted to my phone. I've started an exercise regime and eating healthier food in spite of being a stone's throw from Maxwell hawker centre.

My HBA1C is now at a low of 7.0. My weight has gone down to 66.7 with my BMI at 22.3, even better than my BMT days ! But it's all thanks to this new drug I'm having called Jardiance. My doctor rewarded me by taking out Janumet and replacing it with Metformin. This is $64 savings per month.

Better health always translates to better wealth. Next is to see how I can decouple myself from cholesterol medication since I eat so little meat these days.

Nevertheless, it would be a struggle to save $4,000 a month because I've lost my TC allowance. Let's gun for $10,000 savings by September instead. I've also started to cook at least one meal a day to cut down on my expenses further.

e) Financial Markets
Markets are really going crazy. There is so much volatility its probably better to give up trying to project market movements and instead just react to other investors. Rocking markets will occasionally generate bargains so it might be a good time to look for 8% yields in the markets right now.

Also good news for me is that my margin account is fully formed. The next six months will see me try to strengthen my portfolio and reduce the leverage. Thereafter, I will stop paying off my mortgage using my CPF and let it heal.

f) Readings

I was reading Organize your Mind, Organize your Life by Hammerness and Moore because it one of the rare books that can train a person to become more conscientious. I found the material rather disappointing as only the last chapter has practical advice for readers, the rest is too philosophical for me. This reflects the difficulty in getting folks to become more conscientious in life, something that can dramatically increase their chances of success.

Other than that, I'm rapidly mugging up the skills to make myself an expert trainer.

Monday, July 09, 2018

The Art of the Good Life #30 : The Opinion Volcano

As a financial blogger, I have to admit that I cannot follow the advice of this chapter because my blog is the vehicle where I share my opinions with everyone no matter how ridiculous they may be. In a strange way, I get rewarded by my readers. In fact, my last post had an image of a bull having sexual congress with a bear, and it logged me 1000+ views within 48 hours.

Let's do something different for this chapter. The author says that most of the time, we do not need to share an opinion. In fact, having no opinion is an intellectual strength.

Let's illustrate this with an example of a piece of news that everyone seems to be very passionate about - The latest property cooling measures enacted by the government.

a) Opinions from people with no interest in the area are not worth much

Property cooling measures affect some people but not others. They definitely affect folks who want to buy property such as young people who can't really afford to spend the rest of their lives paying for an expensive home when all they have access to is the gig economy. They will benefit from the cooling measures. On the other hand, folk who want to sell the property are negatively affected by the change because a large part of their Singaporean Dream involves escalating real estate prices and retiring comfortably in Perth.

What the measures do not impact are folks who already have one property and intend to stay in it for quite a while longer. It is this group whose opinion may not matter so much as their exposure to property developers should be small.

b) Some opinions are for questions which simply may not be answerable so should be discounted completely !

Some questions regarding the cooling measures simply cannot be answered. Such questions like when will the changes be reversed ? Or whether ABSD will be increased by a further 5% if property prices go up further ? Other includes whether today's rebound is a significant reversal or a dead cat bounce. In this aspect, many financial gurus are more omniscient than God.

c) Some opinions are for questions that are simply too complicated and should be discounted as such. Alternatively, more opinions from a diverse crowd should be sought. 

One such question is why were the cooling measures enacted when the property market recovery has barely started and a big oversupply is just around the corner.

I struggled with this question over the weekend and it does seem very illogical for the government to enact this cooling measure so suddenly. I can understand the ABSD for second home buyers, but the reduction in LTV for first time buyers baffle me because I thought the government just wants the property market to favour young buyers over older sellers ( Who's hearts are actually in Perth ).

As my own answer failed to satisfy me, I starting thinking about whether elections are coming and whether the government does not want to be penalised at the ballot box from Millenial voters.

The closest answer which satisfied me is that we're shifting to a Smart Nation economy and expect younger Singaporeans to take on bigger business and career risks. This means not saddling them with larger mortgage payments. No sane young professional will service a mortgage and throw his life behind a startup. The highly leveraged folks prefer MNCs and public sector jobs and we won't such jobs for much longer.

It is this national obsession with home ownership that's kept us risk-averse all these years. You already have a mortgage to pay, how to start a business and generate jobs for other people ?

If the objective is to keep a lid on home prices to encourage risk-taking and entrepreneurship then expect the government to limit the rise in home prices for a very long time to come because a mind-set change takes a generation to occur.

But this answer is also not satisfying because the best move in such a case is to shift to a rental economy.

Either way, HODLing property counters and residential property may be a fool's errand if this is long term objective of our 4G leadership.

Saturday, July 07, 2018

Coping with Financial Pornography from Millennial Deci-Millionaires.

The question every financial blogger should ask himself or herself is whether have we reached peak Millennial Deci-Millionaires. This is when somebody goes online to talk about attaining a net worth of $100,000. This is often done by a Millennial who attained this net worth before the age of 30.

I want to congratulate anyone who meets this goal before 30 because it is a significant achievement. Absolutely nothing to scoff at.

When I wrote Growing Your Tree of Prosperity I was largely ridiculed  because authors are supposed to write about how to become millionaires - $100,000 was effectively low-balling. Thereafter, I refused to talk about making one million dollars in all my books because becoming a millionaire has become cliche. One author I knew of even wrote his book about attaining millionaire status when he was still an undischarged bankrupt, and I was adamant about not becoming a financial pornographer.

I think there is a better framework readers can employ when reading these news instead of viewing it as financial pornography.

( I use this term because I was inspired by La Papillon who really does not like savings porn and spoken out against it on the BIGScribe FB group. )

Here are some reasonable questions to ask whenever some Millennial Blogger talk about achieving $100,000 in savings :

a) How did the Millennial earn his/her money?

The first question is how the money was earned. This generation of bloggers have a wide variance in earnings. A local graduate can earn $3,600 per month but a private degree holder can only expect $2,400. Currently, the advantage goes to the Millennial who has a job in a bank, law firm, MNC or Public Sector. Otherwise, we might want to give credit to those who are doing sales where earnings have no set limits.

At this stage, we might want to be inspired if the blogger earned the money with extraordinary effort.

Maybe they held multiple jobs, worked overtime, or did so well they received multiple promotions. I made quite a bit of money doing overtime as I was the only AS/400 administrator in my first year of work and had 30% increments on a good year.

This might be an area that the reader can emulate.

b) How did the Millennial save his/her money?

If you earn more, you can naturally save more. The best approach is to see if the Millennial can share how much savings was generated as a percentage of take home pay. Absolute numbers are meaningless.

Also, when calculating the $100,000, the next question is whether it includes CPF money. CPF, along with our low tax regime, is a powerful savings engine that no blogger thanks the government for.

Beyond asking about CPF, you can benefit the most from how frugal the Millennial is. Are there various acts of demonstrating conscientiousness that you can learn from ? Is there a budgeting tool or an active denial of conspicuous consumption ?

For me, I naturally saved a lot because I never had a financial advisor. This means that I only have one term life plan from SAF. If you like to hear of my own savings pornography story, in my early thirties, I was bordering 70% savings from my take home pay, but I spent all my dividends from my investments.

Of course, I also lived with my parents, never drove a car, and ate mainly hawker food.

c) How did this Millenial invest his/her money?

This is the most exciting part of the framework.

No matter what kind of investments people claim to participate in, it's fair to assume that you can blend the equity/bond component to a pro-rated blend of 8%/3%, so reasonable returns will be 3-8% minus costs.

The magic is in controlling costs. Unit trusts and ILPS are expensive and could reduce returns by 1% every year. ETFs are slightly better. The cheapest investments are generally self-directed. This gives you the ability to estimate whether, moving forward, whether the blogger can reach a net worth of $1,000,000 before his or her 40s.

At this stage, IMHO,  I think it's safe to discount the crypto-currency and derivative components of the investment plan. Some financial porno should just be treated as such.

Of course, having gone through this exercise, the $100,000 that Gen-X accumulated should be adjusted to about $120,000 in today's money after accounting for inflation.

Most bloggers, being human beings, would have a long way to go before hitting $1,000,000 because of intervening life events like marriage and children. This can shift their priorities into things other than money.

I guess the fun is in reading about other people's lives and extracting their best practices so that you can benefit from them.

So be kind, reasonable and good-spirited when other people meet their financial objectives.

Thursday, July 05, 2018

Personal Update - Done with Training Contract !

To understand the changes happening to my career, it is important to understand the events that occurred months before my training contract ended.

I was out with my pals and had a rough week at work, and two friends asked me a crucial question which I had never contemplated before. The question went like this : "When will you give yourself the permission to be happy ?"

I was struck dumb by this question, but my buddies had a good point.

I had been financially independent for four years and have paid for my family expenses and mortgage without skipping a beat. I manage a fairly decent 7-digit portfolio that is enviable by modern Singapore standards. In comparison, my work frustrations are quite trivial in comparison because, like many practice trainees,  I do the work of a glorified clerical worker. ( In fact, I think it's safer to delegate work like photocopying to me because I'm not exactly the kind of guy that's good at box ticking. )

Ordinarily, I should be confident but I was not.

Perhaps I have not been making the right moves in my life. I spent too much time trying to please the folks around me and thinking of ways to conquer this new legal universe. In the middle of my TC, I had a nasty bout of food poisoning which gave me two valid days of MC, but I hated to lengthen my training contract, there was hearing in Court and I really was terrified of offending the folks at work, so I gritted my teeth and soldiered on anyway.

I learnt that Diarrhoea and Divorce is not good bed-fellows.

Just then I realised that confidence is not an intrinsic quality in a person.

Arrogance might be, but Confidence is like a case theory. You need the backing of authority and evidence to truly feel confidence.

So I took steps to increase my confidence.

I projected major expenses over the next 6 months and found ways to avoid them. I replaced my phone battery by buying a kit from China. I then took $50 off all my monthly telco expenses.Then I started expanding my circle of influence - a friend is considering some help  starting a business next year. I wrote to general Assembly and e2i to start enquiring about Data Science, I bought new textbooks. Most importantly, I also saved $4000 a month on a $1000 allowance, and farmed it into my margin account in an era of a looming trade war between US and China. I also adjusted some of my counters to make them more defensive. We're hunkering down for possibly a long winter.

I also approached the financial blogging community and told them that I wanted a way out. Do stuff which I am passionate about.

I wanted to deal with money, not broken families and warring couples. The money is good, but the work ultimately in my humble opinion, is petty.

And thankfully, the financial blogosphere was willing to lend a guy like me a hand.

My legal career will be held in abeyance.

I will proceed to be called to be the bar this August 2018. It's not high on my list of priorities, but I am on the lookout for a small law firm to "hang my practice certificate" in some sort of a locum arrangement.

I have speaking engagements booked until September this year. Thereafter, I will be designing a 2-day workshop that systematises Financial Independence with the good folks of Dr. Wealth. The aim is to build a "assembly plant" that produces financially independent professionals consistently. I want to demonstrate that a person's livelihood can be decoupled from work.

For the next six months, I will explore the concept the of doing financial workshops for a living. If that does not work out, I will see if I can do some work with a friend on his business early 2019. If things still don't work out by June 2019, there is always e2i and picking up machine learning ( which would reinforce my portfolio anyway ).

Ultimately, my greatest confidence stash came from some work Dr. Wealth had asked me to do to track my dividends to start producing a record of my passive income for marketing purposes.

I'm now pleased to say, thanks to my use of leverage, that on average, my dividends per month has finally exceeded the monthly Singaporean household income in 2017.

So I can do this.

And of you support me, there is a chance that you can do this as well.

Keep your eyeballs on this blog.  I will share my speaking schedule beyond Investor Conference 2018 soon enough.

Monday, July 02, 2018

The Art of the Good Life #29 : The Book of Worries

As I will be ending my training contract tomorrow and will have quite a battery of updates this week, I will keep this week's installation short.

We all worry because evolution has kept us anxious about what the future has for us. Needlessly worrying about something reduces the quality of our lives and shortens our lifespan.

This section has three practical solutions to dealing with our worries.

a) Keep a diary to track our biggest worries and concerns. 

I think keeping a blog is not such a bad idea because many readers face the same concerns.

b) Buy insurance.

No, don't buy insurance from a commissioned agent, because then you would have to start worrying about paying premiums every year. Buy insurance for worries that you really care about after giving it some thought. Personally, I think joblessness and retrenchment are bigger concerns than critical illness but this is often uninsurable.

In such a case only investing can resolve your problem.

c) Focused work

This is probably the best way to deal with your worries but based on my experience, the ability to induce flow in the workplace is now limited to just a few high tech and high touch jobs. The rest is bureaucracy and paperwork.

If your work is bullshit, all the more you need to save your hard earned money.

Amazingly, the author does not mention F.U. Money as the most effective antidote to personal worries.