What do they really teach you in Real Estate Seminars ?

For a trainer, I am actually pretty noob when it comes to attending other training seminars previews.

But to improve on my own presentation style, I have started attending the previews from other course providers because there's always room for improvement. Because of the embarrassment of getting noticed, I try to avoid investment seminars and focus on training seminars in other fields, so this week, I attended a real estate seminar and can't help but feel that training courses in this domain may be based on a lot of dubious fundamentals.

Without revealing the specific seminar I attended, I will just share with everyone what I learnt. 

Note that I am not an expert in residential properties, so feel free to correct me if my analysis is wrong.

General Strategy - The general strategy proposed in this seminar is that a working couple who is currently sitting on a private property for the past 5 years should sell it and trade up to two pieces of property - one property under the husband and one property under the wife. The couple will live in one property and rent out the other for passive income. Rinsing and repeating this every 5 years will make you a millionaire. 

I see a lot of flaws with this suggestion :

a) These strategies depending on drawing down CPF for passive cash flow.

If you look at the math, for the property that is rented out, rental income these days can seldom cover your monthly mortgage payments, but because monthly payments is covered by $1,200 from CPF, the rental income can become net cash flow positive. 

This is not real passive income but tantamount to drawing money from CPF instead which is already your money. Furthermore, it deprives you from the nice guaranteed 2.5% from the Singapore Government.

b) You will not get a tenant renting the second property all the time.

Even REIT investors get worried about tenants. SoildBuild's primary issue has become that of rent coming from NK ingredients. 

When you have one property, you either have one tenant paying rent or it lies empty and you get zero rent for a particular month. In those months when you have no rent, you are likely to be cash flow negative.

c) Things can go south very quickly when interest rates go up

SIBOR is rising as we speak and I've been paying a lot more every month since the Fed have started raising interest rates. When SIBOR ratchets upwards, you are unlikely to be able to raise rents at the same time and this will have a negative effect on your cash flows.

d) Property taxes are conveniently ignored in calculations.

Owning real property is different from owning a REIT due to taxes that have to be paid for property ownership. Rental income also flows into assessable income every year. 

No attempt was made to quantify this. 

e) The thesis that real estate will appreciate just like in the past is questionable

I have to be careful when saying this because I do quantitative backtesting so I may actually be committing the same sin. 

But when it comes to residential real estate, we know that price appreciation are probably more dependant on whether we will welcome foreign labour in the future and whether cool measures will continue. This thesis has to confront the fact that younger workers are increasingly finding it hard to own real estate because of the nature of their work. It does not help that fresh graduates are finding it harder to get permanent jobs 6 months after graduation.

Commercial property managed by REITs is simply not as big a political time bomb as real estate property. 

f) The trainer actually gets many bites of the cherry 

A lot of these seminars are taught by real estate agents. 

I suspect that trainer fees are not the only payments that the trainer will receive. Subsequent real estate transactions will also be serviced by these trainers. Does this introduce a conflict of interest when trainees are nudged to buy/sell properties through these trainers ?

Anyway, feel free to share what you do know about these seminars and correct my misconceptions if there are any. 

It was quite fun to learn what other trainers are teaching. 

The Model Thinker #21 : Game Theory Models Times Three

This chapter is about game theory where models describe a situation of zero sum games. I don't want to get into a discussion on zero sum games because they are more useful in a situation where you trade in derivatives or currency. Someone's win has to come off from someone's losses. This is the kind of game that I really hate getting into.

Instead the addendum of the chapter talks about something more interesting which is the problem of identification.

What causes people to take up a particular investment approach like value investing or quantitative investing ?

The peer effect model reasons that people adopt an approach when influenced by their peers. If that were true, a person who joins Seedly would become more open minded to buy whole life insurance, where a network of FAs are brazenly picking fights against the BTIR crowd. If this person joins BIGScribe, I am guessing he is more likely to adopt a more hostile stance towards whole life insurance, preferring to invest their way out of any personal situation. At least so far, the design of BIGScribe is that there are no commissioned salesman holding admin roles within the group.

The sorting model suggests that people sort themselves out and they congregate in the same groups that have the same philosophy towards insurance and investment. If you consider the sorting model as the dominant one, you will simply argue that Seedly attracts more FA types and folks who are more open-minded to what is sold by the insurance industry. Similarly, BIGScribe is, somehow, a magnet for very sceptical critics.

The problem of identification is that if we only have a snapshot of data, we can't really tell apart which effect is a stronger play. We have to observe participants in each Facebook group over time. Right now, I believe both effects are always in play between the FB groups. Some folks will be influenced by the regular posters in each respective group but eventually those with the same outlook (or agenda) will congregate within the same cluster.

In designing a good training to enact change in a client, both effects will have to be exploited at the same time to benefit the customer.

I like to to get beginners invested as soon as possible, treating dividends as some kind of "gateway drug" to get a rookie investor hooked ( like Walter White ). Of course, because of the amount of skin I have in the game, I have to pre-select students who will most likely adopt my approach towards investing. Right now, I am aware that engineers, accountants and teachers somehow have a strong affinity to what I teach in class.

Should I soften my style to make it more touchy-feely and emotionally charged so as to appeal to the artistic and designer types that I generally do not have an affinity with ?

Let me give you a hint with a quote from Game of Thrones :

"I am neither kind, nor a lord, Your Grace. I am merely an instrument of the institution I represent, it's wellbeing is a matter of arithmetic, not sentiment." - Tycho Nestoris of the Iron Bank of Braavos.

First World Problems #2

I'm not really in a mood to blog this week so I'll just keep today's article short and sweet just to update everyone on my attempts to hire a domestic helper without a notice of assessment.

a) Wild Goose chase to find out whether my dad already has a fixed deposit account.

The week began with with me finding a fixed deposit statement with my dad's name on this made in 2016 when we hired our previous maid, there would have been a possibility that we already have a fixed deposit account to get our next helper.

So I went to the bank with my mum to make enquiries about my dad's account. Unfortunately, banks have to comply with secrecy laws and even with my mum's marriage certificate, the bank cannot even let us know whether the account would exist. I ended up rushing to the hospital to get my dad on the phone with the banker only to find out that the account was withdrawn some time ago.

b) Sold some stocks to build up the fixed deposit account.

I was prepared to liquidate part of my leveraged account to create the fixed deposit account. Choosing the stocks to let go was not difficult - I got into my account and sold my REITs belonged to the quadrant that paid the lowest dividends and had the highest gearing. The hardest part was saying goodbye to Mapletree Logistics Trust which did very well for me for the past year but no longer gave me compelling yields. (It even went up on Friday. FML )

Upon activation it took the Kim Eng brokers 3 working days for the money to return to my bank account which was reasonable.

c) Fixed Deposit creation was instantaneous

Once you have money in your bank account, creating a fixed deposit account is as simple as using a mobile banking app. Given that I am trying to get rid of this fixed D as soon as I am allowed to do so, I set the duration to 1 month and would get $2.41 (0.05% interest rate) of my trouble next month.

But there was one final obstacle...

d) Getting a fixed deposit statement with my name on it is not straight-forward

As I just created a fixed deposit account, an account summary has not started showing up on my online banking profile yet. The next challenge is getting a physical printout that maps my name, account number and amount in the fixed deposit on the same piece of paper. By now, I was so paranoid about bureaucratic procedures and was more than willing to queue at the banking branch to get this printed. Unfortunately for me, the queue was long on a Saturday so I spent 30 minutes waiting to get this done.

Right now, we have just completed the paperwork to hire our maid from Myanmar and now we have to wait for a week for her to complete her training.

But the journey is not over yet.

I don't have full visibility on how long my money needs to be in this fixed deposit so I would be making some enquiries with MOM this upcoming week, escalating to my MP if possible.

The reason why I'm dying to get out is that having a $50,000 warchest along with my dividend payout may allow me a chance to get into Astrea V bonds ( Likely Tranche B ) in my margin account.

The Model Thinker #20 : Spatial and Hedonic Choice models

This article is a more detailed way to look at the statement that "Price is what you pay, value is what you get."

What models exist to explain the value of a good ?

Spatial attributes have no best value. One example of a spacial attribute is thickness of a slice of bread or the colour of a jacket. Preference depends on the individual. In the financial world, the optimal amount of the debt/equity ratio is around 30-40% and varies from industry to industry. Picking out stocks with the lowest or highest debt to equity ratio result in substandard performance.

Hedonic attributes are values whereby the higher than better. An example is your PSLE t-score, why would anyone prefer 240 when he can get 270. In the finance world, I would reason that free cash flow yield is a hedonic attribute. A portfolio of stocks with the highest decile of FCF yield will almost always perform better than a portfolio with a lower decile.

When it comes to valuation there are other models.

A coordination model is where prices are socially constructed. The example from the book is Art. The value of a Jeff Koons sculpture is ultimately based on the good will and distribution of values ascribed by many individuals. It is highly dangerous to make investment bets on something that has a price that is socially constructed. One day it would be high. Another day, no one will even pay a pittance for it.

Finally, something may have a value that depends on how much a person in the future will pay for it. This is based on predictive modelling. The price of Bitcoin depends on how much people are willing to pay for it in the future.

The models can be used in isolation or in combination.

The books uses examples from political science, but it might be able to qualitatively explain the valuation of securities.

First World Problems

Sometimes I stir a lot of shit on weekends.

The topics that blog readers get anxious about include topics on dating Singapore women, dissing Financial Advisors or delivering a nasty brutal lesson to Polytechnic students. Regardless of the negativity of the engagement, I get 2000+ views in one day.

But sometimes, the world stirs throws some shit at me. In such a case, I should also share on this blog because we can learn something from the experience and I get to dissipate some Bad Kharma I accumulated from previous blog posts.

My dad has currently been hospitalised for a few weeks and it's been quite rough for him. The doctors found three problems with him and are systematically resolving it one by one.  At the home front, we've been trying to hire a domestic help to support my mum when my dad comes home.

Apparently to sponsor my domestic help, I need one of the following :

• Notice of Assessment for my Income Tax
• Evidence that I have a Fixed Deposit account containing $50,000

Unfortunately for me, I only started reporting my income tax for year 2018 so I will only get my notice of assessment maybe end of this year. Prior to that, I was a student. So I spent the yesterday contemplating the stocks I need to sell to build that $50,000 fixed deposit account. 

This is a rare case of something financially independent folks face. 

While I can easily liquidate my stocks to build the fixed deposit account, the opportunity cost assuming 7% dividends is almost $3,500 every year. Considering that I am likely to take this from my leveraged account, the penalty is much worse.

This is not the first time I was inconvenienced by my lack of conventional employment in this society. Years ago, I was abused at at ICA by part time counter-staff and had to document my dividends payments for ICA to initiate my wife's SG citizenship application.

I think insisting on a fixed deposit is cruel, and alternatives should be offered to citizens who really need a domestic helper to assist at home :

• Instead of $50,000 fixed deposit, it is much better to also allow $50,000 in SSBs to also qualify.
• Perhaps the sponsor can also show that his CDP has $250,000 in his account.

I am pretty used to government officers explaining that my case is very special and have experience getting concessions from them. 

But right now, if life throws lemons at you, make lemonade :

• Looks like I now have an emergency fund. 
• As the trade war gets worse, I now have a war-chest.
• I am likely be getting rid of my equities first to reduce the beta of my overall portfolio. 
• For my leveraged portfolio, the securities with the lowest yields will be culled first

Let me know if you have experienced a similar problem I did and whether you have a workaround.

All my administrative requirements have been explained to me by the maid agency. 

( If you are a private banking client, do share with me whether these banks have some sort of way to help their HNW clients out. )

What is your Return on Luck (ROL) ?

If you've been financially independent for a while, you will notice that the blogosphere and social media will be very eager to discount your financial success. You might be marked down on the Internet for the following :

• Coming from a rich family.
• Earning a salary above $120,000 a year.
• Being a scholarship recipient.
• Being single - with no wife and kids to affect your spending.
• Being born with a combination of intelligence and conscientiousness. (Blame Jordan Peterson)

The laundry list expands with the millions in your bank account because folks want more reasons to explain why they cannot be as rich as you.

Here's what these critics are missing. There are actually lot of folks who come from rich families and may not have accumulated as much as you. The same goes for those who make a lot of money, or are single, intelligent or conscientious. Of course, the opposite applies. There will always be someone who is born under worse circumstances than you who will eventually do better than you ! 

While a lot of folks are lucky, what is missing is a metric to compare two equally lucky individuals and measure how one will edge out over another. 

Let's call this Return on Luck or ROL.

To measure ROL, we need to ask ourselves this : 

What are the systems and habits we put in place to exploit lucky events in our lives and minimise the misfortunes that happen to us.

When I was going through my first year of work with Procter & Gamble, the company suddenly fired its CEO Durk Jager and the stock price collapsed to $60. I thought this was a perfect opportunity to exploit the market rout and asked my boss how to buy the stock. This being an IT department and us being investing noobs, no one could guide me to a broker to open a trading account. Procter & Gamble stock eventually doubled its price over the next 2 years. Even when I had some investing insight, the investing infrastructure was not there for me to exploit it. So, as a rookie, I had a low ROL.

A margin trading account can increase your ROL even if you do not employ leverage systematically over the long term. When the US REITs simultaneously declared a rights issue, I had no liquidity in my bank account. But because I had a leveraged account, I could participate in the rights issue and then pay it back slowly over time. I just had to stomach a lower margin account ratio in the mean time. The subsequent rise in Manulife REIT and Kep-KBS REIT became a lot more beneficial for me since I participated in the rights issue for my margin account. 

Other systems that can raise your ROL can be as follows :

• A Crowdfunding account. 
• Cryptocurrency coin wallet.
• Fully funded Child Development Account for all your kids.
• A Private Limited company to bill lawful company expenses and provide legal protection.
• A network of alumni that creates business opportunities for each other.
• An educational credential earned from a prestigious institution that companies respect and eagerly hires from.
• A Bloomberg terminal.
• A decent term life policy that is cheap, rebates premiums every year, and covers a substantial part of your human capital.
• A sustainable diet that is scientifically proven to extend your life and won't make you an insufferable asshole to you non-dieting friends.

I can also think of systems that IMHO, may lower your ROL :

• A mistress
• A Netflix account that costs you money and time ( Which I have and enjoy, unfortunately )
• A ready cash facility that can tempt you to overstretch your expenses.
• A bunch of alcoholic friends who hang out and watch soccer together. 
• A bottle of champagne in some night club with your name on it even when you do not entertain business contacts for a living.
• A financial advisor who has a keen idea of the size of your pay-check and the timing of all your subsequent cash flows AND who is financially incentivised to lock your money down in low interest bearing instruments like endowments or expensive instruments like ILPs. (I'd rather keep a mistress )

How can we judge whether a system can increase your ROL ?

One test is whether this plays a role in the virtuous cycle of wealth formation.

A facility that supports dividends investing is such an example. A virtuous cycle is formed when dividends from a portfolio of dividends stocks can be fed back to buy more dividends stocks, pay for better information systems to filter out better dividend stocks, and even qualify you for higher end financial services ( lower financing fees ).

This idea is of course, not mine. I tried to adapt this from Jim Collins, author of the book called Good to Great who pioneered this idea known as the Flywheel Effect.

Just don't be a smart ass and ask me whether I have backtested this....

The Model Thinker #19 : Threshold Models with Feedbacks

Sometimes it helps to go granular and model something as an agent instead of system dynamics models. So this means that instead of modelling a stock-market as having a number of value versus growth investors, we can model each investor as someone who will buy or sell a stock based on some threshold.

The problem with modelling each investor as an agent is that we run into other problems.

Some investors will buy a stock when it goes up, making the stock go up even higher. This is an example whereby an agent produces positive feedback loops. Other investors will do the opposite and buy the stock when it goes down. This is an example whereby an agent produces negative feedback loops.

A system with primarily positive feedback would be like cryptocurrency markets when prices of bitcoin blew up or collapsed. If you really believe that the cryptocurrency markets will moon over the next few months while the trade war is going on, you might be making a bet that cryptocurrency agents are mostly trend followers and the current trend is up all thanks to the trade war. My theory is that some folks believe that China can go nuclear by selling US treasury bonds. This will push up the price of Bitcoins.

My opinion is that the REITs markets are possibly the opposite of cryptocurrency markets. A lot of REIT investors chase dividend yields and this is primary a market with a lot of negative feedback. When REIT prices drop, yields go up and this attracts yield hunters. REIT markets, therefore, will either stabilise or move in very shallow cycles. This is why I observe empirically that REIT portfolios I build with my students have such a low effective shortfall the expected loss in 1 out of 100 months is less than 6%.

The insight that cryptocurrency markets and REITs markets are opposite poles when it comes to feedback is an interesting one which I am now cracking my head at.

Can a strategy be developed to exploit this ?

I already have a paper on factor based models for cryptocurrency markets and when markets are down, crypto seems to making an interesting recovery.

Perhaps a hedging strategy for REITs can be built with Bitcoins ?

Let me know what you think.

What I learned from observing Financial Advisors

In every preview, my colleagues are always able to spot who the Financial Advisor is in a room full of potential students for my course. This week one subject has his hair combed backwards, his watch looked like a Patek Phillipe ( although it seems out of place as he looked in his early 30s. ) and he wore a prominent Coach bag.

To Financial Advisors, my previews can be a nasty trap that can make them feel depressed for weeks.

Within the first 10 minutes, I would ask the class to participate in answering some questions and you can see the results on this page that shows just how much the public trusts folks from this profession (note that these surveys are done before the substance of my talk so no attempt was made to prime the audience to react negatively in a survey.)

It does not end with just one survey, I do eventually talk about my origin story. I shared about how a policy that was mis sold to my mother that put me in the path of intense study in the field of personal finance that got me to where I am today.

Typically these FAs who attend my preview eventually become so angry that they storm out of the room, my colleagues always tell me stories of folks who get triggered by the substance of my talk. This is not a loss for me, because if you actually get a commission higher than my training fees when you sell a policy and claim that you can help your client, then why are you even attending my preview ?

These are students I don't really want to have.

Of late, I realised that many Singaporeans may have made some insurance moves they grow to regret. This because as part of my class, I get all my students to reveal their weekly expenses to me and I get a front seat on investment decisions made by more responsible members of the Singapore population.

( No worries, I don't make recommendations except to ask them to eliminate the conflict of interest by seeking an independent FA. )

This has gotten me really interested in how financial products are sold and what the internal tricks of the trade the profession might have so I picked up a book on how FAs can handle objections.

Salespeople develop a very mature and complicated system of objections handling to deal with common ways a layperson may reject them. My first objective is to see how to immunise myself from these objections. My second agenda is to adopt some of the responses for my own pitch which faces interesting objections of its own given that my work has an increasing sales dimension to it.

As it turns out, bread and butter advisors you meet daily hardly get into the detailed technical discussions that folks like Money Maverick even get into. I was disappointed that no attempt was made to disarm "Buy term and invest the rest". I ended being grateful that at least guys like Money Maverick are sophisticated enough to talk about real issues like active vs passive investing.

I will just share three tricks I see repeatedly being used to handle client's objections based on their own text-books.

a) Don't let an FA compare themselves to other professions

I noticed that if you can block the move whereby an FA compares his work to a medical doctor, half of all objection handling strategies will fail. For example, when you ask for a discount, the FA might ridicule you by asking whether would you ask for a discount from a medical doctor.  This theme gets repeated over and over again across different objections - that it is rude/illogical to do to an FA what you won't do to a doctor.

Just refer the FA to the qualifications required to qualify to be an FA here. Ask them whether they can really compare themselves to doctors when the education qualifications are A level/Diploma/IB.

This should disarm them fine and good.

b) For retirement planning, realise that you are paying for a financially engineered guarantee so you will need to push into a discussion on numbers.

When it comes to retirement planning, FAs will attempt to sell you a financially guaranteed solution that will ensure that you meet a future goal. There are a couple of ways to deal with that.

First, know that you are paying hefty commissions for this guarantee, so by not taking this guarantee you have some leeway to make a few mistake of your own in investing.

Second, you are sacrificing a huge upside by not participating in market risk - likely the manager of the endowment will be earning that upside instead.

Third, you should get your FA to factor in inflation on their promised meagre returns.

Standard objections rarely move into numerical territory because they want to confine your decision making to emotional ones. Even today, a lot of retirement plans are sold without comparison making. If you invoke recent REIT returns, FAs will find it hard to maintain the attractiveness of their pitch.

All this, of course, assumes that you know how to invest. 

c) Some contradictions are built into the stock answers.

I was quite shocked that some objections handling were contradictory.

One answer claimed that reviewing the proposal is pointless because it is very complicated and only a credentialed professional can really understand it fully. It then proceeds to make the claim that the policy can be explained easily in 15 minutes.

Another ridiculous idea is that premiums will always go up so when you delay a purchase so the advisor will always get richer with more delays. Remind the advisor that markets also go up and you are more likely to get richer when you delay as well. If the advisor wants to refute you, he should provide the CAGR of his premiums.

Anyway, do read this article with a pinch of salt. They are taken from a prominent guide on objections handling and with the number of contradictions in this manual, policies may not be sold today using these techniques. If you are an FA who can go through this article without blowing your top, you may share with me to confirm whether these strategies are really used.

I will be reading every single book I get on FA sales pitches over the next few weeks because I think that my own program will become better once I get under the skin of this profession.

If you are an an ex-FA with some axe to grind ( there are a lot of these guys out there ), the best thing you can do right now is to offer to lend me a copy of your sales manual so that I can deconstruct the sales approach on my blog.

The Model Thinker #18 : Systems Dynamics Models.

Systems Dynamics models are so useful that I have decided to come up with my own spin on why it is so powerful.

A systems dynamics model allows an engineer to model feedback loops and gain a holistic understanding of now a system works. This frame work is sufficiently flexible such that it can apply to any domain.

Here is how I intend to use this framework to teach the fundamentals of personal finance to my students.

The diagram above summarises our financial lives.

Upon first inspection, our monthly cash flow is influenced by our salary from work which is determined by our life-energy exchange.

For the greater part of the financial blogosphere, I think we have make the mistake of thinking that the moment we can start investing part of our money into dividend stocks, we would spark a virtuous cycle of getting more passive income to farm more of our salaries into passive income assets.

Fortunately,  the systems dynamics model also allows us to start thinking about negative feedback loops.

One of the effects of getting passive income is that we find that there is less motivation to work and possibly even more impetus to spend money on discretionary consumer goods. This creates a negative feedback loop decreasing our propensity to generate more cash-flow every month.

I suspect this will be a major theme for many bloggers who are at the cusp of financial independence.

The final effect is that folks who FI do not accumulate wealth forever.

Many will reach a comfortable steady state that varies based on their own personalities.

Why Singapore Women scare Frugal Millenial Guys.

This week I had an interesting chat with some Millenials on their fears.

Some of these guys are familiar with my story and they are aware that when I was much younger, I transferred my CPF-OA to CPF-SA because I was afraid that a future Gen-X spouse would over-leverage and end up with me me getting stuck with a home that is too luxurious for my taste.

All this while, I felt that my fears are those of a bygone era.

I always thought that Gen Y women are less aggressive than their Gen X counterparts who had a lot more to prove in the 1990s and were trailblazers in feminism. Also dating apps like Tinder really gave Gen Y guys a huge advantage in the dating and mating game, the barrier to getting some bedroom action has really come down after these apps were launched. Adding insult to injury is that becoming a BBFA is now a feasible lifestyle choice. If Gen Y guys want to retreat from the marriage game and spend the rest of the life playing the PS4 and watching Netflix, this is something that can result in high levels of personal satisfaction.

So it comes to quite a surprise when some frugal Millenial guys told me that they have a different fear regarding Singaporean women and want to know whether they should follow my lead and marry a Malaysian instead.

The problem they have with Singapore women is that they seem to create the impression that they  love to travel ! These dudes might be right, female influencers may have turned travel from a luxury in life to a necessity. 

Initially I wanted to just argue that travel is de minimus compared to having to pay for a private condominium, but upon closer inspection, travel can be fiscally taxing to a young man. My budget to get my wife and kids to the Gold Coast in June would cost me $8,000. Imagine going to Greece or Spain.

So imagine travelling with your girlfriend to faraway places just to get a few nice Instagram shots. If she likes to do this four times a year, you'd hardly have savings left even if all you did was pay your own way when you accompany her.

Sadly, most of my inventive responses to Gen X women of my time will not work on a younger woman who loves travel since transferring CPF-OA to CPF-SA might not help.

Gen Y guys needs a solution to actually lock down their hard earned cash assets so that nothing can be done to unlock their money to support the travel industry in Europe.

Beyond common sense ideas like limiting travel to Malaysia, here are some ideas :

• Voluntary Contribution to your own CPF - You can pump more money into your CPF and pay lower taxes at the same time. This ensures that you won't see your money until you are 55 and at least the CPF-SA component will compound at a guaranteed 4%. 
• Supplementary Retirement Scheme - This is another method to push your taxes lower. Problem arises if your girlfriend wants you to withdraw it early to pay for business class tickets. Pray that she will not be so cruel to make you suffer a 5% penalty when you withdraw early.
• Illiquid Corporate / Government Bonds - You may need AI status to buy long dated government bonds from, say, Kazahkstan from a private banker.  It might pay handsomely but are not particular liquid.
• Long Term Endowment plans. These toxic instruments, almost tantamount to pure wealth transfers to your financial advisors, take so long to break even that taking the money out earlier will almost guarantee a painful and debilitating loss. If you find that you want an endowment plan just to avoid travelling with your girlfriend, I suggest that you should just travel with your girlfriend. Heck, if your FA is a hot chick, maybe it's cheaper to travel with her.

I feel that none of these suggestions are as elegant as a CPF-OA to CPF-SA transfer. 

Maybe the solution is to become BBFA after all.

Personal Musings on the Imposter Syndrome...

This last month was the month I've met an important milestone.

Last month was the month when my earnings post law school started to exceed the fees I have paid to SMU. Even though this was not important to me financially, I needed to convince myself that I should at least earn my way back to cover my fees without the assistance of my passive sources of income. Of course, covering the fees about 8 months after being admitted to the Bar is no big deal. The Justice Law Clerks paid way less in fees after accounting for academic awards and they were paid during the period I was earning zilch and they were studying for the Bar exams.

I also had to come to the realisation that this will be the second time in my life when I failed a career transition.

The first time was after I studied for my Masters in Applied Finance and took all the finance certification exams only to find that IT paid me quite well to actually stay on. Right now, my training career is doing fine enough for me to possibly keep going on in 2019 and try to do my best - If I had actually stepped into Family law, I'd possibly cover around a third of my fees today and I'd be really miserable dealing with emotional problems from other folks.

To what end should I strive to be a "REAL" lawyer ?

One of the problems after becoming a trainer after going the whole shebang of being admitted to the Singapore Bar is the imposter syndrome that bothers me even right up till today.

The idea that I'm a "fake lawyer" was hinted by the auntie who sells me second hand books in Parklane whom I consider a friend because her son graduated from SMU and I was regular book shopper between lectures and came from the same university.

She said something really insightful. Obviously, she knows that I am free enough to shop for books on weekday afternoons. But she said something to me which was so interesting that only a bookseller who be able to say this to a close friend with much authority.

She said something that is full of BURN !

She said that I buy books "real lawyers" don't read.

The books I buy are full of equations, charts and are dry as hell. And by now she is familiar enough with my habits that she can even predict what books I would buy. In fact, she keeps some of the more arcane investing books for me knowing that no one else will give those books a second look.

Her insight to what "real lawyers" read is even more interesting. She says that "real lawyers" are always stressed. They buy the trashiest fiction novels to read and relax after work.

My imposter syndrome triggered again when I had an alumni's gathering this week. I really enjoyed my time in law school and really miss my professors, but I was self-conscious about my career choice. For reasons you guys know, investment trainer always sounds a little dubious to members of the public. Will there be a pissing contest to see who works harder for their law firms during the alumni meetup ?

Anyway, I thought I should go back to say hello to my classmates and get some name cards. I might need a good lawyer to assist me in writing disclaimers or even help me with IP matters in the future, so I should position myself now as a potential customer.

As it turns out, the moment I stepped into the function room, my ex-classmates greeted me with "welcome to the work-life balance" club.

None of the alumni in the group I contacted are "real lawyers". Some are in house counsel and the rest work for government agencies. The real guys who work for the prestigious law firms are stuck in the offices and have to miss that event.

We discussed a lot of major issues about the industry, the recent "violence" done to family law and how lawyers worked harder than the "996" culture the Chinese are revolting against. I think I held my own rather well because my Conflicts of Laws instructor as me whether what I learned was useful and I was able to discuss her topic at the level where I can quote case authorities and how it got me a thrashing when I was a pupil.

The conclusion is this. The legal industry is no longer what it used to me. Once growth starts to slow and folks no longer see a bright future, they will not put in the hours for a future that is not compelling to them.

My fear about getting into family law has always been about the "SUSS tsunami" that has yet to hit the legal industry so badly. SUSS conducts two modules in Family Law for their graduates and they probably are willing to do the same kind of work for much less. After that the supply will be shifted unfavourably towards those doing Criminal and Family Law work. Relief will not come until 2023 when the new regime for Bar Exams come into existence.

Anyway, self-loathing about career choices can only take one so far. I made a decision to postpone doing some smaller legal projects today so that I focus on my family and training business. I just do not multi-task as well as in my 20s or 30s.

At the end of the day, titles and your position in society may seem illusory, but the money coming into your bank account, your investment performance and the money you make for other people, is totally real.

I will revisit the possibility of a legal career if I ever run out of training gigs.

The Model Thinker #16 : Markov Models

Markov models capture systems that transition probabilistically between a finite set of states.

One application in finance are Bond credit ratings. A "AAA" bond has a 95% every year of retaining it's high credit rating but there is a 5% of it being downgraded to "AA". In similar vein a "CCC" bond has a probability to be upgraded to "B" or go into default. Credit analysts construct a table of transition probabilities to gain a helicopter view of the bond markets.

A Markov process can converge into a unique statistical equilibrium if it satisfies four conditions :

a) It has a finite set of states.
b) Probabilities of transition between each state is fixed.
c) The system can get from any state or any other state through a series of transitions.
d) The system does not produce a deterministic cycle through a sequence of states.

If only these four conditions are met, the number of bonds of a particular credit rating would converge to a fixed percentage over time. Unfortunately, transition probabilities do not remain constant over different part of market cycles. The probability of a bond defaulting goes up in a bear market.

There are a some lessons we can learn from Markov models.

For history to matter, transition probabilities must change.

A one-shot intervention in a food drive creates only a temporary boost and cannot resolve the problem of inequality. As such, beyond virtue signalling, Professor Teo You Yenn's self sacrifice to deny her children her own social advantages does jack-shit for fellow Singaporeans. Instead, pushing for a serious program like the Professional Conversion Program would create a lasting effect because, if done properly, it can increase the probability of transitioning unemployment to being employed. I suppose policy tweaks need to make this work for non-degree holders.

Imagine you can either be employed or unemployed. Career management would mean reducing the probability of transitioning from employment to unemployment. This may mean playing office politics or putting yourself under a 996 work regime to avoid getting retrenched. This can be tiring.

The other possibility is to increase your probability of becoming employed if you fall into a state of unemployment. This is where retraining comes in, but networking and helping folks in your weak networks matter as well because you can call in a favour later in your career.

Dividends investing belong to a totally different class of intervention strategies that makes unemployment totally irrelevant so it can complement your career management strategy moving forward.

Unfortunately, to succeed in dividends investing you may need to manage your career better in the short term so as to generate the funds to build your portfolio in the first place.

There are no short cuts in life.

The Art of the Investment Duel

When I was young, I've always wondered to myself why folks who disagree about investing would not simply take out $100,000 in cash, structure a portfolio, and then see who has a stronger investment idea.

More than a decade ago, fresh after my CFA exams, after I published Growing Your Tree of Prosperity and immediately started to offend Financial Advisors with my strident insistence of Buy Term and Invest the Rest.

One FA was so angry with me, he tried to challenge me to a financial duel. While my investment ideas were quite immature at that time, I thought I would scare the shit out of him in spite of my total lack of investment know-how. First I told him that he must challenge me with his name in public and his firm, we will do this on the newspapers. Then  I told him that the sample portfolio must take into account every single commissions paid for by his client. Also every position must be totally transparent and no hidden positions. Finally, I told that I will be allowed to use derivatives to fight his client's portfolio.

He finally backed off after I told him that I will take a punt on a random derivative and will start to mirror his moves once I get a comfortable lead. Then I asked him whether his firm can survive the reputation loss of losing to a lowly IT engineer who is in his 20s. Even with a 45% of me winning, his reputation loss was way bigger than mine. And while I lack a strong investment thesis at that time, I was a seasoned troll who was a specialist in humiliating my opponents.

Interestingly, I found myself in the opposite position recently.

I love Chaos.

My dream is to see an Independent FA and FA structure different portfolios for one client and see who makes more money for him as a year, all commissions taken into consideration.

But as a trainer, getting into duels have become dangerous. I admitted to Money Maverick that he is the most dangerous opponent not because he can structure a better portfolio, but because I stand to gain little if I win but I stand to lose a lot of  students if I lose. Even if Money Maverick has 2% chance of winning, it's not something I want to get into. This also explains why trainers who all preach different philosophies would not get into a duel against each other at a portfolio level.

Instead, sometimes you only see cherry picks of stocks that have done well.

Now suppose I have no choice. Perhaps the insurance industry and financial blogosphere is sick of my trolling and forced me to take on some folks in the industry by kidnapping my kids, what would I do to maximise my chances of winning ?

Let's assume that the rules are $100,000 of real money, all commissions and trading fees to be accounted for and quick trades will be confidential only for a week.

This is how I would play against each party :

a) Value Investor / Investment Moats

Kyith Ng of Investment Moats is one of the toughest opponents in the blogosphere having singlehandedly FI-ed on an engineer's paycheck. His brand of value investing goes really deep and I suspect that he's confident enough to hold perhaps 8-10 stocks in such a portfolio. His only weakness from what I can tell is not even a weakness - he may hold a warchest to balance out his concentrated positions.

To battle Kyith, I have to assume that he will succeed in picking a stock with a 4% advantage over my quantitative models - he puts in a lot of effort to pick superior stocks and he knows his stuff right down to the micro-level. But perhaps with his warchest, the advantage will narrow to 3%.

My best bet would be to structure REITs portfolio with 3x leverage. I will inject APTV and Lippo Mapletree to boost my yields. At 11% yields, Lippo will yield 11%x3 - 8% or 25% yields.

Maybe my beta will beat his alpha.

I will have to bet that the dividends payout in August and December will boost my winnings to offset his alpha within the shortest time possible and make sure we don't extend this contest for too long. If it drags for 2 years or more, I will end up self-destructing from a margin call and Kyith will win without lifting a finger.

He'll probably be nice about winning this contest, but my ego will take years to recover from this loss.

b) Dr Wealth / FBIC

Suppose my children's kidnappers are so sadistic, they instead force me to duel my business partner instead.

Alvin's style is highly quantitative, very similar to mine but I employ fewer factors than he does and he focuses on growth more than dividends. A duel with Alvin is unpredictable, I can get dividends payouts regularly and this has to be pit against Alvin's occasional stock picks what can grow 15-20% in a single day.

Alvin like a DPS that lands a lot of criticals in battle. I'm more like a tank.

My biggest fear of the FBIC strategy is that it invest in HKSE which allows Alvin to generate some kind of positive skew to his portfolio over time. Positive skew and HK presents a fairly large alpha over me.

I bet that whoever wins this duel will depend on how the market cycles change. I will leverage x1.5 and build in a few safer stocks to lower the volatility. Then I will hope that my algorithm will beat Alvin's.

My guess is that if the market cycles continue to contract, I have a good chance to win. If China and US end the trade war, Alvin will trounce the shit out of me.

Losing to a business buddy is definitely less humiliating. I am more than happy if Alvin wins this round.

c) Commissioned FAs/ Money Maverick

The rules of the game is already slanted in my favour. Commissioned FAs must account for sales fees and management expenses. This creates a negative alpha that any rookie or noob can exploit.

If I am forced to explore the possibility of losing to Money Maverick, I will first try to keep the fight to less than 6 months. If that is so, I will put everything into Astrea IV bonds without leverage because the commissions paid out will do most of the work for me and I get a YTM of 3%. It should be painful to redeem an ILP within such a short time.

If Luke wants to extend the fight to multiple years, I have to be more careful as he has a tendency to place bets on volatile emerging market bonds and equities funds. In such a case, I would tangle with him 1.5x equity multiplier on a portfolio of high-yielding REITs. In this scenario, the odds of me winning is not as high as I would expect as REITs are already overpriced and EM funds are coming from a low base. In this case, I will rely on high management fees on the other side to eke out a win.

In summary, beyond this attempt to imagine what happens if the financial blogosphere turns into a Wrestlemania event, we probably won't see an actual fight. The Straits Times actually ran such a competition many years ago and my Accounting professor Professor Sebastian Chong, handily won.

I leave some intellectual puzzles for my readers - There are bloggers that I cannot imagine crafting a winning strategy to win with skill, like Brian Halim, who combines investment and gambling skill so well, he only seemed to have may made one bad bet last year and it was on crypto-currencies.

I leave that to the many experts who like to comment on these mental exercises.

The Model Thinker #15 : Lyapunov functions and equilibria.

I don't really want to get to the mathematical derivation of Lyapunov functions but they are a class of equations that allow us to predict whether a process will reach a state of equilibrium.

One example of how a Lyapunov function be used in a real world situation is to model a Race to the Bottom situation.

Imagine a game where governments get to set the amount of investment taxation. The heuristic to  set these taxes is to set it at 90% of the average of what other countries are setting last year so as to attract a larger share of investments from other countries. Over time, this game becomes a race to the bottom where the only equilibrium state is when every country imposes close to zero taxation.

This was probably what went around policy maker's head when they tried turning our local stock exchange into a REIT hub. To attract other countries to their their real-estate assets in Singapore, we simply make it as tax free as possible.

Even better for local investors, to maintain our position as one of the best places to launch REIT products, our government extended this tax break until 2025, ensuring that one of the conditions of a Perfect Storm for REIT investors would not manifest for another 5 years.

This game of race to the bottom to attract foreign listings is the reason why these tax breaks are likely to stay beyond 2025. The only way this can be taken away is when the Singapore voters gets so upset with inequality here that they make the ruling government lose another GRC. This is not likely the situation right now since the number of foreign workers is now under strict control.

But in the grander scheme of things, REITs democratise ownership of commercial property allowing someone to own a mall with less than $1,000, how can this play such a big role in generating inequality in Singapore ? Passive income from REITs are a lifeline to many retirees here.

I think a better move would be to remove legacy admissions from Primary schools and bring down the Special Apartheid Plan or SAP schools in Singapore.

Nothing disgusts me more than seeing virtue-signalling liberals entrenching a good life for their children by securing the best seats in  the schools along Bukit Timah road.

The Twin Arrogances in Investing.

Initially I wanted to just provide a personal update today, but tragedy has befallen my mother's side of the family and, over the next few days I will be hanging out with my my dad while my mum goes to Johor to pay her last respects to her youngest brother.

The other thing is that Kyith of Investment Moats wrote a really objective article on leverage that you can find here. I strongly recommend that you read it to get under the hood of how most leverage strategies work. I this the article is sufficiently well-written such that a public rebuttal is unnecessary, any specifics on why my method works is something I can only discuss with my students behind a pay wall. Given how polarising leveraged investing is, I do appreciate that it must be damn hard to write a balanced article like what Kyith has done.

Nevertheless, I just want to add to the discussion something about the Twin Arrogances in Investing.

a) The Arrogance of Superior Asset Allocation

The first arrogance of an investor is that belief that he is a superior at allocating assets. If you think that markets are bullish, you tilt a portfolio towards more equities and less bonds. If market are indeed bullish, you will outperform someone who has a larger allocation in bonds. If markets are bearish, you will underperform.

Promoting leverage falls into this category of arrogance and hubris. When you have a normal portfolio, you may be 70:30 in equity:bonds. When you are leveraged we typically go 120:-20 or even as extreme as 200:-100.

Interestingly the "girly men" who stick to a warchest also fall into this category. They may go 50:0 because the right hand side is largely stuck in cash. So if their superior portfolio returns 20%, they only generate 10% over their entire portfolio. A lot of folks only count the returns of their equity portfolio and fail to account for their cash drag which next to zilch while waiting for their next big bet.

Be wary of pornographic numbers displayed on other blogs.

b) The Arrogance of Superior Security Selection.

The second arrogance is superior security selection. It is this idea that by spending more time to assess a stock, you will be able to pick a portfolio that provides superior performance. When we do quantitative backtesting, we also have to be careful of this belief that models will retain its usefulness over time.

If we all have infinite time to investigate every stock, then it may be better to go after superior security selection. The problem is that as we put in more time, we also get diminishing returns. Worse, time spent becomes a sunk cost and many value investors get fixated on specific stock counters. I have witnessed so many investors get trapped into just looking at a few stocks and for years, these counters never go anywhere close to their intrinsic value.

Let me share an "almost embarrassing" example made by me and my own students.

In the last class, my students were sent to investigate Cache Logistic Trust. After a review on analysts reports, they concluded that Cache should be thrown out, citing declining cash flows as the reason. Cache was 75 cts at that time. I was uncomfortable about Cache being 75cts as well so I was too pleased with their findings to argue with them.

Immediately after I built my portfolio with training fees, the CWT default occured and Cache crashed to 71.5cts, then all the online armchair theorists starting screaming about Cache's exposure to CWT which was estimated at 20%-30% at that time. So the 3-6 pairs of eyeballs went to read reports written by paid professionals (often CFAs) did not even clearly flag the CWT default risk even once. One report in January even cited CWT lease expiring as a risk.

It did not stop at my students. The armchair theorists also missed out the real exposure to CWT which was reduced to 16% after a clarification from the REIT that evening.

I think as retail investors we overestimate our ability to do the the deep investigation that even professionals struggle to do.  I'd fully admit that even with 30-50 brains in every class, a collection of analyst reports written by an Army of CFAs, my class makes a lot of mistakes rejecting stocks from the portfolio (which I record them all to teach future classes). We still do it in principle because one batch of students rejected all 3 stocks correctly (possibly by luck) and made 40+% returns in about 4 months.

The question of Asset Allocation and Stock Selection is, of course, an aged old debate that CFA candidates study. At least over a decade ago, the verdict is that asset allocation matters more in portfolio performance than stock selection.

I think on balance, we still need to guard against the hubris of thinking that we are fantastic asset allocators. I have always maintained that leverage is something Millenials and Gen Z HAVE TO DO because they face such short career trajectories before they have enter the cycle of retaining and retrenchment that will cripple their lives in their 30s and 40s. If someone wants to critique my methodology, you should provide a template to give a young 20-something a career that lasts at least 15 years which was about how long I took to retire WITHOUT LEVERAGE.

Actually, I'd rather my students avoid taking the risk of a margin call but I bet even the PAP government does not have a solution.

No government in the world has one right now.

Anyway, my student are sitting on fairly massive gains so far, so they should be reminded that a lot of superior performance comes from leverage and this will soon reverse itself if REIT markets go south.

WINTER IS NOT COMING FOR LEVERAGE INVESTORS.

WINTER IS ALREADY HERE.

YOU  HAVE SIMPLY CHOSEN TO LAUGH AND MAKE SNOWMEN INSTEAD.

Life Narratives

It is only when you start becoming a trainer when you start to realise the importance of narratives. 

A good narrative is where my biggest disadvantage lies. 

I don't have a good Cinderella story - it is public knowledge that I grew up on landed property. Unlike many motivational gurus and some financial advisors who want to rely on sob story to churn sales, I never had to experience my home electricity being cut off and neither was I forced to dumpster dive when I was a kid because my dad gambled away all my bursaries. The lack of a good narrative, unfortunately can,  can create some kind of gap between me and potential customers. 

Worse, I cannot rely on the excuse that I do not come from a rich family to explain why I am not a deca-millionaire yet. Also, all my problems are "first world problems". Describing issues I face will always risk being recast as whining. 

( In fact, I will readily admit that I am not a deca-millionaire because I have some personal flaw that cannot be blamed on other people. Yeap, it's my bad ! )

Anyway, here are two nice narratives you can have :

a) The Conan Narrative

Would make a nice ITE ad

Conan was barely a thief and brigand until he rose through the ranks to become the Destroyer and King. This is a classic rags to riches story. The best narratives in Singapore follow the Conan storyline can sound like this : 

• You are first condemned by the education system and wind up in ITE/Poly/Private university. 
• Then you refused to submit to the labels from everyone around you making you a Byronic superhero entrepreneur. 
• Then you get into MLM/Internet Marketing/ Insurance sales/Value investing/Forex.
• Everyone rejects you, but you strive forwards backed by the power of FAMILY and TEAMWORK.
• You eat what you kill.
• Then you become a millionaire. 
• Then you have drive a nice Lamborghini.
• You are a winner. If the reader wants to be a winner, he buys something from you or pays for your course. Then they can be winners too !

b) The Elric Narrative

Elric of Melnibone is one of the Eternal Champions created by author Michael Moorcock. Elric is an Albino prince and through a series of tragic events, becomes manipulated by his sword Stormbringer to being an end to the current world so that a new world can be born.

Elric is the opposite of Conan. It is a story of how the mighty can fall and in return regain a sense of humanity at the end of the story arc. An Elric story in Singapore can look like this :

• You are identified as being gifted when you are young child being able to read Russian Literature or solve the Byzantine General's problem at age 6.
• As you get older, you start to rebel against the authorities because they won't let you do English Literature and Art History. Your parents say : either study Engineering, Medicine or Law or be forever branded as a disgrace to your family. 
• Being unable to study the subjects you like, you start taking drugs and engaging in premarital sex.
• Your grades begin to suffer.
• You are forced to study for O levels despite being an RI student. Your final O level aggregate is divisible by 32.
• You get kicked out of the Golden Road and end up in a Polytechnic.
• Relatives, waiting decades to pounce on your insufferable parents, have their day laughing at your academic fall on Chinese New Year.
• By this time, now no one cares whether you read English Literature or not. Your folks are too afraid of you committing suicide.
• Now you can finally study English Literature in some overseas 3rd Tier British Metropolitan university.
• Today you give talks on New Age Therapy to help sexual abuse victim debunk common narratives in Singapore.
• Today you are happy and centred, fully in control of your own being.
• Sign up for your program to erase the pain of the past and Rise like a Phoenix !

Two narratives. One about a rise from the ashes. One about fall from great heights. Both immensely profitable from a trainer's perspective. 

What lesson is there for investors ?

One possibility is this :

Either apply for leverage and hope for a big rise or short CFDs hoping for a massive fall.

Go loud, go big or go home.

While I will not question stable investment strategies, I can question the manhood of some folks who get excited over endowments that give north of 2% but take liquidity away for 3 years.

Yes, there are wusses who hold a massive war-chest and missed out on the recent REIT Rally. Yeah, the girlie men who get an orgasm and finger themselves because Singapore Savings Bonds return 2.1+% to investors. 

They lack a narrative because they can neither win nor lose.

Why do I write a blog article to make fun of them ?

Simple.

I have balls. They don't.

Here's to all fans of the Game of Thrones Season 8 !

The Model Thinker #14 : Local Interaction Models

Today's installation is so abstract that I will just describe two local interaction models.

First the Local Majority Model :

-->

1	2	3
4	C	5
6	7	8

Each cell in a two-dimensional square can be in two states : White or Black. In each period, one cell is chosen. If a cell is chosen it will adopt a new state if five or more of its neighbours are in that state, otherwise it maintains it current state.

If we allow this Local Majority Model to run over a canvas of Black and White Squares, we will eventually have patches of Black and White like a Holstein Cow.



The moral of the story is that where local coordination takes place, the global configuration would be patchy and diverse. This model explains animal hides like that of the zebra.

The Game of Life is more complicated. Suppose we play by these two rules instead and refreshed each cell every period :

Life Rule : A black cell with exactly three white cells turns white.
Dead Rule : A white cell with fewer than two or more than three white neighbours die and turn black.

Depending on the initial arrangement of white and black squares, we will get equilibrium, moving or complex arrangement of black cells. This shows that by just a few simple rules, highly complex functions may result.



This would be fun if I were still a Computing A level student and programming in Pascal.

But right now, I have no idea how to make this relevant for investors.

Maybe a reader can do some Googling and let me know how he would apply this to making money.

What does it take to be Marriage Material in Singapore ?

I think it is about time we update some figures on what it takes to be marriage material in Singapore.

According to evolutionary psychologist David Buss, women across multiple cultures value economic resources, earnings potential and ambition much more than men when selecting their mates. This is why the world is full of examples of rich and powerful old men marrying younger trophy wives but you can hardly find examples of rich, wealthy women marrying athletic and young men.

In fact, evolutionary psychologists are specific enough to say that women desire men to be in the top 70% percentile of earning power compared to male peers.

Getting statistics on this is a little challenging and we will need to get data from different sources and make a series of assumptions before a useful estimate can be derived.

The first source of data is to get household income statistics per member for 2018 which pegged at $3,804. Each household has about 3.3 members in 2018, so we can derive a total household income of $3,804 x 3.3 or $12,553.

Once we reach this stage, we may have to make some assumptions about a typical household to zoom into our data on working folks. One such assumption is that a household has two working members, so a person makes about $12,553 / 2 or $6,276.

Finally, we have to adjust for the gender gap at work. Women draw a salary about 87.5% that of men at work. So we have to adjust the salary again backtracking to $12,533 x (100 / 187.5) or $6,694.

So most guys should gun to order produce a salary of $6,694 including CPF before they can consider themselves marriage material or within 70% of male cohorts.

Of course, just because women desire an earning potential at the top 30% percentile in surveys do not mean that they actually get it in practice, there are only 30% of such men to go by in society today. In practice, women also desire other traits like kindness and generosity in their men.

There are interesting conclusions from this exercise. If you have $1,000,000 but listen to enough bull-crap from commissions sales folks and think that earning 4.75% from an endowment fund is a big bullock cart wheel, that's only $47,500 a year which misses the mark if you think that you can "shake leg" your way to marital bliss. So even a millionaire would need a day job if he listens to the insurance industry and still want to be considered a worthy marriage partner.

The hurdle rate to be taken seriously in the dating game for "shake leg" millionaires is at least 8%, which means that you need to wrack your brains in the investment game to play it well.

Of course, guys are still way luckier than women when it comes to mating game.

Men are a lot more superficial than women. When it comes to selecting women for marriage, they consistently go back to waist to hip ratio of 0.7. Worse, men of all ages prefer dating women aged 27.

Some useful Waist to Hip ratio figures for your consideration.

• Scarlett Johannsson has a WHR of 0.69. 
• Gisele Bundchen has 0.66. 
• Tyra Banks has 0.67

In such a case, you don't need a Bloomberg terminal. 

A measuring tape will do.

If you invest with an aim to "Shake Leg" one day, you will never become a Millionaire.

One of the interesting facet of my work as a trainer is that my work is, at best loosely, coupled with the Dr Wealth Marketing team. This means that I can only at best influence how that team markets my course. Consequently, I do not have the power to dictate what the marketing team does.  if you think about it, this makes a lot of sense given that I know very little about marketing to other people and the Dr Wealth team are pros at what they do.

Naturally, member of the Marketing team read this blog to determine how to pitch their message.

Just the other day, I tried to convince the team that by no means should the words "Shake Leg" appear in the marketing materials promoting my course. Objectively, I suppose "Shake Leg" is a powerful word that is attractive to the team because it is a bastardization of the Hokkien Words "Kio Kar" and it creates this image of not having a care in this world. Using it right can potentially raise the bottom-line.

For me, I actually think that it is quite crass. As my course depends on students who are motivated to get their hands dirty to analyse and read about investments, I can't really count on folks who invest simply for the aim of "shaking leg".

Putting that aside, I do not think that investing in dividends with the aim to shake leg meshes with my brand identity because if I am financially independent enough to "Shake leg", then it does not take a genius to ask why the fuck am I conducting investment courses in the first place ?

There are more rational ways to show that if you invest with the aim to "Shake Leg",  you would not achieve very much more in your lifetime.

If divide the Singaporean household expenses in 2018 by the number of headcount in each household, you will get a number between $1,500 to $1,600 per month. At $1,600 per month, expect to spend $19,200 a year.

For the folks who attended my class last week, we constructed a portfolio what yielded a forward yield of approximately 7.6% per annum unleveraged prior to injecting assets that lowered it's volatility.

So to generate $19,200 a year, you only need $252,631 to cover your basic expenses.

The gap between $252,631 and your first $1,000,000 represents one of the hidden ugly secrets of the FIRE movement that no blogger really likes to talk about. Between $252,631 and $1,000,000, even the best amongst us experience a significant drop in motivation to keep plugging it in the job market, which has become quite toxic of late.

One million dollars is a just a number. You don't really need a million to have your dividends pay for your basic meal and transport expenses, that kind of freedom is already quite sweet and you can FIRE your boss once you get used to living within your passive income.

Another words, you can "shake leg" for amounts way below that of a millionaire.

There are larger societal issues at hand when you design such a powerful financial solution for other people.

• Will a BBFA who can cover all his personal expenses have the motivation to start a family ? 
• Will a successful DINK couple bother having kids given that they can travel four times a year on their passive incomes ?

For me, I just want to use my FI to make a serious dent in the universe and find ways to disrupt this training industry. What truly sparks joy for me is seeing folks confident enough to invest on their own so they can eschew insurance products with a large investment component with subsequent losses in commissions for sales professionals.

Finding ways to motivate people post-FI is, unfortunately, not in my current pay grade.

So if your sole aim of dividends investing is to pay for a monthly VPN subscription  and Porn Hub membership, much power to you. I can only solve the financial component of your life.

Meaning is something you need to figure out for yourself.

The Model Thinker #13 : Path Dependency

Path dependency happens when current events interfere with future events. There are two extreme models of path dependency.

Imagine you have an urn full of white and black balls and you get to draw one at random from the urn.

If, after drawing a ball, you get to add two balls of the same colour drawn back into the urn before you draw again, you end up with the Polya process. The Polya process models the situation where anything can happen. After drawing 1000 balls, the probability that the urn contains 40% white balls is the same as the probability that it contains 5% balls. Interestly, a Polya process should not be confused with a tipping point as the entropy of the process decreases gradually even if the same coloured balls keeps getting drawn.

If the rules are changed such that after drawing a ball from the urn, you introduce two balls of the opposite colour, you get a path dependent process known as the Balancing Process. In the long run the urn converges to 50-50.

I note with much amusement that leveraged REIT investing has been increasingly the subject of discussions in Telegram and Whatsapp discussions and to be fair, my public speeches and masterclass played a humble role in popularising this form of investing.

At this moment, the popularity of leverage REIT investing may be undergoing a Polya process. As more successful investors come on board and talk about making some money from buying leveraged REITs, it will attract more curiosity from the investment community, if this effect is large enough, it may even push REIT markets further north as more and more investors borrow to magnify dividend yields.

Even so, we need to maintain some humility especially in the face of such remarkable gains in the stock market.

There will come a point in time when the Polya process breaks down and the Balancing process takes over. This may happen after a prolonged period of yield compression. At that stage, folks who invest in leveraged REITs investing make less money and start telling other people that it is overrated and maybe they can do something else instead like growth investing in small cap equities instead.

After this, perhaps a whole new era of growth investing in small caps will herald a new age with a new crop of trainers. The adoption of this new strategy then becomes the new Polya process.

When will this reversal happen ? Will my quantitative models be able to detect this inflection point ? Will I be able to pivot my class to deviate from the REIT strategies that made my students a decent amount of money so far ?

I can't answer these questions right now. I am adding a level of flexibility to give my class the chance to vote between an equity or REIT portfolio in June.