Saturday, January 30, 2010

Will the Reform Party make your blue furry fantasies come true ? A look at proposed improvements to education in Singapore.

In the movie Avatar, the Na'vi were only able to fend off the colonial humans because humans found way to break ranks with their own kind and joined the Na'vi in battle. This fulfills the fantasy of the white man who joins the savages in upholding their rights in the Universe.

I think this tale has great parallels in the political situation in Singapore.

One of the best news this week is that the Reform Party has managed to bag two government scholars into their ranks. Almost everyone on the Internet has applauded the move by these two potential heavyweights. The Reform party is, as such, on the right track. By and large, Singapore is still very status conscious and we'd very much like to see people with a strong academic and career track records in politics.

Well this post will critique the proposals by the Reform party on education. I'm doing this because I do not want to be caught up with all that mutual back-patting that goes on when opposition parties make some headway. Opposition parties need folks like us to critique their ideas because, well, better us than a rival politician in the Singapore government.

Here are issues on what the Reform Party has proposed so far.

a) Lowering defense investments and raising investments in education.

I applaud the Reform party for taking such a stand because this is about the first time I'm seeing opposition politicians actually proposing where some of their proposed investments are coming from. However, many Singaporeans will not support lowering our defense expenditure. Our neighbors has recently torched 10 churches and we will need to maintain our determination to put a large amount of our money to keep our lives and investments safe. The high proportion of investments into defense maintains our status as attractive places to invest money.

In fact, if it were up to me I'd increase defense expenditure to leverage on new technologies so that NS liability can be reduced by another 6 months, freeing men to join the workforce earlier.

b) Getting rid of the PSLE to prevent streaming at secondary schools.

I strongly disagree with this policy. This is one of those populist ideas which people will buy but may actually reduce social mobility even more. Without regular exams to channel people into the schools which suit their pace of learning, rich people who manipulate students to join top primary schools like Henry Park would be able to extend that ridiculous advantage even further creating micro-communities of their own in their elite neighborhoods. Students will also experience more stress when they finally reach O levels after 10 years of gentle schooling.

There are better ways to eliminate the social stigma of being sent to EM3 or Normal stream. Simply segregate subjects to Special, Express and Normal tiers. A numerate pupil can take Maths and Science at Special level, Languages at express level and maybe social studies at Normal tiers. University entrance will be credit based and students have a fixed time to earn their way to University or enroll in an industrial apprenticeship school.

All that whining about selfish students can be met with project work where joint scoring will determine the score of the team.

c) Comment on "practical" courses by James Gomez is confusing and pointless.

I'm going to leave my most scathing criticism to what James Gomez said when he gave his speech on education. James Gomez wanted more theory and debate to complement practical lessons in institutions of higher learning. First of all, James has to show what theories and debates are lacking in a curriculum and which faculty is the culprit for this criticism. Secondly, students who incur debt will always opt for a practical education so that they will be able to gain employment when they leave.

Will Accenture's HR department be impressed with my deep philosophical musings on Jane Austen ?

As an engineer who did public speaking and gate crashed many union general meetings, I don't think there is a lack of debate. Personally, students should drink less booze and go to fewer discos and focus on their grades so that they will have more time to get involved in CCAs in campus. CCAs simulate the politics, backstabbing and debates of the real world.

With my experience in our universities, I think there are cheaper ways to help graduates. Simply have better outplacement services in campus which is sorely lacking in NUS. Come up with system to attract HR departments by giving Singaporeans the first choice to talk to the top MNCs, have small tax subsidies for MNCs that grant internships and hire Singaporeans on a per head basis.

Seriously, what is James Gomez trying to do ? Is he trying to permanently stamp his own liberal conscience in our local universities ?

Anyway, I would like to end by talking about self-esteem. I think political parties are always thinking of ways to invest or legislate our way into giving voters more self-esteem because it's a great way to gain power in this world that we're in.

I'm not a big fan of Socialist Egalitarian European or Liberal American self-esteem. Our teachers cannot be transformed into an Adam Khoo or Anthony Robbins so that our children can feel good about themselves, they have real content to impart to Singaporeans of tomorrow, its a job for professionals. Our competitors are getting more and more vicious by the day.

By and large the silent majority of Singaporean want to be winners. That's the reason the PAP has been around for decades.

Make that the same reason to give Reform party a victory on the next elections and you'll be on the right path.

Friday, January 29, 2010

Moratorium on investing my money for about 5 months

For the past 3 years, I have been investing almost my entire salary packet into the stock market. The aim of doing that then was to ensure that I was able to make my investments when the market was at its worse as statistically markets outperform just after a terrible year. The second idea was that recessions don't last and markets can seldom sustain a downturn for 3 years.

This idea paid off rather well in 2009. At this stage, even though I have predicted another fantastic year with STI reaching 3400, the case for a V shaped recovery in Singapore is no longer as rosy as a month ago.

One idea which was off my radar was how the government may react to the people's anger over immigration as a key issue during the next elections. To appease the voters, the government may make adjustments which may hurt small businesses and HDB speculators and this may increase costs over the short term in the form of inflation for citizens and higher operating expenses for businesses. There is also a subtle shift of news to focus on future not so much about GDP growth but about being productivity growth.

On the whole, these adjustments will be negative for Singapore businesses even though i would expect most readers to welcome these changes. the higher cost of hiring a Singapore will eventually trickle down to the consumer. If we adopt Japan practices and try to model them, we will end up paying japanese prices for goods and services.

While such news will hardly impact the defensive yield investor, my mandate this year is to accumulate about my annual income worth of blue-chip equities, so it may be prudent to sit out the market and miss the upturn bought in by the Chinese New Year and just lay low for about 6 month.

The money will sit in a fixed deposit for now and I will come back when investors try to heed the cliche "Sell in May and go away".

Wednesday, January 27, 2010

What Apple's new tablet would mean for writers.

What do you get if you add this :

To this ?

In a moment's time, Apple will probably unveil their next big thing, some sort of tablet PC device. While tablet's are really nothing new and neither would their OS be anything special, I strongly believe that Apple's entrance into the tablet computing will severely change the game for writers and authors in Singapore.

Here is what i think will happen:

Apple will work with several publishers to publish content which is likely to be some sort of an iTunes-like portal for books. What would be new is that, unlike the Kindle, the tablet is a generic device which can also play videos and render books in full color using what is commonly called the ePUB format.

( Acrobat 9 already allows people to author multimedia files of this nature. )

This creates the possibility of new kind of media which will become a new book. Imagine a PDF file which can be distributed as text with some pictures, but with an Internet connection, some publisher will be able to stream music/video or to animate graphs and allow you to attend lectures at the same time. Videos, music and graphical animation then, become the new embedded objects within what was known previously as a book.

This is the killer app of 2010.

This has the potential to resolve piracy issues arising from the copying of books. Suppose we distribute these media files with the text for free but paid subscribers can asssess videos from a page, we will only need to secure the videos and the multimedia to ensure that only customers who pay can get the full amount. While books remain static, videos centrally secured can be always kept up to date. Pirated copies of books with text will only end up being some kind of advertising for the full product which will be rich media that keeps up with the times.

This has serious implications for the publisher of textbooks.

This is a radical shift of power once again to publishing houses because authors in the past can distribute e-books directly to the customer and have higher margins by cutting away the distributors and printers, Now publishers can leverage on their size to get authors to embed lectures and sound into multimedia pages. The richer the media, the higher the barriers to entry to be a writer.

As an author, we will have to take Apple's tablet device seriously, because if we wish to recapture the margins from our information products, we will have to develop skills beyond writing. This means using software like Qik to take a video of us giving our speeches, learning how to create graphs which move and slide (anyone tried learning the Mundell-Fleming model without animation can confirm how hard this endeavour is).

As I embarked on my third book, I remembered that I had to pick up cover design, desktop publishing in addition to word processing. In the future, I see myself doing public speaking all over again to win over a generation of new readers and have to pick up the skills of an animator to boot. If I outsource the work to someone else, I may create a media product which is priced too higher for the discerning reader.

In the world of Apple, only renaissance men can become successful writers.

This is what people call progress.

Sunday, January 24, 2010

So having an Ivy-League degree is like having a D-Cup breastsize ?

This week, the OverEasy nightclub has caused quite a stir by offering ladies drinks based on their bust size.

Basically if you are a lady and you have an A-cup bust size, you get one free drink. If you are B-cup, you get two free drinks. If you are C-Cup, three free drinks and D-cup ladies get one free bottle of vodka. AWARE has condemned the action one which objectifies women but that did not prevent 200 women from attending the event, making this a huge marketing success.

While most Male netizens are find it quite difficult to take AWARE seriously, we tend to get indignant when the civil service performs a similar exercise.

The civil service rates civil servants based on their academic performance, if your grades are good, you get to have a higher starting pay. Depending on the prestige of your scholarship, the civil service provides a gradient of salary expectations (currently estimated potential or CEP) based on your performance as an undergraduate.

This makes our civil service almost exactly like a nightclub. If you are a top scholar, it's as if you have a D-cup bust-size at Overeasy. You start with a steep CEP which will be revised downwards only if you screw up badly. A farmer ( local graduate non scholar ) who was hired into the ministries will have a more gentle CEP and will need to produce fantastic results to have that revised upwards.

Both organizations have a good reason to adopt similar approaches to assessing someone. Overeasy knows that by attracting enough women with a D-cup breast size, their business will improve because men want to be in the presence of busty women. Similarly, our country gains credibility if our top bureaucrats are well-endowed with Ivy-league and Oxbridge qualifications, investors want to invest in a country run by well-qualified people.

To study how the CEP approach can be improved, would be to investigate areas where this analogy no longer holds.

The fear of paying a young scholar well and promising them a path to greater fortune before seeing any performance results is that it shifts their risk taking behavior to one which may be over-conservative and something which Singaporeans did not vote for. If I am paid $5,000 to make policy decisions and can try to get a $1,000 increment by doing something significant for the Singapore people, I may actually make a career bet to make things happen. If I am paid $20,000 and can get a similar increment if I succeed, the odds are that I will prefer to refrain from taking big risks in my career. There is too much incentive to support the status quo and even keep a low profile and let the CEP take care of itself.

My opinion is that there are some things which Singaporeans can be enjoying if we can engender more risk taking among our bureaucrats:

a) Singaporeans may be able to opt into a pension plan using uninvested CPF dollars. Our OA returns a pathetic 2.5% but if civil servants have the courage to build an infrastructure for Singaporeans to invest in a low expense, state-supported global equity fund and a global bond fund, an 6-8% ROI over a 20-year horizon is highly probable for everyone.

b) Singaporeans will not be stuck with a 30% limit on investing their own CPF money from the OA account. A civil servant with personal courage is required to conclude that we can independently manage our own money will be willing to raise this to 100% for CPF dollars which exceed the CPF minimum sum.

c) A courageous civil servant will figure out that a Masters education has an ROI which often exceeds equity returns and will allow Singaporeans to use their CPF money to get a Masters degree from a local university to equip themselves with skills to survive in the Global economy.

The civil service CEP system can make with the following overhaul:

a) Start all civil servants at the same grade and do not adjust starting incomes for better academic performance. Adjust salary for nature of work and hardship.

b) Supervisors who grade the civil servants should not have access to their previous academic performance.

c) Promotions and increments are based on the immediate performance of the previous years and will incorporate 360 degree feedback.

d) Civil servants will have to sell themselves using their EQ to work in sexy projects. The projects cannot be given by default to people from more prestigious institution.

e) Allow civil servants to fight for transfers after 2 years in a department. Make retention a KPI for all senior civil servant supervisors.

f) Establish flexible work hours and results oriented approach to assessment. Civil servants should be attracted to the work not for money but for greater work-life balance and enlightened office practices that are more progressive than the private sector.

Thursday, January 21, 2010

High frequency trading and having your own hedge fund.

Right now I've been pretty intrigued by the concept of high-frequency trading. If these experts are to be believed, market efficiencies drop precipitously as we reduce the time we hold our positions. This means that if we buy and hold, we will usually just earn the normal market return but we if hold a series of securities position for seconds or milliseconds at a time, we can potentially earn ridiculous Sharpe ratios of 2000+ which trump even the top fund managers in the world.

What this means is that finance firms already have a stable of IT-Finance types ( like myself but maybe 100x smarter ) writing algorithms in C++ in FIX protocol who are running various programs to take advantage of market inefficiencies to make money in hedge funds.

Unfortunately, my own progress to learn these techniques is hampered by the lack of literature on high-frequency trading.

Some books will introduce the concept to a potential investor but most whiz kids are mum about how these algorithms can actually be written.

If you are interested, take a look at this book from Amazon :

It's full of equations and does'nt actually show anyone how to get a program written.

If you have any insight to building a personal hedge fund, why not share your ideas with the rest of the folks who read this blog ?

Wednesday, January 20, 2010

Financial Recap of 2009 and my predictions for 2010.

Straits Times invited me to give a summary of 2009 and make a guess on how 2010 will turn out. I submitted the following reply. In the end my comments were never published but I'd be happy to share this everyone who reads my blog here.

Just Fire away if you disagree with my projections !

< Submission >

As a person who invests in the stock markets with the objective of covering my basic expenses, my emphasis will continue to be counters with free cash flow despite the good prospects i see for the market in 2010. The difference in my current strategy as compared to the past is that I will focus on equities in 2010 and 2011. I aim to grow my equities portfolio to 33% of my portfolio of REITS, business trusts, and stocks.

1. 2009 for me is like the emergence of spring after a very bitter winter of 2008. My portfolio size dipped 60% despite all efforts to farm my savings back into my investments in 2008. In December 2008, some stocks ( and prices then ) which I held include Ascendas India Trust ($0.435), Cambridge Reit($0.205), Cityspring($0.495), First Reit($0.40), Lippo Mappletree Reits($0.28), Pacific Shipping trust ($0.195USD), FSL ($0.45), MI-REITS($0.26) and SP Ausnet($1.02). I still hold these stocks today, having accumulated my positions since and the current prices in the market today speaks for itself. Some stocks I sold and made some losses because it stopped paying dividends include Saizen REITS, Macarthurcook Properties securities fund and Omega Navigators. A stock which I regretted not holding onto further was Ascott REIT which netted me about 30% gains but would have doubled had I been more patient during the H1N1 crisis.

Not counting the amount I farmed into my portfolio on a monthly basis, I made about $60,000 in capital gains (sans dividends) in 2009. This is very approximately a modest 20% return given that there is almost stock counters in my portfolio. I also made at least $24,000 in dividends in calendar year 2009. ( NB : Actual count exceeds $27,000 for 2009 )

2. My guess is that 2010 is going to be an exceptionally good year. The elections will mean a generous budget for 2010 and the economic stimulus is not likely to be withdrawn this soon. I expect GDP to be revised upwards several times and my bet is that the STI will be in the region of 3400 before year end. The big winners will likely focus on the commodities secular bull trend and emerging markets of China and India. It will also be a year for small caps growth stocks and the return of the retail speculator.

3. Because 2008 has taught me a painful lesson in humility, the best offense for me is still a good defense. These days I ask myself what stocks would I want to own if things do not turn out too well, so despite the obvious possibility of underperformance for 1H 2010, I will continue to build up my large cap dividend stock portfolio focusing on "boring" stocks like Starhub, M1 and SPH for the free cash flow they have. for 2H 2010, I will look for 10 small cap dividend counters to accumulate, I'm still doing my research and have yet to build my watchlist but very likely Karin technologies and Challenger will be part of that list. I hope to end the year with about $8000 - $8500 in dividends every quarter.

4. My only advice to readers for 2010 is to seriously take a good look at your personal finances and determine how much cash you could farm into the markets through your savings. It's tempting to consume and enjoy yourselves when times are good but a recovery like this will not come by every year. If you are not too sophisticated, buying the STI ETF index should reap reasonably good returns for 2010.

< End Submission >

Saturday, January 16, 2010

Love and politics - Singapore style !

Suppose you are male student studying in the Normal Academic Stream in Bukit Batok Secondary school. You've become infatuated with a girl from St. Nicholas Secondary school in the express stream ( she is at least a C cup ). You really want her to be your girlfriend but, heaven forbid, you have a love rival.

Your love rival is a Gifted boy athlete studying in Raffles Institution who is on his way to an Ivy League university direct after 'O' levels.

What do you think is the best course of action ?

a) You call the girl and bad mouth your rival. You say that he does not love her and is seeing other women, some from MGS, and others from TKGS ( Many foreign, with D cups ). You say that he does not have emotional intelligence. You insinuate that he is cold like a robot. You paint scenarios where he leaves the girl for a hotter SCGS girl 5 years down the road.

b) You improve yourself. You strive to discover your strengths, overcome your academic fallings with your streetwise and carve a career as a successful man. You convince her that you have what it takes to looks after her for life and demonstrate that you can protect her from harm.

In any love scenario, it's better to go for (b) rather than (a). When you choose (a), you fail to address the woman's security needs. When you choose (b), you build yourself up to become a credible alternative for the woman of your dreams.

Once you substitute the girl for the Singapore population, the love rival for the PAP and you as an opposition party, you will begin to understand why every election has been a constant disappointment for people who want an alternative government.

The blogosphere is full of liberal commentators who can point out where the problems are. when asked for a solution, they fall back to the common defense "but I'm not a minister who makes millions of dollars, they tell me what the solution is." Because of this attitude, Singaporeans have no choice but to keep themselves in that relationship with the cold but smart RI boy.

Because the government has the solutions and the opposition don't.

I think politicians understand that the silent majority of voters do not really care for the following :

a) Minimum wages, because that will create inflation and up costs for everybody else.
b) Welfare, because that will increase the tax rate and make the whole pie smaller.
c) Human rights, because you simply cannot eat human rights to fill up your stomach.

I want a strong opposition.

My template for credible opposition should function like this, let's just call this the People's Reaction Party / People's Republican Party (PRP).

This party will be moderate right wing to counter PAP's centrist policy making. The party will focus on the following :

a) Immigration. The incumbent government has gone too far and will seek to lower admission rates. This will require a balanced compromise between workers and businessmen. There is a difference between getting 1 million workers to flood the market and meeting the need for skills Singaporeans lack.

b) Wage insurance through CPF. CPF money belongs to the people, they have the right to invest it as they wish and draw upon an amount to maintain their own dignity when they lose their jobs. Singaporean also have the right to lose their money. Come on, we're adults and its our money.

c) Accountability for Singaporean's money. It does not make sense for people not to even have an idea of the risk breakdown of GIC's investments, you can expose the credit risk and market risk variables without exposing actual positions.

d) Laws to reinforce private ownership. Why are Singapore business men taking 60+ days to pay off their accounts payable ? There has to be a convenient avenue for entrepreneurs to get paid for their services quickly to speed up the velocity of money in this economy.

e) Be super harsh on white collar crimes. Time to treat the Durai's, Joachim Kang's and Ming Yi's like rapists and murderers. The damage done to charitable institutions are permanent and the party should support capital punishment.

f) With wage insurance and immigration, we can squash workfare and find ways to make the civil service more efficient and lower tax rates further.

In summary, if social democrats keep rehashing the same issues encountered in kopitiams, they will remain in the kopitiams. Political change cannot come from the left-wing, they've disappointed us for so many decades.

It is now time to shift gears towards the political right, where the focus on keeping Singaporeans competitive with harsh laws and strong families may create the alternative that we've been dying for all this while.

And this time, maybe this time, the RI boy will need to get a new girlfriend.

Thursday, January 14, 2010

Analysis of SPH in June 2009

Not too long ago, I was contemplating the creation of a website using Wiki technology to create a community to contribute fundamental analysis to a site in Singapore for all investors. The is to start with a simple report and then get help from the community to improve the analysis.

Here was my proposed stub for the analysis of SPH.

i) Do let me know if there were any flaws in the analysis.
ii) If there is interest in a combined effort to evaluate the fundamentals of all STI stocks, do comment on this article as well.

Note : This information is dated and does not constitute a recommendation to buy or sell a stock. I do have vested interest in SPH and saw the stock climb since I bought after making this analysis on my own.

Singapore Press Holdings Limited Analysis

SWOT Analysis

SPH's strengths is in its monopoly on the local newspaper scene with the publication of the Strait Times. Media is highly regulated in Singapore which makes it a sustainable barrier to entry in this industry. SPH is also involved in telecommunications and owns two major pieces of property in Orchard road. Investors can take advantage of steady earnings from the media and some growth from its telecommunications and property stakes.

SPH's weakness stem from move made by companies to move their advertising online. Print media and TV advertising is slowly losing its appeal and international newspapers are seeing their finances deteriorating as a result of this.

SPH's future potential lies with the Internet with websites like Stomp. The full potential of social media has not been realized by the local press and SPH should look into seriously experimenting with this new medium to connect Singaporeans together.

SPH's biggest threat is that liberal Singaporeans will turn to alternative sources to get their news. Already, blog aggregators like Singapore daily have a steady traffic of viewers who want an alternative to state controlled information in Singapore. These threats are currently negligible and will not have much impact on financials at the moment.

Relative Market Valuation

Relative market valuation is graded based on the position of the metrics relative to other stocks in the STI index. An “A” grade implies the top 80th percentile, A “B” grade implies the 20th - 60th percentile and a C grade implies the bottom 20% percentile.

Market ratios are taken from DBS Equity Research 2nd June 2009

Ratios Value
P/E 11.2 (B)
P/CF 9.8 (B)
P/BV 2.3 (B)
Current Yield 8.80% (A)

Dividend Discount Model

SPH is a steady blue chip defensive stock, when discounting dividends we can treat the cash flow as one delivered by a government bond. We adjust the risk free rate by 1% to account for the slightly risky proposition of buying equities. We also make a very conservative estimate that SPH will not grow at all in perpetuity as in 2008 since SPH has been giving almost all of its retained earnings out as dividends.

Assuming discount rate, r to be (10-year SGS long+1%) bond

r = 2.74% + 1% = 3.74%

Dividends in 2008 = $0.18

Projected dividends in 2009 ( Conservative ) = $0.15

Intrinsic cost per share = D(1+g) / (r - g)

Intrinsic value assuming a growth rate,g of 0 = $0.15 / 0.0374 = $4.01

Free-cash Flow discount Model

Using the same assumptions, we can derive the intrinsic value of the share by looking at the SPH Free cash flow model.

Cash Flow from operations = $457 million

Capital Expenses = $55 million

Net Borrowing = $0

Free Cash flow to Equity = Cash Flow from operations – Investment in fixed capital + Net Borrowing

= $402 million or $0.253 / share

Once again, assuming no growth of Free cash flow to equity,

Intrinsic cost per share = FCFE(1+g)/ (r – g) = $6.76

Residual income method

The residual income method adopts a different approach from the rest in that it uses book value and return on equity to derive the instrinsic value of a share. This approach works for shares which have negative earnings, cash flow or does not pay out dividends.

Book Value per share taken from analyst report = $1.319

Return on Equity = Earnings per share / Current price = $0.276 / $3.10 = 8.9%

Long term growth rate = 0%

Intrisic value per share = Book Value + Book Value (ROE – r ) / (r – g ) = $1.1319 + (0.089 – 0.0374) $1.1319 / 0.0374 = $2.69


Based on analysis on this page, would be a good investment for its high yields and monopolistic position in Singapore. Models of cash flow show that the intrinsic value of the stock is high compared to current price. Residual income method projected the lowest intrinsic for stock price but the model is more appropriate for companies are losing money.


Growth Portoflio = Neutral
Income Portfolio = Very appropriate
Speculative Portfolio = Not appropriate
Diversification Portfolio = Neutral

Tuesday, January 12, 2010

Zorba the Greek and our perception of time.

I was acquainted to Zorba the Greek because of forays into Lifestyle Design.

Having only read less than 50 pages, the deep insights into life as exhibited by the title character already has useful insights that we can all learn from.

I think that there are two special types of people that we can encounter in our daily lives.

a) People who live their lives as if they will live forever.

These people do have yet to feel their mortality. People who act as if they'll be around forever ( like myself ) is always be concerned the about the future. We are always planning our contingencies and taking steps to sacrifice the present for the future. People in this category are conscientious and have a future orientation towards time.

b) People who live as if their lives can end any minute.

These people know that they live finite lives. These people do their utmost to enjoy life's simple pleasures because no one can really know what is happening next. They are action orientated and always around to find amusement even in the most mundane of things. People in this category exhibit a deep open-mindedness and have a present orientation towards time.

Unlike Zorba the Greek, I will not favour one mode or lifestyle for another, I think that there is a time and place for everything. Younger folks with their sense of invincibility should make some personal sacrifices and delay gratification to bring something important to this world prior to reaching middle-age. After middle-age, it's wiser to come to terms with one's mortality and start thinking of ways to enjoy life better and find pleasure in one's families.

What is interesting is that finance theory can benefit people who adopt both philosophies.

People who live as if they will be around forever should take need of compounding value of money. Saving and investing for the future will allow one to compound their assets and create a powerful second stream of asset enhancement, hence increasing the quality fo life in the future.

People who live as if they will die every minute should start thinking about the compounding value of time. This concept is more arcane and fewer people understand how this works. When we compound time, we find ways to do more with less so that the time we get can be spent doing something that we enjoy. One example is through automation. Can the work we do be automated with macros and scripts ? Another is through outsourcing - can our work is givne to someone who can do it better for less ?

In summary, we should try to emulate these two special types of people. We should avoid becoming the third kind of person. Someone who lives without any inkling of his mortality and neither prepares for the future or revels in the present. You know who these people are : fatalistic types who keep trying to remember the good old days and blame all the changes in society and all this while marching slowly towards oblivion.

Stories of hope are never written for such people. Tragedies are.

Sunday, January 10, 2010

So Singapore is not good enough for Singaporeans. Now what ?

There are a lot of unhappy people these days :

a) The single Singaporean man is unhappy that the government is not giving enough HDB grants for them to have flat ownership.

b) The petulent father of a boy genius who whines about Singapore schools being inflexible to their child's special needs.

c) The fat but fit father of three who hates being called up yet again for RT.

d) The artist who blames the government about not promoting arts enough for them to flourish.

e) The cat loving activist who crusades against the government's pogrom of cats in the neighbourhood.

This article will not talk about whether these folks are right or wrong. In every discussion, individuals are all capable of building sound arguments to promote their own political agenda. The problem arises when the governments makes the best decisions for the collective population when the people vote individually based on what municipal issues matters to them most.

I'm going to present my personal philosophy, you are free to criticize it as you wish. I respect my fellow citizen's right to complain, but i think that complaining is a highly inefficient exercise. Best leave this to those with time with their hands and nothing to prove ( I personally believe that being a Singaporean means that you have something to prove ).

My philosophy is that, fundamentally, Singapore is not good enough for Singaporeans. Singaporeans are also not good enough for each other.

But my philosophy is that actions also speak louder than words.

Singaporeans can, therefore, do the following to help themselves:

a) Vote properly.

Net liberals are always talking about voting properly. Please do so. If your party does not come into power then accept that majority still wants the status quo, respect other Singaporeans if they make a conservative choice again . Don't vote the party you don't like for economic stability and spend 5 years whining about foreign talent.

b) Vote with your feet.

As an investor, I really like our government policies on taxation, I can't help it when my dividends are taxed just once and pass over to me free of taxes in my account. Singapore happens to love investors. Low income taxes, high consumption taxes means that I can really preserve my wealth and have multiple sources of income. But I also sympathise with Singaporeans who are always whining about not having minimum wages and a welfare system. Governments around the world are competing for talent and there are governments around the world which have a tax and welfare program that suits your tastes.

Singapore is the country where you sell your right to freedom of speech for economic prosperity. Many other countries are not like this and they welcome talent too.

c) Vote with your capital.

A democracy is one man one vote. The genius scholar with 200 IQ gets one vote. The imbecile gets one vote. The nincompoop also gets one vote. That is rule for most political systems.

Economic systems run on a different set of rules. A person who has a 1000 lots has a thousand times more power than a person with one lot. he gets 1000 times more dividends every year. Regimes which are socially authoritarian but economically liberal will simply make it far more comfortable for people to be more concerned about economics than social ills.

Singapore is one such regime.

I think in summary, society does not deal every citizen with an even hand. You owe it to yourself to play your hand to the best of your ability. The YPAP dudes want you to blame your forefathers and your karma. Elite scholars want you to get out of their elite uncaring faces.

But I disagree.

I think it's better to forget your karma and forefathers and do well materially despite YPAP and the elite scholars based on some things which are difficult or hard to change here. When you succeed materially in Singapore, somehow the powers-that-be, who want to preserve their own capital, will begin listening to you.

Let me end with my take on living life in Singapore.

I was one of those guys who hated Chinese Language as my mother tongue. One semester when I was in NJC, I had straight As including GP, the only guy to do so but my parents were informed because i failed my mandarin yet again. I used to whine and bitch about ting xie and mo xie which sapped my my youthful energies away which would be better pursuing subjects which i was good at like maths and the sciences. All my complaints fell on deaf years. The son of an education minister ( an ethnically chinese education minister BTW ) in my time in JC actually did not need to take Cl2 and that made the experience much more bitter for me. After my AO level papers, I told my CL2 teacher that I had already given up after getting a D7, my priorities were to get CL2 behind me so that I can ace my university courses.

Chinese was as non-negotiable as NS in those days.

But look at what is happening today, massive changes country-wide in CL2 education.

The public news is that MM Lee admits he is wrong about CL2 and IQ because his daughter told him so.

I have a better explanation for this change.

I think that my generation X/generation Y Singaporean citizens are starting to realise that it is impossible to remain in Singapore if their children is going to be denied a university education because of Chinese grades. Frustrated with the political process, these Singaporeans are leaving with their human capital and CPF money to Australia and Canada. A thousand millionaires going to Australia means $1 billion of losses for Singapore.

That's gotta hurt the PAP. That will hurt any policy maker.

The government is changing because the economic losses are huge and Singaporeans are figuring out that voting with their capital remains the powerful leverage for political and social change.

So, no matter what you do, fellow citizens, do WELL, get rich. Do so amazingly well so that your capital matters to the people in charge.

When things improve, don't thank the powers that be, thank the fellow ex-citizens and quitters who did the painful deed by making a point by giving up their citizenships so that you can have a better Singapore.

Thursday, January 07, 2010

The Singapore Plan.

I just want to take a short break to introduce the Singapore Plan.

i) Do well in school.
ii) Get a university degree in a professional field
iii) Get work in either the civil service or MNC.
iv) Get married.
v) Buy a HDB flat / Condo.
vi) Get a car
vii) Have kids
viii) Finish reservist / Grow old.
ix) Die before you become a burden to the government.

Powerful institutions exists to reinforce this plan from HDB loans to baby bonuses. People who deviate from this plan are on their own or labelled quitters or unpatriotic assholes.

A large component of this plan is also only possible with hefty loans or obligations.

I think a large part of wealth accumulation means breaking out from this plan and coming out with something on your own but that will be a post for another day.

Which brings us to this new idea called Lifestyle Design. I always believed that Singaporeans can come up with their own plan based on their own personal circumstances. This requires some effort in developing a Philosophy to Life, something which I'm currently developing for future books which I hope to launch.

Tuesday, January 05, 2010

Greek mythology, CPF and the Single man.

I just heard that a friend of a friend who takes the cake when it comes to being a pragmatic dude. When asked by my friend if he has a girlfriend or significant other, he replied that he is hesitant to make a solid commitment because the girl is too young and has too little in her CPF to assist him with home payments once he gets married.

Now I have heard of guys who are practical minded but I've rarely heard of man who may actually prefer an older spouse for her CPF monies. While I find his style too extreme ( thank goodness he is not Singaporean ), my wife likes to remind me about the way I gamed my CPF, so I'd like to share this with my readers here as well so that you can judge for yourself who is worse, me or this foreign talent.

When I was in my early twenties and very single, I was very afraid of falling in love with a Singaporean woman. There have been too many horror stories about Singapore women demanding an engagement ring costing 6 months of income to those of Singapore women who will only live in condominiums and wear LV handbags. I never dated seriously before and I was genuinely afraid of falling in love with one who will then proceed to suck all my hard-earned money away.

One of my biggest concerns is that my future wife would not be willing to live with my mum. Another worry is that being Singapoore women, they might want a 5-room flat rather than a 4-room flat.

So I thought of a strategy from Greek Mythology to find ways to prevent this from happening.

The Greek hero Odysseus wanted to listen to the song of the harpy, some kind of half-bird half -woman monster, but is afraid that he will be coerced to drown in the deep sea as this often happens to sailors who fail to resist the siren's song. So instead of donning ear plugs, he instructed his men to tie him up on the mast and told them not to untie him no matter how much he struggled and begged them to. Needless to say Odysseus became one of the few Greek heroes to be able to come back alive after hearing the song of the Harpy.

I figured that the best way to prevent such an occurrence is to game my CPF before I met my soulmate. It's easier to make a decision with your brain rather than your OTHER brain.

So I channeled all my CPF-OA dollars every year into my CPF-SA account. I will make a slight hair-cut profit from an unbeatable 4% interest and, as the process is irreversible, there is nothing my hapless, future girlfriend can do about the status of my own cpf. I've outsmarted my future,unknown girlfriend with one keystroke on my CPF website.

Soon enough, I maxed-out my CPF-SA and the government no longer allows me to contribute to that account. Instead, I was able to accumulate enough interest to match the CPF minimum sum as required by law.

Today, as I have no HDB flat, my CPF returns me about $8,000 a year in interest rate, higher than my tax rate. Some of my OA account investments give me about $1500 in dividends. I consider it a part of my fixed-income portfolio I intend to draw out from at the age of 55.

Well to end my story, I eventually met my wife who is'nt a Singapore woman and, guess what - actually has her own 4-room flat along with her sister. Obviously if her future boyfriend wanted to buy a home with her upon getting married, she would be unable to comply as well.

Clearly, life mirrors one's actions and deeds in interesting ways.

Sunday, January 03, 2010

Why foreign talent will trounce your asses.

The next book I completed over the weekend is Daniel Pink's Drive.

This book could well be the best piece of work on motivation so far and I recommend a read for anyone who wants to understand people develop the motivation to succeed in meeting their goals.

For particular importance to most Singaporeans is the concept of intrinsic versus extrinsic motivation. Extrinsic motivation is motivation by external factors like bonus payments, increments and various company perks. Intrinsic motivation is motivation by inner forces, such as the personal willingness to work because one wishes to master a skill or find meaning in one's life.

In the old industrial world, problems may be manual in nature so extrinsic motivation used to be effective. Pay a bonus to get more widgets manufactured and you'll likely have a more productive company.

In the knowledge-based economy, workers are there to solve complex problems which may require creativity coupled with some deep domain experience in something. In this economy, once fair wages are established, more extrinsic motivators actually lower the quality of the work and the focus becomes less that of problem solving but getting more rewards instead. All these findings have been proven in psychological studies.

After reading this book cannot help but start thinking about how disadvantageous Singaporeans put themselves in the workplace when competing against foreign talent.

Here's my train of thought.

Foreign talent willingly came over to our shores to seek a better life from their old regimes. They are unencumbered with mortgages. Many rent their homes here and saving a mere 20% of their take home pay may mean earning 6 months in living expenses back home. Working here itself is already the highlight of their lives so they are intensely motivated to work even for a small SME. They can bet their lives on their stint here because failure means that they just get sent home where everything is often 3 times cheaper anyway.

Singaporeans, on the other hand, desperately need to find meaning in their work and daily lives but are encumbered with mortgages, family upkeep and car loans. They need to retire here so their savings rate is generally not enough to have a reasonable retirement. A combination of rampant consumer and mortgage loans ensures that most Singaporeans are obliged to step into the workplace to get their jobs done. As a consequence of this Singaporeans are forced to go for extrinsic rewards and bonuses to keep on living their lives. Compounding the matter further is that our education does not really teach people how to accumulate money or develop a philosophy of life. For these things, Singaporeans need to be self-taught.

When you have a foreign talent population who can afford to be less motivated extrinsically against a local population who has no choice but to crawl into the office, you get exactly what is happening in Singapore today. Many local entrepreneurs like Adam Khoo have even started speaking out against Singapore workers, calling them fussy and less willing to make personal sacrifices for their companies. The Government is torn about the foreign talent policy because having foreigners keeps costs down and business people happy.

I think there are several ways for Singaporeans to turn things around:

a) You need to develop a new plan. The old plan : get a degree, get married, buy a flat and car, have kids then retire and die amidst a sea of consumer goods cannot work anymore with foreign talent in our shores. As foreign talent is unencumbered with costs, you cannot take on more debt and remain competitive at the same time. The workplace demands a dynamic worker who have little mental burdens to solve the most pressing problems for the economy.

b) Do not be afraid of unconventional solutions. If you are single and think that marriage is a financial burden, go ahead and cohabit once you find the right person. If you do not want kids to slow your career down, make that choice and stick with it until policy makers change the rules to make it easier to be a parent. The French have a natural replacement rate because they allow both fathers and mothers to take 9 month leave to look after their kids, Singapore will have to become that that sooner or later. So called old-fashioned Asian values will become a luxury for many of us who struggle to make a living everyday.

c) Once you become unburdened with a Singapore life plan, the tables get turned. You become more motivated to work complex problems and become and asset in the office. You do not need your boss to be always trying to manage you and can even demand better standards. You can set up your own business to hire cheap foreign talent, even compete with Adam Khoo!

But more importantly, you're on HOME ground.

When Singaporeans are as equally dynamic and motivated as foreign talent, Singaporeans can start kicking asses. You know your own home country, can get the best deals and have a network of fellow locals to pick on to meet your career and personal goals. Nothing gives you a bigger network than a stint as a reservist soldier.

But wait, there's more...

Unburdened Singaporeans have a large CPF stash. We can become mobile and attractive workers for any economy. Singaporeans can choose to uproot themselves to work in a different regime. You can work for a more relaxed economy like Australia or New Zealand and find ways to qualifyb for welfare, or you can join a cheaper economy, like retreat to East Malaysia to spend the rest of your retirement days paying in Malaysian Ringgit.

The fact that thousands of Singaporeans who cannot bear that existential angst are leaving the country forever speaks of the effectiveness of this strategy.

Choose the right regime and you'll not only have your savings, your entire CPF fund will be at your disposal.

Now is'nt this a dangerous idea?

Friday, January 01, 2010

Design Thinking and your Personal Finance

Ok, 2010 is going to be a new year. One of the things we're going to see this year is that this blog will have more regular updates. Because I read about 3-4 non-fiction books a week, a short article trying to apply the new concepts I picked up will be enough to keep you guys occupied for the year.

Let's start 2010 with something on design thinking.

Design thinking for business by Roger Martin is a nice work on rethinking about businesses and validates the importance of intuition and patience in product and business model design.

The most important in this book for is the concept of a knowledge funnel.

Knowledge always begins as a mystery to all of us. Then scientists and artists will attempt to convert these mysteries into heuristics or rules of thumb, which defines some patterns behind these mysteries. This process requires a lot of guesswork and can be very expensive to perform. Once a steady set of heuristics arise to define the mystery, engineers and accountants will attempt to turn these heuristics into algorithms. This process unlocks tremendous value and profit, but once an algorithm is built, competitive advantage is lost as algorithms run with reliable results.

The book acknowledges that many old business models run on reliability, which is to turn heuristics into algorithms but do not have an emphasis on validity, which is to craft heuristics from the mysteries around us.

The primary value of this book refines my own personal philosophy about seeking good work in the corporate world. I always encourage readers to seek jobs as symbolic analysts and move away from skills involving technique towards interpretation. The last thing you want to do is to stick around to invoke standard operating procedures everyday instead of crafting them for a living.

Maximal profits in this working world will be concentrated in two kinds of workers.

a) Symbolic analysts who have the power to convert heuristics into a reliable algorithm. This may employ Six Sigma, PMI to meet business results.
b) Designers and economists who predict the future by making guesses about how the future will be shaped and designing new models and products creating new markets altogether.

The next important value is that in the financial world, a lot of energy is spent coming up with new algorithms to consistently make money which eventually fail as markets gain a whole new level of efficiency. Finance is a special playground where there will always be mysteries and a good working heuristic and algorithm cannot be sustainable for too long. Just look at all the books on high frequency trading and hedge funds today.

A good investor thus, will always be trying to interpret the wisdom of financial markets with well crafted hypotheses, transforming them into an investment plan and then employing the feedback to understand the market wisdom further.

An investor is never infallible. An investor is an artist, scientist, engineer and accountant all rolled into one and he will still lose money to the markets every now and then.


Happy New Year to all readers !

Here's wishing all readers a Happy New Year.

2009 has been a fairly good year with the market recovery starting as early as March. I remember listening to an colleague who was talking about the recovery being fake and markets taking a double-dip thereafter, I resolved to pump all my income into the markets further because I've always believed that its the darkest before the dawn.

Well, the bets paid off and i look towards 2010 as the year where I seriously build-up an equity portfolio to complement my portfolio of REITs and business trusts.

Currently my equity portfolio is still quite weak with about $30,000 spread over the dividend stalwarts SPH, M1, Starhub and Singapore Post. I expect accumulating $20,000 more and looking for another good blue chip before June before really pumping more into small cap dividend stocks which yield 6% or more.

Looking for such companies is like searching for a needle in a haystack, my watch-list so far has about 9 such counters, they are too risky to warrant an investment of more than 2% of my portfolio.

All in all, 2009 has reinvigorated my confidence in my strategies of yield accumulation and I hope that by balancing my earning, savings and investing rate, I'll be off the rat race before the age of 40 with a net-worth over $1 million.