Wednesday, August 23, 2017

Why finance bloggers are not the prophesied heroes that you are looking for.

Image result for night king

This post started out with Whatsapp discussion between friends who examined the difference between paper generals and entrepreneurs.

The impression I got from a large part of the discussion is that entrepreneurs are heroes in Singapore society because they dare to take on business risks and very often take a personal stake in their enterprises. On the other hand, paper generals can broadly be used to reflect Singaporeans who were overladen paper qualifications and attain a degree of comfort without risking too much of their skin.

This discussion reflects the dreams and desires of the common Singaporean. Everybody wants to be the hero of their own story - specifically in GOT, an Azor Ahai who was named in prophecy to overcome personal and environmental challenges to save the world from disaster with nothing but a flaming sword in his hand.

There is also a moral element to this story - You need to overcome difficult odds and, in spite of such odds, you still succeed. Otherwise you are not a hero.

This is when I came upon this insight - Most, but probably not all, financial bloggers are not the heroes that most ordinary Singaporeans are looking for. This is because most prominent bloggers come from the comfortable middle class. Even the few financial bloggers who run companies have fairly decent degrees.

( But there area few minor exceptions ! )

Here are the reasons why we are closer to paper generals then entrepreneurs :

a) Investors are better off when they have better paper qualifications

This is politically incorrect but bear with me for the moment.

When you need more money to invest and have a job in the Smart Nation economy, odds are you will need a degree. Local degree holders start out $600 ahead of private degree holders and $1400 ahead of diploma holders and can get access to more permanent jobs. Statistics also show a steeper salary curve for degree holders who have more experience. This additional money is important because it becomes savings which is then invested in the markets.

I am not asserting that we should be satisfied with society as it stands. My kids might not do that well in school so my struggle as a parent has just begun.

b) A stable career facilitates risk-taking your investments

One of the side effects of Gary Becker's theory of Human Capital is that our career and investment portfolio should be taken as a whole and a good stable job can be reframed as the bond component of a person's total wealth. This facilitates more risk taking in his investment portfolio and as a result he can take on more equity risk.

The result being that a SAF general can take on much more market and credit risk than a salesman or an Uber driver.

So paper generals can extract more market premiums than their risk taking counterparts.

c) Investors wants the odds in their favor. 

Even the most successful business men will admit that the odds are against them when they first started out. You pay the landlord rent, pay salary to your employees and even a merchant terminal extracts 3% from your revenues. If your company becomes insolvent, secured creditors and employees take precedence over shareholders.

We investors prefer to take on the other side of the bet. Preferably the rental payments go into their pockets. For quite a while Neratel was a good investment when they supplied payment terminals.

d) We are closer to monsters than heroes

If you follow the Game of Thrones, a credible financial bloggers cannot afford to be Jon Snow who somehow blunders from victory to victory while knowing absolutely nothing.

The closest thing I can think of when I see financial bloggers as community is that we are the Night Walkers. The best financial bloggers are cold AF. They have an army of zombies to do their dirty work for them. Even a (market) bear can be zombified and turned to their advantage.

Investors also try to be objective as possible and are generally hard to faze by the markets.Notice how calmly the Night King took out his Ice Spear when Daenaery's dragons attacks. It is as if he was preparing for this encounter for quite a while.

Which is the last insight I leave with you GOT fans, we really would not know when the Dragon will attack in the financial markets.

Winter is Coming.

But with the right spear in reserve, we can bounce back from the assault riding on an Ice Dragon the next time the bull run returns.


  1. Interesting comparison to Game of Thrones *thumbs up*

  2. When I try to roast Daenerys:

    Me: Once, your dragon's eyes were red as fire. Now, they are ice-blue. What say the Mother of Dragons?

    Dany: Once, your portfolio was green as leaves. Now, it is as red as blood. What say you, financial blogger?

  3. Creed,

    This is brilliant !