Titles Culture : A Demon of our own Design.

I think it's going to be quite vogue to talk about "Titles Culture" in Singapore today. "Titles Culture" happens when Singapore yuppies get together. The first thing they try to probe are the schools that you have attended. In this other article on Today, this is repositioned as an act of probing for weaknesses.

Like many things about Singapore society, it's easy to point out our problems and then try to appeal towards a "mindset" change. This always sets off alarm bells for me because it smacks of not really trying to solve the problem at all. Mindsets will only change if there are underlying socio-economic reasons for reform - otherwise the status quo remains.

I did not experience "Titles culture" when I became an engineer 20 years ago. The idea of a JC/University student doing tech willingly was sufficiently rare in the face of IT Outsourcing and the usual Senior IT engineer was an NCC Diploma holder or someone with a Private degree. There is also no need to probe for any weaknesses when any degree holder can volunteer to leave IT to get a better paying job in Banking or even Real Estate.

The "Titles Culture" really started to hit me when I tried to enter the legal sector.

Law students are cows.

Law students are really graded like Kobe Beef in the workplace, a summa cum laude or First Class can be as expensive as grade A4 Kobe beef with A5 grade reserved only for the Oxford BCL or Cambridge tripos graduate. I found myself probed right up to the subject level and my interviewers were really interested in my JC and secondary school experience.

[ A classmate just corrected me. An Oxford BCL is the equivalent of a Masters. A tripos is an exam name. I will leave the mistake here for the reader's edification. Cambridge Law degree is a BA Tripos Law. I also need to get my knowledge of beef right. Only Wagyu is graded like what I described. ]

Being probed did not annoy me, but here are some uncomfortable thoughts about "Titles Culture".

a) What if this is really a better system of meritocracy in Singapore ?

One of the things I picked up in Part B is that Law Students are actually quite well-rounded and smart.

I tried to start a negotiation session by asking my opponent when he did A level maths and then worked with him on turning the legal case into a maths problem involving the Binomial distribution and was pleasantly surprised that he understood the maths perfectly. At the end of the session, I felt a tinge of sadness because my opponent would have made a decent engineer and could have created quite a number of jobs in Tech. In fact, every single decent engineering student who could have build a unicorn in Blk 71 have gone to Law or Medical school because of our society's priorities.

You can hate Titles culture but what if it is really what we have been working towards in the past 20 years ? If 40% of the population can enter Universities and there is already a route to the top from Polytechnics and ITEs, then there are fewer excuses for not getting a degree in the first place. Furthermore, as more late bloomers no longer find themselves disadvantaged, people no longer feel elitist when they probe the schools you come from.

It becomes culture. A habit adopted by everyone.

It might actually be a fair and objective benchmark.

b) It begs the question as to what can replace Titles Culture ?

As much as I dislike Titles Culture, I'm not sure what can possibly replace it.

Older European cultures still have aristocratic titles like Duke, Viscount or Baron. Is this the kind of culture we want ? What if like some countries we want to know whether someone is related to someone in the ruling party ? Twenty years ago, the status symbol is the company you worked for. You get a lot more credibility if you worked for a international bank or an oil firm.

The major question for any reformer is how should HR change its practices in the future ? I agree in part with the Startup community that a skills based meritocracy is what we really need to build a vibrant ecosystem but is this realistic? If the startup community wants to do this, it has to actually pay for skills and get their HR to set an example by not using paper qualifications.

Why is this not being done? Why are our startups not trying to headhunt our Poly and ITE graduates ?

If you you pay a top flight programmer from Poly the same as a CS grad from NUS, we will get the skills meritocracy we deserve.

c) So should we make your net worth your report card ?

The issue at the end of the day is how to really stop feeling like shit if you don't meet up to other people's benchmarks. I don't have a comfortable solution as well.

As far as I know, markets don't look at your qualifications when they decide to give you a dividend. Perhaps your net worth can become your report card.

Personally, I don't really like this approach as well because most ACS alumni start out with much more than I do. Some financial bloggers struggled with a working class existence before becoming financially independent, I think they deserve more credit than those who have a push from a posher background.

d) Maybe we really need a mindset change after all - specifically, yours.

Our education system, being Asian, does not really put an emphasis on self-esteem. There has to be science behind building a set of beliefs that allow us to keep our confidence up when some asshole starts asking you what school your come from and how many H3 subjects you took during your A levels.

( Although in my opinion, the last thing you need is to have someone in a school or government to bestow a "title" on you to make you feel like a human being. In the US, you can get a trophy for coming in at 6th place - we should not build a culture that celebrates mediocrity. )

I'm not a trained psychologist but I recommend that we seek a "confidence target", a major win in life that can form a bedrock to buttress our personal esteem. This can be running a successful business. Becoming famous for a worthy social cause. Making a big social contribution. Being a champion in a sub-culture. ( Like being a Grand Prix Champion for Magic the Gathering although many of them are pretty big assholes too ! )

Unfortunately, many will go through their lives without ever winning a major milestone to give them enough self-esteem to resist a Titles Culture.

But we owe it to ourselves to give it a try.

Just don't let the assholes win.

Next BIGSCRIBE Talk #2 : The fear of leverage.

I was supposed to be pushing for my next talk but ticket sales picked up over the weekend and we're down to almost single digits worth of tickets left. If you have not bought your tickets, this is your last chance. Click here.

As I'm reading Andrew W Lo's Adaptive Market, I will begin this post by talking about an mental experiment that some of you might be familiar with.

Which pay-off would you choose ?

Would you prefer a $240,000 pay-off with 100% certainty or a 50% chance of making $500,000 ?

Intuitively speaking, most readers will choose the 100% payoff of $240,000 even though the expected payoff of the second option is $10,000 higher. We are much more interested in a guaranteed $240,000 because we cannot stand the idea of risking a 50% chance of winning nothing. Loss aversion is a natural part of human evolution.

For years, I refused to touch leverage because, even though I was aware that my gains can be multiplied, the idea that an event that could wipe me out completely made me afraid of committing my funds into a margin account. During the depths of the Great Recession, I walked into Maybank's branch in Shenton Way and then walked out without doing anything because I just did not have the guts to go ahead with my plans to start playing with a margin account. Even then, I had information that recessions seldom last longer than 1.5 years and we've almost facing a downturn of 2 years. That could have been my millionaire (or multimillionaire) moment.

I finally got into leverage recently only after I convinced myself that my financial independence would not be threatened by an event that would wipe out my entire margin account. From this safe vantage point, I have recently created a small account that is designed just to help me pay-off my mortgage.

For my next talk, I will imagine what it is like to use leverage to speed up the attainment financial independence. I am backed by a brilliant and controversial work by Ian Ayres called Lifecycle Investing who was also behind some legal papers I had to read when I was a law student. I then took the approach in Lifecycle Investing and adapted  it to be used locally in the REITs sector.

Like all my talks, they are focused on how you can attain financial independence with all the mathematical backing I can muster from my Bloomberg backtesting.

Even if you fail to conquer to your fear of loss aversion, you will find my very conservative approach of matching leveraged assets to personal liabilities ( With yields possibly reaching beyond 10+% )  refreshingly novel.

Next BIGSCRIBE Talk : Getting more from REITS workshop.

My next talk will be held on 22nd November 2017 at Raffles City Tower at 7.30pm.

To buy the tickets, please follow this link.

My next talk is going be highly dangerous but exciting. So right now, I am putting enough disclaimers onto my slides.

The first part of my talk would be updating my findings when I was tweaking a REITs portfolio to create a reasonably diversified mix that can backtests over 12+% for the past 10 years. Previous attendees if my talks might wish to see how a refined strategy looks like.

Ordinarily, the first half of the talk should give you your money's worth, but intermediate investors want more because anyone can do backtesting if they have the right tools to do it.

In my next talk, I will be talking about leverage the first time and will talk about how to responsibly create a margin portfolio for yourself. This is highly dangerous for the uninitiated but I will specifically discuss two specific applications of leverage :

a) Applying leverage to speed up your journey towards financial independence.
b) Applying leverage to offset a specific liability on your personal balance sheet like a mortgage.

The moment you get into leverage, you are risking your portfolio and net worth towards absolute ruin. During this talk, I will be discussing the ways and means to minimise the possibility of this occurring.

More importantly, I try to also paint the Doomsday scenario that awaits any leverage investor.

Over the next few weeks, I will be discussing the major points leading up to this talk.

Do give us your support and pick up the tickets before they are all gone !

 

Efficiently Inefficient #15 : Event Driven Investments (Last Installment)

Going through this books slowly has certainly aided my attempts to be a better investor. I have some academic basis to the leverage portfolios that I am currently building and am beginning to see the benefits of at least starting a new portfolio involving momentum next year after completing my leveraged portfolio. Hopefully, I would have finally mastered the science and personal courage of shorting counters using CFDs.

This late installment is about event driven investing. 

When you engage in event drive investing, you are not really profiting from the direction of the markets but from an event taking place. Executed properly, a great events driven investor can have returns that are uncorrelated with the markets.

a) Merger Arbitrage

This is a bet on a merger and acquisition actually taking place. A really exciting opportunity which happened recently was when Croesus RTrust was about to be taken private. The offer was made at around $1.17 with a potential dividend of about 0.04cts. 

When the offer was declared, a lot of investors took their money off the table as they have already made a decent 10-15% from the announcement. This actually brought the price to $1.165 the next day. This was a mouth watering deal for the merger arbitraguer. There is a 4.5 cts gain if the taking private of the counter succeeds once we include a 4+ cts dividend was declared. This is a 3.86% return which can be consummated in 3-4 months or annualised close to about 10%+ per year. A savvy investor might be able to buy this on margin and leverage at 300% to lock in an annualised return of 30%. 

This can be stressful way to invest and risk-sizing and I'm glad that some amount of legal knowledge on delisting and merger and acquisitions can come in useful when dealing with merger arbitrage investing

b) Distressed investments

I expect a new class of hedge funds to emerge in Singapore that may specialise in distressed securities investing. We've recently reformed our insolvency regime to become more similar to that of the US. One feature is the introduction of debts with super-priority that allows a creditors to lend money safely to distressed firm to assist them in recovery while gaining priority over creditors if the company would somehow fail to be saved anyway. 

The the events driven investor can take provide financing at a super-priority and help the company have a good start towards recovery. He can also buy the bonds at a great discount rate while shorting the company stock at the same time.

For the retail investor, events are fairly hard to come by. You have to wait patiently and take tactical bets when an opportunity arises. At least for me, having a lowly leveraged margin account gives me the option to take on such opportunities as they arise.

Lastly. one special event would have happened today :

UMS declared a a bonus share issue of 1 share per 4 shares owned. When a company does so, there is no ordinary business event or good news that warrants an increase in price. Therefore, mathematically you would expect UMS shares to drop about 20% this morning. That, in fact, did not occur. The stock dropped on 14% which meant that if you had bought the counter yesterday, you would have made 5% over the bonus issue,

This is a consistent pattern you will observe whenever a stock splits ? As of now I would not really bet on that happening all the time.

Anyway, it has been fun going through this book Efficiently Inefficient. This book has changed the way I look at my personal portfolio and in time to come will affect the seminars I give on investing. 

The current books I am reading are quite brisk reads, I should be reviewing entire books on investing moving forward.

The Origin Story of Growing Your Tree of Prosperity

[ I wanted to share this story because I just read Chris Guillebeau's Side Hustle. Guillebeau was never really an author that I respected in the past, his earlier works glorified financial independence a little too much and reminded me of MLM programs and the kind of rotten insurance agents that I troll on a regular basis on this blog. His latest book, however, was extremely useful and highly accessible. The stuff he brought to the table was quite intuitive and often based on common sense, but he had a lot of interesting examples from folks who managed a side hustle.]

I did not get into writing because I wanted side income.

My finances were doing ok and I was just discovering dividends investing. The primary motivation for writing my first book was just to prove that I can get shit done when some folks around me are just shuffling their feet and just talking about their grand ambitions without shipping a single product despite talking about it for yonks. In fact, my parents were somewhat against me writing a book and spilling the beans on how I invest. I mean, why share anything if it work surprisingly well on the family wealth right ?

Truth is, I always had some friends who were always talking about finishing a published work. I never figured out why was authoring was so hard. I finished my undergraduate thesis fairly early and spent most of my final semester refining my algorithm so to me, a published work is simply a thesis that people would actually find use to read.

Just to say that I can finish-off what other people can only talk about, I looked for ways to hasten the process of getting a book into the bookstore. The manuscript was strangely the easy part. Once I finished up my table of contents,  I can sustain a lot of writing for hours once I got off work - a lot of it was actually done in Bangalore when I experienced outsourcing destroying engineering jobs in Singapore.

The original aim was to lose all my allocated money on this project, get the book on the shelf, and possibly act smug because of my quick time to market. I hired a consultant, ponied up about $6000 and passed him my manuscript. Within a few months Growing Your Tree of Prosperity was on the shelves of major bookstores.

The book was initially a shit-storm of a product.

I had listened too carefully to my consultant. He advised me not to hire an editor to keeps costs low so it turned out to be badly written. The feedback was also negative from some folks I  met in the writers guild, some author said that my grammar was unforgiveable. Some friends pooh-poohed this product because it was self-published and lacked the cachet and pedigree of a real published product. The book has also gone through two distributors. I pulled out from the first one because I felt the owner did not have integrity and the second distributor even gave up because of the disruption the book business was facing from e-books at that time.

Then, amidst the horrible feedback and brickbats, something strange happened.

People clicked with the contents of the book.

Maybe the bad grammar made the book more intimate.

I was featured on Me and My Money, got a radio interview and the book hit no. 10 for just one week on the Straits Times non-fiction bestseller lists. The fact some people thought I was an attention seeking troll who claimed to save 70% of my take home pay helped. Turns out bad publicity is awesome publicity.

I also cannot escape this new found attention at work, management began to see me as a possible asset to be deployed in financial institutions. Of course, the biggest benefit was that in writing a book on personal finance, I have to really get rich because I would not be able to live with the cognitive dissonance of not making my first million before I retired.

In conclusion, I'm not sure whether there is ever a moral to this story.

My first book was a pissing competition. It was basically the length of my dick against the length of the dicks of everyone else I knew who had literary ambitions. I wanted to show that my dick was longer. I even had money to make it happen. On hindsight, I did not even win this pissing competition properly, I self-published and neglected to hire an editor.

But this pissing competition took me to quite a few places.

• I have this blog. It's not a big deal, but you're reading this, right ?
• I quit the workforce and took a 4 year holiday to argue with Millenials over some finer point of Constitutional Law.
• I can conduct a segment in a financial seminar and get a 100% full house record in all my talks given so far. ( No one ever paid me to talk when I spent 10 years with the Toastmasters movement. )
• I have awesome friends who are truly investing experts. This has rubbed off on me to take bigger risks with my portfolio and share with everyone new ways of making money.
• My awesome friends even offered me shares in their company that will be paying dividends this year !

As a side hustle, Growing Your Tree of Prosperity was a failure on many counts. But failure sometime pays its own dividend.

If you are an artist who is always criticised by other, why not put it up on Etsy and see if you can do something good for your personal cash-flow.

Or like me, you have friends who were dreamers and can't seem to take the final step to ship a product, why not just finish the job for them? It sure beats criticising other people. Show, don't tell!

Anyway, my stock of Growing Your Tree of Prosperity is about to be sold out, I might have only a few copies left.

Tomorrow, I am going to find whatever copies I have left and will sell each copy for $88.88. Whoever buys my final copies will get my two other books for free.

[ Ok, I just salvaged 8 copies and have updated my store-front. I guess at this stage, I don't really mind if they never get sold.]

Efficiently Inefficient #14 : Arbitrage

The final section of the book discusses arbitrage. The formal definition of arbitrage is the achievement of guaranteed profits by simultaneously buying low and selling high.

In practice, a guarantee is almost impossible.  Traders buy and sell securities that are almost the same to achieve a profit, sometimes incurring massive losses when their trades fail to diverge.

Arbitrage is too mathematical for a retail investor blog.

I will just briefly describe the sub-sections of this book under the Arbitrage trading section :

a) Fixed Income Arbitrage

Fixed income arbitrage covers the buying and selling of bonds of make a profit. One approach is based on trading the slope of the yield curve. If long term yields are expected to drop but short term yields are expected to rise, one form of arbitrage would be to simply buy 10-year bonds and sell 2 year bonds. Mathematical formulas employing bond duration calculations will be used to determine that proportion of long and short term bonds to buy. The best way to get a good handle of such trades is doing the CFA II exams.

b) Convertible Bond Arbitrage

I am not even sure if it is possible to perform this form of arbitrage here.

First you need a convertible bond. This is a bond that can be converted into the stock of a company. If the convertible bond is considered underpriced, the trader will buy the convertible bond and short the stock. Executing this trade requires the use of sophisticated programs that crunch option mathematics as a convertible bond consists of an underlying bond instrument embedded with a call option.

Let me know if you have any experience doing this.

c) Event-Drive Investments

I will jump into this form of investing next week as it is definitely possible to do this here. Suppose a counter is going to be delist and $1.00 will be delivered to investors per share in 3 months. If the current price is $0.95, this is a 5% return over 3 months. Event-drive hedge fund managers will buy up this stock with leverage to magnify their returns.

If the delisting fails, this trade can explode in your face.

Cutting through the bullshit when assessing investing stories.

I certainly did not like Narrative and Numbers : The Value of Stories in Business by Aswath Damodaran because it takes a while for his framework to sink in and become monetizable for local investors. In fact, upon closer reading,  the book is actually solid evidence that narratives can be quite dangerous for investors as even experts don't have a clue and have to run with multiple assumptions. Nevertheless, Damodaran is open-minded to criticism and a master of his art and possibly the best guy to ask when assessing companies with no credible cash-flow.

Ok...About narratives... why do we read a financial blogger and decide to jump in and support his story?

I am usually quite trigger happy when a story involves dividends but I, too, exhibit a personal bias when I jump into the markets after reading about a good investment. A lot has to do with whether I see the blogger as a person of substance or a bag of hot air. Sometimes I jump in if I like the blogger and do a double-take if I "see him no up". It's not an objective process at all.

I think we can do better in this regard.

Damodaran has a framework that allows us to assess how good a story is. I have tried to create a very rough outline based on his book.

To have a credible investment story, we may need to consider the following elements :

• Does the story address the total market size of the investment opportunity ?
• Does the story talk about the market share of the company in question ?
• Reality check - Revenue can be derived from an assessment of market size and market share. Is it realistic ?
• Does the story talk about future trends in operating expenses ?
• Does the story discuss trends in operating margin capital which can be obtained from operating income by revenue ? ( Operating income = Revenue - Operating expenses )
• Does the story discuss future trends in taxes ? ( Might be less important for local stocks )
• What are the reinvestment opportunities - Typically the story should have a credible sales to capital ratio which is how much revenue can be generated from $1 of reinvestment. But, accounting-wise,  this is complicated as it involves dividing (change in revenue) to ( capex + working capital ).
• The entire story will need to be discounted based on the discount rate and probability of failure.
• Reality check - Do these financial characteristics fit with a company in a particular phase of its growth cycle ?

I thought perhaps this list may be refined to form a checklist that can be used further to "audit" any investment recommendation and assist the investor to ask further questions of the blogger.

For example, a person who is very bullish about Banyan Tree over tourist arrivals may be focused on the market size over the next year. Series of good questions from an investor would be whether Banyan Tree can capture more tourists or market share over the upcoming year and whether the added arrivals would increase their operating expenses ? Otherwise the thesis that profits would increase may not be as strong as what the person claims.

If any financial blogger wants to volunteer to have an article "audited" in a friendly manner, do let me know !!!

Otherwise, I might just "volunteer" someone to test it out !

The Electric Toothbrush and the Vibrator

Imagine an electric toothbrush.

It is a stick-like object.
It contains a motor.
You stick into a sensitive part of your body.

What other device can you think of that has the same general features ?

A vibrator.

It is also a stick-like object with a motor like component. You also stick it into a sensitive part of your body.

From an engineering perspective, it is possible to invent a device that is both an electric toothbrush and a vibrator at the same time. Components and form factor are very similar.

But we don't think generally about an electric toothbrush being a vibrator at the same time.

In the finance industry, however, people sometimes do not make such distinctions.

ILPs perform the task of protection and investment at the same time.
It is a toothbrush.
It is also a vibrator.

The one of the group of anonymous insurance agents who tried to declare war on the financial blogosphere told a story where he met an MBA and CFA during reservist who was rendered speechless when confronted as to why he felt so strongly that insurance and investment should be treated separately.

What justification do we have to separate investment and protection so vociferously ?

This is a common defence against "buy term and invest the rest" philosophy that clearly makes a distinction between insurance and investing that we tend to support in the financial blogosphere.

The anonymous insurance is unfortunate because he did not meet me during his reservist training.

I will ask him whether he would like to back my project to kickstart an electric toothbrush that can also serve as a functional vibrator.

And then I will ask him to shove it up his arse.

[ This is my first attempt at financial comedy. Other bloggers have been asking me to consider financial stand-by comedy in future talks. ]

Efficient inefficient #13 : Managed Futures

Today’s article is about managed futures but this strategy is really about trend following. The result of this strategy is very credible, with Sharpe ratios going as high as 1.8. Bershire Hathaway’s supposed ratio is about 0.76 and my usual backtests struggle to hit 0.6. According to the textbook, a diversified trend following trading strategy can return 19.4% with only a volatility of 10.8%.

My primary interest in this strategy is figuring how I can apply these learnings to the build-up of my momentum-based portfolio which would proceed sometime next year. As it turns out, looking at long term trends lasting about 1 year is optimal with weekly rebalancing taking place, but equities provide the lower returns than fixed income and commodities.

If you believe in market efficiency, it would be hard to accept that you can make money from trends, but the return drivers come from two main sources : 

A) People react too slowly to information

One theory is that people anchor their views to historical data and adjust their views too insufficiently to new information. Another reason is that people tend to sell winners and ride losers for too long. Central banks also exacerbate the process as they focus on reducing exchange rate and interest rate volatility. Also, market friction, prohibitions against short sales do not allow arbitrage to take place instantaneiously.

B) After a time delay, people overreact to information

Once prices move for a while, the bandwagoners start piling onto a stock. People are afflicted with confirmation bias ( Boh Koh Leng ! ) and focus on what they already believe in discarding evidence to the contrary. Investors also add to the problem chasing investments that tend to do well recently which contributes to fund flows.

My leveraged portfolio is only 50% done and it’s already calculated to return about $20,000 a year. A momentum based strategy that adopts some of the best practices by trand following investors will not only provide me decent returns, it is likely to have little correlation with my leveraged or unleveraged yields portfolios.

 

Manufacturing Outrage in the Financial Blogosphere.

It takes a troll to know when someone is trying to manufacture outrage using the realm of personal finance. Roy Ngerng had a large impact when he spoke about the CPF system even though a lot of reasonable folks wanted to point out that a lot of his arguments were unsound.

Mediacock attempted to so this recently, basically just creating a scenario where if you do the maths, you will become outraged and then proceed to take it out on the PAP or anyone who is perceived as an obstacle to your Singaporean dream. ( Simplest answer when you savings $960 to cover expenses of about $200,000 requires a minimum of 17 years, longer if you factor in CPF contributions. )

Netizens have pointed a lot of issues with this example :

• Singaporean workers get increments and they tend to be higher in their younger years. Family income settles down to $8,800 a month. 
• A wedding banquet is normally offset by ang baos. (A 60% offset is reasonable. My ang baos covered around 90%)
• Photography and Videography is "nice to have".
• 15% savings rate is a rookie number and really should not be a constraint. Graduate with a job should live like a student and gun for at least 50% savings. 10-15% in American finance books is not contextualised to Singaporeans who live with parents prior to getting married.

But the simplest way to debunk this attempt at outrage is to note that folks without degrees are settling down and doing fine.

For a savvy university graduate couple who can save up to 50% of their income and gain increments of 8% a year, $200,000 can be accumulated within around 5 years. Maybe even 4 years if they pick up some solid investing skills. Of course, very few folks are savvy.

Imagine a different scenario where we exist in a European Socialist welfare system :

• Maybe 50% of the income of this graduate couple may be taxed to line the pockets of the unemployed Welfare queens.
• Sluggish economy means that salary increments are almost non-existent and may not even cover inflation.
• Folks pay rent because it's so hard to be able to afford homes.
• Welfare economies do not incentivise the development of financial planning know-how.
• Upside is that families are breaking down so folks cohabit and no longer get married.

Mediacock can try such a math problem and figure out how long it would take to accumulate $200,000 SGD.

I think that's a bigger reason for outrage.

A Third Class Honours, by any other name...

In today's new NTU has made a decision to re-label the Third Class Honours designation to something more politically correct. The question is whether this will really make a difference to their students or how the industry would view local graduates.

I was in a bad situation myself sometime last year. I was teetering on the brink of losing a cum laude  and started make plans to graduate without a cum laude designation. This was because I was scored bottom in my Civil Procedure and International Moots class. The options do not look good because the industry is going through a tough patch, I have yet to score a training contract, and a 1-1 mapping between NUS and SMU would map a summa cum laude to a 1st class, a magna cum laude to a 2nd Upper and a no-frills cum laude to a 2nd lower even though a cum laude designation within SMU maps to the upper half of a 2nd Upper from NUS. I was also really worried that the older lawyers, many who would not even countenance a second law school in Singapore, would discriminate against us SMU graduates.

The situation was the opposite 18 years ago when I graduated from Engineering. I was in the 1st Class bracket, but in all my job applications, I mentioned that I expected to get a 2nd Upper. In those days, 2nd Upper was a cool grade. Folks were more relaxed about academic achievement with only the government and Anderson Consulting being really interested in paying more to hire top flight engineering graduates. Those days, lying about expecting a 2nd Upper even turned out to be a good move. After I joined P&G for a year when I found out that some of my colleagues take quite a lot pride about rubbishing 1st Class Honours graduates resumes. But the excuses are always that 1st Class Honours graduates may not have developed as a "whole person" and may have sacrificed their extra curricular activities.

These days grades matter. It's not because universities developed funky titles for their best students.
It's because HR departments need it to justify the expense and there are more students vying for those few professional jobs that guarantee a ticket to the middle class. HR department know where you stand on a percentile basis relative to your peers because it take an intern perhaps an hour to generate a table that maps degree classifications to percentile numbers and subsequently to starting salaries. Kids these days just put CGPA on their LinkedIn to erase all doubt about their quality.

Another words, NTU can't outsmart the industry by simply relabelling their product.

I'm also going to burst a couple of bubbles on this blog :

a) The silly idea that your degree classification only matters for your first job.

This is completely untrue from personal experience. If it only matters for one job, no one would regret getting average grades in university, go ask the middle aged uncles my age. In practice, when you submit your resume, you include your job experience AND YOUR GRADES so your interviewer will look at your candidacy IN TOTALITY.

You might have solid grades but if you did your work in a less inspiring setting, grades can save your career. Like my short 1.5 years stint in Government, you might find yourself in a position with no solid contribution to write about in your resume after you leave (Even my 11 months with NTUC netted me one data centre move). In reality, some work is just BAU (Business As Usual) work. You don't get rewarded when things work, but shit really hits the fan when things fail, so if you have done a perfect job, there's nothing to rave about to your interviewer.

Worse, in many cases, the sexier work is just farmed out to the folks with better grades.

In any case, it is highly dishonest to lie about grades or university being unimportant after your first job.

b) The lie that we are moving towards a skill driven society.

This is so dishonest I think we need to install a new hell to folks who are spreading this lie. The move towards a skill based society is not a motherhood statement that is bandied about to make the weak and mediocre feel good about themselves. Degrees contains two sources of value, one comes from skills development and another component comes from signalling.

The signalling value of a degree qualification is quantified by the salary difference between a person who comes from a better university and a person who comes from a less prestigious institution but is equipped with the same skills.

You can shoot your mouth off and say that we're moving to a skills driven society when this salary gap narrows and when employers have decided to pay for skills instead of branded paper qualifications. Until then, Singapore overwhelmingly pays based on the talent and potential of a graduate that is divorced from actual skill-sets picked up from school because MNCs can train their own employees better to give them the skills they need.

In fact, I would even argue that the gap has widened and is widening further because we no longer belong to a society where 20% have degrees and instead are moving to a society where 40% have degrees. Grades will matter even more in a society full of degrees. HR has KPIs to meet as well and don't like to be kept in the dark about what kind of guys they are putting on payroll.

So if local universities really want to make grades matter less, the solution is not relabelling. It's not even better teaching. The solution is to do the politically incorrect thing and limit the number of graduates in Singapore society by limiting their intake. This move must be coupled by a strong apprenticeship system that allows Polytechnic graduates to gain access to the middle class with good jobs that, in turn, allow them to raise families without running away to Australia to get a degree. These polytechnic graduates can then, based on personal circumstances, learn their way towards better jobs through part-time studies.

I think with university graduates being capped at a smaller number, we can have a society where skills matter more !

Openness to new experiences and regaining cultural capital.

I wanted to write something less hardcore for the blog today.

One of the side effects about reading about entrepreneurship is that you begin to start understanding that some personality traits make much better entrepreneurs. Successful entrepreneurs tend to be more conscientious, open to new experiences, non-neurotic, and extroverted with research actually taking into account actual business results.

Perhaps being open minded to new experiences may have monetary consequences.

For folks like myself who is knee deep into our 40s, we're mostly stuck in the past. Married folks and parents have musical tastes which are stuck in the 1990s and like bands like Radiohead, with Boomers pushed back even further to the era of probably the Beatles or Elvis. For the past two weeks I've been hanging at Wild Market food court and watched as a highly talented but hapless Millenial performer struggle with coming up with a tune for the folks who want "old people music". She eventually settled with Tracy Chapman's Fast Car which in my opinion, failed to make the request.

I don't think there's anyone should be proud of being stuck in the past. Even amongst geeks, there is somehow a generation gap between the folks who follow the latest anime storyline compared to those whose cultural capital is stuck to the 1980s. Cultural capital can be like money sometimes. If you use an old Banana note from the time of the Japanese Occupation, it's the same as being conversational about Evangelion and Macross when the world has moved on to anime One Piece or Attack on Titan. People won't conduct a cultural exchange with you if you just know the cultural artifacts of the 1980s.

Openness to new experiences can also be about brands.  

I discovered the Quechua brand when I started shopping at Decathlon. It definitely does not have the cachet as Nike or Adidas but it does have the virtue of costing me only about $15 for a pair of sandals. The price point was so cheap, I actually decided to ditch my brand loyalty to BATA.

There is a quick way to regain the cultural capital lost when you started a family or started having kids. It will not be easy and requires some effort.

One particular magazine I like that oozes with cultural capital is 1843, a lifestyle publication from the same folks who publish The Economist. What I do is that I take some time to engage with their cultural articles in spite of not having any affinity with it.

I choose music as my primary means of engagement because music relaxes me and I don't really have to turn all the songs I like into an intellectual exercise. You can choose to read some serious fiction or watch some movies.

This week I learnt of a talented new artist called St. Vincent. I even picked up information on an old chinese song called Da Hai by Zhang Yu Sheng which is recently seeing a resurgence due to the death of political dissident Liu Xiao Bo in China. Coincidentally a local artiste Chen Wei Lian has a fantasy cover on this song.

Efficiently Inefficient #12 : Global Macro Investing, the Rojak of Investing.

I find Global Macro Investing super confusing because you can't really distinguish the good investors from the bad ones.

The Warren Buffett-level guru for Global Macro is none other than George Soros himself. I attempted to understand his theory reflexivity a third time and have no idea how it can be used for trading my portfolio. It still appears to me that George Soros trades on his own gut-feel but had the time and luxury to create a philosophical framework around it so it seems more intellectual. Global Macro investors strike me as being very intuitive in their approach to money management which is fine so long as it make s money.

Some Global Macro investors make money by carry trades.

This is when you go long on any asset with high interest rates and short any asset with low interest rates. In the 1990s, a lot of boomers used the Australian fixed deposit as a means of getting 6% yields every year. Imagine borrowing Singapore dollars at 3% to invest in Australian dollars at 6% - that's a basic carry trade for you. Global macro investors are not limited to currency carry trades and they can find the equivalent carry trades in equities, bonds or even commodities.

Other Global Macro investors can spend their careers just monitoring and predicting the behaviour of Central Banks so that they can make directional bets on the markets.

What is possibly more useful for readers of this blog are Global Macro investors who trade on economic developments who have a simpler framework to assess what works best when investing in a particular country.

You need to know whether the GDP growth and inflation of a country is strong or weak relative to its historical record before you can apply this framework :

a) Strong Growth + High Inflation = Overheated Economy

In an overheated economy, the central bank may be compelled to raise interest rates so Global Macro investors will sell bonds. Stocks tend to do well at this stage. The US economy right now seems to be overheating.

b) Strong Growth + Low Inflation = Goldilocks economy.

In a goldilocks economy, both stocks and bonds do well but volatility drops which would lower the price of options. I think Singapore is currently in a Goldilocks situation.

c) Slow growth + High Inflation = Stagflation economy

This is a nightmare scenario because stocks do badly because of slow growth and bonds flounder because the central bank may need to raise interest rates to fight inflation. In this kind of economy, Gold and commodities do well. I would venture to guess that Bitcoins would also thrive in situations like this as well.

d) Slow growth + Low Inflation = Lost Decade economy

Japan might still be trying to get out of this rut and if Singapore does not leave a door open for some foreign labour, we will enter this phase and stay there for many years. Only bonds do well in this economy.

If you can chart which stage a country is in you can theoretically invest in a basket of ETFs containing stocks of overheated and Goldilocks, for example.

Should you rubbish your business diploma from a private institution ?

My last post on private education has received many eyeballs. Unfortunately, it had zero engagement or comments. One possibility is that it's relatively well argued and so hard-hitting that readers probably spent more time contemplating their personal life choices rather than pick a fight with me to disagree on details.

For today's bombshell, you can relax.... As of now, I have YET to be able to conclude that a business diploma from a private institution deserves a better place in the rubbish bin.

But I think I'm objectively closer to that goal this week.Remember in my article on private qualifications that a business qualification is possibly the stupidest decision you can make :

• 48% of private degrees are in business administration, making those with a private business qualifications a dime a dozen in Singapore.
• In the US, there is already conclusive evidence that such a qualification can be a "negative signal of value".

Last week, the Economist delivered another bombshell that is so juicy, I have to share it with blog readers. A group of academics (one with ties to NUS so I'm super proud) performed an experiment in Togo Africa, it divided a large number of entrepreneurs into 3 groups. 

• One was a control group. 
• One group was given traditional business training such as those found in marketing, economics and accounting training programs.
• A final group was given psychological training. 

It was found that for the entrepreneurs that received business training did not experience any significant gains in the running of their small businesses. However, those that received psychological training had such massive gains that the cost of training can be covered by increased profits within 2 years. Note that small business in Togo only generate revenues in the hundreds of USD a year.

A clear conclusion can be made about the value of psychological training over business training for  entrepreneurs. But the results do raise interesting questions :

• Is business training and skills really useful for entrepreneurs ? 
• At which point of business growth do these formal business skills become useful ?
• Are MBAs being hired purely based on their talent and innate intelligence and not for their skills in business administration ? ( Remember that companies that hire MBAs can put them on management associate programs that train them in actual work tasks. )
• If those with business diplomas are going to be hired by an SME, would their skills make a difference in their jobs ?

Of course, the big elephant in the room now is what constitutes these psychological skills that made such a huge difference in an entrepreneur's business results. I actually dug out all the original research papers with the training outline and I then mapped training objectives to some books I have read before so you can read up on your own to develop these skills in your spare time, so do enjoy  :

• How to be a Self-starter - Stephen Covey's Seven habits of Highly Effective people. Anthony Robbin's Awaken the Giant Within.
• Innovation and Opportunity Identification - Blue Ocean Strategy by Chan Kim. Another book on creativity but avoid Edward De Bono unless you want to cure your insomnia.
• Goal Setting -  Try something by Brian Tracy. This comes so naturally to me, I don't have a book to suggest.
• Action Planning - Getting Things Done by David Allen
• Feedback - Thanks for the Feedback by Douglas Stone
• Overcoming Barriers - Adversity Quotient by Paul Stolz or Grit by Angela Duckworth
• Bootstrap Financing - $100 Startup by Chris Guillebeau. I personally do not like Chris Guillebeau even though I read most of his books. I don't think this book is good enough so appreciate any other suggestions. This topic is super important so I made it a section on its own.

The original training is, of course, way better than just merely reading books because you get hands-on practice, networking and even a capstone project on how you can enhance your current business.

If you read until this point and you are absolutely fascinated by ideas here, I actually think that entrepreneur training that is based on credible research data will be a killer app in Singapore and I might even want to either receive this training myself or even make money training others. 

If you are also interested and may even want to back this idea up with money of your own, drop me a line privately because I think we're onto something that is not just big here, it can have a massive impact to our small business ecosystem in Singapore.