Saturday, February 29, 2020

Why it never pays to carry balls in the office

I got away with a hell of a presentation today, and this is one of the slides I shared with folks who attended my class preview today.

Throughout my career, I've always found it strange why people are so eager to Angkat Bola / Carry Balls / Brown Nose their way up a workplace. I think employees should be generally agreeable and get their work done promptly, but there is not need to go overboard when it comes to making your bosses feel good.

One particular case I know involved a colleague of mine who had an exasperating habit of inviting her managers to her home for a barbecue while not inviting her immediate peers. She was not mean to her peers - she just wanted to "manage her superiors" beyond what was socially acceptable in a Singaporean workplace (Obviously, she's not Singaporean). As a consequence of that, she rose  up the ranks of the company very quickly. I remember the day my company failed to win a major government tender, and since this colleague played a major role in the bid, I recall her peers were quietly celebrating the loss.

If you look at MOM data, an average worker can expect a 5% every year from age 25 to 45. After that, staying employed becomes a problem, and salary trends tend to flat-line after age 45. A lot of senior managers lose their jobs in a retrenchment exercise and political savvy is not that useful given that their patrons may also be out of a job as well. The reality of the situation is that, once retrenched, a 50-something worker will never be able to get a five-digit a month job again, so why shore up this amount of political capital when companies will discard you like an empty printer cartridge in the future ?

The idea behind this slide came from Thomas Piketty's controversial idea that for the most part, the inequality (r>g) holds in a capitalistic society unless there is a plague or a war going on. The growth in the value of your investment assets will always outstrip the growth of income derived from labor (proxied by GDP growth ).

Let's put this down using a practical example.

Scenario A) Be a balls-carrying sycophant and lose the respect of your peers

Suppose you decide to carry your bosses balls. In the normal case you get a 5% increment. If your boss is particularly impressed with your brown-nosing, you can raise your average increment by 60% or get a nice 8% increment.

Let's just say that you are this good at balls carrying.

Scenario B) Be an uncontroversial worker but save 50% of your income.

If you can save 50% of your income and can get 8% investment returns last year, you would be able to get a 5% raise on your salary and the equivalent of a 4% raise arising from your investment savings made last year. At 9%, you can actually beat the sycophant by 1%.

Of course, the two options I selected are not mutually exclusive. The best solution is to combine (A) and (B) and become a sycophant who also invests in the markets. In practice, that requires a lot of effort.

If the (r>g) inequality holds in Singapore society, you are always better off just being a solid corporate citizen but also be an avid long term investor. My personal experience is that manager types, upon knowing that I'm pretty good at investing, are often eager to befriend me instead. It has made my time in SGX a lot more pleasant when your key customer is also a retail investor. When an engineer accidentally brings down a server, maybe I can start the conversation with a friendly tip to ease into the ugly discussion about the IT incident.

When you hit your fifties, your bosses' balls have become so sagged that you may need more than two hands to carry it. On the other hand, if you plan your finances well, after 20 years of work, your investment income may have already exceeded your take home pay.

Just don't invite hubris by crushing the balls that fall unceremoniously onto your hands.



Wednesday, February 26, 2020

Maybe we men should NOT give Singaporean Women what they want...

Image result for skiing

The biggest incident I experience last week shows the multi-stage nature of the COVID-19 virus outbreak.

First the markets reacted when people started falling sick in Asia. Now markets are reacting when everyone around the world started falling sick. I think the next wave is when the economic fallout starts to hit the main street in Singapore. This can take place even when the outbreak is under control.

Last week, a friend was let go and I spent the day panicking about his future. I visited a head-hunter's home for a social event hoping that I find a way out for my friend only to find the headhunter out of a job himself.

A week's deeper reflection confirmed that I was deeply wrong about who needs help.

My friend is intimately familiar with my investing methods. I pointedly asked him how long his money would last to which the reply was easily 3 years. He is also very gritty and has even lined up for himself a job that pays an hourly rate. He has no expectations to get a better job amidst the virus outbreak. My friend is young and can take quite a decent amount of punishment.

On the other hand, the headhunter seemed "confident" that he can last another 6 months without employment, after which all he had to do is to "sell his home". Like me, the headhunter is not a spring chicken anymore and has to contend with a tougher job market. How he can get employed amidst the virus outbreak is a mystery to me because I'm pretty sure he has more headhunter friends to seek help from !

So it is highly likely that my young friend will survive. My headhunter friend may be in serious trouble and I have no idea what he will do to get out of this mess.

There may also be a fundamental difference with the way my friends see life :

  • My young friend is tough and willing (even eager) to eat shit. Like me, he does not have much a sense of style. He spends a lot of time gaming. His was a life of instability and struggle.
  • My headhunter friend is the opposite and was my go-to source of great food recommendations. He's cool and have a great sense for music his era - A product of decades of job security and career success.  
So here's the thing. If we build a male avatar out of my friend and the headhunter, I think Singapore women will probably dump my friend and go after the headhunter equivalent in his 20s. 

When Singaporean women were asked what is the biggest turn-off in their dating profiles, they roundly condemned men who have an affinity for gaming and anime. If I were dating in my 20s today, I would have settled for becoming a BBFA. In the world of gaming and anime, Dungeons and Dragons and Magic players are even more alienated from the main stream.  

Singaporean women are subtly telling everyone that they despise introverted men.

In fact, Singaporean Women also betrayed their preferences when they said that they loved men who ski. I am familiar with this because one of the reasons I did not like lunching with colleagues in my mid-20s because Gen X women love to hijack the conversation to talk about scuba diving - the "skiing" of my Generation.   

As we need to get out of Singapore to ski, perhaps women want men who are sporty, extroverted and outgoing. They may also prefer men with openness to new experiences. But to enjoy skiing, men would first need to be willing to spend money - I googled a 7 day trip to Hokkaido and it costs about $3000+ per person. If someone skis as a hobby, I expect several such trips a year to the Swiss Alps or even Aspen Colorado.

Here's the thing, while hypergamy is normal for women, a willingness to spend does not imply actual wealth. Millenial women should be smart to observe what happened to the men of my generation : some of the dashing, debonair and cool dudes end up being betrayed by their corporate masters and end up bitterly complaining about the unfairness of the capitalist system. 

Younger guys need to wake up to the idea that just giving what these women on online portals is a recipe for a lifetime of pain. 

Just ask yourselves, what happened to the "fly" dudes of Generation X. 

Some dudes in my generation had to be cool in their 20s, playing guitars and riding a motorcycle - where are they now? Are they living lives of "perpetual job search" like the Kims in the movie Parasite ?
  • Save 50% of your salary. Own the means of production.
  • Ignore women who hate anime fans. You can even get fitness tips from One Punch Man. 
  • Don't pick up skiing. Each trip is worth at least a decent position in a good REIT of your choosing.

Monday, February 24, 2020

MBA in a Nutshell #26 - Accounting and Finance : Other People's Money

Other People's Money (OPM) or float basically means that savvy business people arrange to receive cash owe to them at the earliest opportunity and send money that they are obligated to pay others at the last possible moment. When managed well, this results in a cache of money called float.

You can earn interest on your float. The master of float is Warren Buffett because he gets to invest his float consisting of insurance premiums prior to them being paid out to cover insurance claims.

The book mentions variants of OPM such as :

a) Gift certificates - All that amount of Kino vouchers you are hoarding is earning them interest.
b) Traveler's checks - I never used these but folks prefer to keep them rather than redeem them after a trip.
c) Commemorative stamps - No sane collector will use the stamps in the First Day Cover to send actual mail.
d) Celebrity Checks - Imagine if Billy Eilish or Blackpink's Lisa wrote you a $100 check. The check with her signature is probably worth more on eBay than the value of the check itself.

What is evidently missing in the book and relevant in modern times are the amount of cash value stored in super-apps like Grab and some of the new-fangled multi-currency credit cards like Revolut. Most of us would put a little bit of money in these wallets and then use it at a much later time. I can imagine the amount of float Grab has right now because there is a lot of spare change in our Grab super-app.

If float is used properly, it can be many times more effective than having a margin account.

I guess one way of making your business better is to design it around the idea of getting more float so that you can invest in higher yields and then use the dividends to run your company.

Theoretically speaking, a company can "FIRE" if investment income can cover the costs of running the business.

Saturday, February 22, 2020

Personal Update

No photo description available.

It is time again for a personal update.

a) Impact of COVID-19 

The impact of COVID-19 has been very small in many retail investor portfolios. The STI ETF was down 1.21% so far in 2020. The ERM portfolio is actually positive territory at 1.62%. Defensive investors have avoided the worst so far.

Sadly the same cannot be said about the real economy. I was trying to help a friend move on with his career by consulting a headhunter yesterday only to find the headhunter out of a job ! The combination of bad news flying around this virus season totally ruined my Friday. I suspect us full-time investors are living in a bubble protected by dividend payouts. We don't see the reality of how bad things are.

Is it something we can foresee ? Thomas Piketty spoke about inequality being represented by an equation (r>g). The rate of return of capital always exceeds growth of labor income. Investors seem unaffected by the corona virus so far, but we will see a lot of workers laid low over the next few months. SME, companies relying on the goodwill of private investors will be affected first.

b) Budget 2020

Budget 2020 gave a nice boost to the stock markets this week. I was initially disappointed with the lack of tax rebate for individuals but I soon realized that the investment community won big with a 25% corporate tax rebate and property tax rebates. 

This is a very generous budget and should offset the downturn which is likely to be much worse than SARS.

c) Training business and COVID-19.

Some other trainers have been asking whether my business was hit by the corona virus. I have not and my results have been largely the same even though I was asking myself whether I should stop and take a break.

So far attendance and sales of my program has held up and we have enough to run a class in March 2020. We are very paranoid about infection in our sessions so in the last round our attendees were screened for temperature twice - once by the building and once by Dr Wealth staff. It does not cover asymptomatic cases but we do what we can to ensure the safety of the customers.

As the possibility of a slowdown is still there, I have started planning for an advanced course for current alumni of my program in case revenue needs to catch up in 2020. I am pretty excited by this new course idea but we're still trying to find the data sources to make this kind of investing feasible for retail investor. If I succeed, we might be able to launch mid-2020.

d) Working out

I am midway through my physical training regime to improve my blood sugar numbers. Training is short but intense and I face body aches two days after training. In between weekly sessions, I make sure that I swim enough to keep my fats burning.

But the improvement was felt within a few weeks. I don't have willpower to do everything well. A lot of my mental exertion is spent on the financial markets so I benefit from paying someone to keep me motivated to work out.

I may run with the idea of getting external help by attending a Python class even though I can easily learn Python on my own with a book. I can follow at a reasonable pace and can even make a couple of new friends.

e) What I am reading

The most important thing is what I am not reading - my Economist subscription has lapsed and I am not renewing it as I have 50-60 books in my KIV list. I just finished Margin of Trust by Lawrence Cunningham and Stephanie Cuba that talks about how Buffett runs his business empire. I also wasted a lot of my time on a Gary Vaynerchuck book that I shall not name. Without reading the Economist, I can now attack entire volumes of finance textbooks because they are actually easier to read !

f) Getting more jaded with my working gear

The corona virus has reduced my overall expenses but I am scaling up in other ways.

When it comes to work, I have been getting really upmarket gear that would be dissonant with my engineering roots. My presentation laptop is a high-end Microsoft Surface Book 2 that costs >$3,800. Recently, my old clicker that got me through law school died and I got a ridiculously expensive replacement at >$160. It allows me me to spotlight a tiny area when making a presentation and even vibrates when I am out of time.

This does not even consider the software licenses I pay to enhance to my training materials or the paid tiers I use for the cloud. I am likely to teach myself Canva to enhance my materials further this quarter.

Maybe one day it would be tax advantageous to be able to expense all this.

But that day is not here yet.

Thursday, February 20, 2020

Which type of Charlatan are you ?

Image result for ben carlson scam book

I strongly recommend Ben Carlson's Don't Fall For It for any reader who is trying to become more streetwise. More importantly, as someone who aspires to disrupt the training industry, it is important for me to be armed with a better way to distinguish between a crook and the real deal in my own industry and, as it turns out, one of the chapters from the book makes the price of of the book worth paying for.

Basically, there are two kinds of Charlatans, each corresponding to one form of statistical error.

a) Type 1 Charlatan

A type I error in statistics is a false positive. If you are shopping and get a fire alarm but there is no fire, you get a false positive. Correspondingly a type I charlatan is someone who is sincere about what he is doing, but following this charlatan ultimately destroys you. The example in the book is John Law, a Scottish economist who convinced the French government to develop the use of paper money and ultimately precipitated the Mississippi Bubble which led to massive losses for French citizens and led to his dismissal in 1720.

b) Type II Charlatan

A type II error in statistics is a false negative. It is the situation where there is indeed a fire but it was not detected by a fire alarm. Correspondingly, a type II charlatan is someone who knows that he is a fraud and goes ahead to cheat other people with the aim of becoming really rich. John Blunt, who was the founding director of the South Sea Company, did something similar to John law and was responsible for the South Sea Bubble that affected many hapless English investors, is an example of such a person.

If we contextualize the situation to Singapore, this framework may be useful in daily life :

I think the first application is on any financial adviser that you may have. There will be a class of FAs who are doing this work to churn commissions. Those that fall into Type II category may be the kind of folks who openly refuse to sell you term insurance or find all sorts of ways to churn the current policies that you have. My commissioned-based agent friend, before quitting, used to tell me stories of their agency bosses who spent a lot on a lavish lifestyle. An agent friend, prior to leaving the agency, told me his boss even flew into a rage when he publicly challenged his lavish spending ways in some company meeting.

( But I think he had fun asking why his soon-to-be ex boss why she was not setting a good example. )

In my opinion, the Type II FAs are actually the safer ones - once you know someone who just wants to earn commissions, you can do your own research and just buy what you need. As practice, I think there are enough groups in the Web that act as a zoo for Type II FAs - just observe how aggressively they defend the high-commission ILP products online.

The real danger are the Type I FAs - The sincere folks who are not really numerically savvy who really believe that some products are great until they explode in your face. Type I FAs can sell a lot of products and ruin a lot of lives. There is very little defense against someone who is genuine about helping you. The only way I can think is to flip the table and educate the FA on how insurance products are structured on the back-end. One possible approach is to get them to befriend an actuary and say that you'll buy something if the actuary buys it for himself.

I would avoid eating sausages that the sausage maker would, himself, refuse to eat.

Of course for any discussion to be fair, the framework has to apply to investment trainers as well. Generally speaking, a trainer is more likely to be Type II if :

  • Employs fake credentials. Without mentioning actual names, there is case law on such trainers in Singapore.
  • Cherry picks investment results. For results to be credible a consolidated snap-shot of the entire portfolio should be made available. If you just share your 10x baggers, what about the bad investment calls you have made ?
  • Demonstrates best effort to employ empirical findings to back all assertions. 

This leaves folks in a conundrum. What about the Type I investment trainer ? Someone who is earnest about his training program but we have no idea whether his approach can lead to ruin.

Because finance is a wicked problem, it is entirely possible for someone sincere to product horrible investment results. Heck, even someone with the right methodology can lead to horrible results.

In this matter even my suggestions are somehow incomplete and need further refinement :

  • The trainer should be open-minded to accept that there are plenty of alternatives to make money. 
  • There is an adherence to the doctrine of falsifiability - Every model can potentially be disproved by investment results. This can lead to new, improved model over time.
  • The trainer must be intellectually humble enough to flag out all bad judgment calls and find ways to turn them into teachable moments.

The Type I or Type II Charlatan is a great framework for assessing any scheme you encounter. The first thing you do is to assess whether you might be subject to a con from someone who is out to get something from you. Next you need to accept the reality that even if the person is sincere, the scheme in question may still be unsafe for you to act.

Nevertheless, if you can, read this book.

Tuesday, February 18, 2020

MBA in a Nutshell #25 - Accounting and Finance : Internal Controls

To safeguard assets, every organization needs to establish internal controls.

Here is the list of widely-accepted forms of financial control:

a) Be clear about roles and responsibilities. One person to be made responsible for losses in the cash register as and when they occur. In IT we use a RACI chart to do this and its a nifty tool for this purpose.

b) Where there is a potential of interest, create two or more roles. The person who controls cash cannot double-hat as the book-keeper. In a previous job, my role as IT governance reported within the IT department. I actually got into some trouble suggesting that I report to internal audit instead.

c) There has to be a system of checks and balances like two signatures on checks or access to lock boxes.

d) Hire reliable personnel. A nice acid test was suggested by the book is to ask a previous employer whether they would rehire the worker if he were available.

e) Document control procedures wherever possible. A simple example is an incentive given to every customer to report incidents where a receipt was not given to them.

f) Create duty rotation. Banks do this a lot to see whether some problems stop when an employee goes on vacation.

g) Utilize independent checks like auditors and CPAs.

h) Supervise closely to monitor performance.

As you can see, this is a lot of work. If I ever set up a company to do all this, I won't be able to focus on providing training and research on financial markets. Imagine having to create these internal processes for marketing and finance at the same time.

This is why MBAs still matter. You need good administrators with book smarts to keep a business running.

Visionaries can't do much without able lieutenants.

Sunday, February 16, 2020

What can we learn from Oscar winning movie Parasite ?

Image result for parasite movie

English Literature in lower secondary school would be more interesting to me if my Literature teacher were to spend more time talking about how to make money and attract chicks.

There's actually plenty of financial inspiration from literary works - In Jane Austen's Pride and Prejudice, Mr. Darcy value as a mate was tied to his $2000 GBP income from Pembroke estate. If students are taught that $160,000 USD in passive income would make them as eligible as Mr. Darcy, the value of English Literature lessons in Singapore would be much higher today.

I'm not sure what deserves more scorn - English Literature classes in lower secondary school, or the Oscars ? In my entire life, the Oscars has never chosen a respectable Best Picture, skipping movie greats like Inception to classics like Empire Strikes Back or Superman v Batman.

But this year, things are different. The Oscars actually picked a decent movie for Best Picture. 

Parasite is a wonderful riff off Ursula Le Guin's The Ones who Walk Away from Omelas and brutally explores the differences between the rich and the poor in Korean society. To really appreciate this piece, you need to understand the idea from Ursula's work that in every Utopia every  household has a child locked in the home basement and kept miserable so that the household and society can remain prosperous. If somehow this child were to escape, calamity ensues.

Parasite takes it one step further, proposing the idea that there is a basement within a basement and the movie climaxes by showcasing what happens if someone from this deep basement actually escapes. The movie leads to a satisfying conclusion that does not attempt to molly-coddle the audience with a good ending.

As my own literary criticism skills are stuck in Secondary 2 because my teacher could not teach me about making money or hitting on chicks, I am unable to provide that analysis that most RGS-Literature-Goths chicks can give. Reading that may cost your a significant portion of your life-force, instead this is what watching Parasite means to me :

a) The Rich will always attract Parasites

I think the things that freaked me out the most watching the movie is how easily the Rich attract Parasites. In the movie, a parasitical family eventually replaces all the staff supporting the wealthy. This is the same in real life - the middle-class are constantly harassed by commissioned financial advisors and real estate agents. As you climb up the ladder, the parasites change - they get replaced with private bankers and personal shoppers. It also recurses downwards as personal bankers also attract parasites of their own.

( Note : The idea that investment trainers can be considered parasites if they keep finding ways to monetise their students community is not lost on me. I think the movie's greatest weakness is that it did not portray the rich family also as parasites of something even bigger than themselves ! )

b) Tragedy comes from misunderstanding

Another thing that makes me glad is the the rich family was not portrayed as being callous or cruel. This is much unliked the viral Prince Ea videos that always had to portray the evil system as an old, white guy.  The rich in the movie behaved in a human manner, but questioned the lifestyle of the poor and criticised their smell only when they believed that the poor are not listening. In essence, they were less blameworthy than the poor family who had to scheme to be able to leech off their resources.

The real evil was the misunderstanding that comes from class differences. This is the beauty of the movie as even the instant noodles eaten by the rich has to be infused with top class steaks. My own take is that a person's wealth does not have to come with isolation. A millionaire can take public transport and fly coach. I think  with more exposure to ordinary people, it is easier to avoid situations like that in the movie. Conserve the money to solve real emergencies.

c) Compassion is a weakness poor people cannot afford to have

This is the kind of answer that will make the English Literature teacher hate my guts and why one principle I follow is to always avoid being examined on humanities subjects.

An important moral people may refuse to acknowledge is that for the lower classes, they simply cannot afford to be compassionate to others. The tragedy in the movie can be avoided if the parasite family did not grant access to a previous parasite access to the home basement premises.

If you want to displace others in the hierarchy, you need to be totally cruel and block access to the people you have just displaced.

Compassion is something only the wealthy can afford.

Anyway, I hope that some of you would be willing to brave COVID-19 to watch this movie that is still showing in some cinemas.

I will be replicating the Ram-Don instant noodles tonight. Hope I don't end up with Lao Sai instead !

Friday, February 14, 2020

Happy Valentine's Day - On assortative mating and hypergamy

I try to write something every Valentine's Day to update my understanding of the dating world. By now I am a dinosaur and have been out of the dating game for over a decade and things have changed quite a bit from the last time I dated.

Recently someone asked FB what is the probability of a JC-Poly union blossoming into an actual marriage. The trolls immediately activated and said that the chances of dying from COVID-19 is higher than such a relationship succeeding. The good news arising from this thread is that I participated by asking for instances of RGS-ITE relationships and was told that a Govt scholar married her ITE sweet heart who works at the front desk in the same government ministry. It's a nice tale that deserves a Jack Neo movie adaptation but I rather not verify it because we are all entitled to our own fantasies of modern living.

Assortative mating is now in mainstream policy making. This was mentioned by Tharman Shanmugaratnam as a major source of inequality in modern society. People are now attracted to others who fall within the same social economic status likely arising from more more women getting into the workplace. Consequences for society are dire as rich couples then transmit a much larger social advantage to their children. I am glad that assortative mating is there to take the heat off rent-seekers like us dividends investors - when some woke person bitches about inequality, I get to ask them why they married a degree holder like themselves.

The other issue is that even though assortative mating takes place, female hypergamy is still rampant. Asian women still do not like marrying down socio-economically. Even CNA Luxury is featuring a new dating app that has an acceptance rate of only 14% that allows only elite men to participate.

Government has not started introducing hypergamy into mainstream discussion even though I think they should. I think it keeps too many women on the shelves. In a meet-up with financial bloggers, many female bloggers alluded to me that they are prepared to decouple salary metrics from a potential mate's masculinity but female bloggers are a small constituency in the female population. It is up to a new generation of Singaporeans to decide how to redefine masculinity. I think the situation is still quite bad - stay at home dads get micro-aggressions in daily life. I take my son to school sometimes and I feel it too - five-digit monthly dividends portfolios are invisible and people will look at you funny anyway.

The response from males in the face of both assortative mating and hypergamy is very straight-forward -They withdraw from mate competition.

In every major recession, males who drop out from the job market experience a boost to their life satisfaction. This is because there is a universe of computer games and streaming videos waiting to entertain them for $20 a month.

We've done this mental exercise before. A $100,000 portfolio can generate $500 a month at 6% yields. More if you are willing to employ leverage. $500 a month can support a BBFA that just streams and eat instant mee. If the portfolio fails due to some reason, just get a gig economy job to top up. This is slowly becoming a acceptable lifestyle for males.

If you take this BBFA route, you will not have a lot of hair left by the time you hit your 50s, but there is no woman to judge you on Valentine's Day.

Wednesday, February 12, 2020

What can Private degree holders learn from Money Launderers

Throughout my working life, I worked with private degree holders of all stripes, some good and some bad. There are bad local degree holders as much as there are bad private degree holders but the good ones I am exposed to are often unfairly tarred by their qualifications. This is largely because educational qualifications in Singapore are signalling instruments rather than skills certificates. Our HR departments want a to use a shortcut to reduce the number of applications to a reasonable number so a local degree provides a convenient tool to make life easier.

So, I probably do not need to need to remind everyone that if a local degree holder play the Game of Life at Normal mode, a private degree holder plays it at Hard or Inferno mode. The salary gap between the local degree holder is over $1,000 a month bench-marked against a private degree counterpart with a much higher employment rate six months after graduation.

When I suggested to a colleague to launder his private degree ( because I think he's a great worker ), he couldn't stop laughing.

This is probably a good reason to do more research towards a blog article.

As it turns out, money launderers can teach private degree holders quite a bit. In fact, if you have a  third class or second lower local degree, the same lesson applies to you here as well. It's not that your degree is crappy - grade inflation just makes things so bad that an Honors degree is just not what it used to be.

As it turns out, money laundering is divided into three phases, all of which can point to useful and practical steps a private degree can do to improve his station in life. This article does not cover the situation whereby a private degree holder gets into a sales role or starts a business because these are options that are least dependent on educational qualifications.

a) Placement

The first step is moving money from the source of its ill gotten gains. In this step, money launderers typically find a way to smuggle the money out of a country. Imagine someone crossing national boundaries with a sack of gold.

When analogizing this process for private degree holders, the national boundary is the boundary between school and the workplace. Needless to say a private degree holder can face a lot of discrimination in a job interview. Here are some suggestions in the placement stage :

  • Do a lot of internships so the employer can witness your actual work ethic. This makes the job interview unnecessary.
  • Pull strings to get a job. Use your family connections to get something. Be shameless at it because us local degree guys will not fight fair anyway.
  • Join the tech industry. Tech discriminates the least because the demand for IT support will always be there and skills matter more. Why so many private degree holders study shit subjects like business management baffles me when Tech is one industry that will hire anyone that can code or do system admin.
  • If all else fails, lower your starting pay to get anything that pays the bills.
During the placement stage, avoid joining the gig economy unless you can developing deep tech skills. You don't want to be stuck as a Grab driver for an extra $800 a month even though that may be tempting.

b) Layering

When layering, a money launderer makes it harder to detect and uncover money laundering activity. One way to do this is to buy a material asset with your cash and then sell it away to make the money more legitimate. In the 1990s, I heard that some folks are offering cash to buy up winning lottery tickets at a face value higher than the winning value.

Layering is critical to a private degree holder. Once you have a steady job to pay the bills, you need have a plan to make your private degree stick out much less in your resume. This phase is not easy, some ideas I have include the following :

  • Produce results that are so stellar that it overwhelms all your previous educational history. This is hard because a lot of job roles may not have clearly defined results.
  • Get a masters degree from NUS or NTU. This works but local universities may also discriminate against private degree holders. 
  • Get into a good MNC via a contract role and then work like a bitch to turn it into a permanent role.
  • Create a stellar record of community service outside the workplace. Joining grassroots or Toastmasters may create something to talk about to an employer beyond work. 
  • Earn a string of industrial qualifications that are recognized in your industry such as the CFA, CPA, CISA or even PMP qualifications.

Remember that you need to be a realist when you commit yourself to layering. I am fully cognizant that private degree holders actually pay more for their degrees and the temptation to emphasize it more will be there, but everything you need to do once you get a job is to take steps to overwhelm it with something better in your resume.

And for God's sake, do not use your hard-earn money to get another advanced qualification from a private university. If you do need skills, use a MOOC or get a graduate diploma from a local university.

c) Integration

The final stage of money laundering is integration where the money, once laundered get reintegrated into the legal economy. Launderers often employ shell money to buy properties where proceeds from these sales would then be 'legitimate'.

With a good resume and a job, it is now time for a private degree holder to improve his station in life. Getting to this stage probably means that this person may have done more career planning than the normal local degree holder so I expect this guy to be tough cookie. At this stage, the usual career advice matters but some common patterns exist :

  • Develop a niche in your company to make it hard to retrench you. When I was in HP, the first managers to be retrenched are non-degree holders. Pink slips came so fast, a work record could not even be established. Doing something no one else wants to do is vital. During my time knowing how to operate a mid-range or mainframe server leads to years of job security.
  • Build networks with other private degree holders to cover each other's backs. In my time in the legal industry, I know that the University of Tasmania lawyers cover each other's backs much better than local degree holders. They go back a long way when they were students in Temasek Polytechnic.
  • Of course it goes without saying that this is the time to start building an investment portfolio.
Also, don't fall for the big lie that soft skills matter. People get better people skills as they get older. To think of soft skills as a competitive advantage is balderdash. Where two executives are equal in tech skills, of course soft skills become a tie breaker. Deliberately building up soft skills beyond just OJT thinking that they will boost your salary is hogwash designed to keep humanities professors employed. I work with a lot of low-EQ troglodytes because they have a mysterious power to keep things going. May of these trogs come from the legal department.

I think while private degree holders in Singapore do find life much harder than local degree holders, developing a stoic and realistic attitude can make a big difference in balancing out life outcomes at a later stage in life. 

While it may be unpleasant for some readers to review the approach used by money launderers to wash money from ill gotten gains, it forms a reasonable analogy to show us how to develop an action plan forward.

Monday, February 10, 2020

MBA in a Nutshell #24 - Accounting and Finance : Creative Accounting

This article highlights various approaches to accounting that can possibly lead to civil and criminal penalties. Because financial statements allow a degree of flexibility and discretion, highly skilled accountants with the right lawyer can this game while avoiding more serious consequences.

It is therefore up to the investor to be wary of creative accounting techniques :

a) Growth in accounts receivables exceed growth in sales 

This happens if you sell a sell a lot of products but keep extending credit terms so you never collect on the debts owed to you. This technique can boost revenue but minimize actual incoming cash flow. The final outcome is that the company eventually runs out of cash while looking profitable throughout this period.

b) Growth of inventories exceed growth of sale

This suggests that the company's products are crap and they are losing market share.

c) Ordinary expenses are included in restructuring charges and restructuring happens frequently

This can overstate future profits. As I am not an accountant, I'm not even sure how to detect this. I am guessing that reading footnotes on the restructuring is required to see this. This gets worse if the company is serially writing off something. In the book, Kodak tried to restructure in 6 out of 7 years.

Having worked for HP and facing restructuring throughout my entire stay there, this should be more common than expected. In fact, I can argue that in old HP, restructuring charges ought to be ordinary expenses.

d) In-process R&D charges are written off by the purchaser at the time of acquisition

As I am not an accountant, I thought this was fine. How much of R&D even results in a product that can be monetized by a company ? Why not just write it off so that investors will not have false hopes about the future. But this idea is also wrong, most decent companies have intangible assets and this has to be R&D spending that will be amortized over time.

As an investor, it is very tempting to build a checklist from the above-mentioned points to qualitatively suss out the weaker counters. Unfortunately, they hardly matter in REITs because there is little by way of product sales and R&D.

The problem in investing is that even if you can build a detailed checklist of accounting watch-outs, you will merely be left with a few obvious stocks to buy that every retail investor is hoarding like toilet paper right now. The outcome of rigorous screening is often the same as intuition.

As such, you need to be be careful of investment experts who talk about screen filters and qualitative checks but end up with a list of strong-sponsor REITs that yield less than 5%. Any uncle with some investing experience can create this list for you without a model or a checklist. 

Saturday, February 08, 2020

Can you support a sugar baby using CPF payouts ?

In Financial Blogger's Cinematic Universe, the topic that always sparks a reader's interest is CPF.

Another topic that readers like to read about is sugar babies.

In times like the Corona virus infection, it may not be too feasible for some of my friends who are life-long investors in the Geylang region to continue to visit their regulars haunts because there may be a chance of infection. In fact, the 12th Corona victim is likely to be a freelance sex worker. The person who reminded me of this fact is strangely enough, my mum, who was so concerned about my friends, she asked me to remind them to stop visiting Geylang this new year season.

But I am a realist.

If I can't sell my investments in anticipation of the situation getting worse, I am pretty sure my pals would still need to have their needs met. With this realization, why not combine these two topics into one and let's see whether it is possible to support a sugar baby. Sugar babies probably see fewer clients so I expect them to be a safer choice in times like this.

Fortunately, we now have data on how much a sugar baby costs. It takes about $3,000 a month to support one. In fact, A friend gave me another data point of $2,500, but he gave the caveat that at this price point, the sugar babies are kind of plain and not really worth the trouble.

Armed with this data, let's go to the CPF Life estimator website to see whether someone born at the same time as me can support a Sugar Baby.

a) Current FRS sum of $181,000

The first simulation is for the sum of $181,000 for a males with around the same birthday as I do.

The output looks like this :

As you can observe, the standard plan is your best best as it has the highest proportion invested in annuities. The Escalating plan increases at 2% every year but you might be too old to enjoy your sugar baby by the time that reaches $3,000 a month.

Ok, so I estimate in most cases attaining FRS is insufficient to support a sugar baby.

b) ERS sum of $271,500

A CPF member can keep an enhanced retirement sum of up to $271,500. If you are really committed to getting a sugar baby at age 65, you can commit more money in your CPF. Based on the calculator you get the following payout :

You get better numbers at around $2,000 under the standard plan. At this stage, it should be pretty obvious that sustaining a sugar baby with CPF is going to be quite hard.

c) CPF Life supplemented with dividends 

I think by now, you should be convinced that CPF Life can, at best, supplement the sugar baby lifestyle and cannot stand on it's own. Suppose you already have FRS, you can expect a pay out of $2,000 a month, you will need a dividend portfolio to do so.

Suppose you blend a REIT portfolio with some blue chip equities, you should be able to attain a 5%.

To generate an extra $1,000 a month, you will need $12,000 / 0.05, you still need an extra $240,000 to cover your short-fall.

d) Share a sugar baby with friends

With a full FRS sum, you will still need $240,000 to life your sugar daddy lifestyle. This can be  insuperable.

Fortunately I know an old friend who was able support a sugar baby while working as a technician in his 40s with an income below $4,000 - He got a few colleagues to share one.

I don't really recommend that readers do this because it's almost tantamount to sleeping with your colleagues and you might be cultivating a super-infector.

Anyway, I hope that you have learnt something from this article and can experiment with the CPF life estimator.

Wednesday, February 05, 2020

Why are there so many jerks outside the private sector ?

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[ Update : The preview tonight is on and most tickets have already been taken. You can review the new format for my preview "Roads to Riches" this evening. Click on this link for further information. ]

When I unsuccessfully transitioned out of the private sector. I was shocked by the number of jerks I had to contend with in my new workplace that eventually led to the demise of my regular salaried career. I fully admit my failure, but it is only recently that I managed to get a glimpse of an idea as to what went wrong.

There is an academic term for a jerk in the workplace. A jerk is an "interpersonal deviant". The typical jerk will say things like "what kind of school did you come from" when they detect weakness in their colleagues.

At a more personal level, I have two experiences to share on this blog :

  • A superior called me into room and hectored me over some "improvements" I made to a table column on a Power-point slide. Her focus was not the merits of amendment, but how my amendment proved that I looked down on her because she does not have a First Class Honours for her first degree. She spent the rest of the time reminding me of her advanced degree qualifications. 
  • Another superior, after the Little India riots, asked an Indian IT vendor whether they participated in the riots the day before. 
  • This behavior was not new to this superior - she even told another superior to be careful when admitting a potential new team member because she was newly married and may create a manpower vacuum if she got pregnant.
In my decade in the private sector, I made my share of mistakes but I never encountered this kind of egregious behavior in the workplace in an MNC.

I finally managed to get some insight from The Economist's Bartleby article this week that explains the difference between the private and government sectors.

Imagine putting a private sector CEO or 6 Sigma expert to screen travelers who were hit by the corona virus. As the numbers infected are low, perhaps there will be cost savings if we just sampled a few passengers from a plane and reject the entire load if one test turns out positive. That would save costs for the taxpayer.

But this would be ridiculous behavior in the government sector. Problems faced by the government cannot be reduced into bottom line. Every action has to consider optics, multiple stakeholders and a lot of different KPIs exist.

Studies in the private sector show that removing a high-performing jerk from the office will mean that the team may lose it's best performer, but the rest of the team will eventually improve their performance, calculated by bottom line, by around 30%.

The government cannot flush out their deadwood and jerks from the organization. 

They don't even know what resources and hidden domain knowledge these folks have. They can't measure what are the improvements when a jerk gets removed from an organization. So they live with it, and eventually the entire organization normalizes jerk-like behavior.

There is a lesson to learn from all this. 

The best way to transition out of the private sector is to target agencies that are very close to the private sector, where there is a semblance of  a bottom line. MAS and EDB comes into mind but these agencies will be highly selective. 

If you are one of those older workers forced to leave the private sector, then good luck to you. Endurance and resilience are more important than actual competence.

Or you can be like me, transition with dividend income more than take home pay. 


Monday, February 03, 2020

MBA in a Nutshell #23 - Accounting and Finance : Tax Reduction Considerations

With the three accounting statements out of the way, it is now time to look at legal forms of tax reduction.

a) Structure of the Organization

The structure of the business will have a strong influence on the taxes paid by the company.  If you incorporate a Private Limited Company in Singapore, corporate taxation is at 17% although generous tax exemption schemes exist. If you were to incorporate Limited Liability Partnership, income is treated as personal income for the business partners.

b) Timing of Purchases

You can game your company expenses to offset high taxes from a good year. This is often because revenues are recognized on an accrual basis, when the sale is paid and not when the bills were collected.

c) Write-off accounts receivable

It is a bitter reality that many companies do not pay up after buying  a product or service. These bad debts can be written off tactically to gain some tax benefits.

d) Depreciation, depletion and amortization

This often involves taken an asset and reducing it's value in the balance sheet annually. If you depreciate an asset more aggressively using a double declining depreciation method versus a straight line method, your expenses will go up short term and may reduce your taxation income accordingly.

In Singapore, depreciation of some asset like machinery may be governed by statutes so there may not be so much flexibility over this.

e) Inventory Valuation

Because we are subject to inflation, sometimes you can manipulate your profits by selection which batch of inventory are sole. If you use a last-in-first-out (LIFO) approach, you can be treated as selling your latest inventory. A first-in-first-out method (FIFO) would mean selling at a price marked for your oldest inventory. Somewhere in between is the weighted average approach.

Singapore is closely aligned to IFRS.  In IFRS, LIFO is not allowed under our accounting conventions because it understates profits and possibly causes inventory to be marked at obsolete values.

An understanding of what is possible in taxation should also govern the decision of whether a self-employed person like myself is better off incorporating a company.