Monday, March 30, 2020

Brave new world of Webinar training

Dua Lipa: Critics rate Future Nostalgia as the best album of 2020 ...

After the government announced that gathering of more 10 persons banned, we've been trying to pivot into Webinars, so I have spent the greater part of the weekend trying to translate my training program into a webinar. 

The work to pivot was much harder than I thought and other trainers may want to read this before going ahead.

(Why do I want to share my training intelligence with other trainers? Simple, I believe one-day investment trainers will be asking me to train them! BWAHAHAHA !)

a) Webinars are labour intensive

My biggest fear was that webinars are so easy to run, there will be thousands of competing training programs in the near future. As it turns out, this is farther from the truth. While I proceed with my training at a much slower pace, my colleagues spent the entire time troubleshooting connection issues.

Their work is worse than IT operations because even if a server fails we have an hour to get it back up. My trainees miss one hour, it is as good as not attending the course.

Make sure there is a team working when a webinar is happening.

b) Better for the team to be located together during the webinar

As a webinar is a performance to a large remote crowd, don't make of the mistake that you can do the webinar remotely vis a vis your teammates. A lot of coordination takes place real-time.

In my case, there is a time delay between my narration and the time my students receives the message. Without another teammate logging in as a virtual student, I can't estimate what that time is.

I also received an urgent call from health authorities halfway while conducting a quiz ( SHIT! ). My teammate took over. Turns out they just want to arrange to delivery of medication.

Anyway, this may be unavoidable as we lock down further. I now have all the infrastructure to conduct the next session from home. I need to cordon my kids off if I have to do that.

c) Attention span is different in a webinar

We took the decision not to risk the quality of the training by stretching the training from 2 days to 4 days. This gives more time for Q&A, which comes in a greater volume in a webinar format and prevent students from losing focus. I can definitely rush through investment training, but I am unique in that I invest in my student's portfolio. This forces us to put a premium on quality.

d) IP issues take centre stage

It is much harder to defend your IP when you go webinar. We rushed into this without much forethought (unforgivable, as I am legally trained). You need a web of NDAs and physical measures to protect your IP. My material changes each lecture but trainers need to spend more time on this.

In can introduce my professor to anyone who is interested in such matters.

Just contact me privately, even if you are a market rival.

e) Never go full 100% webinar no matter how bad the situation is

It never ceases to disturb me when I see an ad slashing a $1,800 course into a $19 webinar. The decision to go online will kill most legitimate businesses, including my own. So right now I am willing to add one day of face time to all my students when lockdowns are over.

It will be one full day of practice sessions I intend to model after this Software Development school called 42.

While I am not Dua Lipa, I am pretty sure my physical presence nets my business partners more than simply just downloading my disembodied voice.

This blog continues to post with lower frequency as I put renewed focus on my ERM FB community.

I will see you guys probably one more time this week where I post a personal update.

More next week when my class is over.

Thursday, March 26, 2020

Riding the COVID-19 roller coaster ride

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The past few days were horrendous. I thought once I squared off my margins, I would have a few days of peace but the COVID-19 situation grew so bad, I was no longer allowed to conduct my class this weekend, ruining months of marketing and sales of tickets.

While these restrictions are very much needed in Singapore, I just can't let my planning all go to waste. So I had been working on turning the class into a Webinar and had to learn the use of webinar software from scratch.

The harsh truth about training programmes is that if it can be made into a webinar so easily, then it will be too easy to take the instructor's lunch because all it takes is a series of Youtube videos with the same content to get the job done. This parallels the work from home effort going on in Singapore - if you can totally work from home without missing a beat, your work can be outsourced and your employer will remember that when the economy recovers.

I will be converting my course into a two-weekend webinar, but once this is all over, students will be invited for a full-day meet-up to run through the practice sessions again with a new data-set. Hopefully, they can appreciate that they will get more than any previous batch of students.

Of course, my anxiety is not over yet. We're still not in full lockdown mode, so I can still conduct the webinar from an office location. If there is a fullscale lockdown, I may need to retreat further to conduct the webinar from home.

We are basically operating from instinct, trying to stitch different web-tools together to make learning a superior experience. As in all things IT, a little bit of lag and all hell can break loose on the day of the performance. The upside is that I can now conduct web seminars so I will expand my reach and community engagement over the next few months while COVID-19 rages in Singapore.

And just as things are about to get worse, investors received a significant amount of dividends today and this will go on until 31st March. At least the rents have not stopped arriving for this month.

Another pleasant surprise is that I may even be classified as a freelancer under the Budget announced today, so I am actually entitled to $1,000 for nine months!

I will not invest it away because the economy needs me to put it into circulation as soon as I receive it so it goes to my wife to buy groceries for my family. I have plenty of ways to pick up more investment securities.

Make no mistake. The response to the COVID-19 will hurt my training business. But whatever I experience, it will be nothing compared to the rest of the gig economy who suffer tremendously over the next few months. I'm glad for them that we've announced the Mother of all Budgets to help them for the next few months or so.

This blog will not receive a lot of updates in the meantime as I struggle with the fluid situation.

Saturday, March 21, 2020

Invitation to Gloat and a Personal Update

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I miss this blog.

I don't know 99.99% of you guys but I am sure folks read what I put up.

The reason why I took a short break was that market changes forced a rethink of my course slides and I was suddenly asked to submit the slides for printing by this weekend. Couple that with adjusting my portfolio to avoid margin calls, it was a shitstorm for the past few days.

a) Death of the Leveraged REITs strategy

Risking sounding too dramatic,  the Leveraged REIT Strategy died a horrible death last week. I have been selling for weeks and informed all my students of my change in investment approach but my selling was still too slow to mitigate the damage to my leveraged portfolio. I think a series of articles on Dr Wealth would be more appropriate and I expect readers to look forward to it.

You guys should know I don't do the "I knew it all along"  kind of articles, I prefer to think about what went wrong for me and I promise to showcase the stupidity that got me to this stage. My advice to critics is to gloat now and be as public about it as possible. I mistimed the market even though I documented everything on how my own strategy could fail in my older slides.

On the brighter side, I no longer owe my brokers money and, unless a miracle V-shaped recovery occurs, I can make my kids millionaires with the bargains we are getting in the markets.

The wealth exchange between one generation and the next generation has begun.

b) COVID-19 and lifestyle adjustment

Removing margin also has a strong psychological dimension. I am now free to think about things that matter.

As an extrovert, I have been too focused on life outside my home. Now it is time to look at the large volume of books and games and finally, find a way to play them. I will see whether I can teach my kids to play The Fantasy Trip, an old retro game only the oldest fogeys will know about. Each character sheet is the size of a credit card.

c) Impact on training business

Make no mistake - COVID-19 will hurt the investment training business. Attendance is down as a proportion of registrations and registrations is also down. As a response, I am adding a lot of COVID-19 related investment analytics into my presentation to spur demand.

My fear is that classes cannot continue. We have changed venues once yesterday to ensure the 1-metre safety distance and I will be experimenting with webinars once my course prep is complete.

The upside to all this is that I get to interact with my 370+ community.

d) Sharpening the Saw

At least two areas in my life is not a total shitstorm. My Python programming is moving along fine and I managed to get some leeway building websites with flask.

The best progress is my exercise. As gym sessions continue, my body has stopped aching after an aggressive workout. I also have developed an unholy breakfast concoction using yoghurt, blueberries and granola that does not taste like shit so I can sustain it. Today I even managed to make avocado edible by adding lemon juice, salt and yoghurt.

Yoghurt is very key because the acidophilus bacteria helps with controlling my blood sugar. Problem is that this class of yoghurts are very sour and needs some bit of hacking.

e) Reading

I am torturing myself by reading Playing at the World by Jon Peterson. It is more boring than legal cases I used to read but it is a painstaking description of my D&D hobby. I learnt about the kind of wargames Prussian generals played 300 years ago and mythical roots of elves and dwarves.

Anything to get me out of overthinking about the markets.

f) Hobbies and entertainment

So far I have held back from taking the easy way out buy playing computer games or binge-watching anime. This is probably not sustainable. Right now, anything can happen as I try to stay indoors. Maybe I'll watch Star Trek Picard. Maybe I'll buy a PS4 or Nintendo Switch.

I've also reduced my workload to focus on leisure this weekend.

Anyway, without the weight of a margin account, I am actually much happier than before COVID-19. Bargains galore in the markets for those who can hold indefinitely and I am forced to think about my hobbies and leisure.

Sunday, March 15, 2020

MBTI - Astrology for HR Professionals !

Image result for I'm not crazy MBTI

A big market downturn is also a time for personal reflection. After the Friday 13th panic where I unloaded stocks to shore up my margin account ratio, I had to distract myself. This time around, I chose to read a book on the Myer-Briggs Type Indicator, a personality profiling system largely dismissed by the academic community but generally quite successful in the business world.

In my view, when a system does not have the firm backing of the scientific community, it belongs to the same class of belief systems as Astrology. My opinion is that technical analysis, the capital assets pricing model and the efficient markets hypothesis, all fall under this category. Consequently, I do not like to dismiss Astrology, being a huge fan of good and somewhat random advice in many Astrology columns. Up till today, I have yet to see an astrologer advise Capricorns that this week would be a good week to murder an insurance agent or commit money laundering. In a similar vein, technical analysts do have a respectable approach to risk position sizing and emotional management.

I will not really explain what the MBTI is. I think readers should try to find some online test and figure it out yourselves - there are plenty of tools on the Internet for this purpose. I was aware of the weaknesses of this system - I tested ESTJ in JC but recent online assessment have tested ENTJ. The context of an engineering career makes a person highly practical and data-driven., a luxury a lawyer might not be able to enjoy. Legal training tends to teach us to be more strategic and think about the big picture. I probably am neither ESTJ or ENTJ, I am likely E*TJ.

This book by Pearman and Albritton takes the MBTI further and delves deeper into the model by considering alternative modes of behaviour and personal weaknesses. You may not believe in MBTI yourself, but you will come off feeling that the authors really drink their own kool-aid.

The first insight is that beyond our primary processes, we have auxiliary functions. My primary mode of behaviour is Extraversion-Thinking and this shows across both my engineer, a law student and trainer personas. So I take in information best when interacting with team-mates and crowds.

A person's auxiliary function balances the Extraversion with the Introversion axis. As such to make a decision, I often have to reflect internally upon the information I get from conducting classes. At this stage, it's get confusing because I can't tell whether my auxiliary function is IS or IN. An IS prefers to reflect upon hard facts and have a bias for the practical. An IN prefers to intellectualise and loves dealing with broad concepts and theories.

I am neither a sensing or intuitive person. I generally find myself dealing with back-testing data and trying very hard to reconcile them with theories about market outperformance. There is no escape from tying the hard facts to the broad concepts to determine the action an investor has to take. I think it is this full-stack approach to investing that makes it so hard for me to pin down my current MBTI profile. Sometimes the most practical way to take on huge amounts of data is to start with great first principles.

Of course, the hardest part of the MBTI is to know your weakness. In my case, my biggest problem is coded IF. Getting in touch with my internal feelings. Even the remediation steps are really hard to contemplate given my current work situation.

In situations when I deal with people I should focus more on their emotional state and the personal values they bring to the table. This is a horrendous idea to me given that, logically, people come with so many contradictions that dealing with it means arriving at sub-optimal results. Also, I think culturally, this can be viewed as a weakness.

The hobbies I should adopt is less vomit-inducing. I was advised to spend more time making art. In this case, I am grateful for my RPG background which is amateur theatre with lots of dice and mass murder. With my financial independence, I have attempted musical composition and improv classes. I think they all ended in unpleasant disasters.

This should not stop me from trying shit that I don't understand - I need to set an example to my kids.

Even with the lack of scientific rigour, readers should make it a point to know your MBTI. This will at least prevent you from being stuck doing work you hate. Imagine an INFP studying data science. That would be suicide-inducing.

Knowing your MBTI also helps in understanding a lot of business books that seem to be hell-bent on adopting MBTI over the better frameworks used by academics. I once had an economics professor who asked a group of zombie public servants whether they like more entrepreneurs DNA in their organization which was, predictably,  met with a resounding yes. Then he pulled the rug under us, saying that entrepreneurs tend to be ENTPs, one of the flakiest and least conscientious types who are likely to the worst fit for my organization.

That moment of one of the most pleasant ones I had when I was in government. Broccoli had more personality than some of my colleagues.

Friday, March 13, 2020

Beyond Anger and Frustration...

Image result for atrocitus

This morning Dr Wealth CEO Alvin Chow asked me to pen my thoughts on the context of the Great Recession of 2008 against our current economic back-drop. I decided not to do so yet because I am in the middle of aggressive back-testing on this new bear market, what I want to know is to get a real-time understanding of investment factors that fail when the market is in free-fall. The results will probably be available next week before my next preview.

But Alvin said that this is a good time to demonstrate some pathos to the investing public. I don't think the Dr. Wealth blog is ready for any pathos from me yet, like many investors I am shellshocked by recent market moves, but this blog can accommodate my more random musings.

The truth is that I'm really angry today.

This is nothing like the Great Financial Recession. During the GFC, I had one simple unleveraged portfolio and a ridiculously low expense rate. Now, while I have a substantial unleveraged portfolio supporting my family, I do have a leveraged portfolio that is almost facing a margin call this morning.

I have a personal rule to react when my margin account ratio reaches 150% - I sell away enough counters to get some breathing space regardless of my personal feelings of how the market might turn in my favour later.

Today my margin account ratio hit a low of 147%, so I took a significant number of my legacy investments (before I started using Bloomberg) and sold it off to push up the margin ratio to a more reasonable number. The result is that I took some losses and only gave myself breathing room to take in a further 18-20% drop. Doing this lifted the psychological burden on me, but not the possibility of further drops when Western governments were found to be unable to cope with COVID-19.

My personality is that I hate selling my investments. The broker takes a cut, and the guy buying from me is certain to make a huge profit if he can hold onto it for 2 years. But selling now is better than selling everything when a margin call occurs.

Naturally, when an investor sells shares, magically, the markets will rebound. As of this moment, the DJIA futures are trending up. Selling stocks is almost like making a sacrifice to some Pagan God by killing your firstborn child.

Once the margin accounts are secure and I am not going insane and thinking whether the broker will margin call me, the next thing to do is to distract me from compulsively looking at the markets. At least for today, teaching myself Python paid off as I was able to write a nice webpage using the flask library and even picked skills on Python project skeletons. After that, I even forced myself through a fairly technical book on the MBTI personality framework.

If this market event is a repeat of history, then those with strong holding power who can farm their salary into the financial markets without breaking a sweat will be almost assured a straight path to becoming a millionaire when all this is over.

As to how much leverage to take and which strategies to follow, this is something I have to explore over the next few days. There is a delicate balance, make a portfolio too defensive and it can protect you against further downturns, but defensive portfolios will not do that well in recovery.

Wednesday, March 11, 2020

MBA in a Nutshell #28 - Accounting and Finance : Investment Appraisal

Today we will look at various ways to internally appraise projects in a company. These frameworks are more appropriate for business administrators but they can be modified for use by some investors.

Let us begin with common metrics :

a) Net Present Value (NPV)

NPV =  Cash Outflow - Present value of incoming cashflow

This is the most basic of all investment appraisal techniques. Where the NPV is a positive number ( such as +$10,000 ), the project is viable. Where it is negative, you are likely to be throwing good money after bad projects. This can be manipulated by projecting a different future incoming cashflow and lowering the discount rate in the calculations.

b) Internal Rate of Return (IRR)

This measure calculates the proper discount rate that would set the NPV measurement of zero. On a spreadsheet, the IRR() and XIRR() functions can perform this calculation separately. When you use IRR you no longer have the ability to manipulate the discount rate. Companies often set a hurdle rate when assessing projects using this framework. Many years ago in P&G we were told that IT projects that do not have an IRR of 15% should not be carried as P&G is better off farming the money to branding campaigns.

c) Payback period

The final measure is based on the number of years a project needs to break-even. This simply takes the investment outlay and divides it by the yield of the investment project in absolute dollars. A $100,000 project that returns $20,000 every year will reak even in 5 years. If you use this approach, projects are chosen based on how quickly they can pay you back your original investment.

The text-book goes beyond these standard measures with a scathing critique of measures created by the consulting industry. Measures like EVA and MVA are designed to distinguish consulting offerings from each other and introduces biases in measurement. For example, EVA tends to be biased towards managers who milk their companies and focuses less on growth.

The author suggests that, instead of following the latest management fad, simply using operating income divided assets into an ROI measure works best.

Saturday, March 07, 2020

How to think about Skills Future, educational courses and future proofing your lives

Image result for iron man

I was thinking about this question when someone on BIGSCRIBE decided to ask around on how to future proof ourselves and determine which Skill Future course to take.

This is a question I have been grappling with myself for decades. I entered the workforce when some people still believed in loyalty to the firm you work for. When I joined P&G, there was this rare moment in my life where I actually aspired to have a lifestyle like my managers and bosses, so I upskilled based on what I thought were tech skills a manager should have to look after an IT infrastructure properly.

As IT managers tend to look after an entire IT platform, I took every certification exam I could on Windows, UNIX, AS/400, Novell, Cisco, IT Security.

I wanted to rise, and I needed to rise really fast.

Taking two to three times the number of exams compared to an undergraduate did not accelerate my career progression, but it did accelerate my ability to take a lot of exams. This may seem sort of worthless at first, but I found that I could take the CFA, CAIA, and FRM almost simultaneously when I realized that my company is not that loyal to me as compared to my stock investments. So, inadvertently, I unlocked the most important future-proofing skill in my 20s - the ability to pick up deep technical skills almost real-time on my own, with negligible costs, without the need for instruction. 

I think doing what I did would be a waste of time for younger people today. Instead, I will provide a framework on how to think about investing in personal skills.

Here is what I think you should approach your education :

a) Being job-ready does not make you future proof

Being job-ready means you have something an employer wants. It can rapidly put food on the table. If you do not have a job right now, you better find a way to be job-ready. The constellation of courses on specific skills like how to be a security guard or a private investigator falls into this category. If you are jobless, you better rush towards one of these certifications.

Future-proofing courses are generally not as practical as job-ready courses. A course on statistics and linear programming will not land you a job immediately but it will pave the way for a deep learning programming course that will in turn land you a better job placement in the future. The goal of future-proofing is to download as many mental models into your head as possible, but you can only afford to do this when you are not hungry because developing mental models need patience.

The consequence of understanding this will change the way you look at education. As the government drives for more adoption of polytechnic diplomas, that's just trying to get Singaporeans to be job-ready. If you really want to future proof yourself, only a series of advanced degrees will give you the myriad of mental models to do that. But advanced degrees may not directly land you a job unless it also teaches job-ready skills.

b) There are some skills that make you job-ready and can future proof you.

In fact, these can be categorized into four categories.

  • Interpersonal skills involve public speaking and selling.
  • Creative skills involve writing and design. 
  • Technical skills like programming, investment management, and marketing funnel design.
  • Physical skills like personal hygiene, yoga, and organization consulting (Marie Kondo ?)
To monetize these skills, my experience is that focusing on one is not enough. I know folks in the Toastmasters for decades who hardly make money from their public speaking skills which win them trophies every year. My current job involves at least three skills: Selling, public speaking and investment management. 

I just need to hone each skill to the top 30% of the cohort and I should do ok.

c) You need a learning 'exoskeleton'

I'm still developing this new idea which I think has merit. As investors, we have no idea how much alpha has already been extracted from financial markets before the profits come trickling down to us. 

As a trainer, I can't simply present myself as a person people would pay money for, I see myself now as a combination of tools with my personality to do my job - sort of an Iron Man character. The exoskeleton places me quickly up the rankings in an interpersonal, creative or technical skill for a small investment on my part. Also, unlike the good old days of corporate loyalty, my tools ow travel with me from project to project. 

My exoskeleton looks like this :
  • High-end laptop and presentation clicker. 
  • Bloomberg terminal to backtest investment ideas and empirically make investment decisions.
  • Mentimeter presentation tools to crowdsource insights in real-time from students.
  • Pre-built graphics for slide and infographic creation.
  • Grammarly subscription to proof-read all articles and generate a better style. 
  • Books summary subscription sites to keep me at the edge of business fads in the corporate world.
  • Online cloud storage to bring my lecture materials wherever I go.
  • I'm not even done. I hope my Python programming skills will lead to a few customized modules to answer some hard questions investors cannot answer even with current skills.
To keep above the crowd, I pay a fee every month to maintain my tools so that my tools will always be slightly more sophisticated than someone who gets the tools for free. My dividends and fees make paying for these tools a piece of cake ( except the Bloomberg terminal, that I wish I can afford one day ). 

For a complete treatment to answer this question go read The Last Safe Investment by Michael Ellsberg and Bryan Franklin. I will be integrating the concepts of the book to the local context and likely presenting part of it in the Seedly festival in June. 

Wednesday, March 04, 2020

Why are young people so jelly about my Financial Independence ?

Image result for michael ellsberg

If you read financial blogs but have just started out, you would probably be shocked that it is possible not to work in Singapore and have everything paid for by dividend payouts. A decent number of these readers will then hunker down to figure out how the capitalist system in Singapore works.

It is of no surprise to me that many readers will feel jelly or salty about financially independent folks - to these guys, we must somehow be crooks!

I think my own success is actually quite conventional.

The basic framework even has a name - Financial Advice Commonly Delivered or FACD based on the excellent book shown above by Michael Ellsberg.

Here is how FACD works :

a) Earn money from a job.
b) Save a large chunk of it, delaying gratification for the next 2 decades.
c) Invest (and reinvest) in various instruments with an emphasis on stock equity.
d) Retire when dividend income/capital gains begin to exceed basic expenses. ( 4% withdrawal rate )
e) Be happy because you've won the game. ( Maybe at the expense of family and relationships )

Almost every FIRE initiates to grandmasters employs some kind of variant of FACD to meet their financial goals.

If financial success can be so cookie-cutter, then how do we explain that young readers, upon reading about my six-figure dividend income becomes so traumatized that they need other financial bloggers like Budget Babe to console them and make themselves feel better? (link)

Actually, there are many structural weaknesses of this FACD model that renders it useless to many Singaporean.

Take earning money for instance. Not all degrees are recognized the same way by the industry. A better local degree qualification can mean more than $1,000 per month in earnings. This means that FACD has a bias towards above-average academic ability.

On the other extreme, savings require a lot of willpower. Most American books on personal finance talk about saving 10% of your pay every month. To get comfortably retired, I needed to save about 60-70% of my take-home pay in my late 20s.

There is clearly a bias in FACD and it does not account for recent developments like the gig economy and the disruptive effects of AI on the ability of an average person to hold a day job. Even as this book addresses the issue by advising readers to develop the right skills, I think it does not have a full solution to the problem.

Because of the inadequacies of FACD, the industry has spawned multiple advisors and trainers in an attempt to fill this gap. As finance is a wicked problem, you will notice a significant variation in things that are taught and advice that is given.

Like the martial arts schools in Wu Xia novels, contradictions and conflict can arise.

As a content provider myself, I believe that the problem of financial independence can be tractable if you believe that a partial solution can make a positive difference in your life. In other words, if you cannot attain $10,000/month of dividend payouts, what about just aiming for $100 a month.

At $100 a month, at least your data plan is free.


Monday, March 02, 2020

MBA in a Nutshell #27 - Accounting and Finance : Improving Cash Flow

This section, while common sense for street-wise entrepreneurs, may not be too obvious for folks with no business experience.

Incoming money deals mainly with accounts receivable. Here are some tricks of every trade :

a) Have payments wired into your bank account - This earns interest and avoids delays from cheque processing.

b) Use a central bank account - This applies only if your organization is so big and decentralized, it has multiple bank accounts. One account can reduce bank charges and even earn more interest.

c) Give cash discounts for early payments - 2% if payment made within 10 days. Note that this can be a lot of money when annualized.

d) Bill customers on a timely basis - Odds of collecting a delinquent payment after 90 days is 75%, for 180 days is around 60%. Bill on a cyclical basis.

e) Make an active collection effort - Use a lawyer for a nice letter of demand if necessary.

f) Deposit receipts on a daily basis - Don't want to lose cash or cheques.

g) Use a factor - You can sell your accounts receivable at a slight loss, but the factor then will become responsible for collection.

Managing outgoing cash has a few bastard moves, all designed to maximize float within the company :

a) Centralize accounts payable and pay at the last moment - I would hate this if it is done to me.

b) Draw cheques from out of town banks to take advantage of float and take longer for cheques to clear - This sounds like a super bastard move that may not work here as we don't have out of town banks. Can someone share how this is done in practice?