Friday, January 29, 2021

Lessons from Gamestop

Quite a lot has happened over the past few days. If you've been living under a rock, here's what happened in a nutshell :

Hedge fund short-sellers over-extended themselves when they oversold Gamestop (GME). This was flagged by retail investors who decided to take collective action to punish these large speculators, so thousands of retail investors decided to buy the GME counter knowing that short-sellers would eventually have to buy back the stock. As they pushed the stock value, the hedge fund investors started to lose money as they unwound their positions. 

What happened next was really unfair to Main Street, the major players, massively butt hurt by GME rally,  managed to convince brokerages like Robinhood to prevent further purchases from retail investors. Angry retail investors decided to take Robinhood to court.  

At this moment, we are probably not seeing the end of the story because this episode was framed as an instance of class warfare. It's manifestly unfair that hedge funds can prevent retail investors from market participation when they were allowed to manipulate the market all these years. 

I don't have any skin in the GME trade but I have two insights to share :

a) Be at peace and accept that stupid people can make a lot more money than you do

I was asked what's the ideal market return to target by a group of investment experts. They all have big numbers for themselves, like an 8% over the next few years. I said that my target was about 3% and one guy joked that I'm like a terrorist who aimed to blow up a propeller plane when everyone else were targeting passenger jets.

Actually I felt that his comments were too kind. My back-tests routinely flag 17% returns over 10 years and my ERM leverage accounts just deleveraged from x2.4 to x2. My 3% is more akin to an attempt at blowing up a sampan. 

Investing should be divorced from self-esteem and ego. A multimillion portfolio generating 3% returns would still generate $60,000 a year and it can feed a family of five in the HDB heartlands.

The key psychological skill in investing is to be at peace when people whom you think are stupid and making a lot more money than you do. If you adopt that mindset, you would have avoided the crash in Bitcoins when it first peaked in 2018/19 as well as the GME crash when brokers decided to intervene in otherwise fair markets. You also would have avoided real estate just before cooling measures in Singapore, I know FOMO hurt a lot of real estate buyers about 5-6 years ago.

I think this is really hard in Singapore because we're brought up to think that just because we have better paper qualifications, financial markets will automatically reward you for that. 

The financial world works differently from real life and if you're smart you better not invest your ego in your investment portfolio.

b) Can Gamestop happen in Singapore ?

The GME episode arose from class warfare. It's really horrible to think that big boys playing the markets can stop trades from happening when the man of the street is starting figuring out how to win the game. 

I'd imagine this scenario. Suppose a lot of wealthy HNW individuals start leveraging on REITs and someone flag this on EDMW. Imagine that REITs have been pushed up to a PB ratio of >3 and yields less than 3%.

What would happen if angry Millenials begin to short the REIT market ? A lot of Singaporeans blame escalating prices on REIT landlords so it is not too hard to cultivate a desire to hurt SG REIT investors.

What can theoretically happen is that the short will pressure REIT prices. Then a drop in REITs by 5-10% can trigger margin calls for overleveraged investors. This can potentially trigger a tsunami as margin calls ala March 2020 !

But this scenario is unlikely to play along the same way as GME. 

Leveraged investors still collect dividends from short sellers. And these imaginary Millenials will find themselves the same position as GME  hedge fund short-sellers, they have to cover their shorts sooner or later. Can these guys short a REIT to half it's value to hurt those leveraged at x1.5 ? I'm not too sure about that.

Should this happen, there will be plenty of high net worth individuals who will apply for a Home Equity Loan to buy up REITs at a 50% discount.

Fortunately, I have levelled up on programming once again and have developed the ability to optimize relative strength based trading strategies based on local stocks. The empirical evidence on REITs show that it has properties of a mean reverting stock counter as opposed to momentum based properties in counters like GME. 

For local REITs, what goes down must eventually come up.

A more detailed write-up should be available at the Dr. Wealth blog by next week.  

Saturday, January 23, 2021

"Confucius is a bastard !" - How to fight off Singapore's Cultural Involution

I was brainstorming one of the worst titles an author could come up with for a philosophical piece of work with a friend and we settled on something that can piss off a significant part of the ethnic Chinese population. The working title he came out with was "Confucius is a bastard."

We were, of course, being deliberately immature. At that time, we did not work out the central thesis of the work, and we settled on some small-time critique of Confucius' love for ritual and music. 

Little would I know that cultural anthropologist would complete the task for us.

Before you read the rest of the article, I strongly suggest that you follow this link and read this article on involution. 

Involution is a powerful idea that should animate all Singaporeans. It is the concept that encapsulates the problem that plagues all Confucian societies. There comes a point in a Confucian society, that people become imprisoned in such a narrow definition of success, that they give up hope because they cannot find a way to get out of this narrow mindedness. 

I'm a product of such a society. 

When I got my third degree in SMU Law School, even with my financial independence, I felt constrained by the GPA system in SMU. For every law subject that I felt interested in, being of average ability in class, I had to pay a heavy price with my GPA score. This was fine until my GPA started hitting the low 3.4s. Any slip-up could mean losing one Honors classification. So, subsequently, I started playing safe, and took subjects I had a serious competitive advantage in. The final outcome was that I did not really stretch myself to learn areas of the Law that gave me the most intellectual growth. 

Involution also affects our career choices. This CNY I expect questions from relatives why I wasted a law degree and did not get into practice even though I make relatively good dough on my career choices. 

(This topic is so interesting the Rotary Club may invite me to speak about NOT taking up a legal career next month.) 

Sometimes, I would imagine my financial independence being the sole reason I can tell folks to fuck off and leave my career choices to myself. But deep inside I know this - without my dividend payouts and magical middle-finger made of my investment portfolio, I may not have the strength to resist societal expectations and I would be pretty depressed dealing with divorcing couples today. Every decision I make relating to career and family will be scrutinised and criticised by nosy relatives. 

All the Confucian societies pay a heavy price today for involution - No sane mother would give birth to a child so that he/she will lose or play second fiddle to other kids. Worse, the trend is now assortative mating that entrenches genetic advantages to the child of two working professionals.  I am now no longer surprised that the fertility of Confucian societies is now trending down compared to other societies with more Protestant roots. 

I don't think anthropologists have found a solution to this problem. Confucianism has been around for thousands of years and this rules out a mindset change. China may collapse because of this.

Here are some ideas I have:

  • Universities should just award Pass degrees and give out prizes for best dissertation and maybe subject performance. This allows every candidate to be assessed based on their merits and personal interests. HR departments cannot use a shortcut to cut down the candidates they interview so they need to assess everyone individually.
  • Secondary school, one of the largest sources of inequality, need to be debranded and every student is routed to a nearby secondary school.  
  • Instead of minimum wages, institute legislation to cap maximum time spent on work. 996 culture will just induce a rebellion against corporate culture. If you want to stand out, get more work done within 10 hours. 
I suppose none of my suggestions can produce a mindset change within one generation. But at a personal level, we know how to resolve that issue if it really gets into our nerves.

Simply emigrate to a non-Confucian society.

Lee Kuan Yew himself said that in a slow-growth economic regime, it is better to experience slow growth in Australia than in Singapore. I think academically, our average students in Singapore kicks ass in a society that does not have Confucian roots. This is simply some something Australians do not emphasise in their society. 

This is also what I observe about Asians who settle in Australia - laggards can become winners when they venture outside the country.  


Tuesday, January 19, 2021

The Emperor's New Road


One of the more exciting opportunities for investors and enterprising young professionals is the Belt and Road Initiative and for yonks, it has been hard to find a book that can summarise it well for Western audiences. Worse, I heard that the analysis coming out from China was overly optimistic about its prospects, so The Emporer's New Road is a welcome addition to an investor's library. 

I don't a have the academic training to really appreciate the work, as I suspect that a student of political science can possibly benefit from having a framework to arrange all the information shared in the volume, I will do my best to share three points I picked up from reading this volume.

a) Somehow major rivals must fight each other.

Almost every book on geopolitics must reference the rivalry between China and the US and no expert will rule out the possibility of a  Cold War evolving into Hot War between the two superpowers. The term is Thucydides Trap - Athens and Sparta must go to war because an incumbent cannot countenance the emergence of a new superpower that will replace it as the next hegemon.

What is surprising to me is that smaller states can play on this trope and threaten to go with the other party if they cannot get support from one. Superpowers can keep using their hard-earned taxpayer funds to support a finding black hole to get an edge over a rival power.

What is sad is that even with really smart people in charge, nation-states cannot find an alternative to the escalation of rivalries.

b)  When it comes to development funding, the country that receives is more important than the generosity of the country that gives 

When a superpower funds or assists a country's development, the question of whether the country prospers under such support depends on the receiver rather than the giver. The Belt Road Initiative is often compared to the Marshall Plan when the US was helping Western Europe and Japan recover from the ravages of World War II. 

The Marshall Plan succeeded because of the industriousness and work-ethic of the recipient countries. The BRI has a much harder time because recipient states may not even be genuine about their own economic development. 

This book details the various fiascos of the BRI and has very few good things to say about countries like Pakistan or Sri Lanka. 

While this is not mentioned in the book, China may be wasting their resources on nations that simply are not culturally disposed towards progress and improving their lot in life. 

c) Progress is slow where land rights are too strong

Another thing I learnt about the development of nation-states is that optimal progress requires property rights that are not that strong. Singapore grew fast because our laws allow the government to confiscate someone's land for development with some compensation. Imagine going to an emerging market and obtaining enough land to make way for a railroad. Another problem is that politicians are already in the pockets of wealthy land-owners. 

If you are expecting an analyst from the US to say really nasty things about China's Pet Project of the 21st Century, this book will definitely meet your expectations. It is well researched, with footnotes spanning a quarter of the text. 

After reading this book, I've come off with an extremely negative view of BRI after reading this book. The BRI has too many moving parts and many countries have an incentive to see it fail. I have no doubts that you will feel the same way after going through this text.

Sunday, January 17, 2021

Should Gen-Z just give up their private property ownership dreams ?


Before I start, I just want to say that I have no expertise in residential real estate investing. I got a EC about 6 years ago and sitting fairly decent capital gains. These gains are trivial as my kids go to a school next door and it will be at least 7 years before I can even move on.

Vina Ip's Behind the Scenes of the Property Market is a good first read for budding property investors who are not looking for a property right now and want a primer on the local property markets. 

First, I enjoyed the general tone of the book which is negative and somewhat cynical. Singapore is a high trust society but we should not trust commissioned real estate agents so readily. The book is full of anecdotes that uncover the various unethical practices of local developers and their agents. I particular love the exposes on developers who manipulate units for sale to always give the impression that markets are bullish. 

This alone is worthy for the time,effort and money to read the book. 

Secondly, I'm somewhat neutral about whether the book can help someone who is looking for private property to buy. Perhaps this is the objective of the author as she does conduct workshops.

I can summarise her approach into two parts:
  • The 3-3-5 approach seems very conservative. I should not have purchased my EC judging by the earned income of my household at that time. My neighbours who do not have millions in the REIT markets are also sitting on excellent capital gains today and many have already cashed out moved out. I leave the reader to google what the 3-3-5 rule is but I prefer you support the author. 
  • Secondly, most of the best deals shared by Vina were largely based on exploiting the downturn of a different economic era. This means that even if you have an intention to buy private property, there is fairly solid evidence that the trend of residential property prices will be down moving forward.
Combining these two insights, this is tantamount to saying that Gen Z should simply BTO and forego their private property dreams!  She might be right and I leave it to the reader to decide whether to agree with her. 

I can't seem to decide my stance on this.

What I really disagree with her about, which should not be held against her because she's entitled to her opinion, is my impression of her view on government policy. She seems negative about Singapore's high rate of home-ownership close to 90%. This is the highest in the world.

The impression she and quite a number of seemingly anti-PAP property gurus ( that I shall not name ) is that home-ownership saps innovation of a country and we've evolved into a risk-averse population as a result of that. Interestingly, she came from a place where some elderly live in coffin-sized apartments. She goes as far as to assert that Singaporeans give up a slice of their personal happiness to support their expensive mortgages. 

In my opinion, that is a step too far even for a very credible property guru.  

My personal take is that broad-based home-ownership produces more good than harm. Sure, we're a lot more risk-averse and maybe even less innovative than Hong Kongers, but we still make decisions that are the best for the community at large and we're less individualistic. It was the Christmas tree at Hong Kong Festival walk that was burned down by the innovative and entrepreneurial protestors of Hong Kong that affected MNACT shareholders. Also, home-ownership means we have a greater incentive to look after our property, as a landlord she should be aware of how "entrepreneurial" a tenant can be with property that they don't own. 

It's the reason why our heartlands are such pleasant places.

But my disagreement should not be a reason for someone not to read her book. I learnt a lot from HK D&D players who are extremely proficient an creative in gaming as individuals, but Singaporean players are better team players and form stronger teams.  One of my most memorable games was making a HK DM rage-quit after the Singaporean party members decided to cooperate and refused to backstab each other in the game regardless of the game scenario. Even the HK DM admitted that this Singaporean trait was hard to beat because he's warier about being betrayed by his own kind in a business engagement. 

To folks from Hong Kong, Singaporeans will always be naive, gullible, kiasu, less creative, less entrepreneurial than HK counterparts. In an individual deal, Singaporean businessmen can be outmanuevered. As a country, however, I leave the reader to investigate how we're faring in this pandemic and the state of our GDP per capita. 

The author's eventual transition to become a Singapore property owner shows how correct our policies are. 

Friday, January 15, 2021

Is it wrong to bribe my kids with $100,000 to avoid a Polytechnic education and go JC ?

Polytechnic education has achieved leaps and bounds ever since Ong Ye Kung has been the Education Minister. The latest numbers show that up to 30% of the Poly in-take go on to study at a local university. Making matters more interesting, the makeup of Poly students has improved over the years with a significant increase of students who would have made it to a JC program with their O level grades.

This presents a sea-change in the calculus of choosing the right academic track and I'm starting to imagine my own children coming up to me in their teens to convince me to support their polytechnic ambitions in the future. One glaring reason to skip a JC and go Poly is CL2, which is as fun as having a root canal for potato-eating Singaporeans like me. Also, my daughter can also doll-up in a Polytechnic setting instead of going to a lecture in school uniform.

For all these reasons, you might expect a parent like me to simply just support my child's wishes, but I am thinking of doing the opposite. I'm thinking that if my kids want to study in a Polytechnic, I may opt to bribe them to take the JC track instead. This is not a small bribe. I fully expect this to be around $100,000 in tomorrow's dollars to balance the hardship between a JC and the Polytechnic program for a discerning teenager.

I detail my reasons below :

a) Polytechnic education is now very relevant with the existing industry

As the government ramps up Poly education, they will try to align closely with industry so that students will be able to hit the ground running. From my point of view, this is totally meaningless because industries do not last very long in the future economy. Imagine a bomb hitting the Singaporean economy and all jobs are lost, having bankable skills with a diploma would be meaningless because we will all be on Universal Basic Income. 

But a JC student using his writing skills learnt in GP class can whine much louder to the government. He can put his suffering in a different framework and become more philosophical over the dystopia he is in. 

While a Polytechnic prepares a student for industry, a JC prepares a student for a society where there is no industry.

b) Polytechnic education teaches practical skills to students to solve real-world problems

Once upon a time, I served an IT vendor in support of a financial exchange. The trading system went down and my highly skilled diploma-trained engineers recommended we restart the trading service. The unskilled but terribly overqualified manager in charge of us from the customer-end (who enjoyed reminding me of his scholar status) insisted we troubleshoot the issue even though we do not believe the root cause to be on the infrastructure end.  We troubleshot for hours and exacerbated the outage.

In the end, my diploma-trained engineers were proven right, bouncing the application service solved the issue and trading resumed. A few days later this asshole manager told his CIO that even though we were technically right, we were wrong because we failed to convince him to bounce the application.

Practical skills are worthless in the real world. The real skill is in negating practical skills with trash talk in the real world. 

This guy is an ex-scholar. I'm pretty sure he has an A-level cert.

I rest my case.

c) Polytechnic lecturers empathise with students and treat them like human beings

One of my favourite Maths teachers in NJC set such a tough Further Maths exam that moderation was set at 20% and over 50 students tried to drop the subject after failing it. We were so traumatised, the Maths department even conducted an intervention to stop the massive exodus of students from taking the subject. I felt that teacher meant well, because until that test we took, we thought we were Math geniuses. 

Most JC students today will say that nothing in University matches the stress level of the A level exam. I continue to have nightmares of taking exams during my JC days but never in Law or Engineering school. But there is an upside, whenever I look at some AI algorithm and think about tensors and matrix manipulation, I think about A level Further Maths in NJC and all the resistance to pick up these new coding skills disappears. 

In all my personal engagements with polytechnic lecturers on the other hand, I find them actually are quite encouraging. One professor in SP even told me that he loves making them feel good about themselves.  

I'm sorry, empathy, love and words of encouragement, is actually not appropriate for my children. 

This is not the Five Love Languages. 

If my kids go Poly, they will never understand what it is like to be forced to drop a subject they love because it may drag down the JC's overall results. They may never experience the differential treatment of ordinary students against students who study H3 or S-level papers or the jadedness of a JC tutor. 

In the end, it is the JC that truly reflects the capitalistic meritocracy of Singapore society and I prefer that they get a taste of it before getting out.

My final point is - as attractive as they are today, polytechnic graduates are in a rough patch. Recent graduates are not seeing salary increases and a larger proportion are joining the gig economy. But the government propaganda machines, orchestrated probably by a JC student, still has FB ads that look like this :

" I did not regret skipping JC to study XXX diploma, at XXX Polytechnic. "

These idiot scholars behind these silly campaigns don't get it.  

REGRET is absolutely what needs to be experienced within the education system. 


The A level track is all about these things.

So I am prepared to bribe my kids with $100,000 to learn all of that. 

I reserve my right to change my mind. If you have a better argument or reasoning for your own kids, do share with me, but we can agree to disagree!

Wednesday, January 13, 2021

What do we really pass down to our children?

I'm quite happy to read financial blogs from parents that occasionally share their parenting philosophy. 

In many cases, I can't say that I fully agree with their approach because parenting is even more personal than personal finance. Because of negative personal experiences, I also believe that it's really risky for anyone to run on the platform that they have superior parenting approaches. 

Specifically, an acquaintance had a newspaper column on parenting in the 2000s on how she raised her kids but when her daughter was in her teens, she got impregnated by a security guard who worked in the same location as she did. The security guard refused to marry her. So my acquaintance talked candidly about her daughter's decision to become a single parent. The newspaper shut her column down because the authorities do not want to advocate for single parenthood. 

Due to decisions I've made in my life, my kids may have a tough time in Singapore society, so I cannot really be considered a good parent. I summed up the problem like this - Other folks in my generation are assortatively mating to produce GEP kids and their spawn will clog up the academic system which my kids would have to struggle to bash their way through. My kids would need to be extremely strategic and competitive to fight in the future workplace. 

If they fail and end up in the wrong track, the government will make wonderful speeches about public-private sector collaboration to get them hired in some kind of faux-automation job that is relevant to their diplomas where they will just wait to be retrenched over and over again until they die of old age.

Ok, now I got some of you fellow parents suitably depressed, let's review what can really pass on to our spawn :

a) Intelligence

I still think the best attribute to pass onto our kids is Intelligence. If my kids are intelligent, they can harness the power of Quantum Computing to cure cancer. Otherwise, they can go GEP so I can promote it online and can sell my sperm (or my wife's milk) for some extra cash. Even conduct another course on various sexual positions on how to have GEP kids.

The problem is that our kids are, too often, not intelligent enough. There is a wide gulf between a degree from Stanford versus a degree from Stamford. So if they don't make GEP, you have to spend thousands of dollars enriching the tuition industry - with obviously none left to enrich the financial training industry. Which can't be a good thing.

Gen-Z guys need to wise up early to have more Intelligent kids. I think it's too late after the kids are born. Logically, intelligent kids (especially sons) come from Intelligent mums. 

Guys should become sapiosexual. Sapiosexuals are folks who are turned on (sexually) by high Intelligence. I suspect we have at least two Prime Ministers who are sapiosexual.  

So go date a Daughter of Better Age to have smarter kids. Imagine how much you save on tuition and scholarships. 

Just do it lah. Tarhan !

b) Values and Conscientiousness

Last week I asked my daughter who is the most vulgar person in the family. I thought my son would get the vote because he composes songs about his dick at age 5 ( I did not teach him that, but I think I used to do it as a kid too). I was stunned when my daughter said that it was me. 

Children catch onto bad things really easily, so I'm not sure what kind of values I will transmit to my kids. I really want my kids to be competitive though, but they don't get to experience it in a family setting. My son might be a little competitive but he's a sore loser. After he got thrashed in King of Fighter 97 by his sister, he abruptly switched games saying that the game is boring.

If my kids can't be competitive, they should be conscientious and have grit. But my kids don't even have a gritty dad. I'm a quitter for more than the latter half of my professional life. Once I became financially independent, I stopped trying to endure toxic cultures or shitty office environments, I just walk away. This sort of bugs me because somehow, I wonder if my kids can really quit their way to a better life like what I did. 

Also, I suspect that conscientiousness may be genetic and cannot be taught. I also think my daughter is more conscientious than my son. 

What I do know is that moralising does not work and when they become teenagers, they can sense hypocrisy quite easily. I can't tell my kids to play nice and ignore an obvious edge if the academic system is structured to ensure that only a few actually win this society. 

c) Wealth

If you look at it from the perspectives of (a) and (b). Wealth is the easiest thing to transfer, but it generates a different class of problems on its own. Your kid needs a basic level of intelligence and values to manage money correctly so that don't end up destroying themselves with drugs, or ending up a cameo in the Singapore Social Cinematic Universe.

Even so. I depart from other bloggers in that I look forward to an early wealth transfer for both my kids if they meet the right academic targets. I do not subscribe to the philosophy that my kids should be denied wealth so that they will understand the meaning of hard work. My kids need to understand the meaning of a broad-based strategy and how to tap resources only available to other much older adults.  

Also, I don't want my kids to dwell on the stock micro-management track for too long. I needed to do it to FIRE for myself, but my kids do not have although they need to learn how to consult others. While it's not a bad thing for others to fixate on things like BTC or TSLA, but I think it's not how a strategic wealth manager thinks about money and the intergenerational impact of it. 

A nice number like $100,000 at age 18 can allow concepts like asset allocation and risk-reward to be understood over multiple investments. This is the kind of exposure a responsible teenager can have to build a decent portfolio while attending a full-time course. He has an incentive to follow the news and figure out how the world works. This can even expand to maybe $500,000 after doing getting the CFA or MBA. Personally, I've felt that my potential was not reached because I took too long after my CFA to bridge theory and practice. 

Anyway, these are my kids. 

I reserve the right to change my mind as they grow up. 

Don't take this as any form of advice for parenting. 

Better parents than I have failed so dramatically in the public sphere, I sometimes think that having children can be such a bad idea. 



Sunday, January 10, 2021

For older folks "New Year, Old Me" is good enough

Apparently the mantra in January every year has always been "New Year, New Me".

It's logical because when resolutions are made, for a majority of people, they hope to achieve some kind of break-through that makes them a better person by year-end.

Increasingly, I think the new year resolution for folks after their 40s should instead be "New Year, Old Me". 

As we get old, the struggle is not achieving new things. The struggle is maintaining the engine at a tip-top shape. Status quo can be a great reason for celebration.

  • If you can hold onto your old job, it's a blessing. 
  • If you can still do some simple coding and decipher a bash script, good for you.
  • If you can still run 3km, celebrate it. (It's a big deal for me.)  
  • If your paycheck was the same as 2019, hallelujah!

There are of course some things that tend to get better with age - Compound interest is one example of how older folks can get more control over their financial lives and avoid ageism. I was tallying my dividend payouts for the last 6 months for my next preview and I'm clocking more than the Singapore median household income these days in a pandemic year which is not too shabby given that my family does not live beyond the means of a heart-lander household. So without a single bet on Tesla or shitcoins, I had an excellent 2020. 

I would caution the folks consuming the myriad of "dividend blogs" to be careful though. There comes a time in your life more cash-flow only brings a psychological feeling of security and nothing else.

  • My house is big enough for my family.
  • I don't have folks to impress if I get a car. If I get a Ferrari, I'm pretty sure folks will ogle at the Ferrari instead of me.
  • My kids are still too young to be driven through the tuition assembly line.
  • The weather already gives me the feeling of travelling to another country.
  • Can't even buy a console as my personal projects are way more interesting than Fire Emblem: Three Houses.
  • Freaking Millenials and Gen Z drink expensive coffee that is sour! So I prefer to stick to my $1 version. 
I'm thinking to myself what can I do with my life in 10 years if I ever quit teaching investing. The nostalgic part of me wants to open a comic/game shop along Bukit Timah road. Might provide employment for my kids if they fail the academic grind in Singapore. Problem is that I can't convince myself that it would make me happy to do that for the rest of my life and may even turn me into a hater of otaku culture if I have to deal with shoplifters or shit reviews on social media.

One thing I really need to do is to hang out with younger people because they have a lot more optimism about their lives and don't exude the cynicism of folks my age. For that I am lucky - two RI Sec 4 students are seeking an attachment with me in the middle part of the year and I am happy to line up some interesting work for them so they can pick up some investment skills. 

I used to cry myself to sleep when my PSLE score could not get me into RI. Now RI boys think they can learn useful stuff from me. 

That's a pretty fine development.



Friday, January 08, 2021

What I am doing in 2021 so far

Markets seem to be becoming more interesting with the Classic Capricorn effect appearing in the Singapore Stock Market in 2021. Nothing more can be done this year as I've spent the entire pandemic downturn positioning a leveraged portfolio to tackle the upside. My only hope is that we deploy the vaccine quickly so that the economy can get back to normal. 

I don't have tickets to sell this week so I am enjoying a nice new year break, I've been really trying to enjoy this "unprecedented" cool weather, bringing my mum to Haji Lane for artisanal coffee and croissants. I regret that I can't travel with my mum as the pandemic kicked in months after I lost my dad, so I will do as much as I can within this island while the weather is good. The cold weather is a gift that makes Singapore seem like a Western country in autumn. 

As you can see, Haji Lane can be quite beautiful in the early morning without the crowds. 

Programming for me has become the "Tai-Chi" of the mind. I did not want to do anything too critical to my web app, so I've been doing some simple 2-3 hour projects to sharpen my skills. 

My first project is to figure out how computers produce PDFs with programming code. Things are simplified so much these days that there are library routines to convert HTML into PDF files if you know a little bit of programming. I managed to create a simple reporting tool I hope to deploy for my future batch of students. 

The stuff can mostly be found on my web app, so I was wondering how I can add some text into a reporting system. Instead of doing data-entry, I thought I should teach myself web-scraping so that I can populate my report with text descriptions. 

Web scraping is a lot harder then I thought because dynamic websites run javascript on the client. In the end, I employed Selenium and BeautifulSoup to write a program to fetch text based on stock ticker symbols from the web.

The final result is a program that can produce a description of a company using only the stock ticker symbol. Looks really simple but there are so many new things I need to pick up to do this. 

Actually compared to days I was doing Computer Science for 'A' levels programming has become a lot easier, but the demands on the programmer is a lot higher because they need to assemble something that can work and scale for a business within a few weeks. I used to spend months building a library to create and populate text/graphics on a window before I can even write my program - and there are no Youtube videos made by Indian programmers during my time. 

Tuesday, January 05, 2021

An early retirement plan for blue-collar workers?

Someone on Seedly came out with an interesting plan to retire early for blue-collar workers or non-degree holders. I think the plan attracted unfair amount negativity but it merits more attention. I think any plan that shows that a Singaporean without a degree can retire early should be studied carefully.

So I am going to out some ideas to the test with some concepts I teach in my ERM class. 

The plan has three components :

  1. Instead of working for a company, the person works in the gig economy starting at a young age, say fresh out of poly/NS at age 20.
  2. Work so much over-time ( about 15 hours a day ) in order to earn about $6,000+ a month, saving $5000 a month.
  3. Invest at 6% returns a year.
At $5,000 a month or $60,000 a year compounded at 6%, the person can hit about $500,000 in 7 years. A safe rate of withdrawal of about 4% with a principal of $500,000 could generate about $1600 - $1700 a month, which is enough money to sustain a 55-year-old singleton based on a survey conducted by LKYSPP. 

Also, all three points individually make sense. 

If you work 15 hours a day, you can possibly find a $6,000 job that lets you save $5,000. The first thing on my mind is to become a prostitute, but Seedly denizens have suggested heavy vehicle driving as another possibility. Perhaps another possibility is to look at the funeral industry. But if you are willing to put in 15 hours a day, $6,000 is possible and not limited to the gig industry. I also believe that driving and food delivery profits are sustained by VC burn rate so these incentives are not sustainable within the next 7 years. 

Also, 6% returns are possible with a simple two-ETF retirement plan. You can read my article on that here.

On first inspection, this is a brilliant plan that allows a non-degree holder to retire by age 27! If that's the case, however, the person who came up with this plan needs to look at Gen-X and ask themselves why so few Gen-X non-degree holders succeed in doing this. 

Are we that dumb as a cohort? 

While we did not have a gig economy in our twenties, we had overtime opportunities as well as an explosive real estate market to make this happen.

Here's my opinion on what the weaknesses are as follows:

a) Meeting criteria for (1) and (2) is almost impossible for human beings

You are basically telling a 20-year-old person to work 15 hours a day for 7 years. He is not a robot. Don't need to look at non-degree holders. Rookie lawyers work about 15 hours a day at about $7k-$15k/mth and most drop out before making partner. 

There is no partnership waiting after 7 years of doing food delivery (or prostitution for that matter).  

b) Meeting criteria (1) and (3) is difficult for folks who did not spend enough time at school

Not only does this person need to work like a dog for 7 years, but he also needs to be financially savvy. That's even harder given that our education system does not really emphasise personal finance. So the burden on this young gentlemen is that at age 20, he needs a maturity beyond his years and will prevent his hard-earned money from being burned by endowment plans that do not meet his 6% criteria. or ILPs that bleed 3-4% expenses every year. 

He will have friends who will join the insurance who are waiting to pounce on him.

But we can't say that this plan cannot be modified to make it work. 

I know one senior of mine who can be said to have succeeded in early retirement without going through the degree track and I think he did this by relaxing most of the three criteria which I believe can be a starting point to make this work.
  • He got a diploma and worked for a manufacturing plan to max out his overtime as a technician and supervisor. In the 1990s, he was making $5,000 - $7,000 a month. 
  • He was frugal, married a very down to earth Malaysian spouse who worked for a hawker stall. 
  • He did not have children of his own.
  • He did not fully retire but he downgraded to a shift role with a transport operator earning less than $2k in his last 10 working years in Singapore.
  • He was savvy enough to hand over his wealth to be managed by an RM in a local bank. ( I was in opposition to that when he told me about it. But it turned out ok ) 
  • He emigrated to live with his in-law families in a small town in Malaysia to retire for good later on as he was nearing his 50s commuting by train to Singapore to maintain his asset holdings. 
  • His 4-room flat in Sembawang generates some income for him and he converts it into MYR.
On his last day at work with the transport operator, the legend was that he gave his supervisor a banana with his supervisor's name written on in black marker ink.

I knew him as a gamer in my youth and I have to admit that a certain way I game my finances was due to his influence.   

Even today, I wished I had a banana on my last day of work.



Saturday, January 02, 2021

Geopolitical Alpha - How to think about investing in Malaysia


Geopolitical Alpha by Marko Papic is an ambitious piece of work that is possibly the first of its kind. It attempts to show investors how they can sharpen their political analysis skills in order to derive extra profit from financial markets. I have to admit that the greater part of this book is very much beyond me as I don't have any training in political science and really hated my Constitutional law classes, but I will try to distil its key ideas and apply it to the SE Asia context.

There are three pillars to political analysis for investors :

a) Dialectic Materialism

The first point of geopolitical analysis must be attuned to the material. The substance is more important style. At every step, the analyst needs to ask themselves what the material constraints are. The rest of the book discusses the various constraints which are political, economic, and geographical as primary points of consideration. 

b) Diagnosticity of Constraints

The second point is that the constraints are diagnostic. We have empirical information backing up our assertions about what these constraints are. Where we have hard data, it trumps political instincts and intuition. Naturally, as someone who leans to the quantitative, this idea really appeals to me.

c) The person versus the situation

The third point is that where a person is confronted with the situation, the situation always win. Making political analysis based on a person's inclination is worthless if the situation does not allow his wishes to be fulfilled. An example is Trump's attempts to torpedo Obamacare. He will not be able to get it through moderate Republicans. 

Beyond the three pillars is the key idea known as the Median Voter Theorem. This is possibly the most valuable idea in the book. For policymakers and politicians to stay in power, they must continuously enact policy that appeals to the median voter. This makes sense to me: the PAP cannot repeal s377a because the median voter does not support that idea, not because the cadre have heteronormative tendencies. If you observe the WP's stance on the same issue, they are taking the same tactic of ignoring s377a - both PAP and WP are playing to the tune of the median Singapore voter. And we are seeing results - WP as PAP-lite receives more traction than SDP which is anti-PAP and possibly homonormative. When hard empirical data shifts on local attitudes towards same-sex unions, the law will be repealed instantly - no ballot box required.  

Let's apply the same principles to Malaysian politics to determine whether it is a good destination to invest our Singapore dollars. 

Malaysia's perpetual problem is that it is facing emigration. There are close to 1 million Malaysians in Singapore and thousands of Malaysian Chinese leave every year (mostly to Singapore and Australia) which reduces the tax revenues and technical know-how of the country. Interestingly, the Malaysian Chinese are replaced by Indonesians so net immigration is a positive number.

A big overhang for Malaysia is the brain drain and this will be exacerbated by the decreasing importance of oil to advanced economies. The operative question any investor should ask is whether the political process will ever blunt the racial policies of the country. If Malaysia blunts the affirmative action policies of the country, it can reduce the flow of Chinese labour to other countries.  

If we apply the Median Voter Theorem, we will come to the conclusion that the median voter, being likely a rural Malay, will never give up their affirmation action policies without a fight. This is a political constraint that will cause even a genuinely reformist government to stumble. If you had come to this conclusion, any Malaysian political party that talks about dismantling Bumiputra privileges will be defeated in the ballot box or would not be able to enact any meaningful legislation.

So we don't expect the NEP to disappear within our lifetimes and likely, we should expect the Malaysian Chinese Diaspora to continue. 

If you look at the position from Singapore's point of view, Malaysian Chinese labour presents a cheap resource for us that we will continue to welcome even in the face of xenophobia - Malaysian Chinese are easy to integrate so much so that me and my kids have Malaysian Chinese blood in us. We will be beneficiaries of this immigration for decades to come. 

Once we understand this constraint, we will be careful if any investment thesis relies on progressive reforms in Malaysia. The fewer Chinese there are in Malaysia, the more aggressively the median Malaysian voter will defend the NEP, the more capital and technological know-how to flee the country. This means lower taxes for their government, larger deficits, over-expenditure, and a lagging economy in the future.

This is why I told my Malaysian relatives that keeping money at home will mean $4 MYR to $1 SGD within their lifetimes. Worse, any false dawn involving a progressive political party in Malaysia will lead more Singaporeans into losing their money in the form of landed property and condominium purchases. For change to happen, something must happen to an average Malaysian citizen, someone a Singaporean will never be able to understand as all he knows are the urban Malaysian Chinese who hang out here.

As half my family is Malaysian, this is depressing stuff.  

After this mental exercise, I finally understand why our government is so warm and obliging to the UMNO government, and more hesitant when dealing with Malaysian progressives. 

But there is an upside to this analysis, I suspect the political pendulum will shift back to BN within 10 years and both Singapore and Malaysia will review the High-Speed Rail again.

I hope my son can take a 90min train to KL within my lifetime. He can date Malaysian girls over the weekend and still come back home for dinner. 

And continue the tradition of marrying Malaysian girls.


Friday, January 01, 2021

Nothing much to wish for in 2021

As the years roll and I am already 46 years old, I am finding it increasingly harder to set really hard resolutions or goals for myself. I have fine-tuned my life to the point where I have very few wants. If I really do have a want, I can probably get it with a snap of my fingers. 

a) Personal finances 

The amount of money I directly manage not counting real estate and CPF exceeds what people would normally term as Fuck-You money. Even if I yield 4.5%, it would mean a five-digit stipend every month. So 2020 was the time I shifted from wealth accumulation to wealth preservation - balancing outperformers to offset the laggards so income can be maintained at a comfortable level. 

I think the work of capturing the upside of 2021 has to be done in 2020. Like many investors, I have already started adding hospitality and aviation tilt into my mix. 

Anyway, while I do hope the portfolio outperforms the benchmark, but even if it struggles with a 3-5% capital gain it's good enough for me. So in 2022, if a younger investor tells me of his 200% return because of his investment in some weird alt-coin, SPAC or some new-age-brothel-trust, I'd just give him to go fuck himself.

b) Business

With five-digit a month from investment sources, the question is what about the training business? Business is still down, and I've also reduced my effort to do it. The worse-case scenario is halving my profits of 2020. This cannot be helped as Singapore is a sluggish market and students preferring tech stocks and bitcoins over dividend counters. 

The silver lining is that it would genuinely free me up to do interesting projects.

c) Personal Projects

A riskier proposition is personal projects I'd like to do if the business really drops by 50%. I think I can start writing my next manuscript to codify ERM into a text-book. I hope to also get on with pro-bono talks if there are opportunities to do so. These projects will not grow my bottom line but develop me as a human being. 

d) Health

I will probably need to get back to the gym with my personal trainer once I get vaccinated. I've been losing momentum, stopped intermittent fasting and exercise thanks to the weather. 

As in all things that fail in 2020. The best solution is shock therapy. Back to the gym once I get jabbed.

It was hard barely passing my HbA1c in 2020. I still have high triglycerides. 

e) Travel with my family

Like everyone else, I hope to resume travel in 2021. Before that can I happen, I need a vaccination first and countries may need to allow some sort of vaccination passport for tourists. At this time, I'm not fussy about where to go, somewhere relaxed like New Zealand or Japan where my mum can come along with my wife and kids would be great.

f) Friends

2020 is a tough year for socializing. I'm grateful to be invited to lunches by younger bloggers, forums and investors. 

I was joking with my wife that I don't want to hang out with 40-something-year-olds like myself anymore. If they are not fishing for stock tips thinking I'm some kind of mystic oracle, it's no fun to see your life plateau and you got kids to feed, and mortgages to pay. 

Truth is that I suspect Gen Z will have a harder time than Gen-X when they hit their 40s, they don't have an idea of how pressing that issue is right now. They still have dreams and aspirations that the System has yet to attempt to destroy at a much later stage of their life. 

Still, on balance it is still better to plug into their pop culture and media they consume. 

But not BTS. I can't tell whether BTS is a boy-band or a girl-band.

BTS can suck my balls.