Tuesday, March 22, 2022

Blog taking a short break !

This is a critical period for my business as I launch my Cryptocurrency for Conservative Investors programme this Saturday, so I'm not exactly in a state to write an article. 

The nervousness of doing something totally new and the risks are also starting to get me right now. Crypto is highly dynamic and I was frazzled trying to decide whether to incorporate changes when a better approach comes by. 

I should be more relaxed next week so I'll see you then.

( Picture of the latest book I'm reading, not that I really understand what the author is driving at right now. )

Sunday, March 13, 2022

Garbage IT professionals and Institutes of Continuous Learning


Recently, a highly regarded professor of Computer Science that I greatly admire commented that the Computer Science department had low cut off scores and basically had a Garbage In Garbage Out problem. IT professionals who studied just enough to get a paper qualification so did not make a consequential impact on the industry.  

Actually, I would have been proud to come from a garbage faculty, but Engineering was quite decent during my time and I was AAA/B and the Dean of Engineering told me that Honours classification was generous for my batch of electrical engineers because it had students with fairly good A level grades. I understood quite deeply the tradeoff of studying Computer Science during my time. I was a Computer Science A level student and even spent time (as the dumbest guy) in the IOI Olympiad training team in NUS, but we were very concerned about our employment prospects and most of us then would not choose a Science degree over an Engineering degree 25 years ago.  

The consequence is that NUS did graduate CS grads who I felt, were a joke, the Honours class was excellent and can hold their own, but there plenty of jokers who thought coding was hard. I did two modules on Information Systems there and some CS students actually felt database programming was challenging.  The stories of girls who took CS was particularly unflattering. A pal from CS who was quite good said his grades were excellent because he basically had to tutor his girlfriend so he did every programming assignment twice. The girl even dumped him after graduation.

The NUS CS folks now have a few "outstanding" alumni. In particular, someone from their much admired Talent Development Program and Honours class is now a prominent enabler for "intelligent vaxxers" in Singapore and has had some run-ins against the law at the moment, providing hours of entertainment on the mainstream news.

 Anyway, I hope folks will not cancel this professor. Sometimes, we benefit from candid truths. Even if you do not agree with him, we should not scare elites into clamming up so that I can't read their mind. 

We should be asking ourselves what are the ramifications if the professor is right?  

In my generation, only 25% of my cohort went to a local university. Those who got into CS in the past are not the worst from my batch. These days, we happily admit 40% with the education minister trying to push it up to 50% with Institutes of Continuous learning. From this understanding, there's a lot of garbage floating around in this country if the professor is right. 

If anything, I think the professor is censuring himself because he did not share what he thinks about students from other NUS faculties or the newer universities, some with a primary Poly intake. It is not too difficult to use the Pareto principle when looking at each cohort. As economies become more specialised, volatile and knowledge-driven, 20% of the cohort contribute to 80% innovation and growth. In the future, we can end up with something more extreme, where 10% contribute to 90%.

What happens then?

The education minister has a huge problem in his hands. He thinks that we can maintain our employability with micro-credentials. 

I see some obstacles in his way :

a) HR departments will not change their practices.  

HR departments will still use the first degree as a signalling mechanism to hire staff. The best MNCs function as schools so they prefer aptitude and malleability, they can provide the training.  

The most competitive jobs will still go to the local uni grads with the best grades. Unless there is a gap in the labour market, I don't expect this to change. HR professionals are human beings, they will use a filter if only to reduce their workload.  

Personally, I do the same for stocks, I won't even look at the stock if there are no dividends. Of course, I miss out on growth, but I leave that to other investors. 

b) The top students of each degree program will grab all the best certifications

I think once folks understand that they are not built to learn stuff, the last thing they want is to learn more stuff and stay longer in school. Top students who have high morale from their academic pursuits will end up pursuing micro-credentials the most aggressively because it was a place they are used to winning in. I don't even need a resume anymore and I still pursue courses on Coursera!

The professor has already predicted what will happen. Some folks will do the minimum micro-credentials and use the paper to get a professional job. After a while, HR departments begin to flag folks with micro-credentials as garbage-in-garbage-out. 

Micro-credentials will then become the new private degree certificates.

There are a couple ways for policymakers to make Institutes of Continuous Learning work.

One approach is to cut down the intake for first degrees drastically. Down to 30% of the intake, so the industry must confront students who have ICL micro-credentials. This will reduce the stigma attached to studying in ICLs when the student can be top 31st percentile. This will be politically painful as I expect SIM, SIT, SUTD and SUSS to be shutdown or combined to form a mega-ICL. 

Another approach is for the civil service to eat their own cooking and hire ICL grads and put them on the same track as degree holders. Hiring criteria may be a basic degree or a specific microcredential. If I'm still a public servant today, I will definitely sign up for courses on balls-carrying and ring-fencing of work which is the real micro-credential we all need!

Finally, micro-credentials can be relevant if they come with a ridiculously high failure rate. The CFA, Cisco Certified Internet Expert of the 1990s, the Part A bar exam are all highly sought after because so many fail taking it. If you have enough folks in the industry who attempted it and failed it before, the credential will automatically be respected.  


Wednesday, March 09, 2022

How the Dalbar study gets abused by commissioned Financial Advisors

I had a secondary school classmate that I will call Mushroom. He was not known to have a scintillating personality and I found that he had a personal nature that was quite grasping and "kiasu" in nature. For some strange reasons, my friends in Engineering school turned out to be close to him because they did NS together and I was able to catch up with his dating life as an undergraduate in NUS. Mushroom is, after all, an old classmate. 

According to what I learnt as an undergrad in Engineering school, Mushroom had issues with dating women in spite of a decent paying job. I thought, in my arrogance then, that maybe he was boring and lacked the ability to communicate. 

A few years after work, I was flabbergasted to learn that Mushroom managed to not only find a girlfriend, he was on the way to getting married. This is a few years before I even met my wife and it definitely led me to suffer some amount of cognitive dissonance in those days.



I found out from a pal that Mushroom had a specific and powerful strategy to trap his girlfriend in his grasping appendages.

He met her in SDU and the moment he got his first date, he kept telling her that future events are a waste of time and they were going to be very unpleasant. According to my pal who provided the intelligence, he dominated so much of her time that she was unable to review other better matches in SDU which was why he ultimately won.

Commissioned Financial Advisors also find success in utilizing the Mushroom Strategy, basically covering their clients in so much shit and keeping them in the dark so that they can't achieve any financial agency on their own.

One mechanism to do this is the Dalbar study. The idea is that while low-cost ETFs may outperform actively managed unit trusts,  in practice, retail investors do not have the willpower to buy and hold to realise these gains. So according to Dalbar, the Average Equity Fund Investor underperforms the market indices. 

I would not want my daughter to be smothered by human fungi when she reaches dating age, so I'd like to share some ideas on how to disarm the Dalbar study.

a) What is the extent of this underperformance?

The most obvious answer is the question of what this gap is. According to this link. The gap is around 1.11%. So one counterargument is that even if an investor underperforms, the underperformance is lower than the difference in management fees of ILPs and unit trusts compared to ETFs.

This argument is good, but the gap changes over time and your FA may pick a study where the gap exceeds the management fee.  

b) Underperforming the index on your own does not directly mean that you have to buy from this FA. 

Mushroom will try to convince his girlfriend that the SDU outings suck and she won't get a better deal, but SDU is not the only game in town. She can visit a matchmaker or she can follow my approach by signing up for multiple language classes to find a mate. 

Similarly, robo-advisors are killing it in the markets with some quasi-active portfolio plans. There are also services provided by non-commissioned FAs.  

c) Bayesian Inference can still show that you can still win in a DIY game.

The Dalbar study shows the outcomes for an average investor, but you really know where you actually stand in a population. There are possible factors to suggest that you can potentially do better such as a higher intelligence and a higher conscientiousness.

If you have a degree, you already exceed the minimum requirements to become a financial advisor. If you read investment forums, you already know more than the average person. If you are crazy enough to invest time to follow an investment talk. If you own and have read a copy of The Intelligent Investor. If you read my blog, even more so! 

All these factors may suggest that you will do well when dealing with your own investment.

If readers encounter more strategies used by FAs please share them with me and I will happily work towards debunking them. 

One of the saddest developments in the financial blogosphere is that my source of research ideas is down at the moment.



Saturday, March 05, 2022

Personal thoughts on having expiration dates for degrees

Recently a local politician kicked a hornet's nest by suggesting that degrees have an expiration date. If he is right, I will have no degrees by the end of this year. I am actually cheesed that some really smart folks actually agree with him arguing that people tend to forget what they learn within a few years after graduation. 

I have a different crypto-based argument.

Imagine you've accumulated a number of NFTs in your wallet. Some dickwad who collected enough governance tokens start proposing that all NFTs minted more than 5 years ago can no longer be moved out of any wallet.  

Would you be angry if you've paid good crypto for your NFTs? 

Invalidating someone's expertise is not the job of a government, it's the job of HR and the reality is that we already face a virtual expiry given the kind of degrees we earned. The worse case, maybe no one wants to buy your NFT because no longer fashionable to own, but you still need the right to be able to sell it off. 

But are our old degrees really worthless?

Let's talk about the business of cryptocurrency course creation. My program, as it stands, does make money to feed some mouths not just for myself, but indirectly for some really capable folks of Dr Wealth. As a new entrant to Cryptocurrency courses, I know that I have weaknesses like a lack of testimonials from students because I've yet to teach my first batch, but let's look at how my "useless expired degrees" played a pivotal role in creating a unique program.

a) Bachelor in Engineering from NUS in 1999

An engineering degree should be worthless after 22 years, but I still need to adopt the beginner's attitude when I learnt how to code in C++ MFC 22 years ago which was unsupervised. I picked up OOP without a course on it so it was a real mess. Learning windows events driven programming from scratch without guidance was way harder than picking up data science and invoking libraries in Python. 

I'm now able to write Jupyter Lab documents, share them with my students so that they can do their own market timing. 

b) Master Science in Applied Finance from NUS in 2002

I actually spent a lot of time studying CDOs in NUS before the Great Recession of 2008, they were hilariously such a big deal in those days. But one of things I learned in my fund management class is that when shit hits the fan correlations all go up and diversification between stocks and bonds becomes worthless.

These days I can generate correlation matrices using Python and I've written code to track correlations between the largest pairs of cryptocurrencies and average them up in a time series. With this, my students have an alternative means of measuring the amount of fear in cryptocurrency markets which have indeed trended up since the invasion of Ukraine.

c) Juris Doctor from SMU in 2017

Until last night, my legal training played a minimal role in course creation but something dramatic happened in the crypto-space, the Singapore High Court made it supremely clear that crypto is property. 

In English, this means that folks can go to jail for CBT if they steal people's crypto. You can also establish a trust relationship over crypto assets. Spouses who try to convert matrimonial assets into stablecoins before the divorce had better be careful an associate is not trained to track money flowing into crypto exchanges.

So this slide happened : 

As far as I'm concerned, I think my old degrees are as good as they were when I first got them, but I suspect that they have been upgraded over time because I was obsessive about applying them into any domain that I get myself into. It happens that the domain I am obsessed with always involve money.

The trick is to gain a sufficient degree of financial independence so that you can design a vocation that leverage all your strengths, which includes your eclectic mix of degree qualifications. There is no job in Singapore that will allow me to leverage all my qualifications at the same time but I can invent one on my own. 

I call my combination a horizontal Phd, I prefer three degrees in disparate fields than having all three in one narrow expertise. 

What I lack in tenure, I get from my dividend payouts and stablecoin yields. 

Feel free to join me for a chat in my next preview :