Thursday, June 30, 2022

Adventures in the Terra Classic Blockchain.

This week, both my mum and various pals on FB have been buying a lot of Toto tickets. I just took a short visit to the website and noted that the next draw is worth $8,000,000. When this happens, heartlands normally go berzerk and you see long queues in every betting outlet in Singapore. 

The crypto space has its Toto equivalent and a few days ago, I authored a paper on the Terra Classic Blockchain on the Dr Wealth Blog ( link ). The central idea is that we can treat some long-shot cryptocurrency bets like a visit to the amusement park. Everything is harmless so long as you do not entertain the idea that real money can be made. 

It seems that the world has changed over the next 5 days. A hacker group known as Anonymous has decided to throw their hat into the ring and pledged to bring Do Kwon, architect of Terra, to justice. As a result of that both the LUNA Classic and USTC mooned.

  • In my article, I got into USTC at around 0.63 cts. It is now 7.35 cts. A 10x increase.
  • LUNC was 0.000054. Now it is about 0.00013. More than an x2 increase. 
I'm sitting on decent profits now, but I've yet to cover all my crypto losses if I count my losses that are stuck in Finblox right now. 

So as I've suspected, the Terra Classic blockchain has become the new Toto, if USTC restores the peg, then folks like me will be sitting on 200x gains. I can't even imagine what will happen to me if LUNC gets to $1. While these are all highly improbable events, so is winning Toto. As a consequence, there is a lot more capital locked into the legacy Terra Classic blockchain than the new Terra 2 Block Chain. 

From a mathematical perspective, high-risk high-return asset classes do have a role to play in your asset mix provided you have will power to keep it within 1% of your total net worth. If you lose the 1% to a de-pegging event like LUNA, it will not affect your overall portfolio, but in the event, it goes up 10x, it would significantly boost your annual performance. 

USTC and LUNC has gone up too quickly over the past few days, it will retrace, but traders will be waiting for the next catalyst to make their move. 

The next catalyst can be anything, a new platform that accepts USTC and LUNC can lead to another rally. But my bet is that any incriminating evidence found on Do Kwon and Terraform Labs will lead to minor rallies. I see a major upside coming if, somehow, Do Kwon's influence on Terra Classic can be totally excised from the chain by regulators.  

The central ideas are explained in Robert Ross' High Risk, High Reward Investing and I will be talking about this tonight.

If you're free, why not log in for this short session where I address my Alumni who might be thinking of pivoting into high-risk growth instruments. 

Tuesday, June 28, 2022

Fighting Insurance Balloon Snatchers with Dividends Investing


There's been quite a outrage lately against the latest stunt financial advisors are pulling against parents of little children. Mothership has an article that contains the details here :

The company has since apologized and then word was circulated over the web that a particular group in trying to deny that they are behind the balloon stunt in Tampines had inadvertently admitted that they pioneered the maneuver.

The follow-up actually even reflected even more badly on FAs as some seem to be more sympathetic towards the balloon snatching maneuver. This was reported on CNA as FAs cite rents as some kind of justification to bully a small child over a balloon : 

My friend suggested that I talk about how to generate dividends to pay for balloons so that parents will never be subject to the marketing tactics of insurance agents. I think we can take a step further to use the dividends coming from retail landlords to pay for these balloons. 

Because... natural justice.

If I am an FA, I'd really hate S-REITs and will find a way to paint REITs negatively in any way I can. This is because older Singaporeans often will not switch investments once they have a way of getting >5% every year. The benefits illustration of longer tenured endowment plans cannot exceed 4.25%.  

So in this mental exercise, we will begin with a quad of retail REITs and their current yields taken from Stocks Cafe:

  • Capital Integrated Commercial Trust - C38U - 4.75% 
  • Frasers Centrepoint Trust - J69U - 5.34%
  • Starhill REIT - P40U - 6.58%
  • Suntec REIT - T82U - 5.56%
If you build a Balloon Portfolio by blending these four REITs in equal shares, you should expect a portfolio that yields 5.56%. By buying shares of retail retail malls, you can be assured that part of the rents from these insurance booths would get into pockets over every calendar year.

( Disclaimer: A well-diversified portfolio should contain much more than four stocks. This is just a way to show how you can pocket the rents paid by insurance agents to buy balloons for your own kids. ) 

So imagine you open a brokerage account and invest $1,000 into each of the four REIT, you should expect $4,000 x 5.56% or $222 a year. 

The next step is to figure out how much it costs to get a balloon. I found a link to buy a penguin balloon filled with helium at $9.90. (link)

$222 would pay for 22 balloons a year or almost 2 every month.

And the beauty of this is that you get $222 to deal with any of the antics insurance agents will attempt on you or your family. Maybe it's just balloons targeting kids today, but it may also be cosmetics for the wife in the future or health center massages in Geylang for the husband. Financial advisors will never stop bothering you the moment you step into a mall since atrium sales are now allowed again. 

More importantly, you gain agency over your own lives (pun intended). 

The insurance agencies has been fighting a war of brand positioning over concepts like early retirement and nothing infuriates them more than a person who can buy equities on their own to make investment income a reality. 

Saturday, June 25, 2022

Pivoting to Growth Investing - ERM-CCI Community Event for Q2 2022

Our next community event will be on 30th June 2022 730pm.

Like all community events I conduct, members of the public are invited to attend, but the materials assume that attendees have already completed at least one course I conduct. Alumni can also gain access to the recording.

The YTD performance of the STI cannot be said to be particularly stellar, but it has outperformed US and China markets. So while dividend investors may be reeling from slight losses, investors who focused on growth would have suffered very much more. And students from my ERM programme should have collected quite a decent amount of dividends in May and June 2022.

In this episode, we will discuss the points to note for a small pivot into growth investing. While I am all for dividends investors continuing to farm their dividends into dividends stocks, some students in my community may wish to consider channelling some income into growth stocks so that they can benefit from bull markets after Fed stops raising interest rates. 

Investing in growth stocks is fundamentally different if you are dividend/value investor. You are coming from a position of strength and likely using a combination of salary and dividend payouts to take positions in growth stocks that will give you the highest probability of profits over the next 6 months to 1 year. You also can exit and move the funds back to dividends after taking profits.

In this next presentation, we will :

  • demonstrate how to use the tools you already know to screen stocks.
  • introduce the simplest frameworks on how to time the markets and minimise your regret.
  • define a comprehensive exit strategy for your growth positions.
  • rinse and repeat our frameworks on how to apply it to cryptocurrencies.
  • update ERM portfolio results and discuss details on how you can sign up for a refresher class. 
This will be a short 1-hour gathering over zoom and I look forward to catching up with students during Q&A. 

Register for the talk here : 

Sunday, June 19, 2022

Which husband would you choose?


The last thread had plenty of great engagement from female readers so I thought I'd do a thought experiment for the ladies today.

Suppose you have to choose between two men:
  • Bert works for his money and earns about $5,000 a month but does not know how to invest. 
  • Ernie gets $5,000 from a trust fund every month but does not work for a living.
Who would you choose and why?

If you apply some logic, Ernie would be a better choice because he can get $5,000 every month without doing anything, so he can theoretically give you financial support and still be helpful around the house. The choice of Ernie may also be supported by economists like Thomas Piketty who posits that over time, the growth in investment returns from capital trumps the return on the value of labor over time.  ( r > g )

In reality however, Ernie is more likely to be discriminated against in modern society, because he's laid back and his personal time has no value to the real world. Bob can be introverted hermit without suffering any consequences, while Bert can be seen as a potential leader in corporate world. 

This thought experiment exposes the differences between rationality and evolution. 

Ernie comes with $5,000 and time that can be deployed around the household, but Bert would still be the pick of a majority of women because he's got potential, leadership qualities so may be considered a better candidate to father more children.

But I'm getting ahead of myself. 

Lady readers can share whether they prefer Bert or Ernie.

Of course, I think the modern woman would prefer not to make the choice given that they have pretty good careers on their own. If they are PMETs most of them already have built onto themselves an Bert. 

The promise of investing better allows women to have their cake and eat it too. Ideally, they can have both Bert and Ernie while retaining their autonomy as well. 

This makes it really stressful for single men who have to up their game and generate the same kind of income as multiple Bert's and Ernie's. 

The alternative is to lie flat and just give up on starting families. I'm seeing a lot of this too.

I find some new-age Gen Z guys amusing. They dress themselves up to look like a harmless chipmunk even though they are of the age where they can date women, but the only women who might date them are those who are into Spongebob Squarepants.  

Thursday, June 16, 2022

Robowars and the Gender Gap in investing


Of late, aggressive marketing teams from robo-advisors have been trying to promote superior returns by comparing performances against their competitors. But finance is a very subjective field and when making comparisons, it is possible for one party to make it seem that they are better for investors by adjusting their timeline of comparison. The result of these aggressive forms of marketing is war, where roboadvisors try to one up each other to steal market share.

For a more detailed treatment of the Robowars, you can visit Seedly here to read about one salvo being fired by Stashaway.

Personally, I'm not really for roboadvisors taking pot shots at each other because marketing professionals need to be hired to do this, and this inflates the expenses of a roboadvisor and its ultimately the consumer that pays for the entertainment. 

I am also sensitive that investment trainers do not do the same. Singapore dividends investing is riding high at the moment after perhaps a decade of trailing behind US Tech investors and Crypto bros. In another economic regime, we would not be doing that well, trends come and go. If trainers start tracking their portfolios and trigger a wave a comparisons, it would invite reprisal when the economic fortunes begin to shift. I think it's a lot easier to focus on personal charisma and refining a philosophy to pick students who are more aligned with your style. That being said, because two decades ago, I got challenged by an insurance agent to compare investment returns, so I have have my performance tracked on Stocks Cafe, just in case some investment pugilist wants to come knock on my door. 

In the end, I did throw my hat in the ring. I suggested a simple duel. The warring robo-advisors should always be ready to publish returns net of fees, standard deviation, and Sharpe ratios for three years ending say, 1 June 2022. A higher Sharpe or Sortino ratio should adequately divide the boys from the men. Interestingly, once these marketing guys see a genuine attempt at resolving the issue of whose dick is longer, they disappear from the forums. 

Comparing dicks is of course, what some companies might want to get out of business of doing.

Yesterday, I was also invited by Stashaway to attend to discussion the gender gap when it comes to investing and went out of sheer curiosity because I cannot imagine why someone would be crazy enough to invite me, a BBFA spokesman and Senator of Singapore Incels, to discuss why women are not investing sufficiently in the equity markets. So I had to go to at least find out how I got selected. 

I was pleasantly surprised and flattered to hear that I'm one of the OGs of financial blogging. For a blog that earns just $150 every 4 months, that was very flattering.

The research presented was not novel, as Stashaway is heavily regulated by MAS. I expect them to present the results on the web soon, I added some points which probably cannot be shared by on their platform, instead I just want to put on this blog what I think about gender differences in investing :

a) Males invest more aggressively because, unlike women, we males are ranked and yanked based on economic resourcefulness. So long as women prefer more successful and wealthier men, men will not only be aggressive with investing, they will take more risk than it is mathematically rational to do so. This is why men buy more crypto, and women buy more cosmetics. It's evolutionary psychology.

b) Simply showing what women are leaving on the table when they lower their asset allocation to equities is not enough to get more women into investing. I bluntly told Stashaway to invite a lady divorce lawyer to share her experience on the latest case law. She can speak credibly about division of matrimonial assets and in which cases wives actually end up giving husbands maintenance. Fear is a much more powerful motivator. 

c) My favorite narrative is that, in modern societies, guys are not reliable anymore. Males not just lose important earning years doing NS, we are slowly losing out academically to women. While guys dominate the STEM disciplines, there are guys who can't operate a spreadsheet. Even if the strongest case where a women finds a local male grad in the tech field, it'll be heroic for him to take on 70% of the economic workload. Women can look into societies like Afro Americans in the US where black males face large unusually high incarceration rates and see how much these Black women are studying hard and empowering themselves. 

 d) In my possibly archaic view, men will never be an "Ally" of women. I'm a provider to the women of my family, and I am concerned about the welfare of my daughter when odds are my son in law will suck and unable to support her 100% (won't even be his fault). When you say Ally of women, I imagine some effete BTS team member who wears makeup and support equality so long as they sell more music records. Gen X men are grudgingly partners, but only because we're not good at making money anymore to feed the whole family. I think a lot of old school guys want to provide for the whole family but they can't.

e) Ideally, guys needs to be kicked out of the discussion room for now. Upon reflection, it does not come as surprise or irony that most of the folks discussing the research finding in room are the dudes and I contributed quite a fair of that yesterday. I feel genuinely bad about the whole encounter now. There were two journalists in the room, and they were so quiet I though I was in a speed dating situation organized by the SDU in the 2000s. Initially, I'm not a big fan of women's only events because of my firm belief that stocks don't check your gender before they send dividends in your bank account, but giving up some space so that women feel more comfortable about speaking up is really important for now.  

Anyway, this is just a glimpse of my personal encounters yesterday, I think we should give Stashaway a chance present their findings and pivot to an important demographic. And do give their fund performance some slack - sometimes you win, sometimes you lose. Over the super long term, the gap will not be too different for portfolios with the same asset allocation. 




Sunday, June 12, 2022

For Air-level students, straight B's may be a mark of mediocrity

It may a virtue or a fault with the Singaporean system that we can be so lenient with some of our kids but so brutal to others. 

This week we are treated to an article that talks about the shifting fortunes of the A-level intake for different local university faculties ( link ). While Law and Medicine kept the minimum straight-A requirement, the newest top faculties include not just Computer Science, but also Data Analytics and Food Technology. 

As some faculties got elevated, others fell. Accounting is a particularly prominent victim of this shifting of fortunes with the cut-off being straight-Bs. 

What erks me is not the change of fortunes, as I've witnessed Engineering move from star faculty to the proverbial garbage dump, but the reaction of the faculty when they start getting more ordinary students. 

If you read closely the comments of the Accounting professor, I came off with the impression that admitting straight B students is an unmitigated disaster for the accounting faculty, it is as if straight B accountants are unlikely to think critically or bring innovation to the industry. Of course, the professor did not position it that way, he was questioning whether the course material needs to be reformed, but if you think more deeply, why do reforms only need to be triggered when you start getting straight B students? 

( If the Faculty of Engineering watered down the syllabus when they got students who get a C in Physics and Maths, people can die! The solution is to prevent them from graduating or give them a Third Class so they can make millions selling real estate or insurance! )

What entertains me more is that the Computer Science faculty in NUS does not even hide its exclusiveness anymore with prominent figures calling the older Straight-C generation of computer scientists "garbage in garbage out". I think it says more about the professor than my CS peers in the IT industry. 

This is one of those rare moments when you experience the true feelings of elites in Singapore. I actually think that only Air-level types get exposed to this before the working world. It's real-world training and at the very least it mirrors the public sector and the scholar-farmer divide - the largest employer in Singapore. 

While I think there's absolutely nothing wrong with straight B A-level grades, I always preferred the A-level system because this is where personal growth comes from trauma.

The world of local degrees is going to continue to be like this. At the micro-level, people are constantly going to be benchmarked and subject to a lot of microaggressions. At the macro level, NUS and NTU grads, even straight-B accountants,  can now get fast-tracked roles in London which should see increases in starting salaries in a few years' time.

While I might come off being unhappy with this, I think exposing my kids to elitism, prejudice and unfairness is a good way to build their character, which is why my stand on bribing them to go JC instead of Poly is still something I am considering. 

You would not really want to do the opposite as well. A friend sent me a link from the Mothership where a bunch of parents defended their decisions to send their kids to a private university.  

This was so badly done, I thought whoever orchestrated this should be fired. 

At the end of the day, if elitism and injustice is something that upsets my kids, then I suggest that they try financial markets for change. 

A REIT will give you the same dividend regardless of your A levels grades. 

In similar vein, the Terra USD lying in a wallet of a Dean's Lister will depeg no matter how many Phds you have.


Tuesday, June 07, 2022

Should a fresh Polytechnic Graduate get a Private Degree or Wash Dishes for a living?

Once again, I can't express how disappointed I am at Millenial advice columns and HR career experts who miss out on this latest issue that once again I will have to blog about this.

Suppose you are a fresh graduate from a Polytechnic and contemplating a private university degree. 

A quick survey on the latest private degree salaries would expect a salary of $2,900 based on April 2021 data (link). The private degree is not cheap because it lacks subsidies and will cost you a couple of years of your life.

Now, if you look at the current trends in the industry right now, dishwashers can earn about $4,000 a month. (link

The gap of  $1,100 is not trivial, suppose you become a dishwasher for three years and save the $1,100 difference compounded at 6% p.a., you will have an additional $42,000 compared to your peer who would have just graduated from the private university and accumulated around $56,000 in student loans (I used JCU Business Degree costs in my model).

If you can save more than $1,100 a month, the decision to become a dishwasher instead of attending a private degree can come up to over $100,000 if you factor in additional earnings and the fees you would pay!

Of course, there might be some concerns about dishwashing work in Singapore. 

The first concern is whether the dishwashing work at $4,000 is sustainable. That will be a valid concern if we take on more foreign workers to do this work, salaries will dip again. But I think it's high time the government start to rethink its labour policies to allow foreign workers only in tandem with more local hiring. Also, nothing stops the poly grad from attending a private degree after the gig is no longer available.

The second concern is that an office worker may have a career ladder but the dishwasher doesn't. To be realistic, we may need more data on salary increments of private degree holders, but suppose we go with an annual 5% increment of a $2,900 salary, it would take more than 6 years for the office worker to reach the level of the dishwasher. That's assuming the dishwasher does not invest his savings. Adding the length of the degree we could be looking at a 9-year salary advantage! 

The third question is that dishwasher work is backbreakingly hard and may attract social stigma. This, I agree. But a $4,000 salary is the right step to change our attitude toward blue-collar workers and these salaries may also push business owners towards better automation which may result in easier work.

The issue of Private Education Institutions has always attracted a lot of controversies and I seem to be the only blogger happy to talk about this. So much so that folks actually goad me into commenting whenever a salary survey comes up.

There are of course the politically correct words spoken by folks who run these institutions who keep accusing the industry of discrimination, but no rational business owner can ignore the cost savings they can get when they hire a PEI student as compared to hiring a local grad. The situation may even be the opposite - some policymakers have in their books subtly hinted that the salary uplift of a PEI grad compared to a polytechnic graduate worth about $500 pm may not be justified.

There is a lot of food for thought, but I will end with a thought experiment. 

Suppose a diploma programme director was to be able to convince his entire cohort to take up dishwashing roles, the salary survey for the following year will show results that even exceed some local degree programs! 

That is at least a powerful story in the hands of a local journalist.




Thursday, June 02, 2022

Dirty Secrets of Wei Foo

If I do not have something interesting to write about, I'd normally explore the content generated by others to see whether I can build on top of it. Once again, the Woke Salaryman did an excellent comic strip on FIRE and I think I can add value by doing an article on this. 

Please visit this link if you have not done so earlier because my article assumes that you have read the comic.

I've been following the response to this comic, and I must say that I'm quite disappointed. 

A common response is that we should try to become Wei Foo. 

In my opinion, that's not mature because it's hard to attain FIRE. 

A mature response is to figure out who you really are in that strip. 

My cousin, who works for an asset management firm, lost money in LUNA (like me) and admitted that she's a lot more like Curtis. As for myself, even as I FIREd almost a decade ago, I find that I have a much stronger affinity with Amelia, because my ENTJ personality makes it hard to do nothing post-FIRE. 

I also don't agree with the life philosophy of many folks who area ahead of me in the FIRE movement in spite of my deep respect for them. Do I want to aspire towards a life playing MMORPGS until I die? Or spend the rest of my life splitting hairs to get the 4th decimal place of the safe rate of withdrawal?

As I'm part of this FIRE movement, I think we're to lax with Wei Foo and I want to deconstruct Wei Foo properly and explain why he may not deserve the admiration that has been depicted in this comic series.

a) Wei Foos may be born rather than made

Wei Fee is an imaginary construct of the Woke Salaryman who did an admirable job trying to depict a person who can achieve FIRE. Kudos to them for not Mary Suing themselves into their strip. 

My first issue is that Wei Foo is likely to be born with some specific personality traits, which Woke Salaryman was unable to explore due to their medium.

Every ERM class I conducted would fall into just one or two MBTI personality trait. As it turns out INTJs dominate the FIRE discussion groups on Reddit and also my biggest paying customers, so much so that I no longer see myself as an educator of finance, but as an enabler of a specific group of people who self-select into the ranks of the Financially independent. 

I have very close INTJ pals. 

You don't really turn kids into INTJs, its largely natural occuring, so this defeats that round of folks trying to "become Wei Foo for the winz". A stereotype INTJ-Wei Foo-compliant-avatar is a software architect who listens to World Music, watches obscure anime, and reads books about the Occult. I love hanging out with them, but even I can't even get remotely close in terms of broad interests.  

If you accept my assertion that Wei Foo are probably INTJs, then all hell breaks loose.

b)  Wei Foo may be in a very elite industry that is very hard to get in.

INTJs are fundamentally not a high-earning personality ( but they are above average ). Amelia who seems more ENTJ can say that she can do sales or take on a leadership role to earn her $12k a month. If you expect an Introvert to so the same, then you will be left with just maybe software development that will respect introversion and a broad conceptual approach to work. Accountants and Engineers have an ISTJ inclination.

Modern software engineering is a very modern niche skill. 

(Otherwise the private management degree holders who have a starting play $1,200 less than dish washers today will apply en masse to become full stack engineers.)

Even if you do get into the industry, there's a big difference between the 100x developer who can architect a blockchain smart contracts platform, and a tech peon who specializes in shaping JDBC connections. Its an intuitive open mindedness that can adapt a technical solution to business needs.

Worse, the Wei Foo of the future will be conversant in Quantum Computing. I took a couple of introductory courses and it's no joke. Basically you need to manipulate linear programming matrices that contain complex numbers. Right now, you needs Physics degree with a specialization to get a foot in the door, an elite CS degree may not be enough.  

So it's not easy to qualify as a Wei Foo, you might need to be top 5% in STEM subjects.

c) Wei Foo may be emotionally stunted and will have trouble finding a mate 

The introversion that allows Wei Foo to master finance and investing and develop the "Kiam siap" to FIRE will be an impediment to developing an emotional bond with someone. There are some folks who FIRE and have a family, but there are also quite a number who FIRE and stay single. 

I'm saying this because I feel it too even when I'm not an introvert ! We ENTJs are also emotionally stunted, but we're kinda proud of it.

If you combine introversion, kiam siapness, super mild Asperger's, deep interest in hard core fields like investing and finance, it's a straight road to BBFA life. I encourage female readers to date them to really understand what I mean.

This is why I disagree that Wei Foo can even get married on shoestring budget. Most Wei Foos won't even come close. 

I think if we adopt this framework to deconstruct Wei Foo, then we will understand that sometimes, it's not the price we pay to attain FIRE, but it can be our genetic makeup, and the price to pay is understated. 

Fortunately, the world requires all sorts of folks to function, you need the Amelia and Curtis to run the economy, and if some of them never attain FIRE, it is possible fine.

The movement has evolved milder forms of FIRE like Coast or Barista for other personality types, go read up on them further to explore which idea suits you.