Wednesday, September 28, 2022

Time for a Strategic Retreat


I had a health scare this week. 

After a routine blood test, doctors found that my Lipase level was elevated at 200+. This can be signs of pancreatitis which can be quite painful and requires an IV drip and hospitalisation if symptoms crop up later. Naturally, I carried on googling the symptoms and worse scenarios can occur. I will be doing another blood test tomorrow and already have an appointment with a different specialist.

With medical problems, and an attempt to pivot to part-time legal practice, I have little cognitive bandwidth to entertain a margin call if it happens in the market, so when markets dipped by over 1% on Monday, I told the ERM Community that I'll be getting out of all leveraged positions built by my students, and then I ran a webinar last night to justify my decisions and answer questions in my community. 

The essence is that it's impossible to fight the Fed. 

Repeated 75bps increases to the interest rate will not be remedied even if landlords raise the rent so my fear is that REITs will behave practically like bonds over the short term. If my community were to remain leveraged until 13 October when the US publishes the inflation report, an adverse report will push Singapore stocks lower, even though we are quite insulated and riding on the COVID recovery. 

With yesterday's action, I'm happy to say that we're out with some diminished profits and it's not so much a panicked rout. This is contrasted with my actions on March 2020 where I stubbornly held on until we began suffering losses. It also puts us in a position to leverage again when markets face a recovery, which can be as late as Q3 2023.

In my case, I did not stop at just selling enough to deleverage my portfolio. I sold everything into cash and will be consolidating my holdings over the next few weeks. I will be just 10% cash, but will enjoy my immunity to margin calls. If my calculated gamble that markets will continue to drop, I should be able to do some bottom fishing into the year-end. 

While I do entertain the possibility that I might be wrong to run, this is a whole new era that is similar to the 1970s when Paul Volcker was Fed Chief. To battle inflation, the hawks pushed interest rates all the way to 17+% and triggered a recession in 1981. None of my quantitative models predicts what will happen even if we pick a conservative portfolio of banks, and high-yielding REITs. 

Suppose my factors models outperform the average by 3%, and markets dip by 30%, my community will still be hammered by 40%+ losses on their margin account. I can't have my student's blood on my hands, so my leverage is now about x0.9.

Now we are in a very strong position to watch what happens to the markets here.  

I would caution making any false move until mid-October to see whether inflation can really be tamed. 

Some experts even say that November will see another 75bp rise. 

At this point in time, I will continue to invest funds into student portfolios in my unleveraged CDP account. But this will look more like dollar cost averaging moving forward. 

This is not the time to play hero. 

I hope history will vindicate this move of mine.

[ I put an Advanced Squad Leader graphic because US squads actually have very low morale for a victorious Army. As it turns out they take cover very frequently, but they recover very quickly as well. German forces on the other hand are quite brave but once they rout, it's hard to recover. ]

Friday, September 23, 2022

ERM Community Event Q32022 - Running your own Robo-advisor


Pretty sure by now, folks who regularly attend evening investment webinars are sick and tired of discussions on inflation and the latest series of interest rate increases by the Fed. So when I was thinking about the next Early Retirement Masterclass community event, I wanted a seminar that has some link to the current macroeconomic situation, but it's really about something else. 

For quite a while, I did not comment on robo-advisors because I see them as a "lesser evil" compared to getting a commissioned-based financial advisor, but over time, the lack of transparency over how these algorithms work on the back-end eventually began to grate on me. Worst, there are robos that just could not beat a naive strategy of buying, for example, every REITs in equal shares. 

So I thought I would discuss robo-advisors with my community. We will not discuss specific product offerings in the market, but we will look into various approaches to allocating assets among different ETFs. I will round up a discussion with three theoretical frameworks for algorithmic asset allocation, and I will round up with a software demo of a Jupyter Notebook I wrote combining code snippets from different authors around the world that, when combined together, can be used as robo-advisor for ERM alumni and students. 

We will be looking at numbers for traditional asset classes and crypto. 

Date: 27 September 2022 7.30pm

Format: Webinar 

Programme :

·        ERM – Running your own Robo-advisor – 30 min

  • Core portfolios with ETFs.
  • Different algorithmic approaches to asset allocation.

·        ERM/CCI – Demo a Robo-advisor in Python Jupyter – 15 min

  • Demo on a beta tool that will be deployed to all ERM students in the future.
  • Demo will cover main asset classes ETFs and major cryptocurrencies.

·        ERM Portfolio Update

Registration link :

This seminar is open to everyone but is pegged at the standard of someone who has already attended my programme. There will be no recording for the session but a video will be shared on my Youtube channel soon after the event. 

Beta Jupyter notebooks will only be made available within the ERM Community.

Tuesday, September 20, 2022

The Three House Investment Plan


There are some investment ideas that really enable some really out-of-the-box thinking in this book. My favourite idea is the Three-House Investment Plan.

When a geo-arbitrager settles in a foreign land, one useful rule of thumb is to ensure that rental payments are about a third of total expenses. So logically, after living in a new country for a while, you may wish to make a rent or buy decision in your adopted country. 

If you actually like your new country and have made a decision to buy one home, why not buy three houses instead? 

You live in your first home, so that takes care of the rent. Your two other homes can be rented to others at one-third of their expenses, so if you charge a fair rent, your own personal expenses can be met by rental payments from two houses. 

Of course, the author does not take the pain of coming up with one actual example of employing this in a real country. There are tax laws to contend with and a subsequent home beyond the first may require a different set of calculations. This clearly rules out doing this stunt in Singapore thanks to low yields and ABSD.

But the author sets useful boundary conditions - where rental yields are 2% or below, just stick to renting, as houses will be too costly. This option should only be seriously considered where rental yields exceed 4%. 

In my classes, my students can easily build tax-free portfolios that yield 5%, so Singaporeans can opt to keep their assets at home while renting in a foreign land. There is no pressure to actually buy three homes, but home ownership in a fast-growing economy can reap high capital gains in the right jurisdiction. You also have an advantage as real estate markets are highly inefficient and your area may be popular with other ex-pats. 

Readers who managed to pull this stunt in Vietnam, Bali or Malaysia can share their personal experiences in the comments section below. 

Saturday, September 17, 2022

Letter to Batch 27 of the Early Retirement Masterclass

Dear Students of Batch 27,

It’s been a great honour and privilege to conduct a 5-Day Early Retirement Workshop for you.

We’re getting into deeper bearish territory as the Fed is about to raise rates by another 75 basis points. This will dampen demand and make it harder for growth strategies to flourish. Correspondingly, every factor model built by this class has shifted to favour a value-based strategy. We are slowly changing from a course that invests in high dividend and low beta stocks. Now we buy cheap stocks with decent momentum.

One consequence of a shift to value is that the factor models will start to highlight stocks that are unpopular with investors, so the rejection rate this round was much higher. Another anomaly is that, for the first time, the factor models did not flag a single bank or REIT in the final STI portfolio which may need getting used to. DBS was added as a bonus stock since banks do benefit from higher Net Interest Margins as interest rates go north.

The second consequence is that for the REITs segment, I’ve added the large STI REITs into to REITs universe for backtesting and this ended up favouring the very same 7 REITs in the STI. Choosing REITs with strong sponsors, while reducing volatility has resulted in lower yields for the final portfolio.

Students have commented that the dividend yield of this batch is on the low end at about 5.4%. For students who wish to have higher yields, they are welcome to research US Office REITs like Keppel Pacific Oak REIT, Prime REIT or United Hampshire REIT and make a discretionary investment on their own. I‘m not adding them into the batch 27 portfolio as I have a large allotment in my family fund.

The important takeaway is that the model portfolios built by ERM do not bind student decisions in any way and they are free to invest as they wish. The model portfolio exists as a tool to track the investment performance of all ERM students and bind the instructor into investing his training fees into choices made by the students. Poor investment decisions on the student's part are meant to affect the instructor first. This is the unique selling proposition of the course - I have skin in the game.

Lastly, I hope that Batch 27 will participate actively in the FB group. Sometime in Q3 2022, we should be meeting up for an online community webinar.

Hope to see you then!


Christopher Ng Wai Chung

Wednesday, September 14, 2022

Who is the Seven Dollar Millionaire ?


To maintain thought leadership, I can't stick to just the advanced finance books, I have to read the basic guides as well, and often I get some enlightening reads that change the way I look at my own personal finances. 

Happy Ever After is the brainchild of Michael Gilmore who goes by the moniker Seven Dollar Millionaire. Every local finance influencer who has not heard of him should be ashamed of themselves as I was when I discovered that this foreigner came all the way over to Singapore to teach personal finance to migrant workers here! It's a brilliant rationale, the migrant workers are the lowliest paid workers in a nation that probably have one of the highest standards of living in the world. This alone should make a trainer like myself feel a little inadequate and uneasy.    

I'm going to do a review in two parts, for now, I'm going to just explain two simple ideas from the book. If you want more, I suggest you buy the book from Amazon Kindle. If you have influence over Kino, I think this book should be on every shelf in a local bookstore. If anything, more volunteers to teach migrant workers is not a bad idea. 

a) Your target portfolio size is 25 x Annual Expenses

The first idea is probably quite familiar to most readers and it is to imply use (25 x Annual Expenses) to determine the size of a portfolio to gain financial independence. It's simple and elegant. If you want to reach your target faster either save more or spend much less.  

b) How investing $7 at 7% makes you a millionaire in 50 years 

The second idea, while less practical, has great elegance. If you can save just $7 a day, compounded at 7%, easily achievable with a 50:50 Global Stock: Global Bond ETF, you will have a million dollars in 50 years. 

I've attached the evidence here:

The main point of the idea is that becoming a millionaire is not hard if you compound your investments over time, the question is perhaps how much is $1M worth in 50 years' time, and whether you can retain your good health when you finally get it. For a guy who starts work at age 25, he would have to funnel his CPF Life into his portfolio from age 65 to 75 to get this right.

I'm in the middle of conducting a class. I hope on Friday I can talk about the more counter-intuitive ideas from this book. 

If you can, try to support the author and the book, he's already done a lot for migrant workers here while most of us hadn't.

Sunday, September 11, 2022

On developing new personal hobbies


I'm not posting something too hardcore this weekend as I've just returned from Kulai JB where I spent a fun weekend with my in-laws for Mooncake Festival. 

Instead, I want to just share with readers what's been happening on the personal front. Mirroring some of the changes in my career, I'm also making some drastic changes to my personal hobbies.

I've been playing Dungeons and Dragons for about 38 years, the game has its ups and downs. With the 5th Edition rules, the game has peaked in terms of elegance and playability, but of late, with more adoption by mainstream players, the game has also become more political. Extremely woke elements have entrenched themselves in D&D culture and it has become a lot more intolerant to campaign elements which were welcomed in the past by my generation of gamers. Recently, the game designers created a new race of monkey men that were supposed to be a slave race to an evil wizard. The player base decided to become offended because it reminded them of real-world slavery and game designers had to retcon the origins of the race. 

I don't think game designers can do a good job and tiptoe around fragile players at the same time. The whole point of fantasy is that there is some kind of evil to defeat. I suspect if we push this to the logical conclusion, we will end up with mediocre campaign settings that will be politically correct but bland. I don't Game of Thrones would be so popular if every scene was censored by a woke fanbase.

So I continue to just buy D&D books online but I've almost given up on actual gameplay. My job as a parent is to get my kids involved in RPGs because it's still a healthy and educational hobby, but I think it's time to move on.

But as one door closes and another opens. By some stroke of luck, I bought some old-school hex and counter wargames and got in touch with the guy who actually taught me D&D 30 years ago, and he's looking for folks to play this seriously arcane wargame called Advanced Squad Leader (ASL).

ASL cannot be considered a game. It is a ridiculously complicated simulation of squad-to-squad warfare in WWII.  

You control a few sections of men and have missions to take a few building objectives. Everything is resolved by a pair of dice and it takes maybe an hour of real-time gameplay to simulate a few seconds of WWII combat. 

Like in real life, moving in open space to enemy fire is lethal. Not throwing smoke before advancing is lethal. Not trying to take a stone building with at least 3x the headcount of the defender will see you routed. There are tables for different types of ordnance and armour. The psychological makeup of US and German forces are totally different and matter in the game. The tutorial for the game is 133 pages long and recommends actual study like a university module. Rules are more complicated than our Penal Code. Worse, understanding the rules mean nothing as figuring out how to tie your strategic intent into successful mission objectives. 

ASL also cannot be politically correct. Sometimes, one of the players actually controls the Nazis. The other player often controls the Rusian Communists. I hope this keeps the woke snowflakes from even trying. 

Even right now, I don't understand why anyone would play a game that is more painful than building a diversified portfolio in real life, but I'm happy to meet a few like-minded souls, all guys in their 30s-50s who have the game at home, and did not have a gaming buddy for decades. So all of us are learning the game for the first time in our lives. 

After two sessions, I can finally appreciate ASL as a metaphor for life.

We don't have an operating manual for real life or finance, and we can learn the fundamentals for decades before someone comes along and explain FIRE to you which provides the over-arching strategic intent of investing. And many folks who understand FIRE may not know how to invest to make FI a reality. It takes decades to get your finances to work and have it provide a positive impact on your life. Like ASL, finance also requires a knowledge of odds and statistics, but things often go wrong in practice. 

With my increasingly heavy involvement in ASL, I'm also changing the way I look at the games I play. 

For me, games should be hard. Hard games sharpen the mind. It also attracts a bunch of hardcore geeks and weirdos that I really missed in my RPG sessions in the 1980s. In the 1980s, AD&D players were almost hunted by the local churches. I kinda miss being persecuted actually, it shaped my life as a troll.  

If you spend more time thinking deeply about tactics, you will adopt the same habit with your life and your investments.

I'm not sure how many readers will appreciate this post, but I think I'm going to dedicate my hobbies to the Big 3 hardest games with a fanatical fanbase around the world.

  • Advanced Dungeons and Dragons ( 1st Ed ) - Just declare a grapple and see your DM's face
  • Advanced Squad Leader
  • Star Fleet Battles

I've not started Star Fleet Battles yet but my gang will join me after we master the use of Armour in ASL. They've already started sending me the game tutorials. 


Wednesday, September 07, 2022

BaliFIRE and Geo-arbitrage - The case of Jean Voronkova


RGS girls see themselves as "daughters of a better age". 

Sadly, we live in the Age of Incels, where anonymous trolls seem to be extremely salty of her in various chat rooms. Jean has now joined the ranks of Female financial influencers who somehow, rubbed many single men the wrong way. You can read about her here (link).

Criticisms of her are largely unjustified. I find it quite unfair the incels picked on elite school status and concluded that she had a lot of privilege. Others were fixated on her childless status, only to admit that their own male FIRE role models are also single and childless. 

I don't think  Jean Voronkova is privileged personally, wealthy families will not be so fixated on their daughter's professional status. My bet is that she's firmly middle class.

With so much hypocrisy around this case, I think Jean deserves a more balanced analysis of her approach to FIRE, so this is what I intend to do with this article. 

a) How Jean earned her money

The first point of analysis will always be the way someone who succeeded was to earn her money. There seems to be some jealousy of the fact that she's a lawyer. Her salary was $120,000 after six years so my guess is that she's some kind of senior associate-level lawyer. While the pay is high, the hours are brutally long, and most importantly, we have to accept that logically Jean would not have saved that much given only 6 years of work. Folks who worked longer with lower pay may have more due to the effects of compounding. 

The second phase of her life is not bereft of income, Jean started multiple businesses which I doubt were roaring successes because, in the end, her passive income was around $2,000 USD from various properties she has. 

If we look at the complete picture, FIREing in Singapore would be hard for the Voronkova couple even at this point in time, which leads us to the second point of the analysis, which is about saving money.

While I am not Jean, I thought exhausted senior associates should try in-house legal counsel work first for more pay and less work before jumping to any conclusions about the profession. But that's just me.

b) How Jean saved her money

It is this second point that is the most instructive for readers. Too little credit was given to Jean for the fact that she is GEP by the incels from social media. It takes a high intelligence to understand that a situation is unsustainable and an even higher one to adapt to a new country to solve a problem. 

Jean is outstanding she shopped in multiple jurisdictions like a good lawyer should. 

Getting out of SG is smart because you leave that toxic workplace where divorce lady lawyers battle with Chanel bags. In class reunions, you also would have to put yourself in groups where other lady lawyers start to talk, and compare lives and spouses.  If she is a classic INTJ FIRE seeker, she would actually really hate doing this. ( NB: We cannot conclude her MBTI with such scant data )

Geo-arbitrage in Bali is smart, but ERM students know Kuala Lumpur is even smarter these days as digital nomads have started to really ramp up the prices in Bali, but Jean obviously puts a lot of emphasis on lifestyle and Bali really looks good. According to research from my students which I do every course, you need about $1,500 SGD per month to lead an ex-pat lifestyle in Bali. 

But Jean is smart, she shopped for a future home and has spent time in Vietnam and Bali, so this is something we can all learn from. 

c) How Jean Invests

This section is one that had me the most stumped. We have very little data on how Jean derives her passive income. 

Overseas property generating $2,600 SGD would barely support the couple as a family unit even without kids, so I suspect they are running thin. Bali is also a favourite place for digital nomads so I expect inflation to be increasingly an issue. With this amount of information, it seems that Jean's version of FIRE is threadbare, so the content creation on Youtube may be the start of a new business initiative. 

Personally, I think the forex risk and inflation should justify maybe adding a home into the rental mix but I admit that rents can increase in tandem with inflation. This is an area of risk I would not like to get myself into.   

Is there a way for the couple to load up some REITs in SG and wire dividends to their expenses account? I think it's worth exploring that move. 

All in all, I'm glad young folks are coming out of the woodwork with their version of FIRE. Hopefully, the older folks will have their back when they come under FIRE from Incels. 

I'm definitely biased towards Jean as she is almost an inverted version of myself.

She pursued Law to become Financially Independent.
I pursued Financial Independence to do Law. 



Sunday, September 04, 2022

Overemployment as a method to achieve your FIRE ambitions


I lost an interesting bet lately. 

The structure of the bet I made was this : 

Which will be gone first, s377a of the Penal Code or SAP education? 

I offered the bet to some regulars in finance forums and one guy decided to bet on s377a being gone first, so I naturally took the other side of the bet. The forfeit was a meal. 

I was not anticipating the bet going to be resolved within a decade so when s377a was repealed, I made good for my loss and since "losing with grace" is an important value to me, to make it more fun, I decided to give a meal to everybody who witnessed the bet taking place. 

It's always nice to occasionally give a meal to young people because they are often well-informed on things that we might not noticed and one of the major things I learned from the event is the concept of overemployment. 

Overemployment is an important concept because it is the opposite of lying flat, quiet quitting, letting things rot, and all the reactionary movements to the toxic workplaces in the world. 

The concept is simple, for folks who work from home, it is possible to sign up for two jobs at the same time and do both competently. This works better if the work consists of processing IT tickets and choosing a different time-zone. From an employment contract perspective, it's possible contract breach but some folks tell me that the secret is not to get caught doing it. 

As an ENTJ, I'm very attracted to the idea of overemployment because it would allow a smart, young IT professional to rapidly reach FIRE and possibly FATFIRE within a decade because not only are you earning more, you have less time to spend away your money. By the time you FIRE, you would be so young, downgrading to work on one job would already seem like a holiday. 

This allows some folks to get into a situation where they can have money-time-energy all at once at a fairly young age. 

With overemployment, I have managed to arrange all the reactionary movements, the pursuit of FIRE and overemployment into a single framework where you can pick and choose which part of the continuum you wish to park yourself at. 

At a personal level, I want to implement some form of ethical overemployment into my life, I will be seeing whether I can sell my time to a law-firm during normal working hours and still run my training business with my current hours. My variant does not provide me with a base salary though, I prefer a larger share of hourly billings so that I can control my exposure to work to do justice for future students.

I think what is interesting is how folks with more than one formal job can contribute to CPF. I want to know once and for all whether the $37,740 limit can be busted by taking on more jobs. There are folks claiming it can and some saying that it can't. And whether tax deductibility applies if it does bust the limits.    

Overemployment cannot become too common in Singapore. If this happens, employers will force workers to return to the office and returning just 2 days out of a week can make balancing two jobs a much bigger hassle. But in the case of some folks in software, getting 50% of an ace is often better than team of goons.