Personal Update : A New Dawn

 

Last week was the last ERM session for 2022; as the training business faces one of the biggest challenges ever in 2023, I've begun making some moves in my career, at least to stave off irrelevance, if not to pay the bills. 

Starting 1 December 2022, I should have restored my practising certificate to resume legal work in a firm as an Associate. My area of work is community law, and for a start, I will take on any case my supervisor will be working on. Over time, I expect to find an area I'm comfortable with.

That's not all; starting tomorrow, I will be tagging along to attend the trial in the State Courts as an intern to get back into the swing of things. For folks who are my long-term customers and friends who do look forward to working with me in my new role, please be patient as I will only share details of my workplace on Thursday after I clear my communication with my firm; lawyers have a strict no touting policy. For future updates on my new venture as a rookie lawyer, I expect to use LinkedIn as my major form of communication. 

( Facebook is where I go Goblin mode, and my career will be very short if I talk about the law there. )

For folks who have been following me on this blog because of investment training, don't worry. I negotiated to be a lawyer and an investment trainer at the same time. If anything, I may even become more useful to my clients and friends. The next ERM course will be in February 2023. I will need to see what kind of time pressure my new role entails, and I might get back to the deeper articles on Dr Wealth if I do not have the bandwidth to make new videos. 

Some changes in my life may include :

• This blog may reduce its update frequency; we'll likely see maybe two weekly articles. 
• I probably can't read as fast as before since I still have to process my Business Times, The Edge and Economist weekly. 
• Probably limit my Netflix and Disney+ watching to a minimum.
• My volunteer work in schools will have to be scaled down to almost zero, but I do suspect that I will spend more time with disadvantaged citizens once I get into the swing of pro-bono legal work under CLAS. Given my lack of revenue pressure, I will likely ramp up on this to sharpen my career skills. 
• My gaming life has been dead for over a year. It's part of growing old and seeing D&D turn more woke than I can handle. I still hope to visit conventions and look forward to Comic-Con this year.

Some readers might want to know how my finances work at the back end. 

So even though I now have a hyphenated career as a lawyer-investment trainer, to maintain my flexibility, I do not draw a monthly income (how else can a middle-aged Singaporean man get employed ? . Everything is based on effort/results, so if no payment is made by clients, I get nothing. To sustain this for at least a year, I've already set aside a full year of household expenses and mortgage payments in my savings account. 

The only risk to me is my mortgage payments which are still floating rates loans. My dividends in 2023 can likely take care of that. As I am still developing my basic skills in my new role, I am likely to continue to rely on passive dividend income to make this career transition successful. 

Of late, I have been feeling quite conflicted about this career decision. Even though I was cleared of all my medical issues two days ago, a younger and fitter good friend had a mild stroke, and I can't help but feel that all this is just vanity and a desire to maintain my relevance in middle age. My only solace is through giving legal representation to those who cannot afford it to build up my reputation and skills in the meantime.   

The biggest question at the end of the day is whether there will be an interesting story to tell my students next year. I'm likely the busiest man who has completed the FI of FIRE. But the idea of dividends powering a hyphenated career is an interesting one,  and maybe I can author a series of new articles in mainstream media about this. I won't just talk about retirement; I'll talk about transcending it. 

Now the question is whether I can teach, code, draft and counsel out of this period of rising interest rates?

I'll blog again in the middle of the week. 

  

Letter to Batch 28 of the Early Retirement Masterclass

Dear Students of Batch 28,

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

On 26^th September 2022, I anticipated a nasty market downturn when the Fed started to turn hawkish, so while leveraged student portfolios still had a tiny profit, I told the community to exit all leveraged positions. I liquidated everything in all my margin accounts, hoping to return at a better time. The ERM portfolios will continue after conducting its 28th class of students.  

Batch 28 has its unique challenges.

As interest rates have only risen on March 2022, I’ve made a judgment call to only backtest year to date performance of both STI blue chips and REITs. Furthermore, I also took the liberty to decide that it was high time we took on some more risks and limited our REITs universe to twenty REITs that gave the highest dividend yields. This decision was made even whilst high-yielding REITs underperformed compared to the baseline performance.

The first reason is that as REITs are cheap, thanks to rising interest rates, higher dividends can cushion losses moving forward. The second reason is that if interest rates rise longer, REITs, where landlords struggle with increasing rent, will start behaving like bonds, and REITs with the highest dividend yields will have the lowest “duration”. They will preserve their value better as the overall REITs sector fall further out of favour.

Also, as the class size is small, each team had to review many counters before lunch.

The final result is possibly the highest-yielding portfolio we’ve ever built as a programme, with an average yield of 6.88%. I look forward to investing in this portfolio with my SRS funds. Folks anticipating a return to a leveraged portfolio will have to wait a while longer as margin rates remain relatively high.

Lastly, I hope that Batch 28 will participate actively in the FB group. Sometime in Q4 2022, we should meet for an online community webinar.

 

Hope to see you then!

 

Christopher Ng Wai Chung

Market Deployment #4 : The future of Ang Moh is being more Kiasu

 

Being a parent in Singapore is like being tossed between the philosophies of two different civilizations. I just met my son's kindergarten teachers and can see this clash of ideologies in full swing. My son's English teacher is very cheerful, and encouraging and seems to want to make learning more fun, emphasising creative thinking and life skills. His Chinese teacher, an immigrant from PRC, reminded me that if a child can eat three times a day, doing three pages of exercise should be easy peasy and laments the reduction of Chinese Spelling in primary schools next year. 

Over time I can imagine this effect on kids. They will evolve like me, and even though they willingly invest heavy amounts of time in CL2 and work hard to get great results, they will likely align themselves with the Anglophonic world as it allows them to express their individualism more. 

This game is played throughout the world stage.

Investors should try to read books that attempt to predict the future. One periodical that does so is a special issue of The Economist that will talk about the world in 2023. For the extremely long helicopter view, Hamish Mcrae talks about The World in 2050. These predictions, while not fully accurate, are based on long-term trends.

I don't want to spill all the beans on this excellent book, but I just want to talk about one point I find extremely interesting. 

It is the idea that the future of Ang Moh is more Kiasu.

The book's main premise is that the US will retain its dominance even after losing the no.1 spot in economic size to China sometime after 2030. The main reason is that the US remains a very fertile country that supplements its population growth with many enterprising immigrants from other parts of the world. China, on the other hand, will become an ageing population like Japan and will lose its economic vigour as we head towards 2050. 

One possible side-effect of these long-term trends is that, over time, Asians in America will dominate higher education, politics and even pop culture because Asians just work harder and have a strong preference for STEM subjects. As the US Supreme court was to take out some forms of affirmative action that privileges blacks and Hispanics at the expense of Asian Americans, the work ethic and rigour of Asians would influence the West, so we may see Westerners become less individualistic and adopt more kiasu practices towards their studies. 

Let's face it, if I were a white guy, would I let Asians just walk over me in maths class and tech startups? I don't think so; I can adopt some of the work ethic of my Asian classmates. Similarly, as an Asian in the US, I would also like to be seen as cool. 

Cool might mean being more like Simu Liu than CZ, for example.

There are long-term implications for this. 

Singaporeans who cannot make it in the local system may think they can fly off to a place like Australia or UK where they can academically walk over Caucasians and get GPAs they will never attain in NUS had better be ready for a big fight when they get there. This is because second-generation Singaporeans might already be trying to spoil the market for everyone. 

As for my work deploying my funds in the markets, I've already started to regret moving some DBS to high-yielding REITs as DBS has increased even further. But mistakes are part and parcel of investing life; I've made money even as I thought a red tsunami would sweep Democrats out of the Senate. 

I expect to deploy some funds into the portfolio built by my students this week, but I do not expect any big moves for now. Expect REIT DPUs to be on a downtrend for the next 3 quarters, but prices have already adjusted to account for this fact. 

 

Market Deployment #3 : Will banks conquer the book retailing business?

 

As I run my 28th batch of ERM class tomorrow, I decided to take a short break to visit the latest BookXcess outlet at Wisma Atria that seems like more like a partnership with OCBC bank. This was such an amusing experience that it deserves a blog article on its own.

I've always been a fan and customer of BookXcess and look forward to visiting the branches whenever I was in KL and sometimes in JB. It's not a bookstore like Kinokuniya that stocks the latest an greatest books that support my ambition towards thought leadership. BookXcess has an innovative way of procuring books at rock bottom prices that they get to sell at prices way below e-book prices on Kindle, but you can't be too fussy with titles. You have to take whatever's available on discount.

That being said, I was able to find a few good finance titles and the newage FIRE bible Quit Like a Millionaire can be found there.  It's also selling cookbooks and comics for the cheap.

What I really like is how innovative the arrangement was made with OCBC. If you come for the banking services, the seating is arranged as part of the bookstore, so you can browse while waiting to be served. 

The most amusing part of this bookstore is that banking staff will there to serve you and even help guide you to the books that you want. I've been buying books since I was 7 years old, and I've never seen such an overeager sales team trying so hard to serve me when I'm browsing for books. Of course, along the way, they would remind me that paying for with an OCBC card entitles me to a further 10% discount on books. 

But you know how defensive I get when I meet financial salespeople, so I pointedly asked them whether they sell banking services or books. When they told me that are bankers, I said I'm not interested in banking with them, but I complimented them on the performance of their OCBC stock, and thanked them for the 4+% which beats endowment plans and some structured notes.  

So if you think about OCBC has done something truly brilliant and innovative for readers in Singapore. 

As much as I liked BookXcess, I never believed that they can survive the rents in Singapore. Their KL branches is easily staffed by the stupidest people I know. One counter staff in the Cyber Jaya outlet shoved all the hardbound books I bought into one flimsy plastic bag and pretended not to notice after the bag broke (lucky I brought a haversack). 

With this collaboration, all these problems are solved because the bookstore will be supported by highly motivated finance professionals. Rents can even be shared. Even if you don't like books, this sophisticated "man-trap" has a fairly good hipster cafe and some kind of craft gallery. 

At the moment, I have my doubts about whether this arrangement is sustainable. Here's how I think things can be better:

a) The discounted titles of Bookxcess are not the best partners for a bank. I prefer a more tactical selection of the latest business and self-improvement books to "trap" folks who can be more easily convertible to bank customers. Book title selections should be determined by data scientists.

b) Where money meets books, talks by finance and self-improvement professionals will create more traffic. This is where trainers, speakers and bloggers can work with OCBC to liven up the area.

c) I heard good things about the cafe, but it's located right next to Toastbox where the kopi is probably half the price. 

Within the grander scheme of things, I'm delighted that in a high rental area like Orchard road, we can actually accommodate one Kinokuniya, a Zall bookstore and and a BookXcess store. This is only possible because a banker thought it might be a way to drive more sales of banking services. 

The alternative is having no bookstore on Wisma Atria. 

I guess you can just ignore the bankers when you are browsing books.

The latest inflation numbers are good because they came in lower than expected. The following day, I liquidated 25% of my DBS holdings and placed them into high-yielding US office REITs and business trusts. I still like DBS a lot, but it also went up after going XD, so it's time to spread out my investments quite a bit. 

The next Fed decision to raise inflation rates will occur only after another inflation report in December, so a lot of investors are confirming a real rally on after that event. I think a calculated gamble that inflation will head lower is a good idea as we should only be seeing the lagged effects of the first 75bps raise dome months ago. 

That being said, shifting to high yielding REITs and business trusts is not a really ballsy move.

I leave the ballsy moves to the younger bros. 

Market Deployment #2 : The second crypto Cataclysm.

I consider the First Crypto Cataclysm as the fall of the Terra Blockchain. I lost about $15,000 in that disaster and considered myself fairly lucky, but my crypto course that is focused on passive income folded as stablecoins were found to not to be as stable as presumed. The loss of the course really hurt due to all the man-hours put into coming up with the lab notes.

Thereafter, I thought that the safest strategy would be to buy coins that have already crashed and got some LUNA  and some UST at a fraction of a cent. For the rest of the time, I treated my tokens as amusement park tokens and farmed it on Mirror and Apollo DAO at ridiculous yields of between 200% to 300%. Even today I make about $8 to $10 USD every day from liquidity pools, especially the VIXY-UST pool in Mirror. Every 2-3 days, I put 1000 USTC into a new liquidity pool I find on Apollo / Mirror / Astroport. 

Mirror protocol had its own disaster as of late as the entire developer team stopped supporting the project, Amazingly, someone else compiled the open sourced code found on GitHub and the website was brought back form the dead in multiple addresses. I tried to continue farming some MIAU-UST and, thankfully, avoided getting fleeced so far. 

Instead I continue to make stupid mistakes which cost me $20+ when I tried to use SimpleSwap to convert my LUNA to LUNC but omitted the text in the memo field. 

Even after retreating from a leveraged account for my equities portfolio, I decided to pour in more collateral for my leveraged ETH on Compound, the idea was initially to take advantage of the Merge, but even the merge turned out underwhelming for ETH investors. 

Today ETH is my last leveraged position.

Two days ago, my now tiny position in crypto dropped a further $3,000 USD and I found out quite late that FTX is in trouble. 

To me, this crash is more unexpected than the one that occured on the Terra blockchain. FTX’s SBF is a nice guy and there was nothing to suggest that FTX can become insolvent. It’s easy to talk about hindsight, but even the really smart guys in Temasek did not see this coming. 

I think just like the collapse of LUNA, the collapse of FTX will create ripple effects that will hit other parts of crypto ecosystem, so folks should at least try to move your coins to a decentralised wallet in case your exchange starts to halt withdrawals. 

The question is whether in the grander scheme of things, should investors ditch crypto completely as an asset class?

I don’t think so.

Investors who are sitting on a property and already have a nice equity portfolio, you should continue to put up 1% of their net worth into crypto. If you are risk averse, just put it in BTC and ETH. As volatility is really high, the time difference between An All time Low and All Time High would not be too far apart and we could be talking about a totally different market in 2025. 

Lastly, I think we can learn to enjoy this moment. I’ve always despised the crypto and tech stock pumpsters who were at the top of the world last year telling everybody else to “Have fun staying poor”. If they win, no one would respect prudent risk management anymore. Now that they are silent, I hope they would stay that way. 

Update on my DBS position. I should be expecting some decent dividends from DBS this month end and regardless of the outcome, i have a nice counter-weight to the rest of my REIT position. I’m sceptical of the recent recovery in local stocks as I expect inflation to remain high and herald a more sustained effort to raise interest rates by the Fed. This means more pain for REITs but also a longer time to get some bargain hunting done. 

In fact my DBS position is a bet that folks will underestimate the conviction of the Fed and we will see a battery of 50 basis point raises all the way until June 2023.  

Week after next, I expect to invest funds into student portfolios without leverage, so money has been earmarked beforehand. 

Market Deployment #1 : What society are we trying to build?

 

Two weeks ago, I could finally volunteer at my own secondary school. Blog readers will note that, for one reason or another, I tend to be invited by RI or ACS to speak about the importance of personal finance, but somehow, I never was given a chance to speak at my alma mater.

You cannot call Swiss Cottage Secondary School a bad school, regardless of how negative my personal experience was when I was there from 1987-1990. Swiss Cottage is ranked no. 1 amongst the non-autonomous secondary schools, and entry is extremely competitive with a PSLE cut-off of an AL score of 11 or below. 

My volunteering work was fun and drama-free, but I thought I had one issue to raise, not so much about my secondary school, but what kind of society Singapore is building. 

According to upper management of the school, Swiss Cottage was a leader in educational desegregation. For several years, Swiss Cottage mixed express (AL < 11 ), normal(academic) (AL around 21)  and normal(technical) (AL around 25 ) students within a class. To ensure that nobody gets stigmatised, only the form teacher knows which category a student belongs to. Subject-based banding was imposed so students study with others at their own pace for specific subjects, so a kid can find themselves in a fast-moving Maths class but a slow-moving CL2 class.  

I was fortunate to be able to hobnob with the teachers of my school, and taught me things like always using "positive words". I admitted that to help special needs kids, I told the strongest kids to help the "weak", but professional educators are discouraged from using words the way employed.  I did feel kinda bad after day 1, but when I started on day 2, I was able to just get the fastest kids to help the slowest ones ( to earn a longer recess ) without being too judgmental about them. 

All things considered, I'm proud of my secondary school for trying hard to create the semblance of what Singapore society should look like in the future. Less discrimination and more inclusiveness.

But there are issues with this policy.

Parents are now stigmatising secondary schools for mixing Express and Normal students. In parent chat groups, my wife told me that the perceived value of autonomous schools like Bukit Panjang Government High is no longer sought after because some parents had traumatised children who cannot adapt to having boisterous normal-stream kids in the same class. This is a tad elitist, but I'm sympathetic because there were normal stream kids in my ECA group when I was a teenager, and they love annoying the "mugger-toad" kids like me. In those days, you just shrug it off because it's great training for NS anyway.

If we want to retool the education system to be inclusive, we should not adopt half-measures.

Swiss Cottage clearly has high standards for an Express stream program, but the cost is desegregation. Another school I checked online, Anglican High, has a cut-off of AL12, which is a lower standard but does not offer desegregated classes. As an SAP school, the price to pay for admission is a pass in Higher Chinese.

This is perverse and disturbing. 

Elitist parents can get a safe harbour if they volunteer their children as Chinese elites. Pump enough tuition money into your kids, and they can live in their own "gated communities" free from minorities and normal-stream students. 

I'm not raising the alarm on the really elite schools like Raffles, ACS or Chinese High because good grades are a strict criterion, and they are a small part of the population.

No matter how you improve the system, parents will not change their mindsets overnight. The incoming principal of my secondary school gave me a spiel about choosing a secondary school based on my kid's special interests and talents. I smiled and said that that was not something most parents would believe in. The old boy networks are just too powerful to miss out on in life.

If you want to reform the schools, do it across the spectrum and don't give rich, racist parents a safe harbour.

I've actually done something I might regret later with the funds I got from liquidating my margin accounts. I put most of them into just one DBS stock at the moment. The move is simple and elegant, and I hope to get about 4+% yielding instruments that can benefit from rising interest rates.  

No, I did not diversify between the banks because my objective is to collect dividends in November and slowly liquidate DBS into ultra-high-yielding REITs from December onwards. 

It's arguable whether I'm better off with SSBs or T-bills, but right now, I want a liquid instrument that can bet that markets will underestimate the conviction of the Fed to raise interest rates further beyond 5%.

Also, I can easily stomach the volatility, which is not high anyway because... it is DBS.