Friday, January 31, 2025

Happy Chinese New Year of the Snake !

 


I've spent most of my Chinese New Year accompanying my mother at Woodlands Health, and I'm happy to say that she has recovered most of her speech. She still needs physiotherapy and may be moved to a community hospital for more intensive rehab. Consequently, this is the most peaceful CNY I have ever had as I converted the ward into my tiny office space to work on a new project, mark students' scripts, and prepare for my next round of previews next week.

As it is traditional and very apt to talk about metaphysics every Chinese New Year, my Chinese horoscope reading has been spot on. 

For folks wondering why this blog becomes superstitious every New Year, I have my own philosophy regarding Bazi and the Stem and Branch system of the Chinese zodiac. The first concerns the limitations of my mathematical models - even if I can predict a crash based on financial metrics, too much hinges on black swan events that economic models cannot predict, like the pandemic. I have never met a Bazi master who recommends forgoing birth control, for example. Secondly, zodiac readings are almost universally conservative and never encourage making bad life choices. Finally, I prefer Joey Yap, who is very English-educated and likes to put a positive twist on my reading even though everyone's favourite Ch 8 horoscope uncle has rarely given me anything good for the past 5 years. 

In other words, I don't treat Chinese metaphysics any differently from other astrological models like the MBTI, DISC, Emergenetics or the Enneagram. I use all of it to guide my life and deal with the uncertainty that risk models cannot capture. 

The new year has boosted my finances, with almost all my different strategies posting slight returns and the valuation on my real estate showing the most significant gains. Still, all these came with a personal price, as in addition to my mum's fall, my kids have fallen sick. All this is reflected by the Tiger Horoscope, as according to Joey Yap, we have six inauspicious stars against two excellent ones. 

So career and money-wise I should do quite well this year of the Snake, but I will face many personal and emotional challenges. One amusing star I need to deal with is aptly called the Curled Tongue, and the year is inundated with lousy luck involving my adult students. One entitled boomer has constantly disrupted my lessons and insisted that the syllabus and training materials reflect his expertise as an ACTA-trained professional - I'm preparing for the worst before the feedback report returns this semester. Another thuggish student with anger management issues has written to me stridently demanding I recommend him for the SUSS law program - I have relegated his email to my spam folder.

For folks who know my story, Chinese metaphysics led me to collaborate with Dr Wealth because I was told that I have an outstanding balance of elements except the ability to seek help from others, which has been holding me back my whole life. This year, I started working with a new partner to generate shorter (and cheaper) online training courses to drive more traffic to my main course previews. While I have grave doubts that this is monetizable, I'm impressed by the technical and influencer training I cannot replicate with a Skillfutures course.

This is yet another decision that came about purely because of Chinese metaphysics.

The background is that I was not really prepared to do something new or aggressive this year. Especially since my potential partner has a different but admirable goal: geo-arbitrage, where I prefer to work with local partners. Furthermore, because of capacity issues, I blew off another guy (a loyal reader of this blog) last year because I could not adequately quantify the value of the effort.

What changed the game was the advice I got for the Tigers in 2025. We're overwhelmed with unlucky stars in 2025, but we can turn the tide proactively and allow benefactors to assist us. This is one of the components of Chinese horoscopes that I like. If it comes out from a Bazi's expert's mouth, we might ignore them, but CEOs will pay millions if the same stuff comes from some Mckinsey consultant. 

Anyway, my latest partner is an ISTJ. If an ENTJ and ISTJ can't make money on a project together, they must be mentally ill, extremely unlucky, or both.

I've already put in a decent amount of CAPEX that would enhance my preview materials for ERM. 

I will announce this on my blog once we are ready to promote the product.





Monday, January 20, 2025

Why an 8% safe rate of return can be better than a 4% one ?

 


First, a shout-out to friends and fans who wished my mum a speedy recovery. Yes, she is well on the road to getting better. As for me, I've settled into a routine at the hospital, which has allowed me to read and blog more. 

Today, I will talk about this peculiar book called The Guru Gap by David Mcknight, which discusses fairly technical personal finance topics for US readers and compares the central ideas the different gurus have.

One interesting discussion is an exciting take on the safe withdrawal rate that had been discussed to death in local forums. Apparently, many professional advisors in the US are quite cheesed with Dave Ramsey for suggesting an 8% SWR instead of a 4% one, even though the 4% has been backtested and Monte Carlo simulated to death.

Strangely, the book has succeeded in a reasonably robust defence of the 8% SWR, which may drive Investment Moats into apoplexy. 

The idea is that Dave Ramsey, a popular finance guru in the US, is very aware of the limitations of spending 8% of a person's portfolio every year. At best, the odds of surviving 30 years of expenditure without work are slim. Still, from the US context, it was argued that if you tell an average person that he can only spend 4% of his savings every year, he will be so discouraged that he will not even bother to do anything about financial planning in the first place. So, the viability of the 8% withdrawal rule is a workable lie for folks to get started and shift to a lower withdrawal rate once savings hit a critical point.

Beyond this argument, the book's value shines out when the discussion begins about how an 8% withdrawal portfolio can actually function. This is, sadly, not totally within a credible discussion in Singapore. However, a commissioned financial advisor with some brains might consider reading this book and shoe-horning it into the local context.

The first obvious idea is to employ an annuity to gain lifetime payouts. Annuities bought from the private sector may not pay for life and can be expensive. Instead, we are luckier than Americans because we have CPF-Life. Locally, if we have CPF-Life at the ERS level, spending down 8% of our portfolio is credible as CPF-Life at 4xBRS can generate more income than a 65-year-old needs to have a basic standard of living.

The second idea (which I do not understand well) is that the book also recommends having a volatility shield to spend down on recession to complement an 8% SWR portfolio. If you have a volatility shield with 8 years of living expenses, you can spend 8% with high odds of surviving the next 30 years. But what is interesting about the author's recommendation to invest in the shield is that it will give a warm fuzzy feeling to the commissioned-based FAs who read my blog.

The proposed approach will enrich an FA because it should be invested in an Indexed Universal Life product. The claim is that, after fees, such an instrument can still grow by 5-7%. I leave further discussions to the MDRT and CFP people who read this, but I was not pleased to know that buying an IUL is basically buying an ILP + Whole Life policy.

While the ideas in this book are a treasure trove of ideas that can be adapted to the local context, there isn't a need to deviate from the wisdom of local investors.
  • We use CPF-Life to generate a bare-bones existence even at the FRS level. About $1,100 in today's dollars under the standard plan.
  • We use a dividends portfolio and an SWR equal to the current yield to cover the shortfall, which is about $400-$600 monthly compared to CPF-Life.
  • Our residential home is a source of capital gains and room rentals, covering our bequest motive. 
  • Our kids, if raised correctly, are annuities of last resort.
Sometimes, conventional ideas are great!





Saturday, January 18, 2025

Becoming.a Main Street Millionaire

 


I’m blogging from Woodland’s Health, a hospital in the North where my mum is recovering from a bleeding in the brain after a nasty fall last Friday. At the moment she is out of ICU and the acute ward and recovering from the general ward. Consequently, I was distraught for the past 4 days, but I’ve slowly incorporated this to my daily routine in hospital, helping out as much as I can and trying my best to see whether I can squeeze some productivity out of this. 

One of the side effects of being in hospital for the greater part of the day is that I can read peacefully, so I am actually faster at preparing my course materials and I can now wholeheartedly recommend a good book for readers of my blog.

One of the arguments going on in the FIRE movement are the latest salvo of brickbats thrown at us. Somer folks think that retirement should be postponed to preserve social capital, others claim that working may also mean that there is no genuine security that comes from the investment portfolio. In both cases, I wanted to jump into the fray, but I don’t think there will ever be an end to these skirmishes. FIRE’s ability to attract detractors is a testament to its strength.

Instead, I want to invite readers to consider the alternative to FIRE in the form of a business acquisition. In this book, author Codie Sanchez suggests that a good life can come from taking over a business from a retiree and then finding ways to automate and digitize the operations. While I do not have experience doing this, my brother in law is an excellent example of doing extremely well in life following this play book and he owns factories all over the ASEAN region.

There are two extremely valuable gems on this method of wealth generation.

The first point is to look for businesses that are immune to market cycles and easy to operate, then offer to pay about 2-5 PE ratio for such businesses, finding ways to achieve vendor financing along the way. This is not easy to do in Singapore as you will then be limited to businesses like laundromats and Gachapon machines. I find this section an absolute gem then because I can then use a stock screening software to find stocks trading below 5 PE and ample free cash flow and seeing whether I can buy cheap businesses from SGX. I’m going to keep mum on my screen and the results, but I have at least one investment idea from this book.

The second point is the idea of the technology stock for SMEs. Modern small businesses need not be powered by employees but active automation can be done with an array of software as a service solutions. For example, for employee commmunications, SMEs can use Slack. For documentation and SOP, can use Notion. For recording of screens training, can use Loom. This section alone justifies paying for the full cost of the book, but I needed to consult my mastermind group of young influencers to translate into software we actually use in Singapore. I have to admit that I’m actually very enthused to bring this technology stacks into Polytechnic training as this is the kind industry streetwise diploma holders need to compete in this world. 

For one thing, I don’t believe that a person’s ambition dies just because he has completed the FIRE movement. I’ve been checking out business franchises, and readers and folks who listen to my podcasts have been directed to looks at entrepreneurship to complement the FIRE journey. Buying a consistent business is a very different skill set from investing. If you find the right business, you often do not pay more than 4-5 PE for it and if you pick well, it can pay for an operator and leave plenty of “almost-passive” income for you. However, if you backtest a SGX strategy that has a PE below 5 and dividends above 3%, you would have lost money of the past 10 years. 

I hope readers will find a way to read this book and even find a way to give its ideas a spin.

Do keep me in the loop. 

Wednesday, January 15, 2025

Dealing with a crisis - no updates on this blog for a while

 Last weekend, I found my mum looking confused and unable to form coherent sentences and I ended up getting an ambulance to send her to a hospital as it looked like a stroke. For the last few days, I’ve been shuttling to and fro from the hospital.

Just yesterday my mum transitioned from the ICU to an ordinary ward and I can breathe a little easy, but the road to recovery is going to be very long as she’s lost the ability to speak.

I’m also sitting next to her while I’m hammering out this article. 

All I can say is that I’m grateful for a few things:

  • I’m glad to be at Woodlands Health where I can do some work and shuttle home over one stop where I can bring what my mum needs from the house. There’s even a new bus 967 that lets me do this.
  • We’re financially ready for a catastrophic event to occur, although the hospital has not even broached the subject of Medisave use to me yet. They seem to focus on patient first before payment. 
  • Compared to other stroke symptoms, my mum’s were light. No paralysis of half the body and I can play charades with her to guess what she wants. My mum even had the presence of mind to get me to prepare her medical prescription to be shared with the hospital. 

For the past three days, my mind has not been calm to say the least. I suspect the weakest link in dealing with this event is me. I was still able to do my preview last night and have two days of lessons starting this evening. 

Financial preparation aside, I’ve learnt how vulnerable I am, it was hard to be along in a room as I’ll begin ruminating about what i could have done better as a son. There are also a lot of unknowns like how would long term care look like, and what my options are, so I managed to get a social worker send me brochures  for me to meditate upon. 

Everything being said, I have friends who have gone through this themselves and they are actively helping me cope. I also am lucky have a friend who was able to meet me for breakfast to just cheer me up before I visited the hospital. Relatives from across the causeway are providing heavy duty professional medical advice, going as far as to read scans and share with me what the issue might be. 

Finally, I’m super grateful that my wife and kids can hold the fort. Almost everyone has some light flu symptoms. Hope its not HMPV.

Note : I might disengage from some chattier groups for now. It’s nothing personal.


Sunday, January 05, 2025

Is it time to make peace with commissioned financial advisors?

 


AS 2025 rolls by, one of my priorities is to come up with new slides that are more relevant to the marketing of my Early Retirement Masterclass, and one of my priorities is to see whether the messaging about commissioned financial advisors remains appropriate to modern audiences. 

There are objective reasons to do so on the first examination because FAs seem less pushy these days. The booths where agents look for potential clients are quieter, and I definitely do not see LED balloons being used to lure children anymore. Furthermore, we're not seeing FAs using FB groups like Seedly to get new businesses; the pushy ones that were around before the pandemic have mostly lost their licenses to practice. At the ground level, ERM previews used to attract a lot of FAs who would try to troll me when I revealed some harrowing truths about their profession, but I've not had trolls for quite a while. 

Maybe to help me, readers might wish to share their personal experiences - do they still get FAs asking for a date on their dating app? Are their events organizers FAs in disguise? These are problems folks were telling me in the past. 

So I tried to do further research in this issue.

So as it turns out, reported statistics do not paint a nice picture in the industry. According to FIDREC, on 2023/2024, claims have gone up 32% to 2,894. Life and composite insurers attracted 387 claims and license financial advisors and insurance brokers got 61 claims. 

To decide whether these numbers are big or small, just remember that CASE wants MAS to regulate financial influencers even though they are getting 5-6 complaints a year, which makes me wonder who is really pulling the strings in this issue? 

Next, I should use my legal training to come up with another objective approach is to simply let the reader or attendee decide and just draw my materials from court judgments, which is open to examination by the public. I've made a new slide to be presented on my new preview that sheds some wisdom for folks who want to know what can go wrong when they receive advise from the wrong party.

Let me share my teaser slide below.


In case folks are wonder, this case is now taught to Polytechnic students in Singapore. I have a special sort of interest in this case because,  according to what I read, I was surprised that my pupil master was instrumental in winning this case and crafting the arguments for the appellant. 

Which means that in some alternate universe where I survived my pupillage and decided to do pursue a legal career instead of taking up Dr. Wealth's suggestion to teach Early Retirement, I would have been a saviour of this group of Financial Advisors today instead of being a vocal critic. 

So is it time to make peace with commissioned financial advisors?

I think I need to tone down the rhetoric. How convincing the rhetoric is depends on how annoying the industry is and, save just few folks who lost their licenses have found themselves teaching other FAs, my case no longer rests on a solid foundation of dissatisfaction from the public. 

And it's not necessary anymore - even when I polled my teenage students and asked them who would invite them out for lunch for a catch up after graduation, they would laugh and say that it's highly likely to be a classmate who became an insurance salesman. My students are very streetwise.

Instead, I will use statistics from FIDREC and a wonderful selection of local court judgments to let the attendee decide what to conclude regarding the industry and whether there is a need to build up their own financial proficiency and not rely on others. 

For lasting peace, maybe you should focus on Gaza or the Ukraine for now.










Tuesday, December 31, 2024

Did you make any resolutions for this year ?

 



I've only recently learned how fast time flies for middle-aged folks. The science behind this is that our brain neurons fire much slower, so everything seems to move faster. I've started the habit of stopping myself from reading "useful" books every birthday month to at least catch up with fantasy writing and gaming trends, but this year, I could not read very much. 

For Japanese Literature, I read What You Are Looking For in the Library by Michiko Aoyama. It is a lovely, soothing book that discusses why people should read and how books can turn your life around. It should be given more attention in Singapore because adults read much less. The other book is Lantern of Lost Memories by Sanaka Hiiragi, which is not my style but forces us to ask questions about what day we would like to relive after we pass away.

This is the furthest I can go with serious literature. 

For fantasy literature, I finally started with the first book, Xenos of Eisenhorn Trilogy, by Dan Abnett, which is a page-turner and a great introduction to the Warhammer 40,000 universe. Then, I could cover 40% of the fourth book of Brandon Sanderson's Stormlight Archives, which feels more superhero than fantasy. Still, it's become compulsory reading for me lately as it spawned the most successful RPG kickstarted. 

Finally, I could complete just one large volume with games: Monster, Aliens and Holes of the Ground by Stu Horvath, which runs down different RPGs from the 1970s to 2010s. This is one crazy project that took a few weeks to complete.

That sums up my December, I could not binge-watch, and I now look forward to reading the more "useful" books again starting tomorrow. 

I was once again with a friend at his usual Japanese lounge and bar, and I was stunned when the hosts asked me what my resolutions were for 2025. I was so focused on processing what happened in 2024 that I forgot what I wanted in 2025. 

Last year, I did not dare to make any resolutions, but I hinted that I might start writing a new book or starting a content channel. Still, I did not do all that as my law lecturing workload increased by 300%, so I could be more over-employed as I juggled two freelance roles. The good thing coming out from all this was that 2023 bottomed out, and a quiet benefactor appeared in 2024 to make sure that, in the aggregate, I earned more than 2023 and may start paying taxes again in 2025 after a 4-year hiatus. The market performance, while muted, was still positive, but we will leave it to a Dr Wealth article I will have to start writing tomorrow. 

Overall, I ended 2024 in a slightly better state than 2023 - actually, 2024 was fun with class reunions and hanging out more with my secondary school and JC friends. Socially, my engagements have become more positive. Health-wise, there are no new health scares, and I've gotten used to my prism lenses. Juggling freelance work will never be as stable as regular employment or receiving dividends, so my only resolve is to manage these priorities well and not drop the ball in 2025.

I'm obviously looking at new collaborations. I'm also looking carefully at the kinds of professional conversion plans launched in 2025 and will not hesitate to pick up a considerable, solid skill like AI software development or even quantum computing. But these are iffy and random options, much like my failed attempt to become a professional GM. 

However, a post-financial independent life needs to have a string of beautiful failures and audacious moves because the consequences of failures are so small. Still, the impact on the ego continues to keep one humble.

 

Saturday, December 28, 2024

Harsh Truths about Masters Degrees and the folks who have them.

 


About 3 weeks ago, The Economist published some earnings returns to folks with Master's degrees and measured the value added of these qualifications over those with bachelor's degrees. They found that after adjusting for social and economic status and previous job roles, these degrees do not add much value to the person taking it. 

But the actual data is a lot more damning - folks who had advanced degrees in languages, sociology, English and history actually earned significantly less than those who only had bachelor's degrees, which sort of makes you wonder what kind of folks peddle these programs. If your only career recourse after studying for an advanced degree is to teach the same subject in another institution, then you are no different from someone who sells MLM. You might be part of a humanities Pyramid scheme.

Naturally, the response to the Economist was quick and aggressive, with many academics writing articles to defend their product and saying things like an ROI should not be the primary reason why people should spend more time in school. Ideally, people should be driven by their love for learning. Of course, none of them addressed the elephant in the room - if you have a Master's degree in English or Languages, it would destroy more than 20% of your earning returns!

Another critical data point is why women benefit much more from a Master's degree. The Economist explains that advanced degrees mitigate the motherhood penalty, and women with these degrees continue to pour a lot of work into their careers. Sadly, no troll jumped on this point - men who are about to date highly qualified women need to be put on notice that they will commit less to their families. It's a valid conclusion as well that the manosphere should jump on!

Of course, MBAs are right in the middle of the pack; in the Economist article, MBAs generally do not add any value, but the article hints that very prestigious MBAs tend to have high ROIs. And I'm happy that the Business Times today had an excellent article to fill out the gaps for MBA programs.


The numbers reflect well for the MBA programs - yes, even those for NUS and SMU which are not precisely programs you attend for a higher income, but something you need to have an alternative other than the public sector. When I was studying for my Master's in Finance at NUS, the MBA students tended to be civil servants trying to find alternative employment, and more often than not, a local MBA fulfils that objective for them.

Actually, I did hunt for a Masters program in my mid-20s. My GMAT score was 720 with a 6/6 for the essay component - it was enough to get into an MBA program, but probably not the best program on that chart, so instead, I went after the CFA and paid cheap tuition for it - my MSc in Applied Finance cost to be $10k in total. All I paid was the CFA exam and membership fees. I've always been curious what the ROI for my CFA was, given that I never joined the finance industry before Dr Wealth and brought in a 5 figure passive income a month today - would I have the courage to move my funds from unit trusts to manage my own dividend portfolio if I hadn't witnessed how dumb, mathematically inept ( especially those who fail CFA level 2, you know who you are ) and self-serving finance folks can get?

Ok, so now's the hard part, what can we conclude from this data:

a) If you get a local tech or engineering Master, you should seek an overseas posting.

I don't think the situation has changed much for folks who study for a Master's in Computing or Engineering. The range of jobs is not particularly good, so you are better off going off to Silicon Valley and joining a startup that values your skills. I don't think the ROI for a Tech master in Singapore matches the number in the Economist article.

This has not changed for many years; if you are a computing or engineering graduate of any level, you will always be better off working in the United States to build up your experience. The stock options alone might make a millionaire at a very young age.

b) An advanced degree's primary value is in its signalling effect.

I suspect that you are better off signing up for a course I teach at the Polytechnic if you want to pick up actionable and practical skills, I teach Tort Law and Legal Technology, and sometimes I will make you assemble a PDF document using different free software found on the web or employ ChatGPT to analyse a contract. Amazingly, I also teach office politics and how to stop a dagger from being shoved up your back. Also, the course is almost free, thanks to subsidies. 

But that's not what most readers of this blog want. 

For a Master's degree to have a signalling effect, what is being taught is secondary. Harvard has an excellent case study approach, which makes it the Rolls Royce of MBAs, but the real value of a Harvard MBA comes from the question of who is excluded from the program - which is almost the majority of all applicants. By the time you enter Harvard, you are already a superstar and will build up your social capital working alongside other superstars.
  
c) Can a bad master's degree tar your resume?

You'll only read inconvenient truths on this blog, and I doubt you'll find anything in the mainstream press that will publish stuff like this.

Suppose we believe that some Master's degrees can add a lot of shine to your resume and raise your income. In that case, we have to accept that there is a possibility that some qualifications can reduce your employment outcome even though there's this belief that more learning should be a good thing. After all, we live in a world where a guy can marked down on a dating app if he loves anime or poses with a cat in his profile photo. 

For a while, we know the effect being a private university graduate has on your starting salaries. What if having some Masters degrees marks you as having a political orientation or a more hedonistic outlook? It's a stereotype, but some stereotypes are true. In many social sciences, academics are leaning to the far left. Why would a capitalistic and bottom-line oriented multinational company hire them?

Elon Musk tried to hint as such, saying that he prefers skilled tradesmen rather than those incremental political science types - which aligns with the data from The Economist.

d) A Master's degree may be useful in qualification laundering

Sometimes, I get readers stuck in a dead-end job because they have a private degree. In such a case, if they can get a Masters degree from NUS or NTU, it would take the focus away from their private degree when preparing for a job interview. This might be one of the rare and more practical reasons to pick a run-of-the-mill Masters from a local university.

I call this qualifications laundering; it's not a nice name. 

But I like it.

Anyway, I'll catch you guys again closer to the new year !