Sunday, January 23, 2022

Letter to Batch 24 of the Early Retirement Masterclass

Dear Students of Batch 24,

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

It is pretty surreal to conduct the class in the middle of a Technology stock crash in the US. The NASDAQ fell 2.72% on the previous trading day. Cryptocurrencies fell across the board as well. As fears of an interest rate rise begin to infect financial markets, the Singapore stock market is starting to look pretty tame, with banks forming a large part of the STI. 

Course-wise, I’m personally glad that the Early Retirement Masterclass would finally have a coherent set of slides on investing in cryptocurrencies that is tailor-made for conservative investors. It was also rewarding to see the strategies taught to hold up against massive losses in the price of major cryptocurrencies like ETH and BTC. I look forward to your feedback on how to improve my materials further. 

There is never a better time to participate in building a portfolio of Singapore stocks as it has always been priced reasonably. Our batch of students has witnessed a return of traditional value investing factors to guide our stock selection on this batch. We’ve also decided to cycle out our technology stock picks with two small-cap counters that are relatively safe and well-liked by local retail investors.

One point to note is that we’ve made a stock pick for a recent IPO counter that has not acquired enough data to be placed meaningfully in our report generator. Please refer to our FB community discussion to get information on this counter.

Lastly, I hope that Batch 24 will participate actively in the FB group. In March 2022, we should be meeting up for an online webinar. At the time of writing, I have yet to determine the subject matter of this discussion.

Hope to see you then!

Christopher Ng Wai Chung

Tuesday, January 18, 2022

Putting gaming front and centre in my latest video.

As I'm conducting Batch 24 of the Early Retirement Masterclass this week, you have to wait a week before some content reappears on this blog.  

But I have a special treat for you today :

For this video, my objective is to pay homage to my gaming roots. 

I made a special point to highlight to iFast that I really want to talk about the Alpha Black Lotus card which last traded for $500,000+ at an ebay auction. Considering this is a trading card I used to play within the 1990s, it has the potential to make TSLA stock look like a money market instrument.

Hopefully this can humanise retirement planning and it gives gamers something to shout about.

We will resume regular articles this weekend as by then I should have finished the book on helping vulnerable families by then.


Saturday, January 15, 2022

[Part 1] Building financial capabilities of vulnerable households


I found an interesting textbook for social workers in Kinokuniya a week ago and decided to buy it because it discusses issues that have bugged me for more than a decade. 

When I just published my first book, I attracted my first bunch of critics. They challenged me to see whether a non-degree worker can also be made to retire early on a salary below $2,000 in today's dollars. 

Faced with such a question, I retreated immediately because my salary was actually quite good when made my first $100,000 ages ago. Also, I enjoyed living like an ascetic. The idea then was that most of Singapore cannot be helped. Even if some kind of magic formula were to exist, most citizens would lack the IQ or conscientiousness to implement a multi-decade plan for retirement. Government understand this well which is why they have CPF - it's a system to save Singaporeans from themselves.  

I'm not the kind of guy who retreats from fight, so the incident stung me for many years. 

Even if Financial Capability and Asset Building in Vulnerable Households is unable to address that challenge, it's worth plunking down $100 to read a book that highlights the difficulties of vulnerable families so that we can at least understand what obstacles stand in their way. To further this end, I made the immense personal sacrifice to stop reading the Economist to focus on finishing this textbook book. 

I'm halfway through and find this a pleasurable read. Way more pleasurable than certain sections of The Economist. 

Before I begin, I'd just like to point out that if you are that unfortunate social worker who reads my blog, the book will be useless to you because it is totally US-centric, I had to wade through information on 529 college plans and welfare schemes available to Native Americans. I also baulked at how shameless US textbooks are at giving suggestions on how to lobby and protest against unfair regulations. The book is written by the political left. And we don't need that kind of shit here in Singapore. 

On the other hand, the book may be useful for some local bodies to develop a framework to help vulnerable families, the key is to wade through all the chapters and find the equivalent social programs to document for Singapore. Whoever succeeds in doing this, is a saint, it may make commissioned financial advisors matter less in society, and I'm happy to volunteer my personal time to help. 

Here are some things I have learnt from 50% of the book:

  • It's hubristic to jump in to look at the expenses of the vulnerable immediately. If someone looks for a social worker, they have a specific problem they need to be solved. Solve it first before getting into processes to clean up a person's finances. Eg. An abused wife may need a PPO before addressing the lack of a bank account as all her money is shared. 
  • Banks can be very oppressive with deposit account charges and ATM fees. Social workers need to be armed with alternatives or find ways to top up to avoid service charges. Sadly, if you have a savings account that is less than $500 with DBS, you will have to pay $2 a month. But $500 is kinda manageable.  
  • Because vulnerable families often work for the gig economy, one area that needs to be looked at are earnings volatility. A poorer family can expect 25+% drop in monthly income every few months from illness or other events. So social workers in the US are always finding ways to get their charges to find more sources of income. 
  • A three-month emergency income kitty is ridiculously hard to achieve for vulnerable families and suggesting this can make you lose credibility. $200-$300 standing by for sudden visits to the doctor or malfunctioning appliances is a simpler and quicker win. I would say $500 to minimise service charges from DBS is a good confidence target.
  • Eventually, a social worker needs to build a map of the family finances. Prioritise the income statement first because there may be some bleeding to stop. Constructing a balance sheet can only come later once they are ready to build better financial capabilities. I don't even know how many can even reach the balance sheet stage.
To go through the volume, I have also wasted a lot of time figuring out how to game withholding taxes and massaging a person's credit report. I really think that the US is really not helping their citizens with a complicated system that makes our CPF policies look like a colouring book.   

In part 2 of my review, I may propose what this means for Singaporeans and what we can do for vulnerable families here.

Tuesday, January 11, 2022

On The Status Game in Singapore


One possible reason why I turned to the FIRE movement was that I was never the star employee of the department. I do ok at work and get decent ratings, but someone else will always take pole position. FIRE was a way of creating something which I am good at. While my increments were lower than top-rated colleagues in my 20s, it would be quite hard to beat my income if you account for salary, overtime pay and dividend payouts. 

One powerful way of reframing anything in Singapore is to see it as status games. In the book The Status Game, Will Storr discusses and illustrates with examples how jockeying for status is something really fundamental that human beings really do. If you think about it, the field of financial advice is basically taking folks with minimum A-level qualifications and bestowing upon them high-status labels like MDRT, COT or TOT and then convincing them that their wonderful advice is as valuable as that given out by doctors when, in essence, they are commissioned sales people. 

This book is one of my better reads this week and I think it is time to look at the kind of status games we have in Singapore because the first step is identifying the kind of status game we are really playing.

a) Games of Dominance

These are status games people play in the past and largely evolved from the games where physically dominant males coerce others to do what they want. Games of Dominance can arise from violence and threats of physical harm. Expect games of dominance in the Mafia, but I found a game of dominance in NUS Engineering School - a classmate who was a specialist in the Commando Battalion told me that punching someone up is often a great method of resolving disputes in his unit. According to him, a fight is often the best way for men to respect you. 

I always found this guy unsettling and I'm glad he was not my sergeant. 

b) Games of Virtue

If you cannot physically overcome someone, maybe you can position yourself as being holier. A Game of Virtue is all about attaining a higher rank based on morality. Obvious examples are hierarchies within a religious organization. In Singapore, games of virtue are often played on social media when an angry self-righteous mob cancels someone. 

2021 was a great year for the cancel crowd as folks like Kenny Leck of Books Actually and Sylvia was targeted by angry Singaporeans. 

c) Games of Success

Games of Success is a more modern invention where you can attain a higher status based on personal achievements. Climbing the corporate ladder is a game of success. If you think about it, labelling someone BBFA is basically a humiliating appellation to lower the status of an EDMW denizen to imply that they are not successful in their lives - which is why they are fat, undesirable and hide behind their keyboards all day. You will find that in every society there is some kind of incel or hikikomori who are folks, often male, who is at the bottom of the Games of Success - incels may fight and actually kill women, but hikikomori usually takes flight.

Personally, one of the best insights from the book is that a person cannot avoid playing The Status Game. 

But he might be playing a different game from you. 

In the FIRE movement, we play the game commonly as a Game of Success where we measure our dividends and calculate what it takes to attain a lifestyle without utilising our monthly paychecks. However, there are groups of folks who play FIRE as a Game of Virtue, where they attack capitalism and promote a more freegan lifestyle that is more environmentally friendly. 

You may be wealthier than the dumpster diver, but he's holier than you. 

If we cannot avoid playing some kind of Status Game then everyone benefits if we have access to more diverse games in society. Maybe I can't qualify to take H3 subjects in JC, but I am charismatic enough to lead the Student Council. If society insists on academic excellence, then there is little room to manoeuvre and no one, especially single males, will willingly accept a low status in the environment they are in - some will migrate, and others will turn to violence. 

At a personal level, to protect our mental health, we should also cultivate multiple interests to play multiple status games simultaneously. Young lawyers quit in droves because it is simply not feasible or logical to play that one status game where lawyers race towards becoming an equity partner.  

So the book does have a self-help dimension - Maybe there is a status game or some subculture out there that we can do well in so that we can bolster our self-esteem and not have to be tortured by the idea of being at the bottom of the shit heap.

When I hit 50, I will qualify for Golden Age Talentime! 

Maybe they'll accept a heavy metal entry.

Sunday, January 09, 2022

Two wacky ideas to think about

On New Year's Eve I had a privilege of being invited to a CPF interest party. To entertain my host and fellow guests, I shared two wacky ideas with them. I just wanted to see how receptive folks are to them. 

I was fortunate as there were many younger professionals attending the reception so it's a good way to look observe their reactions as well.

So here it goes :

a) NTUC should mint its own cryptocurrency

I did spend 11 months with the IT Department in NTUC-ARU. Amazingly my host worked with SLF who holds the purse-strings behind NTUC initiatives. 

My first idea is that it is time to launch a cryptocurrency and the best body to do this is NTUC-ARU. The idea is that with the wealthy cornering fiat in Singapore and almost all rental properties, a new form of utility token that can be exchanged when low-income Singaporeans perform services to help each other can create a new hierarchy of wealth ownership in Singapore. Of course the question is whether MAS will provide oversight over this project. The group says that for this to work, this Ucoin will need to replace the Linkpoints system. 

After I got home, I now feel that my idea is actually too unambitious. UCoin should not even be a utility token. 

UCoin should be a stablecoin based on the seigniorage model. There should be a USGD that is pegged to the SGD and a reserve currency UCoin that fluctuates to enable NTUC social enterprises to plug into the infrastructure to create a decentralised Union Cooperative. Union members can yield farm on USGD to get passive income just like a co-op.

The biggest issue is that Unions will become a second central bank in Singapore, but if its a question of regulation the massive resources of NTUC will probably find compliance much easier than, say the gang behind Anchor protocol.  

b) Someone should try to sell Polytechnic insurance

Since we're already into crazy ideas. I thought that Polytechnic insurance should totally be a thing. I was telling everyone about this horrible article about kiasu parents threatening to withdraw support because their son chose the Polytechnic track and it actually force the Polytechnic to offer financial support for this student.

Regardless of how abhorrent this idea is, anxious parents may want to perform risk transfer in the event their kid enters a Polytechnic. 

From a solely mathematic perspective, an actuarial scientist can calculate the difference in human capital accumulation for the Polytechnic versus JC cohort. We do know of two facts about how a polytechnic education would affect the balance of one person's human capital:

  • 80% of JC students qualify for local university as opposed to 20% of polytechnic students.
  • A Local University graduate earns 50% more than a private university graduate while paying much lower fees.  
The question is: If some insurtech company launches Polytechnic insurance, would kiasu parents buy it?

There are some analogues in the insurance world. Tan Kin Lian is probably more proficient in how insurance products are being built, but I can think of how to model Polytechnic risk. 

One model treats polytechnic education (mathematically - I'm not being unPC here) as a critical illness and pays off a lump sum to parents who need to prepare to send children to Australia after the child enters Poly. Another can model a disability payout and pay a monthly fee to offset school expenses until the child's salary exceeds $3,600 or enters a local university. To prevent adverse selection, the actuarial scientist can use PSLE scores to determine premiums and may even insist on a "bribe" that parents will pay their kids if they qualify for a JC program. The idea is that in each risk pool, parents with kids in JC programs will "compensate" parents with kids in Polytechnic programs. 

( Some blockchain enthusiasts will also note that with government data exposed in oracles, a smart contract can govern the payouts. )

The resistance of this idea is that MOE will get upset at anyone who sells this insurance as there is a strong policy objective to equalise outcomes for Poly and JC education. But this is not a fair objection because if Poly and JC outcomes are indeed equalised and parents have no hang-ups, then the value of polytechnic insurance premiums will be zero anyway. The business will fail. 

As such, this is a powerful signal that can be monitored to view how unequal our society is.

Like every polite crowd, I think one of my ideas has received much more support than the other. 

I leave the reader to guess which one is more popular.  



Tuesday, January 04, 2022

Nothing can save you if you lack conscientiousness !


Two previews ago, I got a pretty smart attendee who wanted to know whether my investment courses are good for students who lack the ability to deal with detail, and may not be able to focus in class. Each signup earns me almost $1,000, but because my investment portfolio depends on how good my students are, I told him that my course is unsuitable for such a person because this person is not conscientious. 

Investment courses require attention to detail, some mathematical aptitude, and is, thus,  a function of two things - IQ and conscientiousness. You need to combine your smarts with the ability to delay gratification to enjoy the fruits of your investments.

Investment course trainers are never worried about students who lack conscientiousness because conscientious people will self-select to study investing.  

Anyway, I've been sort of obsessed with the idea of conscientiousness for quite a while because I strongly believe that anyone who can crack the problem of conscientiousness would be able to become a millionaire many times over. In fact, I think a lot of gurus who claim that kids can be taught grit, perseverance, and the ability to delay gratification, are already making millions of dollars without really channelling academic theories that are peer-reviewed and proven to work across different contexts. 

To really get a grasp of all these attempts at hacking the human mind, you can read Jesse Singal's book entitled The Quick Fix that highlights the crisis faced by psychology academics because a lot of studies published by famous academics are not getting replicated and verified by others. Power posing by Amy Cuddy is a particularly infamous study that a local guru has championed but now getting debunked, ruining the dreams of folks who want to fake it until they make it in the corporate world.

Another academic Angela Duckworth, the academic who discovered the academic definition of grit, is also currently under fire, but that's really not her fault. Grit, which is composed of a person's ability to persist despite hardship and maintain their consistency of personal interests, was initially found to play a large role in personal success, now has been discovered to lag IQ by a factor of over 10 in determining academic success. 

Sadly the idea has taken a life of its own in mainstream media and hardworking academics have tried to play grit down as it is too similar to conscientiousness. 

Right now, millions of dollars await anyone who can crack the code of conscientiousness and design an intervention that exists as a magical elixir to make your kids grittier. 

This is exactly what I did today back in NUS. 

I signed up my son Durendal to study under the NUS Psychology department  Unbeknownst to the academics, this study is consequential for my kids, as it will determine whether they can handle their legacies while I am still alive. 

If you are a parent with kids this age, why not volunteer for this study? 

I'm super proud of my alma mater for working so hard to crack the conscientiousness puzzle.

But I get dibs on starting a business on this!

Saturday, January 01, 2022

Happy New Year ! Cautiously optimistic about 2022

It's the first day of 2022 and I've already gotten my share of silly adventures. Last night, I gathered with a few financial influencers to attend my first "CPF Interest Party" where we celebrate the crediting of interest into our CPF. Throughout the evening until countdown, the CPF website was down for maintenance so I was only able to check this morning.

I did not start the New Year on a particularly good note. We left the party at around 1am, I tried to take the MRT home but it terminated after 1 stop so I got stuck at Botanical Gardens. Then I took a rest at Macdonalds Serene Centre to get a drink, then call for a grab car but there were no cars available at 2am in Serene Centre on Grab or Gojek. 

Initially, I thought I could read a magazine until 530am and then take public transport home. 

I finished the latest Economist at 3am and then realised that I have nothing left to do, then I realised that I had to take a leak but there were no toilets at Serene Centre that are open at that time. Staff said that access passes are only for themselves. Half groggy, I walked over to Adam Road Hawker Centre to relieve myself. 

After that, I realised that I might be too old for this shit, and I might fall sick if I waited for sunrise to get some sleep. So I walked along Bukit Timah Road, walk across Hwa Chong Institution and kept a lookout any passing cab. I thought if no cab showed up, I'd be able to get a teh halia at Beauty World. By then my phone has lost all its juice.

In the end, I found a cab at 4am. I hiked a fair distance by then. 

I got home and fell asleep at 5am.  

Hopefully, the financial markets will be less bungling for me in 2022. 

1) The biggest jackass move this year was putting 37% of all my revenues into my CPF voluntary contribution. That made 2021 quite difficult to handle as my training fees had to feed into portfolios built by my student. Any amount left had to go to the $15,300 Supplementary Retirement Scheme contribution. 2021 felt surreal because there were moments, I felt I was farming my dividends from REITs into my CPF account.

2) The combined moves paid off today when the interest was credited into the CPF account. But I will do things differently in 2022. A friend suggested that I put it in stable coin yields farming and earn an interest rate on my holdings until 2022 December before extracting it for tax management purposes. This sound like a decent idea. 

3) Business revenue for 2021 has been down more than 50%. The pandemic has made the investment training business more competitive as barriers of entry dropped once everyone got online. I don't see things improving in 2022, but I hope I get to launch a new product to sustain my current lifestyle. The thought of failure has loomed large in my mind and I have been making enquiries to smaller law firms since I have cleared all my weekday normal office hours. I like my life, don't need the money but I have enough self-awareness to know that I may do something destructive if I stop exchanging time for money.  

4) While the revenue has been down, as a sole proprietor, I made more milestones than if I were in the Employee quadrant. I worked with iFast to launch my introducer service and someone stumbled into a regular segment on iFast TV.  I'm producing a lot more videos than before. 

5) A more detailed writeup will be made on the Dr Wealth Blog on portfolio results. Student portfolios did 13.52% this year compared to 12.92% for the STI ETF. I cannot emphasize how hard it is for factor models to beat the index this year as the STI ETF now has 7 REITs and is fairly formidable as an opponent. Do note that we do take less risk with a beta of 0.8. Factor models also missed out on restructuring efforts as laggard Temasek counters caught up. My students have now beaten the STI ETF three years in a row. 

6) Of course 13.52% returns are not too shabby if you consider the fact that I leverage all my student portfolios for myself. 

7) Thanks to the pandemic, we could not travel, so we did not spend a lot of money. I spent $15,000 on home improvement at the end of the year. 

8) My mum's angioplasty was financially the riskiest event we faced, but we took 3 months of dividends to offset the costs. This is a serious privilege that has been built up by my dad for the past half-century.

Still, 2022 is starting on a fairly good note. 

I think 2021 was kind to me although I took steps to make it tougher to shore up for the future. At least all that work in 2021 was supposed to lower my tax bill so, due to a drop in revenues, I expect lower expenses this year. I've got a solid plan moving forward to survive in my business.  

Let's see what this new year can bring for us.