Wednesday, September 23, 2009

Starhub 50% cable TV promotion

It has been quite some time since I found some money saving tips!

Last month I passed by a shopping mall and was approached by a Starhub cable TV promoter. My natural response was "have already". He was persistent and replied how about 50% off your bill for one year?

Now that's enticing! My cable TV set me back by $50 monthly, including the rental of hubstation. How is that possible? Starhub never offers recontract offers for loyal customers. My loyalty is worth only $50!

Well, just return your set up box today, clear your outstanding bill and sign up with me tomorrow. I will report you as a new subscriber! You just need to sign a 1 year contract and get a 50% off your channels and hubstation.

Knowing the promoter is commission based, I took his word and sign up! Today I received the bill and true enough, I got 50% off for my bill and for the next 11 months!

I do think it is a silly idea to pay out unnecessary commission to the promoters while inconveniencing existing subscribers. Is Starhub aware that their glaring loopholes are eroding shareholder value day by day?

Loyal customers are not retained; new customers are pursued while incurring high costs of acquisitions. As a shareholder of Starhub, I am unimpressed with their marketing strategy.

Is there a need to report "new" subscribers for pay TV when 90% of new subscribers were loyal customers yesterday? Because of the need to manipulate the numbers, fulfill KPIs, money spent on advertising and marketing are wasted down the drain through the loophole.

Time to wake up and value loyal customers, revamp your marketing strategy and retrain your sales officers, Starhub!

Saturday, September 19, 2009

Quiz on Financial Literacy

Not sure whether it is due to my academic pursuit, does that mean I should stop studying since I am already (theoretically) a "Guru"?

Tuesday, September 15, 2009

Are HDBs affordable at all?

With reference to my earlier article, I have calculated that a couple who bought a decent 3 bedroom unit at Dakota Residences will have paid about $3.3M in interest and principal. It is an awful large amount of money. I would never even dare to dream I have that kind of money!

What about HDB?

Let us now consider the cost of HDB from a cost-salary historical perspective. I draw the following information from Lianhe Zaobao, 6/9/09, written by financial columnist Xu Li Qing.

In 1970s, a 3 room HDB flat costs $8,000. A fresh graduate then earns $1,000 monthly. It is about 8 times his salary. Of course it was extremely rare to have a graduate then!

In 1980s, a 3 room HDB flat in Ang Mo Kio costs $40,000. A fresh graduate then earns $1,600, which translates to 25 times his salary.

Currently, a 3 room HDB flat in Ang Mo Kio costs $270,000. Compared to a fresh graduate’s salary of $2,700, it is 100 times his salary!

HDB prices have increased 12.4% (compounded) annually and our salary has only increased 3.4% (compounded) annually.

In simple words, HDB prices have since increased 30 times, compared to 2.7 times our salary since 1970.

And HDB has always maintained that prices are reasonable and affordable. I supposed it is, for the higher income families!

This explains why dual income is the dominant income model for most families. It makes houses 50% more affordable!

It is not exactly a wonderful feeling to know that my entire portfolio of stocks is barely enough for a 4 room HDB flat or a 20% down payment for a 2 room apartment.

When can I afford to buy my own house?

Thursday, September 10, 2009

A visit to Dakota Residences

I visited Dakota Residences over the weekend. There was no crowd, just a couple of families looking at the showflat and the architectural model.
Currently Dakota has fully sold its 2 bedroom apartments and are left with few units of 3 bedroom apartments. 4 bedroom apartments are still plentiful as there are little takers.

I enquired about the 3 bedroom apartments. They cost a minimum of $1.16m or $889 psf for a low floor unit, with an area of 1313 square feet. Similarly sized unit but at 17th floor, costs $1.33m or $1014 psf.

Seriously, for a 99 year leasehold property I do feel that such prices are out of the reach of ordinary Singaporeans.

Let the numbers tell you why.

Assuming I pay a 20% downpayment to purchase the 17th floor unit, I will need to take out an 80% loan which will mean a monthly repayment of nearly $4,800 @ 3.5% interest. I would have paid about $2m for the house after 30 years.

(I used 3.5% interest as it is usually the interest rate banks use to calculate the affordability of individual income on the house and to be conservative)

After 5 years, my outstanding loan will be about $956,530. I would have paid 60 months of mortgage installments amounting to about $288,000.

If I intend to sell it in 5 years, I will need to sell it at $956,530 (to cover outstanding loan) +288,000 (interest and principal paid) +266,000 (down payment paid) = $1.51M just to BREAKEVEN.

This amount does not include legal fees, stamp duty, renovation, insurance, maintenance fees and other miscellaneous expenses.

Dakota Residences site was purchased at height of property boom in June 2007. It is understandable that the price that developers set need to be profitable to the shareholders, after paying hefty remuneration to the company directors, CEO, senior management etc. They probably need to achieve at least a net profit margin of 15%-25% to ensure that shareholders are happy on their equity investment.

The site next to Dakota Residences was sold at a slightly lower price (per plot ratio) to UOL recently. Personally, I might not buy Dakota Residences even if I have the full cash to pay for one apartment.

Firstly, I would need to endure another 3 years of construction noise and dust at my residence while the 2nd condominium project is being built.

Secondly, the apartments might be priced lower by UOL to entice buyers.

Thirdly, I went for hawker fare at old airport market and found the food rather mediocre. The hawker centre has poor ventilation and you can smell where the toilets are.

Lastly, I have the choice to buy a 5 room HDB nearby at $650,000 and use the spare cash for gym membership and a trusty Japanese car. Who need a door step MRT then?! I would have saved at least $2M at the end of 30 years!

Perhaps buying stocks is still safer for some of us now.

Tuesday, September 8, 2009

How does statistics hide facts?

Statistics often make us believe wrong conclusion and misled us into believing silly correlations.
Let me tell you a story that happened in Country Blue Chips (CBC).

A freshly minted assistant professor (in statistics) “discovered” that drinking orange+apple juice makes you smarter. He runs a regression analysis after a grant by the largest manufacturer of juices in CBC. He then engages 10,000 pupils from CBC primary school, and split them into groups of 10 comprising of 1,000 pupils per group.

Each group is given different compositions of orange and apple juice. E.g., group 1 drinks 10% orange juice+90% apple juice; group 2 drinks 15% orange juice+ 85% apple juice and so on. If the professor can have a large enough sample, he can have an unlimited number of sample groups. He then realized that hey, drinking orange juice and apple juice daily for 1 year does not increase the entrance score of the local gifted programme for 9 groups of pupils. However, coincidentally, the last group that drank 15.5% orange and 84.5% apple juice actually had a 99% percentage of people entering the gifted stream. “Okay, I am going to use this statistic and write a paper on it! Based on a 99% confidence interval, the hypothesis that orange+apple juice can make your child smarter is true! 99% went into gifted stream after drinking the juice composition!”

What about the rest that showed otherwise?!!

They are coincidences! Untrue!! I will not publish that! Anyway, people in CBC are too stupid to discover that!!

Assistant Professor gets a hefty grant and promotion to associate professor, the manufacturer of apple orange juice gets a boost from sales. Correlation does not mean causation. But who cares? At least not the people in CBC!

The same trick has been going on for many years in CBC. It is a sure win-win situation for the researcher and grant sponsor. I can also run the theory that TV makes babies smarter using the same manner. The variable is the number of hours of TV. For instance, I can choose groups of babies that watch 1 hour, 1.1 hour, 1.11 hour all the way to 10 hours of TV and choose the group that is the smartest, or with the highest percentage that goes into the gifted programme eventually.

Then I say, TV is good for your baby! Research has shown that 95% of babies who watched 2.145 hours of TV per day grow up to become scientists in CBC. (The group of babies who watched 2.144 hours of TV grew up to be ordinary Joe findings was not published)

Take a pinch of salt when you read statistics next time. Unfortunately, I cannot run a regression that tells me the amount of truth in all commercial statistics. But my rough guess?


At least in Country Blue Chips!

Sunday, September 6, 2009

Grandlink Square Apartments

Which would you buy? A 1200 sq feet freehold apartment or a 1100 sq feet HDB flat, costing the same, just 2 stops away from each other?

Intuitively, all will choose the former. But with reference to my earlier post, many risks are ignored when we make choices based on intuition.

However, there is indeed such an offer!
A quick check at the government website showed that a freehold apartment in district 14 is selling at a lower price psf compared to one which is just 2 bus stops away, within the same district!

Consider a 111 sqm or about 1195 sq ft HDB flat in pine close selling at $600,000. It works out to be $502psf. The larger 1227sq ft private apartment at grandlink square is only selling for $489 psf!

There are 2 possible scenarios, intuitively:

1) The grandlink apartment is under priced, as it has a lot of sleazy pubs at ground floor. It is in geylang and loans can be a problem. Interest rates will definitely be high. Rental to families virtually impossible. Bachelor would not want to rent a large place to stay either. MRT is nowhere near.

2) HDB is over priced, despite walking distance to Aljuned MRT, near old airport road eateries and stadium.

At this kind of cheap pricing, grandlink square apartments may well be the cheapest freehold apartment in Singapore. One can consider for investment if your family consist of only males and can afford huge cash outlay to purchase the apartment

Renting out grandlink apartments are perhaps a headache. Your tenants might be in the flesh trade and your apartment may evolved into a boutique hotel.

Everything is priced for a reason, buyers beware.

Friday, September 4, 2009

My loyalty is only worth $50 voucher

I called up Starhub recently to enquire about re-contracting my mobile line. Being a faithful 4 year starhub user, I wanted to request for a voucher to offset the purchase price for my next mobile phone.
After 3 days, an advisor called me and told me I am entitled to get a $50 handset voucher which will follow my registered number up to 1 month. I will not get a mailed voucher and neither will I get a cent more.

Compared to M1, which I have been a subscriber before switching to Starhub corporate plan, M1 had rewarded me with $100 vouchers without fail every 2 years. Upon termination notice, it offered a 30% cut to my mobile bill to retain their service.

Also, M1 offers a $100 discount to new sign ups now, even for corporate plans. I guess its time to switch back to M1. Moreover, the cheapest corporate plan is only $15 monthly, which is more than enough to serve my needs, giving me a $10 savings monthly. Caller ID and auto roaming will be free for 2 years.
I urge readers to check out corporate plans over the phone with the telcos. They are not advertising such plans and you will need to call them up personally to check. You could possibly make substantial savings of few hundred dollars if you are entitled to sign up on corporate plan.

Time to say goodbye to Starhub!

Thursday, September 3, 2009

Advertlets never pay!

I guess we get bad debts every now and then, and I have decided that Advertlets will be banned from my blog.

Emails were not replied, yet they clutter my blog 24-7.

Unless they pay up, this posting will be as long as blogspot is around.

Fellow bloggers, please upgrade your nuffnang status instead.

Special thanks to LP for teaching me how to upload screen shots.

Tuesday, September 1, 2009

Counter-intuitive and property investment

An intuitive proposition is one that seems to be true when assessed using intuition of gut feelings.

A counter-intuitive proposition is one that does not seem likely to be true when assessed using intuition or gut feelings.

For example, before we proved that the world is round, many folks believed that it is “common sense” to assume it is flat, or at least, not round! It takes great wisdom for another person to question the assumed belief or “common sense” and often takes great rigour to uncover the truth. I mean, who would actually observe the Earth’s circular shadow during a lunar eclipse?

In real life, many decisions were made based on intuition or “common sense”. However, many people are time and again proved wrong. Hence, humans are never rational. Their intuitions are often imagination of sorts, rather than based on actual facts and figures.

Objective truths are often discovered the hard way, either through scientific research or personal horrific experiences. Many scientific ideas that are generally accepted by people today were formerly considered to be contrary to intuition and common sense. For instance, 0.9999… is equal to 1 is considered counter intuitive. People used to believe 0.9999…. is smaller than one.

There are definitely more examples if you search the web. I shall not list them all.

In investment, many risks are assumed to be absent and thus brought the downfall of many. One have to be counter intuitive to be able to see the hidden risks.

For instance in the purchase of a property at current times, the buyer assumes that a new property (e.g., Trivista, Vista Residences, Optima) will fetch a higher price upon TOP and property in Singapore will only head north. This is the kind of intuitive and “common sense” idea that is deeply entrenched in many buyers mindset.

Buyers continue to believe that their jobs are stable (hence a 30 year loan commitment), Singapore will remain a paradise for rich foreigners (hence the perpetual rise of home prices), neighbouring countries will remain laidback (forgetting Hong Kong, Korea, Japan, Taiwan as competitors and assuming Malaysia will remain as it is), he/she will not be diagnosed with cancer and be forced to sell his property prematurely (many Singaporeans are under insured), interest rates will be low (until they sell/flip their property), buying a house during recession is a sure winning bet and tomorrow will only be better.

That said, does that mean we should not buy property for investment? Of course not! But I will be mindful of the risks before that. For instance, before I embarked on a masters course, I went for a full body check up to ensure that I have no illness. I do not want to give up my studies and forfeit my tuition fees because I assumed that cancer will not hit a 30 year old young man. I will definitely insure myself against early stage of cancer and purchase a higher quantum of disability income if I were to commit to buy a private property. The insured sum should at least be $500,000 and disability income benefit of at least $3,000 monthly. Based on earlier statistics I am quite sure most people are not well insured to that extend.

I will also not overstretch my repayment but rather keep payment within 15 years and monthly payment of maximum 40% of my gross pay, before monthly rental contribution. This would reduce the odds of over paying my property through exorbitant interest rates and having a higher level of free cash flow at my more vulnerable years.

That is why I have been rather frustrated of the kind of frenzy that has over taken the property market. I mean, a 2 room 99 year property selling for almost 1 million dollars, everywhere?! The couple who bought it cannot have more than 1 child! And they are going to spend the rest of their lives repaying the loan. Assuming a hefty $200k down payment and a 30 year loan at 3% interest rate, at the end of 30 years, they would have paid $2,615,000. Their monthly payment is $3,372.80. Assuming they earn $10,000 monthly, that is almost 34% of their gross income.

How many couples earn that amount? And you are assuming you can sell a 2 room apartment, left with 66 years lease (assume 3 years construction period) for more than $2.6 million?

Not to consider that one may be retrenched, parents and themselves may fall ill and need medical expenses, they may have more than one child and interest rates may rise etc.

If you are thinking, based on intuition, buying a property here is a sure bet!

Then perhaps, maybe then the Earth is flat.

PS: Finally sorted out the orientation!