Sunday, November 6, 2011

Common Law Is The Law For Common Man 法证先锋3 Translation

Cantonese dramas are the best form of entertainment. It virtually costs nothing as it can be downloaded on the net, provide excellent subject knowledge of law and specialised fields. I took awhile to translate the above, impressed by the efforts made by the script/research writer. The below translation begins at 1:05

Pro Sir: Common law is the law for common man. Common law is the fundamentals of all Hong Kong laws. The model for common law is to accept the objectivity of rules. This refers to the unspoken rules agreed by the majority which dictates habits, truth and false, right and wrong. This forms the fundamentals of common law.

The motive behind an action is accepted is not solely due to my judgment but derived from the fundamentals of common law. It reflects the same motive behind the same action of the majority.

The accused forcefully inserted the pill bottle into the deceased mouth. The motive behind the action was to force the deceased to swallow ketamine pills within the bottle.

Lawyer: Your honour, the witness’s illustration has already been dislodged from the specialization of a forensic scientist.

Pro Sir: My professional judgment must definitely be base on the fundamentals of common law. Thus my court statement is not dislodged from my profession.

Judge: Expert witness, you may continue.

Pro Sir: Thus when you brought the bottle to your mouth with a swallowing action, the whole set of actions under normal circumstances would led one to believed that the bottle is filled with water or other forms of liquid. Thus a normal person would then be driven to display a drinking action.

Of course, a person would also would pick up an empty bottle and pretend to drink. This is because he is acting. He is an actor. The motive behind your actions is to create a perfectly logical scenario. In reality, your account is an unconceivable illusion which is a blatant attempt to overthrow the whole truth.

From your perspective, to overrule my judgment, your motive is reasonable. But I need to emphasize, the legal judgment I made is based on the fundamentals of common law. The accused forcefully inserted a bottle full of ketamine pills into the deceased’s mouth have led to her death.

This is definitely a correct judgment, closest to the truth.

Sunday, October 23, 2011

Why I worry about retirement

Many close friends who read my blog often label me as a salty man. This has a negative connotation because in Hokkien context, it is “kiam” or scrooge in western terms. However, when I explained my rationale to them, suddenly they realize they either be prepared to work past 55 or be better off being more salty.

In today’s competitive workplace, there are not many people who are willing to work past 55 years old, even if they are ABLE to. Perhaps it is due to the increased pace of life and work pressure, many people just find it too stressful to cope mentally and physically beyond 55 years old.

The problem is exacerbated when the same group has ailing parents, growing kids and mortgages to repay monthly.

Life becomes much more stressful, simply because they need to work or they die (from debts and poverty).

In a nutshell, most people don’t retire at 55 simply because they cannot afford to do so, not because they choose not to.

Let’s work some simple figures here. Most Singaporean men with degrees start work at 25 years old. If they aim to retire at 55 years old, they have 30 years of working life. Assuming a life expectancy of 85 years old, they have another 30 years of income-less life to sustain after retirement.

This effectively means for every day we (men) work, we need to set aside funds for both the day we work and another day we do not work for the next 30 years.

And for the savings we put aside, we need to grow it at least at the prevailing 5.7% inflation rate in order to sustain the same kind of life style when we retire.

CPF only grows 2.5% PA, which is grossly not enough to cover inflation. Even if it is enough, most likely it is depleted to purchase HDBs which easily cost $500,000 at today’s prices.

Let’s assume again a modest lifestyle of $2,000 per month for a single at age 55. This works out to be $2,000 x 30 years = $720,000 cash balances in today’s dollars to sustain a modest life style. The amount will balloon to $900,000 if the single requires $2,500 a month for the next 30 years.

If we factor a conservative 4% inflation, today’s $720,000 will be worth $2.34M (future value) in 30 years time.

The same 4% inflation will make $900,000 today’s dollars worth $2.92M.

For people lost in reading, it simply means that you need $2.92M in 30 years time to buy something worth $900,000 today if inflation is 4%.

In order to enjoy the same modest lifestyle of between $2,000 to $2,500 per month, the individual who retires at 55 needs to set aside between $2.34M-$2.92M for him to call it quits at age 55, 30 years later.

This is not factoring if the individual lives beyond 85 and whether he can invest his retirement funds at the prevailing inflation rates. If he is unable to do so, he probably needs to sell off his house in order to exchange for food.

Most Singaporeans who buy houses today stretch their loans to 35 years. This means that a 30 year old couple will need to service their loans till they reach age 65 before they finally own their homes.

There are no prizes to guess why government is stretching the retirement age.

Some other observations I made as follows:

(1) Most singles out there probably spend more than $2500 a month, even if they just earn this much.

(2) Most people at age 55 now do not have $720,000 to $900,000 to lead a worry free life up to age 85. What makes you think we can achieve the equivalent amount in future value 30 years later?

(3) Medical costs and inflation rates are not at 4% only.

(4) You need to earn a minimum of $5,000 a month, save $2,500 a month and invest this sum at prevailing inflation of at least 5% consistently for the next 30 years in order to retire at 55.

(5) The sums required may increase 1.5x to 2x if you have a partner. If you have kids, you need to pray that they give u some allowance if you have not achieve the required by age 55

(6) You cannot afford to be retrenched or your retirement age stretches even further.

(7) You cannot depend on CPF for retirement if you have bought a house.

In my workplace, I do see many people earning high 4 figure salaries but have not much savings. They take for granted that health, wealth and career path will always be smooth sailing.

Let’s not be pessimistic about life but admit the fact that we can’t afford to retire if we are not prepared for it.

And I am not kiam, just getting prepared. :)

Saturday, September 17, 2011

Update on Historical Volatility of SPH and STI ETF

With regards to my earlier post on volatility, yes the calculation was a bit off but it has no material impact on my comparision. But anyhow, for folks interested in the volatility of SPH and STI, I have taken monthly returns from 2008 Jan to 2011 Sept. Calculation was based on excel. The results are quite similar, SPH and STI has a correlation of 86.5%; Annualized volatility of SPH was 22.28%, STI (ETF) was 25.15%.

Unfortunately, volatility does not tell you whether it is upside volatility or downside volatility. It also assumes the same weightage of volatility throughout every month, which is not accurate. It also does not factor in dividends that affects price movement much more on certain days.

Compared to Schroders Singapore Trust, the average 3 year volatility was 23.7%, which is higher than benchmark. As for the returns, it returned 18% over 3 years.

Assuming one bought SPH at 2008 1st Sept at price of $3.98, dividend yield for 3 years would have been 19.85%.

Assuming one bought STI ETF at 2008 1st Sept at price of $2.45, dividend yield for 3 years would have been 5.78%.

At 1st Sept 2011 SPH price of $3.73, total return for the same investor would be 13.57%.

At 1st Sept 2011 STI ETF price of $2.92, total return for the same investor would be capital gain of 19.2% + dividend of 5.78% = 25%

It is likely that actively managed funds under performed ETFs due to higher management and brokerage costs.

This post will convince most people to diversify into ETFs and stop holding large single stock holdings, which includes me!!!!

Saturday, April 16, 2011

Hyflux Preference Shares

This post is slightly overdue as interested parties would most likely subscribed to it. Currently I see a lot of interest in it with books closed for subscription closed that very morning when it was launched in my workplace.

In fact I did carry around the Hyflux advertisements and ask some of my aunties in my office to subscribe to it. The 6% cummulative dividends and 8% step up (2018 if not recalled) is a compelling reason to subscribe.

However, do take note that the preference shares are not rated and most probably only Singaporeans are familiar with Hyflux. It is unlikely to have fund houses buying large quantities as it has no credit rating and fund managers cannot overide the mandate of having non investment grade preference shares/bonds in their portfolios.

This may result in poor liquidity.

It is extremely rare for non financial companies to issue preference shares as it is a tool used mainly by banks to shore up their capital adequacy ratios. The other non bank that issued preference shares I know of is Cheung Kong Holdings.

If the size is increased to $400M, Hyflux will have an additional war chest of $400M, a hefty sum relative to its $1.8B market cap.

Wait, why does Hyflx need so much money suddenly? Not considering Hyflux would have to repay $24M (6% of $400M) every year to preference shareholders which is more than 30% of its 2009 net profit ($75M).

Are there any dividends left for ordinary shareholders?

With interest rates being all time low, is there a reason why Hyflux has to resort to expensive financing?

Is there a problem with Middle East Investments? Middle East contributed the bulk of revenue in recent years, over taking China as it largest revenue contribution region in 2009.

According to SGX announcement in April 15th 2011, one of the directors sold all his stake in Hyflux.

Have you applied for it?

Sunday, March 27, 2011

Patriotic to own a Beemer

One of my classmates bought a BMW recently. I know she earns about $10,000 a month and technically speaking, she is buying a car that cost roughly twice her annual salary. There is nothing wrong to enjoy the finer things in life though it means she is also patriotic as well.

Why patriotic?

In Singapore to own a car, you will be paying a huge load of tax to the government. Take my classmate’s BMW, she has paid the following to the government:

Open Market Value (OMV)= $58,000

Thus Additional Registration Fee (ARF) will cost 100% of OMV =$ 58,000

Excise Duty: 20% OMV= $11,600

Registration Fee: $140

Certificate of Entitlement= $45,000 (few months ago)

GST: OMV x 7% (approximate) = $ 4,000

Total tax payable to government coffers: $118,740

The total cost of her car was about $210,000 then, which means the gross profit margin for the car dealer was 43.4%.

In order to own her dream car, she has to contribute in excess of $100,000 to nation building, I have respect for that.

Good thing is that she only took a 1 year loan and has only a couple of months to fully pay up her car. As for me, it will be unlikely that I will ever own a BMW, probably the furthest I would go is a Toyota Camry.

My rationale is simple. Consider a $200,000 lump sum investment to grow on a compounded basis of 10% (1.1^10), this initial sum would grow to $518k after 10 years. The opportunity cost of $318k means that she might have to work another additional 3 years to fund her retirement. Coupled with her 2 years salary to purchase the car at the onset, she potentially could have retired 5 years earlier.

Yup, 10 % PA might not seem realistic. But if one has the investment horizon and purchase some China Equity fund, we should be looking around this level of returns. China will be overtaking America as largest economy in my lifetime, according to most analysts.

Well, to each his/her own. I prefer to retire earlier and spend my days reading, writing and travelling when I am still able. As for owning a nice car, I think I will hitch a ride when I meet up with her in school instead.

Life is tough, retire early. That’s for me.

Sunday, March 20, 2011

What is the stock market to you?

My colleague thinks it is just an electronic platform to buy and sell shares.

Some believe it is a gambling table. Perhaps that’s why Genting is often the most traded stocks.

Another might think it is a place to park retirement funds in blue chips for steady return.

Yet another might think it is a place where the big crocodiles eat up the small fishes and avoid it at all costs.

I believe it is the best place to generate excess return amongst all asset classes.

My grandmother doesn’t know the existence of it.

It is subjective to define what a stock market is because different people have different experience and thus perceive it differently. Just like how the blind men describe an elephant:

The First approached the Elephant,

And happening to fall

Against his broad and sturdy side,

At once began to bawl:

“God bless me! but the Elephant

Is very like a wall!”

The Second, feeling of the tusk,

Cried, “Ho! what have we here

So very round and smooth and sharp?

To me ’tis mighty clear

This wonder of an Elephant

Is very like a spear!”

The Third approached the animal,

And happening to take

The squirming trunk within his hands,

Thus boldly up and spake:

“I see,” quoth he, “the Elephant

Is very like a snake!”

The Fourth reached out an eager hand,

And felt about the knee.

“What most this wondrous beast is like

Is mighty plain,” quoth he;

“ ‘Tis clear enough the Elephant

Is very like a tree!”

The Fifth, who chanced to touch the ear,

Said: “E’en the blindest man

Can tell what this resembles most;

Deny the fact who can

This marvel of an Elephant

Is very like a fan!”

The Sixth no sooner had begun

About the beast to grope,

Than, seizing on the swinging tail

That fell within his scope,

“I see,” quoth he, “the Elephant

Is very like a rope!”

And so these men of Indostan

Disputed loud and long,

Each in his own opinion

Exceeding stiff and strong,

Though each was partly in the right,

And all were in the wrong!

Poem by John Godfrey Saxe (1816-1887) based on Jainism and Buddhism. Udana 68-69: Parable of the Blind Men and the Elephant

We are still quite blind to the concept of stock market isn't it?

Monday, March 14, 2011


Be greedy when others are fearful, be fearful when others are greedy. I sense fear now. What are you waiting for?

Honestly, the last time I see such a scenario was during the Lehman Crisis in 2008. The selldown back then was even more earth shattering than this.

The last time STI went below 3000 points was roughly in August last year. This means that for STI has given up its 8 months gains due to the earthquake.

That said, 2800 points seems to be a safer entry point for long term investors. At that level, most banking stocks are giving at least 4% dividend yield on your investment.

Honestly, I have not much luck timing market cycles. Hence I try to always buy and rarely sell to build up my passive portfolio income.

If you are reading my blog and not invested, congrats. Buy now and hold as long as you can. Please buy me coffee when you have made money, on my right panel, thanks!