Singapore Blue Chips

Market Updates For Feb 2012 and Portfolio Adjustments

2012-02-07T14:54:00.001-08:00

1) Local market STI increased approximately 11% year to date, 17% from Oct 2011 lows. There were similar returns across regional markets. US markets increase at a lower rate, roughly about 7% YTD.

2) The reasons contributing to the buoyant stock markets have little to do with market fundamentals. It is the consequent of central banks printing money as European Central Bank pledged to lend out 489B EUROS to ease potential credit crunch in Dec 2011. This is as good as providing cheap credit to banks which enable them to lend out more cheaply for investments. This money are flowing to Asia and emerging market regions. Just last week, funds investing in regional equities drew a net inflow of US$430M. This is the 4th straight month of inflows to Asian regions, which explains the 5th straight week of regional equities market appreciation.

3) Aussie dollars appreciated as stock markets rallied. Over the span of 2 months, it has increase more than 4% against SGD and 5.5% against USD.

4) Average turnover of equities are still below last year’s average. There is a noticeable increase in volume, not value. This translates to speculative trading of penny and mid cap companies stocks. An indicator that market may be looking toppish for the short term (3 months-6 months)

5) Borrowing costs continue to appreciate for corporate loans. This is a peculiar phenomenon. Notice that although banks are able to borrow cheaply from their central banks, they are charging high premiums on the interest lent out to companies, driving up returns on bond yields and returns. One local unlisted company have even issued out 8% PA (non investment grade), 3 year corporate bond.

6) The rationale is simple. World central banks provide cheap liquidity to their local banks. Instead of lending out to companies, they lent it out to governments instead. This way, they do not need to set aside the regulated reserve requirements as government bonds are considered their capital. What happens if government defaults then? The scenario though unlikely may result in foreign banks run.

7) The Baltic Dry Index as of last week has fallen to its lowest in 25 years. This index is a leading indicator of world trading activities, which means lower anticipated demand for raw materials.

8) Conclusion: There could be possible downside risk, given that markets have rallied so strongly over the past 1.5 months. Greece coalition government is under pressure from its own people and Euro zone leaders on their debts. There is small break through lately but with debt refinancing due in March, all eyes are on their ability to repay their current debt obligations. Nobody is able to forecast market’s reaction to Greece default as no EURO Zone member has defaulted.

9) What am I looking at to invest? I have taken profit on a number of equity positions and embarking on exciting leverage financing. I will pledge my shares for a cheap OD line (1.3% P.A.), purchase a 3 year SGD corporate bond and leverage on the same bond to purchase another one. This would increase my yield of $250,000 to 6.5% P.A, assuming interest rates remain low. This investment is at the final stage as my OD line is up, I just need to select the safe bond to leverage upon. My outlay will be approximately $150,000 in cash and $350,000 in borrowings. This would enhance my entire portfolio to $500,000 in fixed income, $230,000 in equities and $50,000 in cash. I will write more about this when the bonds are purchased. Margin call concerns will also be addressed.

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

2011-11-06T20:54:00.000-08:00

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.

Why I worry about retirement

2011-10-23T07:07:00.000-07:00

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. :)

Update on Historical Volatility of SPH and STI ETF

2011-09-17T10:31:00.000-07:00

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!!!!

A little comparison with a single stock and unit trust

2011-06-25T18:55:00.000-07:00

Most of my friends who bought Unit Trust didn’t really make money. I personally considered that a weird phenomenon as most of them held their holdings for more than 3 years and are still in the red. Compared to me, most of my holdings are held in single undiversified companies that gave me decent returns. Today I make a comparison with 2 random funds and my largest single stock holdings, SPH.

I will compare the risk and return during the past 4 years.

I am using 2 funds which most of my friends invested during the height of the crisis. They are First State (FS) Asian Growth and First State (FS) Regional China.

During the peak of their price in end Oct 2007, FS Asian Growth peaked at 1.93, FS Regional China peaked at 2.35.

Today I checked their prices; they are at 1.73 and 2.0021 respectively. This is to say an investor who invested at the peak of the fund prices would still be suffering a loss of 10.4% for FS Asian Growth and 14.8% for FS Regional China.

There were no dividends for the above 2 funds.

What was the price for SPH in 30 Oct 2007? It was 4.58. The latest closing price was 3.84. The same investor who bought SPH at the point when the above funds peaked will be suffering a loss of 16.2%, before dividends. What were SPH dividends during the last 4 years?

Assume the investor bought SPH in Oct 2007 and held it till today, his dividends would be as follows:

2007: 19 cents (not accounting for May 1H dividends)

2008: 27 cents

2009: 25 cents

2010: 27 cents

2011: 7 cents (1H only)

Total dividends: $1.05

Thus the same investor who bought SPH at the peak of the fund prices would have recouped his capital and made a modest gain of 6.8%. This is not considering he would have gained interest on his dividends.

Many readers would point to the fallacy of my argument. What if the investor bought SPH at the peak of 4.72 in 10^th Dec 2007 (just before it goes dividend XD)?

His cost of purchase after accounting for the dividends would still be at $3.67, his profit would still be at 4.6%.

Again academia would argue it is not fair to compare a single stock to mutual funds. I could have taken much higher excessive risk to achieve better returns. Let’s calculate it on the basis of risk adjusted returns.

In order to simplify my calculation, risk free rate is assumed to be zero and volatility is calculated based on peak to trough deviation from mean, 3 years average.

FS Asian Growth: 3 year high 1.85, 3 year low 0.93. Average 1.39, 33% volatility

FS Regional China: 3 year high 2.17, 3 year low 1.02. Average 1.595, 36% volatility

SPH: 3 year high 4.72, 3 year low 2.35. Average 3.535, 33.5% volatility

Volatility is assumed to be deviation from the average price. Though not accepted by many academia, it is a rough way to get risk adjusted returns for comparison purposes.

Thus the Sharpe ratio, which gives us the excess return for every unit of risk taken are as follows:

FS Asian Growth: -0.32 (negative returns for every unit of risk taken)

FS Regional China: -0.45 (higher level of negative returns for every unit of risk taken)

SPH: 0.13 (positive Sharpe ratio that states that every unit of risk taken yields 0.13 unit of excess returns)

Some observations, disclaimers and fallacies in my little research report:

Unit trust sales charge and brokerage charges are assumed to be zero.

This is not to discourage the purchase of Unit Trust. I personally have FS regional China in my portfolio as well. This is just to compare (unfairly) SPH with two of my best performing Unit Trusts in my portfolio.

Volatility calculated though consistent is not correct. Sharpe ratio is a function of volatility and different fund house calculate volatility differently, perhaps to their advantage. Some may take minute/day/weekly/monthly/yearly volatility ratios to generate their financial ratios. I use my in house SBC volatility calculation, easy to understand and meaningful for comparison.

As long as returns are negative over the given period, Sharpe ratio will be negative. Most funds give negative sharpe ratio over 3-5 years period anyway.

The fact is I am still holding every single share of SPH I bought in 2007 and some were added, off loaded along the way. Dividends reinvested in other counters gave pretty decent returns during the crisis where REITS were near the bottom.

If I have used some of my worst performing stock eg Hong Leong Finance or DBS (fortunately both less than 20k investment), the above funds will be doing much better.

If I have used Aberdeen Pacific equity for my comparison, SPH would have fared much poorer.

Fact is, SPH did give better risk adjusted returns over most funds available in Singapore.

Diversification does not provide you better returns or lesser risk than a single stock, at least in the above case study.

I still prefer my current way of investment style. Income concentrated with dividends reinvested in different counters for more income. It has buffered a lot of my losses and added a lot more thrill and returns in my investment journey.

I would still be investing in Unit Trust mainly using CPF funds. I will still actively look out for dividend blue chips to grow my income to a day that I do not need to work for a living.

And my apologies for keeping my faithful readers the long wait for a single post.

Busy with work lah!

Hyflux Preference Shares

2011-04-16T18:59:00.000-07:00

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?

Patriotic to own a Beemer

2011-03-27T09:47:00.000-07:00

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.

What is the stock market to you?

2011-03-20T02:33:00.000-07:00

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?

BUY CALL FROM SBC

2011-03-14T21:23:00.001-07:00

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!

Why I wil not hold US stocks in the near term

2010-12-25T20:09:00.000-08:00

Current S&P 500 PE Ratio: 22.95

Mean: 16.38
Median: 15.76
Min: 4.78 (Dec 1920)
Max: 44.20 (Dec 1999)

Looks expensive to me now. If stocks were to revert to mean, either earnings go up 40% or stocks go down 40%. Let's just take the middle path to be neutral. That’s at least a 10% downside to go.

Current S&P 500 Dividend Yield: 1.78%

Mean: 4.35%
Median: 4.29%
Min: 1.11% (Aug 2000)
Max: 13.84% (Jun 1932)

Low dividend yield states that investors are betting on capital appreciation instead of dividend returns. Doesn’t bode well. The last time it went that low was in year 2000.

Current Treasury Bond Rate: 3.41%

December 23, 2010

Mean: 4.69%
Median: 3.84%
Min: 1.95% (Jan 1941)
Max: 15.32% (Sep 1981)

The 10 year treasury bond rate is higher than dividend yield. This is the risk free rate. Investors would probably prefer to park money here than take risk in stocks in medium term.

Current Inflation Rate: 1.14%
(November 2010)

Mean: 2.41%
Median: 2.48%
Min: -17.19% (Jun 1921)
Max: 21.24% (Jun 1920)

Interest rates will remain low, in line with Keynesian liquidity trap theory. People are not spending as they have low confidence in the economy. That’s for sure if every 10 people you meet, one is unemployed.

Current Unemployment: 9.80%

November 2010 unemployment rate — published December 05, 2010

Mean: 5.71%
Median: 5.60%
Min: 2.50% (Jun 1953)
Max: 10.80% (Dec 1982)

Needless to say, spending in US is struggling now. GDP really need to grow by another 3%-4% to bring down unemployment.

If there are reasons to be bullish on the US economy, I will really love to hear.

Investing in Singapore listed ETFs

2010-12-25T01:22:00.000-08:00

ETFs is the acronym for exchange traded funds, which are basket of stocks traded over the exchange. Having invested nearly 0.5M in stocks I must agree that ETFs are not exciting products for people looking at supernormal returns. However, holding ETFs means sleeping better at night since I will probably not be losing my entire capital even during market crash.

Take the STI ETF for example. If I lose my entire capital invested, this would literally translate to DBS, UOB, OCBC, SIA, Singtel trading at zero dollars. For that to happen, I think putting money anywhere will mean total loss anyway.

Besides, STI ETF pays regular dividends as well. Historically, the dividends are about 4-6 cents per unit, which translates to miserable yield of 2%. Well, don’t expect Singpost or SPH dividends payout if you are buying STI ETFs. People mainly buy it for capital appreciation.

The sales charge is equal to brokerage charges (0.2%), management fee of about 1% and that’s it. No need to rebalance portfolio as fund manager does that for you, daily.

I have been through the Lehman crisis and it’s terrible to see my stock holdings bleed day after day. Fortunately, I was holding on to pure blue chips and that gave me conviction to hold. Dividends came in timely as I repurchase other even badly battered mid cap stocks that gave me more than 100% returns on hindsight.

Today as I looked back, I might not have fare much better if I invested in STI ETF. However, I definitely would have slept better during the crash in 2008. This is what portfolio theory explains: Invest according to risk tolerance and you will get an optimal portfolio that gives you the highest return based on your risk profile.

I want to blog more about ETFs as this is the next direction I am getting into. No more single large stock purchase, mainly diversified portfolio in different regions.

In Singapore, we can access to the worlds markets just by buying ETFs and paying the minimum brokerage of 0.2%. However for a start, I would like to constrain myself to buy plain vanilla ETFs instead of exotic new generation ETFs.

From SGX website:

Plain vanilla ETFs (as I termed it) are cash based ETFs that adopt either full replication methodology or representing sampling methodology

Full replication methodology
The ETF holds the same stocks in the same proportion as the weights of the constituent stocks in the benchmark index.

Representative sample methodology
The ETF holds a selected number of constituents stocks of the underlying index according to their degree of historical correlation with such index. In other words, the ETF holds a sample of constituent securities that statistically represents the index.

In other words, my invested captial is backed by shares of companies as underlying assets.

List of cash based ETFs

Cash-based ETFs
Cash-based ETFs	SGX Stock Code
ABF Singapore Bond Index ETF	A35
CIMB FTSE ASEAN40 ETF	M62
Daiwa FTSE Shariah Japan 100 ETF	F1F
DBS Singapore STI ETF	G3B
iShares Dow Jones US Technology Sector Index ETF	I21
iShares MSCI Singapore Index ETF	I19
iShares S&P 500 Index ETF	I17
SPDR Dow Jones Industrial Average ETF	D07
SPDR® Gold Shares	O87
SPDRs^® S&P 500^® ETF	S27
streetTRACKS® Straits Times Index ETF	ES3

As I am only interested in investing in cash based ETFs, options to me are still quite limited. I have invested in STI ETF and will probably look into gold etf (O87, S27), American markets (I17, I21), ASEAN markets (M62).

Asean 40 ETFs invests mainly in Singapore stocks (40%) and the rest in Malaysia (31%), Indonesia (17%) and Thailand (11%). Quite an interesting combination.

As for exotic ETFs which I termed that myself because I don’t quite like the fact that I am not holding on to actual securities but rather options/notes of the underlying assets. If you want more info on this, check this link out: http://www.sgx.com/wps/portal/marketplace/mp-en/products/securities_products/etfs

Though counterparty risk may be low, but I still traditionally believe that investment should be simple and direct. I don’t mean to put new generation ETFs down, but it is just a personal preference to keep my investments simple. Even though that means I am losing out on buying Brazil, Russia, China index funds. Well, I may invest in an emerging market unit trust instead to ride the new commodities and BRIC wave.

Hong Kong Small Size Properties

2010-11-28T21:46:00.000-08:00

I have always like Hong Kong and have stayed there several times during my course of work and leisure. I remembered staying in one of the islands know as Pak Lai Wan for a couple of weeks and I was extremely impressed by the smallish apartment.

The apartment featured here is about 750 sq ft and costs SGD$660k. It is extremely decent, with 2 bedrooms and a seaview of the QingMa bridge.

Cars are not allowed in the island and residents can either take a shutter bus or ferry to reach their homes. It is 20 minutes ferry ride to Central (10 mins interval on average) or 10 minutes shuttle service to and fro Tsuen Wan. This is really pollution free place!

I am really amazed by just how they can pack good quality furnishings into a compact apartment without you feeling suffocated. Full condo facilities and a heated pool. Perfect!

If you are staying at this kind of apartment anywhere in Singapore, it will definitely cost you at least 2x the quantum, not forgetting you will not get the views below...
Getting up early in the morning with such views, no matter how small your living space is, you feel that you are having the whole world! This is first hand experience, honest!

Conclusion: Singapore property is too expensive, even by HK standards!

MRT stations of the future

2010-11-27T04:05:00.001-08:00

Currently properties with MRT stations command a high premium. With the upcoming Eastern, Bukit Timah, North Coast, Downtown lines, more and more houses will be near MRT. In fact, any house will be near MRT stations!
Link to map

Perhaps by then houses away from MRT stations will command a higher premium instead!

M1 Good Service

2010-11-24T05:37:00.001-08:00

I am really impressed by M1. I made a call to them today and wanted to change my subscription plan. Initially, there was a $20 charge and I casually mention to them to waive it, they acceded to my request without any objection.

Thereafter, they informed my that as I am on corporate plan, my new plan costs only $20.54. I replied that I was not aware I should be enjoying corporate rates and the phone officer volunteered to give me a $5 rebate on my phone bill for the next 6 months as goodwill compensation.

I decided that my data plan was going to waste as I seldom use the internet other than checking emails. Besides my company provides a state of the art smartphone that has everything to keep me working 24 hours. I can't be surfing internet on both phones together right? Hence I decide to withdraw my personal data plan from M1.

More savings for me ahead, though I still prefer the days when apple and blackberry are just fruits.

SABANA SHARI'AH COMPLIANT REIT

2010-11-23T21:16:00.000-08:00

Just applied for this reit.

MOE Recent News

2010-11-23T18:07:00.000-08:00

MOE Overseas Scholar admitted being child porn addict.

MOE teacher provided Mas Selamat food, water, map and other survival toolkit.

ACS ex principal convicted of inappropriate behaviour, abused of power to be intimate with his biology teacher subordinate.

MOE primary school teacher serving sentence for having sex with her ex primary student in chalet.

MOE teacher acquitted of molesting ACS students.

Teachers really make a difference and show you the world. Well, only some of them.

Liu Wei: Armless Pianist

2010-11-19T07:06:00.000-08:00

While you are digging your nose and reading my blog, listen to this:

Out of difficulties create miracles.

Now stop complaining about life. Not when Liu Wei isn't.

Everyone should know everyone's pay!

2010-11-16T23:20:00.000-08:00

According to columnist Matthew Lynn, everyone should be open about their pay.

1) Everyone will benefit because we aren't sure if we are fairly paid unless we know what our colleagues and bosses are getting. Our bosses can easily hookwink us because we don't have enough information. Knowing everyone's pay will allow us to seal a better salary package.

2) We tend to feel insecure of our earnings if we do not know how much others are making. We are likely to assume that they earn more than us and feel lousy about it. Truth is, you are probably above average and your self esteem will improve upon knowing your commercial value.

3) It will make us financially responsible. How many times have people bought LV, BMW, Patek Philippe, condominiums on credit without being able to afford it? This is because people don't really know how much you earn and thus some people buy more than they can afford to create an illusion of being highly paid and successful. If everyone knows how much you earn, you don't need to buy anything to create any illusions. Everyone will be humbled and purchase goods that match their income (since it is no secret).

Thus disclosing one's income may be embarrassing in the short run but beneficial for all in the long run. How much do I have and earn? It's all in my blog! Now tell me yours....

Number 1 search result!

2010-11-16T14:43:00.000-08:00

Every time you search "Singapore Blue Chips", you will definitely have my website as one of the top search results.

Google

Yahoo

Rednano

My google page rank has a decent value of 3. For a non profit personal blog, I think that's a little achievement! Yeah!

A Visit To Esparina Residences

2010-11-15T05:12:00.000-08:00

I was driving near Sengkang and decide to pop by the new EC, Esparina Residences. The prices were extremely competitive!

As more than 90% were sold, only 2 bedroom units were left. This is a peculiar phenomenon as usually 2 bedroom units were the 1st the be snapped up in any new launches. As this development is an EC, the main barrier is $10,000 household income. I was interested in a 3rd floor 2 bedroom unit.

The prices were really reasonable. A 2 bedroom 829 sq ft unit, morning sun with blocked afternoon sun and facing a garden, it costs $617k before CPF grant of $30k.

TOP is expected to be in 1st quarter 2014. PSF price works out to be $744.

I believe this is a good buy, stay invest unit for a couple of reasons.

1) 5 mins to Buangkok MRT

2) Low financing rates

Based on 20% downpayment (5% cash 15% CPF), loan amount required is $493,600

Monthly installment before TOP is in the range of $157-$659.

Interest rates are assumed to be 1.05%, 80% financing and 40 years loan tenure.

Upon TOP, monthly installment of $1023; after one year certified statutory completion (CSC), $1259

3) Good Investment potential

If one would want to take the chance to rent out the unit upon TOP (illegally), the expected rental is $2k (minimum) after taking into account the $180 monthly maintenance.

That works out to be a 4% yield based on purchase price. The leverage of 5x will mean yield to be 20% based on 20% downpayment.

Even if one stays for 5 years and sell in 2019, the expected price based on The Quartz selling price now is projected roughly to fetch about $750k-$800k, conservatively.

One can earn at least $130k in 10 years time, or an annually compounded return of more than 10% based on my downpayment!

4) Walking distance to 24 hours fair price and Kopitiam. All amenities has been set up, critical mass attained. More amenities will be available.

5) Land parcel near Esparina Residences is up for tender to private development. This would further support its price in the medium term.

Alas! If only I am eligible....

NS Deferment

2010-11-15T04:40:00.000-08:00

How to defer from NS ICT?

I have been successful in deferring my NS liability through a couple of ways:

1) Masters course commitment

2) Employer letter

3) Employer scheduled training

4) Passing IPPT helps to substantiate reasons for deferment.

Property Bubble?

2010-11-07T06:32:00.000-08:00

It's quite worrying when almost everyone I know starts buying property for investments. Table 1 shows the pipeline of project due, extracted from URA.

Table 1

We are expecting 2,000 odd units to be completed by end of 2010. Supply will still be low in the region of 6,000 completed units in 2011. However, in 2012 there will almost be a 50% increase to 9,000 odd units, followed by a YOY 100% increase of completed units in 2013.

This is almost a 300% increase as compared to 2011!

In 2014, 15,000 units are expected to complete, which adds to the glut of supply. Should interest rate rise to 3.5% then, the influx of supply will lead to further rental depression due to high cost of funding. Investors will be selling cheap when their rental yield cannot cover the interest rate they are paying to banks.

The average net rental yield is about 3% now. I believe we will be seeing a downtrend of rental yield from 2011 onwards together with a apike in local interest rates.

Perhaps one should buy a HDB now and wait for fire sale in 2015.

I might be wrong though.

Highest Fixed Deposit Rates in Singapore

2010-11-05T17:56:00.001-07:00

Just realised that local banks fixed deposit rates are really crazily low. Effective interest rates after all those interest on interest, free vouchers and loyalty bonus gimmicks never breach 1% PA.

But wait, check this out..

Not some Ponzi scheme but fresh rates given by ICIC bank. BUT, they only have one pathetic branch at Raffles Quay. Still not a bad deal for most people!

Their Aussie rates, my favourite currency is as follows:

No link to their websites as this is not an advert.

Stretch you dollars series: Preferred Banking Standard Chartered Bank

2010-10-18T15:29:00.000-07:00

Just receive the preferred banking package. The package sent was quite delightful, considering that I only applied for a credit card and current account.

The card comes with 25,000 points upon first transaction.

There is an overdraft facility that is interest free (without processing fees) for the first $3,000 drawn upon. The current account comes with a debit card that comes with 2% cashback on mastercard spending.

Spending gives 1.5x reward points for $1,500 of spending and below; 2.5x reward points for purchases above that.

Different account categories earn points monthly. For example, a current account, time deposit and investment account earn 250 points monthly or 750 points in total. Online payment of credit card also yield 250 points.

The package comes with some 1-1 vouchers.

I have enquired that there is no termination fees AFTER 6 months for preferred banking account. Before that there is a $30 early account closure fee.

Not a bad deal.

Qualifying criteria: Earn more than $6000 monthly or have $50,000 with SCB. If you have a mortgage with more than $600,000 in value, you also qualify.

Mapletree Industrial Reit (MIT)

2010-10-18T07:02:00.000-07:00

I was rather pissed off when I was only allocated 3 lots for GLP. MIT seems the next best alternative as the market is still flushed with liquidity. The balloting results of GLP suggest that many retail investors applied up to $2M for GLP. A few others applied with $1M. I salute them, though they earned about $1.2k profit immediately in 3 days. Given the response for GLP, I expect MIT to rise at least 6% on day 1. That said, I playfully applied for a few lots. I think it was about 60 lots. Not expecting to keep it for long, perhaps to earn just a bit of kopi money for Oct.

I got 0 lots allocated this time. Wow, my guess is MIT will rise 10% on debut.

GLP IPO

2010-10-13T06:29:00.000-07:00

Just applied IPO for GLP. Applied for 79 lots. Yes, it is overpriced, but at current market I am sure I can strike a winfall even if I am just allocated 4 lots. It will be part of STI index in time to come, similar to Capmalls Asia. Index funds will be mandated to purchase it, from us. :)

Eventually I was only allocated 3 lots, a paltry $600 paper gain on the first day. Oh well, its free money anyway.

SPH 2010 Final Dividends Prediction

2010-10-09T07:54:00.000-07:00

Given that Sky Eleven has ceased contribution for 4Q10, I believe management will be cautious in dishing out dividends. Management is unlikely to cut dividends and have a higher tendency to increase dividends to signal growth and support share price. Hence I expect final dividends to be raised from 18 cents in 2009 to 19 cents in 2010.

Print expenses are expected to decrease due to cheaper US$ and lower circulation demand.

Total profits are expected to be much higher than 2009 due to SPH portfolio and advertising revenue recovery.

Final contribution from Sky Eleven will definitely help to propel SPH profits to near record high.

I predict FY 2010 profit to be in the region of $580M, EPS of 32.5 cents.

Of course I am striking a balance to be optimistic and objective, since a large part of my networth is determined by SPH. I do hope that SPH can deliver 21 cents of final dividends. This would likely propel it to breach the $4.60 mark by Dec 10.

Results will be out after 6pm on Oct 12. Let's see how far my prediction is away from actual results.

Post script: SPH delivered 20 cents of final year dividends, EPS 31 cents. Operating profit of $539M, circulation down by 2.4%, printing cost lowered by 29%. Final contribution from Sky@Eleven of $154.2M. Investment income recorded $39M, a turnaround from last year's loss of $6.2M.

Surprisingly, my projection was the closest than all the reports available in the market.

The new American Express Rewards Card

2010-09-30T06:40:00.000-07:00

One of my colleagues is deciding to buy a 5 year savings plan that costs $20,000 upfront. At the end of the 5^th year, he will receive $1,000 and at the 10^th year, he will get $25,000. In total, his yield is a miserly 3% (average).

This return is better than our 0.15% banks’ interest rate though.

The good thing about his savings plan is that one can pay using any credit card.

Since the new American express rewards card (ARC) advertisements can be seen anywhere, let me do a simple calculation to see if paying $20,000 using this card actually increases his yield.

ARC gives 100% points on spending for the 1^st 90 days. Thus my friend will get 40,000 points upon paying his premium.

He spends $20,000 on a calendar year, thus entitled to 50% bonus points. This is another 10,000 points.

In total, he gets 50,000 points, which allows him to exchange for $250 of cash.

If he adds that up to his total endowment return, his average return is 3.125%.

My friend has a visa infinite card from StandChart. It gives him 2.5x reward points on spending. Thus spending $20,000 gives him 50,000 points. This again works out to a payout of $250 spending credit, similar to ARC.

Hypothetically, if he gets a card that gives him 10% cash back ($2,000) on his spending, he will get 4% return on his endowment plan. Unfortunately, there is no such plan at the moment.

If he uses the Manhattan Card, he will get a $300 rebate. If he pays the bill through NETS using his X tra saver card spread over 2 months, he gets a $100 rebate, a total of $400. This brings his endowment yield to 3.2%.

I am extremely impressed by ARC marketing. I seem to see if everywhere, on papers, buses and even MRT floors! However, there is really nothing much to shout about, considering the points are merely 1.25% cash back on spending (at most).

I almost applied for the card when I was at Ion Orchard, but a mental calculation made me realize that I am better off holding the current cards I have now.

I firmly believe that cashback credit cards are more superior products than points/miles accruing ones. Thus readers should note that points are merely gimmicks to entice spending.

Best Credit Card in Singapore

2010-09-16T07:12:00.000-07:00

This issue of stretch your dollars series is definitely worth a read for all who qualify for credit card applications.

My colleague and I went shopping for a car last week. He liked the car and decided to pay for the booking fee. As he didn’t have a credit card, I offered to pay for him. The booking fee costs $16,000 thus I have to split payment between 2 cards. The first card I used was the Manhattan Card. It gives me a cash rebate of 5% on spending, with a cap of $300 every quarter. Good choice, I just earned $300.

The 2^nd card I used was an Xtra Saver Debit card by Standard Chartered Bank (SCB). As I have more than $6,000 in the account, I am eligible for a 2% cash rebate on my MasterCard transactions. Not bad, I will be getting $160 cash rebate.

As I rarely use my cards, SCB sent a mailer saying that I qualify for a 5% retail rebate, up to a cap of $50 for my purchases. Coincidentally, I earned another $50.

The Xtra Saver card gave me another 0.5% on NETS payment (cap at $50). Hence I will be using the Xtra Saver card to pay my Manhattan Card bill ($8,000). This gives me $40 cash back.

My total gain was $550, for helping my colleague out. He transferred the money back to me this morning.

I did not do my “homework” on which card to use before going shopping but when I came back and search the web on the “best credit card” to use for the $16,000 purchase, it turned out that no matter how many points you chalk up, the returns can hardly be as good as the above combination.

The best combination, perhaps is to use 3 different (holders of) Manhattan cards to clock a $800 rebate ($16,000x5%) plus paying 3 cards using Xtra Saver NETS ($80 rebate) which gives a grand total of $880.

However, it will be too much of a hassle to do that. Currently, even with American Express 100% bonus points or SCB Visa Infinite 2.5x points system, the total vouchers value will not be close to $300. Don't even bother about airmiles or POSB everyday card's 0.3% cash rebate.

Typically, credit card gives 0.5% rebates in voucher values on spending. For example if I spend $10,000 on the card, I can redeem around $50 of vouchers. Even with 3x points on spending, I can only get $150 of vouchers. This is a far cry from pure 5% cash rebates from Manhattan Card.

The only drawback for Manhattan Card is that it only gives 5% rebates when spending exceeds $3,000. But readers can consider using this card to pay your annual insurance premiums, wedding banquet or any other purchases that exceeds $3,000. Do not be fool by marketing gimmicks of 2x or 5x points. They are at most 1% to 2.5% rebates of your spending.

Measures to curb property speculation finally revealed

2010-08-30T06:50:00.000-07:00

Today’s papers reported that measures are rolled out with immediate effect to curb property speculation. In layman terms, they are:

(1) Sellers to pay stamp duty again if they resell the property within 3 years of purchase. (A $1m property attracts $24,600 of stamp duty.)

(2) For buyers who have outstanding loans with banks or HDB they

(a) need to pay at least 10% in cash for downpayment, instead of 5%.

(b) can only loan up to 70% of property valuation limits.

Looks like the government is intervening as the property market astronomical rise is going out of hand and they can only continue to roll out measures in a such manners to react accordingly.

I feel that more can be done to curb the property craze. It is a good thing that government is trying to balance speculative interest from real home seekers. However from my observation, most speculators are already sitting on high paper/real profits; the people who are trying to buy now are real home seekers.

That’s truly an irony.

Then again, what is the definition of speculator? If I am investing in property because I want to leverage on cheap interest rates and earn rental income for 10 years before selling off, am I a speculator?

Actually, I am only trying hard to save for retirement. With the stock market increasingly unpredictable, savings interest rates at 0.2%, buying a property seems to be the next best alternative for anyone who can cough up 20% downpayment.

Yet again, I am always priced out.

I applaud the government for proactively solving problems. But may I suggest that they stay on top of our problems by reacting before they even surface?

Prevention is better than cure, am I right, Mr. Govt?

Public transport

2010-08-17T06:22:00.000-07:00

I tried taking the MRT and bus to work recently. It was a horrible experience to take the train. As I need to alight in Orchard area, I had to smell the arm pits of commuters. Then I tried the bus, service 65. Below was the snap shot.

I was pleasantly surprised! I could even read papers there! The ride was a short 30 minute ride from my home. I could check the bus arrival times rather accurately using my iphone from the SBS website. Meanwhile, I could even have a cup of coffee and noodles for breakfast while waiting for the bus.

The dedicated bus lanes also narrowed the time savings between public and private transport. I felt sorry for the cars beside me having to pay hefty $4 ERPs (accumulated), $150 season parking while being stuck in jams daily.

My daily transport cost? $2.20. Of course I hate to leave my car at home, but it just doesn't make sense to pay 100 times more and spend more time travelling.

As LTA races to tender out railway network in Singapore, I seriously doubt the marginal increase in ridership will increase the profits of SMRT. The circle line is already operating at a loss, major lines running at full capacity, what kind of growth are we looking at? A PE ratio of above 20 doesn't justify its growth rate ahead.

Though the bus business seems to be a dying trade, I would prefer to take the bus anytime now, considering the current situation of MRT rides. Due to training purposes, public transport for me will only be a temporary measure, but I am quite sure I will research the bus routes instead of MRT whenever I take public transport.

Well done SBS!

Make money blogging

2010-08-04T08:43:00.000-07:00

I have been meaning to write on blog monetization so here it is!

I started Singapore Blue Chips in May 2008, it has been slightly more than 2 years from now. I would say that my blog did generate decent income to cover my internet bills over the past 2 years. The majority of my income did not come from direct advertising but rather from indirect sources.

I earn referral fees from US advertisers to put up their advertising on Singapore blogs. I receive $6-$10 for each referral. So during my free time I comb the local blogging fraternity for possible referrals.

Another part of my income comes from online requests. Prudential once approached me to moderate their forum, http://www.honestlyspeaking.sg/ (forum closed down as campaign ended) and I was paid $100 weekly. The forum was part of their advertising campaign and I am honoured to have the opportunity meet their advertising team to discuss on the online advertising aspects of insurance products.

Occasionally, I do get tertiary students asking me to complete their finance assignments. I do charge high prices for that, at $40-$60 per page. Most of them get good grades anyway, so ethics aside, this blog does generate indirect income similar to online tutoring service. I do discourage prospective students from approaching me though as you are eventually short changing yourself.

Lastly, online advertisements account for the least income. My readership isn’t high, slightly over a thousand unique views weekly, hence payouts from advertisers have been slow. And I know you guys reading my blog never click on my advertisements too!

Fortunately my “Singapore Blue Chips” is always the 1^st search result on google and yahoo. Hence readership can always be maintained at a decent rate even if I stop blogging for 3 months. Mr. Tan Kin Lian has kindly linked his blog to mine, which generate the highest number of web referrals too.

This blog was never intended to make money anyway. But it is really satisfying to be able to generate income from a hobby, however little it may be.

I do get several emails a day from readers asking advice on stocks and wealth accumulation. I rarely reply them due to time constrains and the information provided is simply inadequate. Besides, I have no license to advise on financial matters! All I can say that it is never simple to make money through equities investing. Making money through equities does not mean you are correct in your financial concepts. The acumen needs to be honed and there is no short cut in hard work to build one’s fundamental knowledge in finance.

Lately I have been blogging lesser on equities mainly because my portfolio is generating decent income and passivity is my best way to monitor the market. I have no desire to generate super normal returns and my farmer philosophy has served me well.

Hence, everything will continue as so.

Of Cars and Cars

2010-07-22T21:07:00.000-07:00

I have a rather luxurious family car below where I rarely drive. Most of the time, I drive my trusty 5 year old Japanese car (1.6 litre) for work or take the train when I go for trainings in town. Occasionally, I do drive my family car for errands when it is available. Often people who just got to know me will associate the car with me living in a bungalow or working in prestigious MNC. It seems that the car is an epitome of success, which is quite inconsistent with my current image. In the end, I have to clarify that I have a humble job, that car isn’t mine and I only stay in a HDB flat.

Honestly, sometimes driving this car leads to more embarrassment than awe as people who just knew me would probably be thinking why the hell you are driving this car when you are “supposed” to be taking a bus.

There are many cons in driving that car other than the above scenarios. I would be afraid while in my possession that it might be scratched, knocked or stolen. I have to be careful while going over the humps and struggle to remember the different functions that are supposed to “aid” in driving.

When should I be using cruise control these days when the expressways are as crowded as the car parks, 24/7?

I forgot to mention that I need to see a doctor to check for my hearing soon. There seems no difference between a Mark Levinson and a pioneer locally assembled car stereo system.

On the contrary, I feel a lot at ease driving my own LKK car. The leather seats seem seasoned to my butt, fitting them comfortably. The single CD player (not even MP3 player) never jams. The $50 full tank can last me for a good 10 days. Not to mention the $750 insurance premium and $769 road tax is easy on my pocket. The servicing cost me $100 every 9 months, nobody ever bothers to scratch my car since day 1 I bought it. I can floor the accelerator without feeling heartpain. Only God washes my car for me (quite often recently!).

Driving is a luxury only when you comfortably afford it. I guess I still can’t get used to spending things I rarely use and impressing people I don’t know.

Is Singapore really that bad?

2010-04-19T04:21:00.000-07:00

Today a colleague told me she wants to migrate to Australia. Initially, I thought it was just a passing remark. However, as I probed further, she has actually obtained PR status through an agent here, after spending about $8,000. She has also taken an English test to demonstrate her proficiency in English and will be moving over to Western Australia by December as a skilled worker.

My first question was, why leave? She is in her late thirties and has worked in the same line as me since graduation. Her grouses are the same as mine: No work life balance, working over weekends, no time for herself to consolidate and “talk to herself”. She feels the sheer volume of work is making her out of breath, only by leaving Singapore can she regain her sanity. She has a lot of health problems, possibly attributed by her career.

I applaud her courage. She is single, have aged parents and living alone. She will only look for accommodation and job when she reaches there. I would probably sink into depression if I go to a foreign land with no friends and job.

Is Singapore really that bad?

Over the weekend, there are extensive reports on the Singapore Dream. It states that to attain 5Cs has become increasingly impossible over the years. This is extremely true even for me and everyone around me. I earned an average of $6,500 a month. However, I can only afford a Japanese car (5 year old now) and stay with my parents. Unless I get married, there is no way I can afford a roof over my head alone. Well I can, if I use up ALL my savings and investments. That would mean an opportunity cost of at least $1,800 a month as the dividends from my investments generate roughly that amount on average.

I would need to pay for utilities, property tax, maintenance, gas, groceries, electricity and many other costs associated with living alone. My living cost will shoot up and I will be stuck to my job, forever.

Lately, I feel the strained in my workplace. It has become increasingly competitive as every other colleague competes to outshine each other. Workplace has become a place where working hard is no longer enough; Competition breeds office politics and other hypocritical acts. Nobody is my friend now. I am an economic unit of my office which is a subsidiary of Singapore Inc.

Not many people seem happy in my workplace. Many are stuck and resigned to fate.

“This is Singapore”

“It is the same everywhere”

“Some places are worse!”

“I can only do this”

“I have a family and mortgage to service every month”

My Singaporean readers, are you entrapped in the vicious cycle as well? Do you pursue wealth to attain happiness only to lose happiness while pursuing wealth?

Why are you feeling like that?

I believe it is an issue of comparison. Below was an excerpt I posted 2 years ago on my blog:

Robert H. Frank, professor of economics at Cornell University, says that most people find the first option more attractive. When it comes to salaries, we care more about relative size than absolute size. What matters most is earning more than our neighbours.

The same holds true for all sorts of things. The actual size of our apartment matters less than its size compared to everyone else's. And most of us will settle for a modest car - provided our neighbour is driving something worse.

It is a sobering thought. We assume that getting a pay rise, or moving into a new apartment, or trading-up to a better car will bring us increased levels of happiness and satisfaction. In fact, many of us simply raise the bar on what counts as adequate.

We work longer hours, earn more, spend more and consume more. Meanwhile, everyone else does the same. So, by comparison, we are no better off, and therefore no happier.

How true?

(I actually enjoy re-reading my blog sometimes. It is like talking to someone about my past. It makes me philosophical and happy.)

When you can hear

2010-04-10T05:51:00.001-07:00

Today a new admin staff came to my office. When I wanted to speak to her, she passed me a black colour remote control like device and asked me frantically to speak into the device. I was quite taken aback as I didn’t know how to use it until she demonstrated it to me. That was when I realised that she was having a hearing aid on her ear. Every time we want to communicate to her, we have to speak to her listening device and it will amplify our conversation to her ear piece.

I was actually quite overwhelmed by her disability. Even though it was not as serious as not being able to see, smell, taste or feel, yet I feel so much for this young lady.

Over the past few years, I spent a large part of my time pursuing wealth, work and academic studies. Even on a Saturday night, I am clearing my work from home now, hopefully I can have my Sunday free. Yet as I listen to the wonderful music playing from my laptop, I taught of this (near) deaf girl.

What she wants in life is so simple. To hear us clearly. To answer the telephone. To use an ipod. To drive.

Sometimes when I look at the misfortune of others, I gloat at myself. Every day I struggle to juggle between societal expectations of a 30 year old graduate, yet within me, all I wanted was a simple, low paying, brainless job to get by the day happily.

So what if I manage to reach $500,000 assets by December 2010? So what if I get the Masters in Applied Finance? Will that warrant a passport to happiness?

I guess it is time to take life slowly now. As I listen to beautiful music, I feel blessed to be even able to hear them. Something that Beethoven couldn’t even enjoy.

I will tender my resignation by the end of this year and enjoy being unemployed. Perhaps I would just be the clerk next door.

Stay tuned. J

Analysis of Macquarie International Infrastructure Fund (MIIF)

2010-03-13T20:45:00.000-08:00

Macquarie International Infrastructure Fund Ltd (MIIF) is a mutual fund company that has been formed to own, operate and invest in a diversified group of infrastructure businesses around the world.

It offers investors an opportunity to invest in the Macquarie Bank Group’s first listed infrastructure fund in the Asian region and to participate in the public ownership of infrastructure assets.

MIIF's investments include direct investments in airport infrastructure in Belgium and communications infrastructure and renewable energy assets in the United Kingdom. In addition, it will own interests in one unlisted and four listed infrastructure investment funds that have ownership interests in, amongst other things, airports, communications infrastructure, utility and energy assets, water and gas distribution assets and transport infrastructure assets located across the globe.

MIIF was listed on May 2005 at $1 per share. Its first day IPO price was $1.14. It currently trades at $0.525 (14/03/10). No rights shares were issued from its IPO till date.

Below figure A is a screen shot from MIIF 2H 2009 interim report. It shows the portfolio of MIIF:

Figure B shows the corporate structure and investment of MIIF

Figure B

Regular dividend payouts were given since it was listed on SGX

Dividends are paid semi annually, at 3 cents per annum payout, representing a yield of 5.7%. There is a drop in dividend yield over the years due to a larger conservation of cash to lower its corporate level debt (Source: Business Times Singapore May 2009). Arqiva which is the largest revenue contributor of MIIF contributed 62% lesser investment income on 2H 09 (based on 2H 09 interim report). Also, patronages for its China and Europe assets weaken possibly due to financial crisis across the globe.

It’s gearing ratio from 2H 2009 report stands at 63%, considered normal for an infrastructure fund. (Source: Lecture readings: AMP capital Newsletter)

MIIF has a diversified base of infrastructure, which is profitable and commands a high profit margin (before tax) of about 90% based on 2H 09 revenue and net income report.

At current share price of $0.525, book value of $0.80 and yield of 5.7% (before brokerage charges) MIIF presents a good investment opportunity to investors. The global market is set to recover, ease of borrow to resume, thus MIIF is poised to ride the uptrend.

Moreover, management fees of MIIF is a mere 1.5%, compared to many infrastructure unit trusts charging 2% and above for its management fees. As investors can purchase the MIIF on SGX, there is liquidity and transparent pricing of its funds. The brokerage charge is a mere 0.275%, compared to 2%-5% for other non listed unit trust infrastructure funds. All these will add up to a higher return for investors’ portfolio in the long run.

Analysis of SP Ausnet Part 2

2010-02-03T05:49:00.000-08:00

It is observed from the 2h 2009/2010 interim report that Sp Ausnet has the following strong stable characteristics:

· 86% of revenues are regulated

· 100% of regulated revenues locked in until 2011; 62% locked in until 2013

· Prudent gearing & 99% of debt hedged against movements in interest rates

· ‘A’range credit rating enables access to competitive finance

· Distributions & maintenance capexpaid from operating cashflows

Performances over several quarters are also encouraging:

SP Ausnet has delivered steady dividends since listing. Table D below depicts the dividend payouts since listing

Table D

There was a drop in the dividend issued for 2010 (interim dividend) due to a dilution of equity. In June 2009, SP AusNet successfully completed an accelerated non-renounceable entitlement offer (1 for 4 offer@$0.86) raising a total of $408.4 million. Moreover, due to dividend reinvestment plan, more dilution will occur as the number of outstanding shares increase. Investors have a choice of cash or script dividends.

At current price of SGD$1.14, SP Ausnet provides a decent yield of 8.8% (A$1 to SGD$1.25) before taxes. It is also below its NAV of SGD$1.28, hence investors can purchase SP Ausnet below its IPO (offer adjusted) and NAV price.

Investors can also opt for script dividend which will enable him to accumulate more of SP Ausnet at a 2.5% discount.

Analysis of SP Ausnet Part 1

2010-02-03T05:36:00.000-08:00

Background of SP Ausnet (Source: http://www.sp-ausnet.com.au and http://www.singaporepower.com.sg/)

SP Ausnet is a subsidiary of Singapore Power (with a 51% controlling stake) and its operations are managed by staff of Singapore Power in Australia. Singapore Power is a leading energy utility company in the Asia Pacific.

With assets of S$26.3 billion at end March 2009, it is one of the largest corporations in Singapore. It owns and operates electricity and gas transmission and distribution businesses.

SP Ausnet owns and operates electricity transmission and distribution networks and gas distribution assets in Victoria, Australia. It delivers a full range of energy related products and services to more than a million industrial and domestic customers. It was listed on SGX at $1.75 per share in Dec 2005. It current trades at $1.14 a share (03/02/10).

Electricity transmission network – carrying electricity from power stations to electricity distributors across all of Victoria via 12,800 high voltage towers and approximately 6,500 kilometres of transmission lines.

Electricity distribution network – carrying electricity from the high voltage transmission grid to over 600,000 customers across eastern Victoria. This network spans approximately 46,000 kilometres across an area of 80,000 square kilometres.

Gas distribution network – transporting gas to approximately 537,000 customers across central and western Victoria. This network spans approximately 9,400 kilometres across an area of 60,000 square kilometres.

In a nutshell, SP Ausnet derives its income from the follow sources (Figure 1):

SP Ausnet has achieved commendable revenue and EBITDA growth over the last 2 quarters. Below is a screen shot (Figure 2) of its latest 1H 2009/2010 financial highlights:

Part 2 will be devoted on the revenue characteristics of SP Ausnet

Portfolio Updates

2010-01-25T02:13:00.000-08:00

My portfolio of invested amount went up slightly to breach the $400k mark last week when I took the opportunity to invest as STI fell. If you have read my post here, you would have realised that I need to invest $66k annually from 2010 and acheive return of 7.1% compounded yield before I can reach $1M in 2015.

This means that I need to invest another $10k more to reach my target this year.

Is that possible? I am not sure. Markets are volatile and the economic cycle seems shorter and shorter. My masters programme seems painfully slow to complete and I am literally struggling with my 14 hour job daily (including weekends).

I have switched to a new role (downgraded actually) in my company which means I have to be monitored closely. I hate that kind of feeling of being watched and assessed by goondos. This means that I am likely to tender my resignation and go into full time studies at the end of this year.

Where can I get $66k to invest if I have to be out of job for 6 months? Classmates will shun me too!! haha.. especially the girls!!

The only consolation I have is that my dividends of at least 5% per year will provide me with $20k of pocket money (annually) if I am out of job. (actually slightly more lah!)

That said, I think with prudent money management, having $400,000 of investment funds right now is a nice moment to savour. Although I hope I can breach the $0.5M mark soon, but I do hope the trade offs that comes along are not high...

Thanks for reading this blog and saving it at your favourites. Many people have followed my investment journey... MW, LP, WJ, JW, Marvin, Drizzit, Panzer, ghchua and many more.. I hope you guys will be around, young and fit when I write my $1M post!! :)

8% return on your deposits!

2010-01-15T00:14:00.000-08:00

No, this is not a gimmick! For those who are residing in Australia, you can place your deposits at Westpac (2nd largest bank in Aus) and earn a 8% on your fixed deposit. The only catch is you have to place it for a 5 year term.

Wow, only $5,000 minimum sum and you can do it online! Reits in Singapore are not even yielding that kind of return. Forget SPH, Singpost and Starhub! Come over to Australia and enjoy risk free of 8%! Btw, what's the yield of our CPF? Temasek and GIC?

Imagine you put $1M, get the 8% and reside in China.

Beautiful!

Exchange Programme @ UOA

2010-01-07T14:42:00.000-08:00

Dear readers:

Sorry for the lack of updates! Sgbluechip has taken a step to go overseas for studies (exchange programme) and currently resides in University of Adelaide. It is a scary yet refreshing experience. Internet connection took days before it was set up. Some photos will tell a little of my story...

Taking portfolio theory (CAPM) and Alternative Investments modules

Streets of Adelaide

More buildings

The place is just so big! Traffic is fine, people are friendly, air is fresh and climate is wonderful!

I can't blog much, due to limited and slow connectivity. Photos were taken from my trusty 2 MP iphone. SBC apologise for the poor resolutions! More updates will be given when I settle down! Wishing a belated happy new year and a huat year for all my readers!!!

Is GDP a good measurement of life quality?

2009-11-23T11:55:00.000-08:00

Consider the following (excerpted) statement by Robert Kennedy in 1968

“…And if the Gross National Product includes all this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials… the Gross National Product measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile….”

In Singapore, the government’s competency is assessed based on its ability to grow GDP year on year, quarter on quarter. Every civil servant’s bonus and salary increment depends largely on it. Does high GDP reflects high quality of living?

Consider that GDP is calculated using the following formula: Investment + Consumption + Government Expenditure + Net Exports

GDP measures the total income and total expenditure (since total income will equals total expenditure). It is also the total market value of all final goods and services provided within a country in a given period of time.

Intuitively if we compare countries with high GDP per capita over lower ones, we can see and feel the difference. If you have been to Japan, you will definitely find the quality of life there to be higher than Singapore. The reverse is true for Malaysia or China.

So how does GDP which is quantifiable able to measure quality of life which is not easily quantified?

GDP does not measure the health of Singaporeans. However, because of a larger GDP and high savings rate, Singaporeans are able to afford better quality healthcare. The budget for education has been growing (2^nd largest after defence), thanks to high GDP.

This results in bright students becoming top surgeons, enhancing our pole position as medical hub in Asia. With good education infrastructure in place, quality teachers are employed to produce bright students in local institutions. This in turn helps to increase the production output of our labour, thus increasing our GDP.

High GDP countries allow citizens to access to quality education systems, thus many would be able to admire the beauty of poetry, humanities and arts when given the opportunities and education.

Marriages in high GDP countries though tend to be more fragile as there are more interaction and distractions among people. In fact, high GDP countries tend to have lower birth rate (though not always). This by economics theory might suggest that children are in fact inferior goods! Do not forget that as income rises, consumers switch from inferior goods to normal goods. In our local context, Singaporeans switch from having babies to having pets. Hence humorously, children are inferior goods and pets are normal goods (at least for some people!). I do believe that some pets cost much more to keep than children though!

That said, GDP does not also take into account our wisdom, compassion and our devotion to our country. However, with our basic needs being fulfilled (due to high GDP), we will be able to move up the hierarchy of human needs and foster the above attributes.

There are many arguments that GDP is NOT an accurate or good tool of measurement of well being. I will leave the points of discussion for another day.

Are Singapore girls’ expectations beyond the sky?

2009-11-19T14:50:00.000-08:00

Lately, I have been mingling with many of my classmates. Most of them are single, late 20s, with a high paying job and drives a cool vehicle. Sometimes during chill out sessions, they will inevitably talk about their expectations of a boyfriend or partner.

This brings an inspiration for today’s post.

I am absolutely flabbergasted by the standards they have set for their future boyfriends and husbands.

A: I would expect him to earn at least $12,000 a month. Anything less than that is either he is lousy or deserve a lesser human form as wife.

B: He does not need to earn the sky, but he must provide everything for me. I will not want to fork out a single cent for my wedding and matrimonial home.

C: I have even “simpler” needs. He just need to ensure that I can give up my job anytime I want to, possibly if I want to retire by 35, he is able to provide for me and our kids. Hopefully he has his own business and I can give up my job to help him. But he must at least be matching my $10,000 salary now lah! Or else no point giving up my job to work with him right? (Well, his business must be doing extremely well then!!)

D: Well, I expect a romantic proposal from him. Just a wonderful private apartment bought under my name will do. I will love him more!

Sgbluechip: WOW, please do not consider me! I earn a gross $5,000 monthly and will barely touch the $80,000 mark after including all bonuses and allowances. I thought that finding a life partner is beyond dollars and cents, which cannot be quantifiable even with the most abstract model?

A B C D: No worries, we will never consider you! Well, though money does not guarantee happiness, but we do want our husband to earn at least 30% more than us. In that way, we can feel secured and pampered.

Sgbluechip: Well, the median income for Singaporeans is only roughly $3,200 and average income possibly around $4,500. That includes the income of the high net worth individuals which in reality depicts and inadequate representation of the society’s income and standard of living.

Enough said.

A B C D all drives a nice car, earns a 5 figure sum monthly, works in MNC and are under 30. They are highly eloquent and well groomed, somewhat different from the girl next door working in a small company.

It seems that many girls around me are always using their girlfriends’ most eligible boyfriend/husband as a benchmark to set their “vision” and “mission”.

Many Singaporean guys lament that our local girls are pampered and have unrealistic expectations. This might be quite true, especially for girls who have high salary and credentials. Sometimes, I do feel quite amusing mingling with them. I mean, why do people attach monetary value for every single thing they do in their life, including their marriage?

Economist have time and again pointed out that GDP is never a good indicator of standard of living. And by that, it means that an equation of money and happiness can never be drawn even by Einstein. Yet many are conveniently drawing a simple equation with it.

Is there any module in universities that teaches people to love money less?

I think it will be useful to improve every graduate’s real standard of living.

Well that said, I think my perception is only limited to the people I hang around with. I am sure there are many nice girls (which I have also come across) that prefer their guy to be simple. Just a stable career, earning say $3,000 monthly, faithful, homely and reliable guy to be their life partner more than satisfy all expectations.

Not to worry, such guys are a dime a dozen. Let’s just leave the rich boys for A B C D since they live by the adage that money provides all solution and create no problems.

2009 Monthly expenses breakdown

2009-11-09T01:37:00.000-08:00

It is always good to track your expense and savings as you will be able to better plan your finance. Below is a rough breakdown of my monthly expenses. I am not quite done with it, but I do think it reflects an 80% accuracy.

Food

Lunch at workplace: $6 daily x30 days =$180
Restaurant: $20x4=$80 (Weekly)

Subtotal: $260

My workplace provides cheap food for us as we are lowly paid. I spend an average of $80 dining outside. I do not have a girlfriend (no time and opportunities) and this is probably why I spend so little on dining. Dinner is usually at home with parents.

Transportation

Petrol: $150
Parking: $65 (HDB) +$20(outside home)=$75
Maintenance servicing: $20
ERP: $6
Road Tax: $80
Insurance: $57
Miscellaneous: $12

Subtotal: $400

I have fully repaid my car loan earlier to save on interest, hence there is no loan expenses on it. I live near my workplace and that explains the low cost on fuel. Parking is free in my workplace. I go to comfort delgro for cheap and good servicing. To me, a car is a workhorse, so it will not be shiny and be doubling as a fishing rod to pick girls up.

Family commitments

Allowance: $500

Subtotal: $500

I give 10% of my gross monthly salary to my parents.

Personal expenses

HP: $25
Cable TV: $40
Clothing expenses: $30
Insurance: $240
Hair Cut: $10

Subtotal: $345

I do not buy clothes every month, but probably every 6 months when the sale is in town. Hence, that explains the low cost I spend on fashion (averaged) monthly. The cable TV hubstation has bundled together complimentary broadband and home line. The actual amount incurred on telecommunications and TV is slightly lower as my cable TV costs me merely $25 monthly (promotion price).

Leisure

Tour: $200
Movies plus dvd/drama series rental: $10
Books and magazines: $10 (including reserving from library @$1.50)

Subtotal: $220

I go on tours once or twice a year and spend about $2400 annually. I love to read and will reserve books online at least once a month to satisfy my craving for knowledge. I do not like to buy books as they take up space and I rarely read more than twice for any 1 book. Also, I tend to procrastinate reading books that I buy. Borrowing makes me ensure I finish reading the book by the 3 weeks deadline. I subscribe to the Edge Magazine for weekly market updates

Total expenses per month: $1725

Total expenses per year: $20,700

One thing I did not include is my $30k Masters fees. If I were to factor it into my monthly expenses, it would be $840 monthly (considering I need 3 years to complete).

This would increase my monthly expenditure to $2565. This is a hefty sum that would require me to earn at least $3,500 monthly to fuel the monthly expenditure. However, I have already prudently set aside a sum of money for my studies and hence, the “one off” expense will not be factored into my monthly cash outflow.

There will be occasional indulgences like buying a new handphone or laptop. However, I abstain from buying such “wants” as I would rather invest my money (in stocks and education) for future returns. My current desktop is bought in 2001 by my father when I entered university. I am proud that I am still using it. The only upgrade I given it is an additional RAM and Windows XP. My company provides a powerful 4GB Ram and 1GB graphics card laptop for work. I do not own much technology gadgets as I prefer very much to keep life simple at the moment.

It is therefore conservative to say I am able to invest $46,000 cash per year from my career income after taxes. It is worthy to note that due to the nature of my work, it has helped me to attain huge savings. If I were working in the CBD area, I believe I will spend much more on food, clothes and leisure.

I am sure many people would deem me as stingy. But this label is only applied when they compare Sg Blue Chips relative to themselves. I have no issue with anyone spending his/her pay to the last cent as I respect that it is their way to demonstrate passion in life. It just so happens that the pleasures that I obtain in life are just so affordable and simple.

These days, reading a good book, the Straits Times, Edge Magazine or Economics and Finance textbooks together with a cup of green tea at starbucks have eaten away many of my weekdays’ nights and weekends’ afternoons. The pursuit of quality education and knowledge can be enjoyed rather economically. Ostentatious goods are still not quite my kind of indulgence. I would rather people admiring me for being knowledgeable than having a sports car, anytime.

Earn one million dollars (in 6 years time)

2009-10-26T06:59:00.000-07:00

A reader pointed out that it is nearly impossible to turn my $350k portfolio into $1M in 6 years time as I would need an annual compounded return of 19.1% to reach that amount.

(Snap shot of my 360k portfolio invested funds from my trading platform)

Am I being unrealistic?

To be honest, I could possibly set an impossible target judging from current circumstances, as most people think. However, to put things in perspective, perhaps there is a way (at least theoretically) to meet the target.

As a portion of my portfolio consists of CPF stocks as well, the following calculations will be based on CPF investment returns and reinvestments.

Considering I earn $80k per annum now. I spent approximately $24K a year, or $2000 monthly. I have a remaining $56k for investment.

My dividend income amounts roughly $20k a year. Thus, I have about $76k for investment. To be conservative, I put the figure to be $66k. Hence I have $10k for CPF contributions to Medisave and Special account and other off budget spending, that cannot be invested.

Assume it is year 0 on Dec 2009.

Hence from year 1 to year 6, I have $66k for investment into my $350k portfolio every year, till 2015.

Question 1: What is the annual compounded rate of return do I need for my portfolio to hit my target of $1M by 2015? ($66k invested in year 1, compounded annually (7.1%) for 6 years will have a value of $99.6k in year 6)

Answer: 7.1%

To attain this figure it means that I reinvest $20k dividends and at least $46k cash (and CPF) into my portfolio.

My assumptions for the above calculation are as follows:

I have the discipline to reinvest at least $66k (CPF+CASH+DIVIDENDS) into my portfolio from year 1 day 1.

My salary increment is stagnant from 2010. (It is in fact going to be higher, if I stay on my current line).

I do not experience catastrophic financial events (again) that would wipe out my portfolio and bring it back to starting point. (No snakes and ladders game again please, I got a weak heart)

Question 2: Assuming I have the discipline, but due to my limited ability returns yield only 5.5% compounded return. (i) How much will I have at the end of year 6? (ii) How long will it take to hit my target of $1M?

Answer: (i) $937k at the end of year 6 (shortage of $63k); (ii) 6.54 years (takes roughly 6 months longer)

Not a bad plan actually! My current portfolio is giving a decent dividend yield of $20k per year, consider I have bought ARA, Suntec, Fortune Reit, SGX, HL Finance, Starhub over this year. My trading income has also given me a decent return. Hence, at least for this year, I would earn a minimum of $20k dividends (and trading income).

The good thing is that I only need to set aside $66k per year to reinvest into my existing portfolio. My dividend income and pay will rise and I will be able to enjoy a higher standard of living. Hence I do not assume that inflation is non-existent and standard of living remains constant. In fact, I may be able to get married and still achieve this target!

Question 3: However, consider my Singapore centric portfolio, then what is the anticipated Straits Times Index in year 6 (2015) for my portfolio of stocks to be worth $1m?

This is probably the most difficult question to answer. If I assume that STI returns an average of 7.1% from year 1 to year 6, this means that it will have to rise from 2700 points to 4074 points from 2010 Jan to 2015 Dec!

However, as my strategy (philosophy) here is biased towards dividend income investing, I would only need to invest in stocks that pay 5.5% dividend yield and 1.6% capital appreciation annually. Hence, STI may hover at the region of 3500 points in 2015, but my portfolio may have already exceeded $1M.

Hence, I do think that having a million dollars in 6 years time is (remotely) attainable.

That said, we often plan with caution, execute with confidence and the rest is up to fate. I am 35% done with the journey. Please follow me through.

If my advertisements are of interest to you, please follow them as well. It will be a good catalyst to my financial journey.

How to withdraw money from your paypal account

2009-10-14T13:50:00.000-07:00

As my readers have realised from my right column bar, there is an advertorial "Money for your website". Websites with google page rank more than 0 and are willing to earn money from ads will receive upfront advertisement payments from my company. No meet up is required and we pay in US$. I would like to demostrate simply how to withdraw funds from paypal.

Step 1: Log into your paypal account

I have just withdrawn money, so the balance is 0.

Step 2: Go to "withdraw funds"

Step 3: "Click withdraw funds to your bank account" and you will end up below:

Lastly, fill in the amount you would like to withdraw and click "continue". It is ok to fill in in which ever currency you had received in the first place. Paypal will automatically convert it into your home currency. However, the exchange rate may be poor. A spread of 2.5% was taken from me!!! The indicative fx rate on fxstreet was US$1 to SGD$1.39. Look at what paypal charged me:

Do take note that any withdrawal amount lower than $200 will be levied a $1 admin charge. I hope this answers to the many email queries on payments on USD and Sing dollars withdrawals. That said, paypal is still quite efficient in handling money and I have called them on their Singapore hotline for some money matters. The money will be credited into your local bank account within 5 working days.

Jason Marine IPO

2009-10-14T06:33:00.000-07:00

I seldom blog about IPO as I have never made money from it. Usually company owners who want to sell their business will weave a compelling story to entice people to invest. If I own a company that is really profitable, I would need an offer that I can't resist before I sell it. I will never sell it at fair value. Hence, I never believe in get-rich talks because if I find a gold mine, I will not tell anyone about it until it is empty.

However, the IPO market can rarely be predicted using fundamental analysis. Based on my observations on current market sentiments, the IPO launches for the first day are largely positive.

Considering the outlook for marine sector is looking up, Jason Marine may have a good run up on its first trading day.

As my faithful readers will know, I never have any luck making money from IPO. One of my major mistakes in investing IPOs is holding them for too long without any cut loss strategy in place. Hence for Jason Marine IPO, I will sell it on its debut trading day, be it at a loss or profit. Since it only costs $0.21, 10 lots will cost a mere $2101 including $1 admin fee if you subscribe over ATM.

However, there are only 500k shares for public up for grab, 15.5m shares have already been placed to institutions. Chances of being allocated the IPO are rather low. Personally, I feel that there is a good chance to profit from the IPO from the first day, though this view is made purely without any fundamental analysis.

Post dated: Jason Marine soared on the first day of IPO to 40 cents. Currently it is last traded at 41.5 cents. That is a whopping 98% return!!

Flash update on SPH Financial Year 2009 Results

2009-10-12T03:14:00.000-07:00

Full year profit: $422M

Net profit down 3.6% from 2008

Group operating revenue: $1.3B (largely unchange from 2008)

Final dividends: 18 cents (total 25 cents for FY 2009)

SPH paid 19 cents final dividend in 2008, (total 27 cents in FY 2008 and 26 cents in FY 2007)

DBS 1% Unit Trust Sales Charge

2009-10-08T06:01:00.000-07:00

DBS Unit Trust Sales Charge has been publicized widely recently on papers. This is 50% cheaper compared to the 2% charge by online portals and financial advisors. Moreover, financial advisors, especially independent ones quote a wrap fee that demands their clients to pay 0.5%-2% of their asset under management (AUM) annually. This is a hefty charge, considering a 1 million portfolio, you will be paying $10,000 (1%) to your financial advisor yearly, even if your portfolio is underwater, losing 10% annually. Also, the wrap fees force sells your best performing unit trust (even if it is in the red) to pay for the management fees quarterly.

Hence, engaging such portfolio advisors will mean feeding them as long as you live. Unless your advisor can earn you over and above the market expected returns of 8% per annum, you will be better off investing on your own.

As soon as I read the advertisements, I went over to Fundsupermart to search for good DBS fund house deals. One of the funds, DBS Global Properties Securities Fund caught my eye. This fund invests in REITS around the world and pays out quarterly dividend (in units) regularly.

Below is the payout history:

At current price of $0.60, investors will be able to get a decent yield of 10% and diversify into global property equities and ride the property recovery market.

I do not know how good the fund is, but it may be a good deal for investors looking for a potential place to park their CPF ordinary funds.

I have written once on why I do not like Unit Trust here, but this fund may change my perspective.

I might just invest $5,000 CPF money for some global exposure to the property market.

The future of Starhub after losing EPL

2009-10-04T07:50:00.000-07:00

Starhub lost the broadcast rights of EPL, ESPN, STAR Sports and STAR Cricket last week which explains the huge plunge in its share prices. It was down from $2.16 to a low of $1.94 on Friday before rebounding to close at $2.

Is there any future for Starhub?

Starhub is known for paying hefty dividends over the years and at 18 cents dividend per share, the yield is at 9%. Considering its bottom during the crisis was $1.76, $2 seems to be rather attractive buy for a yield and recovery play.

To put things in perspective, cable TV accounts for about 20% of Starhub’s revenue. It has about 550,000 pay TV subscribers and it is not known how many families actually subscribed cable TV purely for soccer.

Reports over the weekend showed that many subscribers and soccer fans will be hanging onto Starhub even though EPL can only be watched on Mio TV. Of course, the reports can be biased as we do not have the actual numbers or expected churn rate.

Personally I feel that losing EPL is a prelude to more losses of TV subscribers to Mio TV. As much as I do not like Singtel, I cannot help but to admit that Singtel has the full financial muscle to boot Starhub out of the cable TV market altogether.

Now that Singtel has committed a large sum of money for the EPL, it is only a matter of time before it competes with Starhub on Discovery, HBO, Animal Planet and other premium content. (Not to mention the 2010 World Cup will be another bidding war highly anticipated by market watchers.)

If the worst case scenario materialised, Starhub will be at the deep end of the water.

Starhub might be its victim of its success of bundling the 3 services into discounted packages. Now that Singtel can do the same, Starhub will need to spend more on marketing, retention and content to remain a market player.

The question is, can it afford it at all?

Starhub nearly pays out all of its operating profit as dividends and I have once questioned its ability to sustain its dividend policy here.

Based on its 2H 09(distressed) balance sheet, Starhub’s current assets stands at 500M versus its current liabilities of 695M. It has a long term loan of 842M, but has only cash balances of 237M. Starhub is easily the highest leveraged Straits Times Index component stock and telco in Singapore.

Given its distressed balance sheet, Singtel has chosen an apt time to enlarge its cable TV market share well. Singtel obviously know that Starhub will be mindful not to engage in a price war as it might not be able to get funding after all. With strong ammunition to target Starhub’s wobbly defence, how long can Starhub sustain the cut throat competition?

I estimate pay TV accounts about 80M of Starhub annual profits (given its 400M revenue). This translates to about 4.7 cents per share earnings. It is not a clear cut of losing 30% subscribers to Singtel translates to 4.7cents less 30% as Starhub might lose other subscribers of mobile and broadband to Singtel as well (double edge sword of bundling strategy). Hence, the repercussion effects are high and difficult to predict.

The only way for Starhub is to lower its pay TV rate, acquire customers on longer contract periods and treat loyal customers like me well. It has to look beyond its current marketing model and rethink its strategy to keep its subscribers base. Once Starhub loses its subscribers base below a critical level, it will be burning cash for its cable TV business. Then, it will need to give up everything to Singtel and compete on level grounds with M1.

That said, for the next few quarters, up till 2011 Dec, Starhub will not lose out much of it subscribers as it has strong followers for its Education, Entertainment and Infotainment package. HBO, Star Movies, VV Drama are staple TV for many, especially foreign families. I do not think that family subscribers consist only of soccer fans. For existing subscribers of cable TV, the content is largely part and parcel of life and EPL is only the dessert for one or two soccer fans in the family.

However, I still think the future is still bleak for Starhub unless it changes its pricing and marketing strategy. There are so many things it can do to turn the situation around given its large retail presence. I do hope it can fend off Singtel’s cash burning strategies.

Selecting a gym membership with swimming pool

2009-10-02T18:50:00.000-07:00

Due to work and studies commitments, I have become rather unhealthy, as I sit on the chair for long hours without knowing and moving. Hence, I decided to look for a gym membership that would best serve my needs.

Basically, I would need a gym membership that is near my workplace or home that comes with a swimming pool. I intend to spend 45 minutes to an hour each time.

My budget is only $40 monthly.

One reputable gym got back to me and offered me a promotion: 36 months of gym membership (all gym access with pool at Suntec) and 6 months free, together with 3 complimentary sessions of workout with a personal trainer. It costs an average of $48 monthly. The only drawback is that I have to commit for 3 years at one go and the pool at Suntec is quite far (though within walking distance) from the gym.

Another gym membership costs roughly twice the price but there is no “lock in” period. It also comes with an integrated pool beside the gym but is too far from my workplace. Besides, it is way above my budget.

Registration fees were waived for the above 2 gyms.

I enquired on the SAFRA (Energy First) gym package and was appalled that it costs almost $60 per month after registration fees and monthly fees were factored in. If you have been to SAFRA gyms, you know it is only a slight tad better than the community sports centre ones.

The SAFRA membership was given by my company and we sometimes conduct our meetings there. My only impression of the facilities and environment is “minimalist” theme and a heaven for teenage kids. The bowling allies and pool centres are remembered to be packed with teenagers in the afternoons. However for less than $4 a month membership and an additional 7% off caltex petrol, I do not expect the sky.

After much consideration, I decided to go for the cheapo and convenient way of signing up for my community centre gym instead. It costs me a mere $10 monthly and comes with a treadmill and a few weights machine. It is only a 5 minutes walk from my home and this translates to savings on car parking and time. I will go for a swim in SAFRA clubs twice a week (which is free for members) and hit the treadmill twice in my community centre for 45 minutes. The drawbacks are it can be rather crowded in the evening and some people there can be boorish and vulgar. Not recommended for ladies though!

Hence my total cost for the healthy lifestyle cost a mere $18 a month inclusive of parking fees. Not bad for 4 workout sessions a week. The good thing of spending way below my initial budget is that I do not feel pressurised to go the gym or pool as my “sunk costs” are low. Even if I reduce the frequency of the exercises by 50%, I do not feel wasteful as I got a pretty good DIY hybrid deal.

Healthy lifestyle, here I come!

Starhub 50% cable TV promotion

2009-09-23T06:49:00.000-07:00

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!

Quiz on Financial Literacy

2009-09-19T19:47:00.000-07:00

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

Are HDBs affordable at all?

2009-09-15T07:07:00.000-07:00

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?

A visit to Dakota Residences

2009-09-10T20:50:00.000-07:00

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 17^th 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 17^th 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 2^nd 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.

How does statistics hide facts?

2009-09-08T08:26:00.000-07:00

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!

Grandlink Square Apartments

2009-09-06T20:56:00.000-07:00

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.

My loyalty is only worth $50 voucher

2009-09-04T01:28:00.000-07:00

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!

Advertlets never pay!

2009-09-03T05:32:00.000-07:00

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.

Counter-intuitive and property investment

2009-09-01T06:08:00.000-07:00

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!

Bad news over the weekends

2009-08-01T00:30:00.000-07:00

According to my finance lecturer, the worst performing day of equities for the past 100 years is not Friday, but Monday.

Apparently, the worst news are released when market closes on Friday as companies hope that investors have a nice weekend to enjoy thus mitigating the sell down that will happen on Monday.

It rarely works.

Perhaps this is why Great Eastern reported the “good news” that it will take a hit of 250M for its Q3. This is a significant payment as the profits for its Q2 is only 97.7M. Understandably, OCBC will also be dragged down on Monday when market reopens as it expects to take a 218M hit on its books in 3Q.

Of course it is no mere coincidence that OCBC will be reporting a decent set of 2Q results on Monday (3rd August) to mitigate the negative news.

I am not sure how market will react on Monday, but I do feel puzzled that GE and OCBC are not acting on shareholders interest, but on customers’ interest.

The objective of all (for profit) firms, theoretically is to maximize shareholders value. Considering DBS who have paid out only 10% of its earmarked impairment fund for DBS High Notes and Minibonds, it has incurred the wrath of many except the stakeholders.

I presume that GE is expecting this move to increase its image and translate to better sales and maximizing shareholders’ value in the future.

That said, GE and OCBC are great companies to own and if their stock prices dipped to an attractive level of $10 and $6 respectively, there is no harm picking them up for long term investment.

A visit to Vista Residences

2009-07-11T08:40:00.000-07:00

I visited Vista Residences show flat today and was appalled by the prices of private property prices! A 1 bedroom 646 square feet unit costs $1370 PSF! After factoring all stamp duties, legal fees, it will cost almost $1400 PSF. Yet there are only three 1 bedroom units left and all 2 bedroom units are sold! The project is at least 80% sold at the 3^rd week of launch!

Consider a district 12 property, selling at this kind of price and high take up rate, does it feels like a bubble brewing?

The Toa Payoh MRT station was not within sight and I have to walk at least 18 minutes to reach Toa Payoh central. This is a far cry from the 7 minute stated on papers. It is near PIE, which means the noise from expressway will probably accompany you everyday. Traffic was quite bad even during off peak hours, the lanes are narrow and I do feel some stress navigating the neighbourhood.

Of course it was the price that totally put me off! The stamp duties and legal fees are not even absorbed. The sales agent even has the cheek to ask me to pay a 5% booking fee within 15 minutes of viewing. He thought I was buying vegetables in the market.

I would have to pay 3% more if I opt for interest absorption and payment deferment.

Consider Vision Crest, a district 9 property near Plaza Singapura. It was initially launched at $1100 PSF in 2003 (recession) and peaked at $2500 PSF. It is currently selling about $1650 PSF, which has an average of $5.92 median rental (1Q09 data).

As I stated in my earlier posts, I am still looking for a $600 PSF freehold property near novena area, for investment purposes. The current prices will definitely be unsustainable as the recession’s impact has yet been unleashed.

I foresee some cheap lelong sale coming up in 2010 and 2011 when the backlog of properties are being cleared by developers and huge influx of projects TOP.

Hopefully by then I have enough cash and CPF to scoop up nicely TOP apartments and can see what I buy.

Buying over priced apartments based on photos, artist impressions, showrooms, floor plans, architectural models and imagination are still too sophisticated for me now.

Bond funds??

2009-06-22T07:30:00.000-07:00

I was reading an online magazine and a financial advisor from a reputable company suggested a bond fund portfolio for risk averse people. He claims that it has low risk and by having bond funds, one can invest in global fixed income and withdraw a portion of it from the bond fund periodically, funding one’s retirement.

Well, even though I am about to have exams in less than a week’s time, I can’t help but to write something to kick the joker’s ass.

I have compiled, as much as possible the SGD returns of bond funds, available to the DIY investor from fundsupermart. The below data are correct as at June 22^nd, 2009.

Returns tabulated using the data of bid to offer returns to account for sales charges. Returns tabulated are also compounded. Example, if I invest $100 in Fund A and it gives me a 3 year compounded return of -2%, I will have $94.11 at the end of 3 years.

I have tried to compile the funds that are named like fixed income instruments. I could have inevitably missed many other bond funds. Apologies on that.

AIGIF SINGAPORE BOND FUND

Bid to offer returns:

3 years: -0.7%

5 years: 1.8%

ABN AMRO STAR EUROPE BOND

Bid to offer returns

3 years: -1.6%

5 years: -0.9%

DBS ASIA BOND FUND SGD (CL A) (only up to 3 years data)

Bid to offer returns:

3 years: -3.9%

5 years: NA

UOB UNITED INTERNATIONAL BOND FD

Bid to offer returns:

3 years: -2%

5 years: -0.1%

PIMCO HIGH YIELD BOND USD

Bid to offer returns:

3 years: -7.5%

5 years: -3.2%

SGAM TOTAL RETURN BOND S$

Bid to offer returns:

3 years: -3.7%

5 years: -2.2%

DBS SHENTON DYNAMIC BOND

Bid to offer returns:

3 years: -6%

5 years: -4%

FIDELITY INTL BOND A-SGD (only have 2 years of record)

Bid to offer returns:

1 year: -9.5%

2 years: -6.1%

FIDELITY US HY USD

Bid to offer returns:

3 years: -5.1%

5 years: -0.7%

ING RF EM MKTS DEBT HC EUR (only 4 years of record)

Bid to offer returns:

3 years: -3.3%

4 years: -0.9%

As one can see, most if not all of the bond funds returns are in the red!!

In Finance 101, we know that bonds are definitely part of the stock portfolio to lower the overall beta and risk of the portfolio. However, bond funds are altogether a different animal. There are a lot of expenses, upfront and inherent costs that erodes away investors’ value. The recent 3 years should theoretically be a bull market for bond funds, as equities tanked (they are inversely related, theoretically). Why is it that they are performing poorly as well? Are fund managers acting on the best interests of the investors? Are they imposing too hefty expense ratio or incurring unnecessary transactional fees that are ultimately borne by investors? We do not know.

If I were to invest in bonds, it will be truly bonds that pay me a fixed coupon rate and redeemable upon maturity. Not bond funds that pay me nothing and return me less than my principal!

Just for information sake, a bond is a debt issued by a company and pays a fixed amount (coupon) which will be redeemable at par value(price which was originally sold) by the company upon maturity. The maturity date can be 1 year to 100 years, depending on the financing needs of the company. It can be traded at the secondary (bond) market.

Ok, I hope I sound more convincing than the joker financial advisor. Who is employing me for financial advice now? Kidding!

Marriage: A risky business

2009-06-12T06:51:00.000-07:00

Lately I came to know a few friends from different social circles getting married. I am not sure if you call it pre marriage jitters, but 2 different couples who have already bought HDB houses are already having 2nd, 3rd thoughts about that person they want to marry.

One couple was together for 6 years, and the reason for getting married is because they have already known each other for 6 years and time is running short! The guy in the relationship really hates to receive SMS and calls from his fiancée, often trying to avoid her whenever possible. Breakups have been tried and failed due to pressure from the fiancée’s whole family, he was time and again held hostage emotionally by them.

As for the other couple, they rushed into a marriage less than 1 year of their relationship as they were keen to receive the 40k CPF housing grant by buying a resale HDB. Both are unwilling to go through the marriage now, but the house had been bought, banquet booked, bridal shoots taken and renovation paid. All by installments. There is little they could do but carry on with the mistake. And by the way, they no longer talk anymore, even over dinner.

Needless to say, we can foresee that they might not live happily ever after upon marriage.

Risk: Considering sunk costs

“It will be a waste if we don’t get married after being together for so long” is not a good reason to get married. Even if we were to analyze the issue from finance perspective, knowing each other for years is actually a “sunk cost” which should not be considered when making cost benefit decision. (Sunk costs are costs that cannot be recovered once they have been incurred. However sunk costs greatly affect actors' decisions, because humans are inherently loss aversive and thus normally act irrationally when making economic decisions. )

Actually marriage is a cost benefit decision between 2 persons. We should be choosing the person we love that would provide the biggest benefit and lowest cost to us in FUTURE. In order words, we want to maximize returns and minimize risk. Hence, “sunk costs” like knowing each other for years, already spent a lot of money on him/her, already bought the house etc should never be considered for marriage decision making, if you are a rational person.

We should rather, be concern about opportunity costs. If I forgo this girl (or project) and I invest time and money in another girl (or project), what is the projected benefits (cashflows) from the new selection? Is the net present value or internal rate of return higher? It depends on your expectations (discount rate) though!

Unfortunately, for marriage, the payback period for the investment is often minimum 40 years. Hence, it is a risky investment!

Risk: Non diversifiable risk

The other reason to consider marriage as a high risk activity is because of its non diversifiable nature. I can only choose one spouse and live with it. I cannot marry many (for non muslims) and spread my (their) eggs over few baskets. Hence, it is of paramount importance to choose the correct one! Even if one may argue that you can choose the best wife from many girlfriends (though not ethical), choosing the correct girlfriend may not turn out to be the correct wife, mother (for you children) and daughter-in-law.

Just like business climate, tax policies and consumers’ taste change rapidly; your spouse will also change. The same spouse today may not be the same one 10 years later. You will need to discount and adjust your expectations accordingly, which may be painful and difficult experience.

Risk: Unfavourable historical returns

Look around yourselves. Are there happier married couples or happier singles? What is the percentage of divorce and broken families? Again, from current statistics and “historical perspectives”, most people are better off single, which again points to the risky nature of marriage!

So if you are considering to get married, do think carefully! Do not get married for the wrong reasons!

After all, life can only be understood backwards; but it must be lived forwards.

Temasek sells BOA stake, loss estimated to be US$ 4.28b

2009-05-15T00:31:00.000-07:00

Just read online that Temasek has sold its 13.7b percent BOA stake during 1Q 09.

Reuters cited a source briefed on the deal saying that the shares were sold for between US$2.53 and US$14.81 in the first quarter.

Based on a Reuters calculation which assumed an average price of US$8.67, Temasek may have suffered a loss of about US$4.26 billion.

SIGH

I thought the banks bought in were supposed to be for long term? 2007 till now is barely 2 years, "long term" is defined like this?

SIGH

They better have a good reason to realise the loss at the worst possible time. US$4.26b is not a small sum, considering Temasek can even buy 100% of SPH for S$4.26b.

SIGH

Portfolio balancing is definitely not the best reason to sell. More news on this will definitely follow.

When facts are false

2009-05-02T19:59:00.000-07:00

"There are three kinds of lies: lies, damned lies, and statistics." The statement refers to the persuasive power of numbers, the use of statistics to bolster weak arguments, and the tendency of people to disparage statistics that do not support their positions.

Statistics is a powerful to induce people to make wrong decisions based on numbers.

Consider the following statement: “Attempting to move in and out of the market can be a costly affair, particularly because a significant portion of the market’s gains over time have tended to come in concentrated periods. Looking back at the performance of the S&P 500 since 1980, an investor who missed out on only the five best performing days in the market would have ended up with a portfolio worth roughly 26% less than one that had been fully invested throughout the period.

Further, missing just 30 of the best performing days for the market since 1980 would have reduced the value of a portfolio by about 73%, compared to one that remained fully invested.”

Source: MARE: Market Analysis, Research and Education, Oct 16, 2008. “Stock market, exit at your own risk”

There is nothing wrong with the statement. All the above stated are known facts. However, it gives people the false impression that you will definitely lose out if you exit the market “prematurely” upon investing and you only miss out the 5 or 30 best performing days but got hit by all the worst days, which is unlikely. Basically, it condemns market timing and embraces long time investment.

Consider the market turmoil last year, if you had exited or cut your losses in Jan 08, you would have missed the 40% downturn. You would probably miss the 20% recent rally, but you will still be better off!

The notion that statistics lie is common knowledge, but we should also be mindful that the motivation behind each statistics evidence is to induce people to make certain decisions. Consider the following fictional examples:

There is an epidemic in Singapore. 10,000 people are infected and on the verge of death. A new drug is available. If you choose to administer the drug, you will save 5000 people. If you do not use the drug, 5000 people will die. What will you do?

There is an epidemic in Singapore. 10,000 people are infected and on the verge of death. A new drug is available. If you choose to administer the drug, 5,000 people will die. Will you administer the drug?

You should be indifferent on both choices. However, the above simple example shows that the way numbers are phrased and presented will induce different emotions (thus choices), formation of different perspectives and possibly even different investment or life philosophies.

I once had an IFA agent who used to service my insurance polices and investment, 2 years back. The first thing he did when he met me was to scrutinize my then present polices and lament on how poor protection I had, how irresponsible my past insurance agents were.

He gave me his blog address to show his superb knowledge on finance and his “many” testimonials of satisfied customers. Eventually, when I invested with him, he disappeared and when I asked him difficult questions, requested financial transactions, he even scolded me (without my name) in his blog and classify me as one of the “clients from hell”.

Eventually, I fired him and sold off all my holdings for his poor and tardy after sales service in 3 months. Today, he is still doing extremely well, possibly earning in excess of $150k per annum. (When I met him, he was earning $120k per year!) Well, he made use of statistics to help him earned a good reputation. Uploading positive testimonials of satisfied clients (minus the complains component); bragging on how accurate his prediction on market was by linking his past posts when 50% of his predictions were wrong; portraying an upright image on himself by thrashing tie insurance agents etc.

All the above are just another form of manipulation of numbers and facts to induce people to make favourable decisions, to erm the “owners” of statistical evidence.

So the next time people show you numbers to prove a point, take it with a pinch, opps, I mean with a bucket of salt!

Sales talk

2009-05-01T03:50:00.000-07:00

My property agent called me today to promote a 500 sq ft property selling at $950/sq ft at balestier area. He claimed that the swine flu is similar to the Sars period in which after that, it is likely that properties would soar. The property is only a 15 minutes walk to Toa Payoh MRT station, good buy best buy must buy!!!

I kindly declined his “lobang”.

To put things in perspective, the swine flu is not even 1% of Sars impact. Firstly, swine flu though contagious is not as lethal as Sars. Many people have recovered from the flu virus and it is still a mystery why people in Mexico die from it.

The global financial crisis is still unfolding, GM, Chrysler and Ford may face bankruptcy and that means millions of jobs off the table. Weak recovery is expected only in 2010 2Q.

Banks are still not lending, credit crunch is still at its thawing stage.

Property market have reached the peak 6 months ago and are now sliding slowly now. Buying a property now is akin to catching falling knives. And if you are leveraging, it means catching falling knives naked!

Usually when they claimed that it is “10 mins” from town or MRT station, you have to add another 50% margin error. Their estimation is usually grossly misleading.

It doesn’t take rocket science to figure out if that person is trying to earn commission or giving sound investment advice.

In another case, my colleague was persuaded to offload their newly TOP at a loss by their property agent as he claimed that their house has depreciated 20% and banks will demand top up on their depreciated amount. Example, they bought the house at $1m, taking an 80% or $800k loan. Now the property is only worth $800k and the bank is only willing to loan them $640k. Hence they are liable to return $160k, “anytime”.

Again, unless they default on their monthly mortgages, banks do not demand sudden top ups for no good reasons.

I believe there are knowledgeable, good property agents around. But the only way not to get ripped off by agents is really to educate yourself.

Sorry agents, but my money is hard earned and hard to earn.

Stocks or residential property investment?

2009-03-07T05:55:00.000-08:00

Needless to say, property and stock markets are the most unlikely places you want your money to be right now. But the question is, given that you have $300,000 to invest now, do you buy a private residential property beside a MRT or a blue chip like DBS for passive income?

Many would argue that in Singapore, buying property would never go wrong. Well, perhaps it is because you have not seen people who have got their hands burnt in property market to live and tell their stories?

Which one offers a higher return and lower risk?

Some parameters of comparison:

DBS: $6.80/share

Assuming you purchased 44 lots.

Dividend per quarter: 10 cents (conservative guesstimate, could be higher or lower)

Income per annum: $17,600

Probability of losing 40% of your $300,000 in 6 months time: 30% (my conservative guess)

Income tax payable: None, as it has already been taxed at source

Yield: 5.89%

Probability of selling and earning a profit in 20 years time: 90% (guesstimate)

Net dividend income at the end of 20 years: $352,000
Assuming a conservative adjustment of 30% error, net dividend income would be: $246,400.

The argument here is that even the best banks in the world can fail, can we even trust to put our money with Singapore blue chips?

There is still a fair chance to lose 100% of our money in stocks.

Next

99 year leasehold Property: E.g: Kovan Melody/Compass heights

Cost: 1000 sq feet, 2 room property purchase @ $580/sq foot, costing $600,000 after stamp duties and other transaction fees. Minor renovations and fixtures have also been accounted.

Loan amount: $300,000 @ 2.5% for 20 years (interest is more likely to be 3.5% on average)

Monthly installment: $1500 (conservatively speaking)

Income from rent: $2100 (conservative estimate)x12= $25,200

Property tax: 10% of $25,000= $2,500

Agent expenses: $1,100

Wear and tear yearly maintenance: $600

Net rental yearly income: $3,000

Yield: 5,400/300,000= 1.0%

Probability of losing 40% of your $300,000 in 6 months time: 30% (my conservative guess)

(Should the property market falls another 20%, the fall in your property price will be $120,000, or 40%.)

Net rental income at the end of 20 years: $60,000

Probability of selling and earning a profit in 20 years time: 99% (based on historical records)

Apparently, property market is a more appealing investment as most people can tap on their CPF funds to finance their property while earning cash returns. From the above example, it is likely that the owner is able to sell the property 20 years later for at least $540,000 and earn a little profit, or carry on renting out the property for a $20,000 annual income.

This risk is considered “lower” as it is unlikely that the property will “fail” due to earthquakes or tsunami.

In the event that nobody wants to rent, the owner can simply move in and enjoy the home himself. You cannot even use the DBS’s branch toilets even if you are a major shareholder!

However, the short term risks are more or less the same. Yet the investment emotions involved are different. The feeling of seeing my property price falling 20% and pain of seeing my investment portfolio falling 50% is totally different even if the amount involved is the same.

Property gives people a sense of security. People need a roof over their heads, no matter what happens. It let investors feel that they can earn some rental income as long as they lower rent. However for stocks, investors do not see themselves owning an essential business. Actually, many businesses are also essential ones. Without them, people cannot own houses or even get a job.

Personally, I feel that property investment carries a higher risk of failure. The rental income might not be stable and one depends on rental income to service the loan. Tenants may default or destroy your house fittings, there might be unhappiness when negotiating new rental contracts or handle difficult tenants.

Still stocks for me for now.

Any inputs?

Personal updates

2009-03-05T23:58:00.000-08:00

Apologies to my faithful readers who have waited so long to read my post. I was literally struggling with work and studies these days, as many of you know. Now that I study part time, I have enormous respect for people who complete their masters and undergraduate degree the same manner. It is really sheer discipline, hardwork, time and stress management in one package.

Other than taking out time to attend lectures and tutorials, the most traumatising part is to prepare for tests and submit assignments on time. With little knowledge and limited time, I have to work like a bull almost every day just to put everything together.

Work definitely suffered as a result. I became more forgetful and careless at work, making several silly mistakes that caused sleepless nights for me. Luckily it is all over now.

I just got back my tests and assignments. I am really glad that all were above 80%! I always fear that I will fail the tests and have to put in extra hours to make sure that I pass. Compared to classmates who are already finance analysts, accountants and traders, it was a personal achievement just to do as well as some of them.

Going forward, I am really unsure if I can stand the stress of the many more modules ahead. The time, effort and price for a masters is taking a toil on my work and health. I might be considering other careers apart from finance when my bond ends.

Hopefully there is a better place for me out there, somewhere.