Burnout

How time flies. It has been exactly 7 years since I started this blog. It has not been a continuous process, though, as I stopped blogging for exactly a year from Jun last year to Jun this year. The cause? Burnout.

For 5 over years, I have tried to blog at least once a week. It gives readers continuity, as they know that I am always around. This is especially important during times of market stress, as readers know that I do not talk about investments only during good times and leave them in the lurch during bad times. Also, they only need to check my blog once and only once a week. The inspiration for a weekly blog came from a current affairs blog that I regularly visited in the past -- www.littlespeck.com, which is now no longer updated as the author has passed away. I liked the regularity of his week blog, which provided updates on a sufficiently regular basis but is not too frequent to follow. I thought too that I could achieve the same kind of regularity, but alas, trying to think up an idea, research about it, organise the thoughts and write it out, and then repeating the cycle 52 times a year proved too much to bear and I burned out.

It was not just blogging that I stopped. Almost everything connected to personal finance stopped. I stopped tracking my expenses, which I had done for the past 24 years. I also stopped monitoring the performance of my portfolio, which I had done for the past 20 years. Naturally, since I stopped blogging, I also stopped thinking about specific stocks and bonds.

During this 1-year hibernation, I wondered whether my blog has added clarity to investment issues or simply contributed to the noise. Individually, each blog might have very good reasons for their recommendations, but because different blogs have different opinions on even the same topic, to a person who is trying to search for some clarity on the internet, he might end up being more confused after reading these blogs than before he started. Nevertheless, my wife consoled me that I have done my best to value-add to the investing community. There will be some readers who would appreciate the unique opinions that I have.

Although I stopped thinking about specific stocks and bonds, I was still keeping up with financial news and there were issues that bothered me and made me want to blog about them. Such issues include the restructuring of Hyflux and DBS Vickers' plans to move the retail stock trading into the bank. Although upset, I did not have the time and energy to restart my blog. 

The issue that finally made me restart my blog was the IPO of Astrea V bonds in Jun. Coincidentally, my last posts before I stopped blogging were on the Astrea IV bonds. In my second-to-last post, I had blogged that I would not be applying for the Astrea IV bonds, although I corrected my initial thinking in my last post of 2018 and acknowledged that the Astrea IV bonds had sufficient safeguards. Fast forward to 1 year later, I decided to apply for the Astrea V bonds and I thought I should come out and reiterate my thoughts about the Astrea bonds before I applied for them. See Astrea V 3.85% Bonds – Understanding What You Are Buying Into for more info.

Once I restarted, the inertia was overcome and it became easier to continue blogging again. Nevertheless, I am conscious of the demands of a weekly blog and I would only be blogging whenever time permits and when ideas come to me. It is more sustainable this way. 

During the 1-year hibernation, although there were issues that made me want to restart blogging, there was also an incident that made me felt that all these years of blogging had been wasted. In Jan this year, I attended the Astrea Investor Day. During the Question & Answer session, one participant asked "could we have more of Astrea bonds?". This was despite the ongoing debacle of the Hyflux preference shares and perpetual capital securities. While I acknowledge that the Astrea bonds have safeguards to protect retail investors, I do not think that they are sure-win investments. Is it a case of the bonds having no risks at all, or that particular participant being blissfully ignorant of the risks? After coming back from hibernation, I wrote a series of posts on the Astrea/ Private Equity (PE) bonds. They can be found here. Readers can read and gauge for themselves whether the Astrea/ PE bonds are really risk-free or not.

That question really hurts. It hurts much more than if someone were to criticise my blog posts. For so many years, I have been blogging and keeping the blog free for all so that it could add value to the investment community and make a small difference to the world. That question just proved that it was probably my wishful thinking and my blog never really made much of a difference. It made me wonder whether I should still continue blogging. So, please, do not let me hear such questions again. It really hurts. 

Finally, for readers who have been regularly reading and supporting this blog, I thank all of you for your time and sharing of your views.

See related blog posts:

• Where it all began: The Beginning of the End
• 1st blog birthday: A Year's Worth of Blog Posts
• 2nd blog birthday: About Blogging and Investing
• 3rd blog birthday: The Value of (The) Boring Investor Blog 
• 4th blog birthday: I Didn't Let My Alma Mater Down
• 5th blog birthday: How Long Can (The) Boring Investor Blog Continue?

How Long Can (The) Boring Investor Blog Continue?

This is post no. 260, which represents the 5th birthday for this weekly blog. In past years, this would have been a joyous occasion, as it means that I have blogged for another 52 continuous weeks. This year, however, there is a tinge of sadness, as there is a realisation that all things will eventually come to an end, including this blog.

Regular readers of this blog would know that I like to string all posts with the same theme together, such as the telco theme of recent weeks. However, to have something useful to blog about, I need to carry out research. And research takes time. Despite this being a weekly blog, the amount of time needed to search, analyse and write useful stuffs is sometimes quite overwhelming. For example, the 4 posts on Hyflux last year were spread out over 7 weeks, simply because the research could not keep up with the blogging. 

Besides the lag in blogging, a lot of personal stuffs are also piling up. There are 400 over unread emails in my mailbox; I have not calculated my Profit & Loss for 2H2017; my database of 260 stocks is only updated up till 2016, etc.

What contributed to the lag in blogging since last year? Starting from last year, I have been analysing stocks as business investments rather than financial investments. This means having to understand the operations of a business and know what factors would affect its profitability, rather than just looking at its income statements, balance sheets and cashflow statements and conclude whether the stock should be bought or sold. A case in point is the telco theme that I have been blogging recently. To have an informed analysis about whether telcos' profitability is going up or down, I need to understand Will SIM-Only Plans Cannibalise Regular Telco Plans?, Impact of Data Upsize Plans on Telcos, Will MVNOs Cannibalise Telcos' Business?, Is Pay TV Still A Reliable Cash Cow?, Do Telco Investors Need to Fear the Fourth Telco? etc., before I can reasonably conclude Is Starhub's Dividend of 16 Cents Sustainable? Looking at the various aspects of the operations of the business is similar to the scuttlebutt approach mentioned in Philip Fisher's book "Common Stocks and Uncommon Profits".

Although very time-consuming, this change in blogging approach has benefited my investments as well. Global Logistic Properties (GLP) was the largest winner in the 20 years I have been investing with my own money. As for M1, although I am sitting on paper losses currently, I am confident the stock price will turn around. Likewise, I am confident that my analysis for the likes of Keppel Corp/ SembCorp Marine, Hyflux, Starhub will turn out to be correct. There is no going back to the days of just analysing the financial statements and buying/ selling the stock. Similarly, I also believe readers would want to know how the business aspects of the company are doing rather than just the financial aspects. 

Thus, as much as I like to continue blogging once every week, there will come a time when this trend will be broken. After having blogged 52 times every year for the past 4 years, I will be quite sad when this day comes. In the meanwhile, let us relish for every week that this blog can continue.

See related blog posts:

• Where it all began: The Beginning of the End
• 1st blog birthday: A Year's Worth of Blog Posts
• 2nd blog birthday: About Blogging and Investing
• 3rd blog birthday: The Value of (The) Boring Investor Blog 
• 4th blog birthday: I Didn't Let My Alma Mater Down

Do Not Judge A Blogger By Short-Term Price Movements

How do you judge if a blogger is correct? Is it by price movement? That is, if the price moves in the same direction as what the blogger writes, then he is correct. Conversely, if the price moves against him, then he is wrong. This is an easy and convenient way of judging a blogger, but is not necessarily correct. If you are a short-term investor, then short-term price movement can be the yardstick to measure a blogger. But if you are a long-term investor, short-term price movement is the wrong yardstick.

Using last year's Brexit referendum as an analogy, most observers think that Brexit was a bad idea. However, the majority of British voters voted for it. Does it then mean that Brexit is good and most observers are wrong? The fact that the majority of voters voted for Brexit does not change the fact that Brexit is a bad idea. The outcome of a vote does not determine the correctness of an analysis. Coming back to the stock market, Benjamin Graham once said that the stock market is a voting machine in the short run and a weighing machine in the long run. Thus, from this comparison, short-term price movement does not determine if an analysis is correct or not. The correctness of an analysis will only show up in the longer term. 

Last week's Sunday Times carried an interesting article about Jim Rogers that illustrates this point. He shorted the shares of 6 different companies but ended up having his savings completely wiped out as the shares continued to rise. At this point in time, would you say Jim Rogers was correct or wrong? 2 to 3 years later, each of the 6 companies he shorted had gone bankrupt. Thus, if your yardstick is short-term price movement, then he is wrong. However, if your yardstick is economic outcomes, then he is correct.

Hence, if you read my blog posts and the price went in the same direction, it does not mean I am right. Likewise, if the price went in the opposite direction, it also does not mean I am wrong. Short-term price movements determine nothing. Do not judge a blogger by short-term price movements.

See related blog posts:

• The Stock Market is a Voting Machine

Wills, Trusts, AMDs and LPAs

I just attended a 2-day estate planning talks on wills, trusts, Advanced Medical Directives (AMDs) and Lasting Powers of Attorney (LPAs) organised by RockWills Corp Pte Ltd. There are some interesting facts about them that I share below.

Wills 

Most people know what is a will, so I will skip the basic facts and mention what I learnt from the talk. As you may be aware, you need to identify who are the executor and trustee of the will. The executor is the person who will carry out all necessary actions to distribute the estate according to the wishes of the will, while the trustee is the person who will hold on to the estate until it is completely distributed to the beneficiaries of the will. Although you can nominate an executor and trustee to carry out the wishes of the will, they can actually renounce these roles! The beneficiaries will then have to appoint another executor and trustee to execute the will.

The other point highlighted is that while you can write a well-planned will, if the will cannot be found or is destroyed, it is useless as well. This may sound like common sense, but the safekeeping of the will is sometimes taken for granted. For example, I made my will approximately 10 years ago. It is sealed inside an envelope and placed in an easily accessible location as nobody knows the existence of this will. However, for these past 10 years, I never open up the envelope and check the content. Who knows, maybe the ink might have faded or the paper on which the will was written might have turned yellow such that the will is no longer legible? 

The other concern for leaving my will so easily accessible is if someone were to read it after I am gone and dislike its content, he could simply destroy it and there would not be a will left behind.

The reason for my complacency is because I believed a copy of the will is kept by the law firm who wrote my will and by the Wills Registry under the Ministry of Law. I was reminded at the talks that the Wills Registry does not keep a copy of my will; it only has a record of when and who drew up my will. Will the law firm still keep a copy of my will 10 years after making it? I believe so, but I better not count on it since it did not charge me any custody fee. I will have to seriously think through how should I keep my will securely while still keeping it accessible when needed. 

Trusts

This is the most interesting topic that I learnt from the talks. If you have read my blog post on There is Really a Regular-Payout Term Insurance, you would know that I have a preference for insurance policies that pay out regular sums of money over a period of time instead of a lump sum. This is because my dependents might not be financially savvy enough to handle a large sum of money suddenly and might unwittingly invest the money in some risky investment products. A regular payout provides greater certainty on the financial sustainability of my dependents.

Similarly, a will pays out the inheritance as a lump sum, which has the same disadvantages mentioned above. However, if you write a will to pay out the inheritance into a trust, you can provide instructions on how regularly a trust disburse the funds to the beneficiaries. You could also set certain milestones for your beneficiaries to achieve before they get further payouts, such as getting a degree, etc.

Advanced Medical Directives (AMDs) 

AMDs are instructions that you set in advance to inform doctors whether you wish to be kept on life-support in the event of a terminal illness and when death is imminent without life-support. You can refer to Ministry of Health's website on AMDs for more information.

The key thing to note is that the witnesses to the AMDs should not be beneficiaries of your will.

Lasting Powers of Attorney (LPAs)

LPAs are legal documents authorising a trusted person (known as a donee) to make decisions related to your personal welfare and financial matters in the event of mental incapacity such as dementia or stroke. This is a very powerful document as the donee(s) can make many decisions on your behalf. Thus, whom you appoint as donee(s) is very important. For the simple LPA, you can appoint 1 or 2 donees and specify whether the 2 donees need to act jointly or can act alone. You can also appoint a replacement donee should one of the originally appointed donees becomes unsuitable. You can refer to Office of the Public Guardian's website on LPAs for more information.

Some other practical considerations that the speaker mentioned at the talk are the donee should preferably not be of the same age, because both the donor and the donee might suffer from dementia when the LPA needs to take effect. Also, the donee should not be someone living overseas as he would have difficulties overseeing daily matters related to personal welfare and/or financial matters. 

That's all for the lessons I gathered from the talks. It is useful to attending such talks from time to time to clear up any misconceptions and understand the options available for estate planning.

See related blog posts:

• There is Really a Regular-Payout Term Insurance
• Preference for Regular Payout Insurance
• My Considerations on Eldershield

I Didn't Let My Alma Mater Down

How time flies. This is post no. 208, which makes it the 4th birthday for this weekly blog. This is a time for celebrations and reflections. Today's story is about my studies in the Singapore Management University (SMU)'s Masters in Applied Finance (MAF) programme.

I enrolled in the programme in Jul 2004. The stock market had just recovered from a 3-year slump due to the dot.com crash in 2000, Sep 11 terrorist attack in 2001, accounting scandals in 2002 and the Severe Acute Respiratory Syndrome (SARS) in 2003. After a prolonged slump, the market staged a strong recovery in 2004 and I made my first (small) pot of gold. I decided to reinvest the profits, not in stocks, but in a formal education in investment. Through good fortune, I heard of the MAF programme in SMU and decided to enrol in it in Jul 2004.

The MAF programme catered to professionals who wanted to advance in their careers in the finance industry as well as people who were looking to make a career switch into the industry. Thus, it took in graduates who were trained in other disciplines. However, being the introvert I am, I had totally no idea what the intent of the programme was all about, nor the hot prospects of jobs in the finance industry then. I was not even aware of the Chartered Financial Analyst (CFA) programme! I was simply happy to be accepted into the programme even though my basic degree is in engineering. It was only after I enrolled into the programme and met my new classmates, some of whom were planning to switch into the finance industry, did I realise what the programme was all about. At one stage, I wondered whether I had deprived anyone with the intention to switch of a place in the programme. Anyway, by then, it was too late. So, I continued my studies.

Frankly speaking, studying for the purpose of gaining knowledge instead of getting good grades is a joy. I enjoyed the lessons and the projects despite having to rush to class from work every Tue and Thu, besides spending the whole of Sat in classes. How could projects be boring if they were on analysis of companies such as Informatics, CK Tang, SIA, etc., since whatever insights we gathered for the projects could be useful for our own investments? Besides, the American education system that SMU adopted encouraged lively exchanges of ideas instead of just copying notes from the lecturer. I even had the curiosity to read up the "Greeks" (i.e. Black-Scholes model for options) outside of the classes! When we were about to graduate 1.5 years later, I felt a sense of loss. Never had I enjoyed classes so much in my life!

After I graduated, I applied for a few jobs in the finance industry, but I was not accepted, partly also because I was over 30 years old by then. Nevertheless, I did not feel too dejected, since my intention of enrolling in the programme was to gain knowledge rather than studying for grades.

A couple of years later, in 2012, I started this blog to share my knowledge and experience about investing. I believe I have a unique combination to offer to readers -- someone who is old enough to have 30+ years of experience in the stock market and has witnessed many stock market crashes but still young enough to blog and share knowledge. Furthermore, that practical experience is complemented by academic knowledge from the MAF and CFA programmes.

It is 4.5 years since I started blogging and 4 x 52 posts later, I believe I have established a useful resource for readers who wish to learn more about investing. What I have shared in this blog has sometimes gone beyond what is found in books. While I did not contribute back to society through working in the finance industry, through this blog, I am returning to society what I have gained from SMU. I like to say that I did not let my alma mater down. Thank you, SMU, for giving me a wonderful education in investment. Last, but not least, thank you readers who have encouraged me to continue writing through your visits to this blog.

See related blog posts:

• The Value of An Education in Investing
• The Value of a CFA Education
• Investing Is A Life-Long Learning Journey

Why Is Protectionism A Concern For Singapore?

After the election of Donald Trump as US President, it has been said that his protectionist stance is bad for open, trade-reliant economies like Singapore. But what is trade? My idea of trade has stagnated since the secondary school days, when we learnt that Singapore had a thriving entrepot business due to its strategic location at the southern tip of the Straits of Malacca. Thus, if it is just the port business that is affected by protectionism, then it is not a very big deal, isn't it?

However, on further thoughts, trade is not just about the port business. When we buy goods from the supermarket or shop online from Amazon or Taobao, that is trade. When we watch the Premier League on TV, that is also trade. As investors, when our companies such as Keppel Corp builds and delivers an oil rig to the Gulf of Mexico, that is trade. And when SIA flies passengers from New York, it is also trade. Thus, trade is all over the place. It is what enables us to consume goods and services that Singapore does not produce and sell goods and services that Singapore produces. The smaller the domestic market is, the more reliant we are on trade with other countries.

The figure below shows the correlation between Non-Oil Domestic Exports (NODX) and GDP. The correlation between NODX and GDP is 0.52. It illustrates the importance of trade to GDP in Singapore.

Correlation between NODX and GDP

What would happen if there is no trade with external countries, as a result of protectionism and/or trade wars? In the extreme case, we would not have food, enough water, and power (because no natural gas), not to mention creature comforts like the latest iPhone or watching the Premier League. Keppel Corp could only build oil rigs for drilling oil in Singapore waters and SIA could only fly from Changi Airport to Seletar Airport! Very soon, these companies would go out of business and all the staff that work for these companies and supporting industries would be jobless! Thus, although we seldom think about it, trade is essential for the survival of Singapore. When there are threats of protectionism and/or trade wars, perhaps we should pay more attention to them, because our survival depends on free trade!

See related blog posts:

• Making America Great Again and Its Impact to Asia

My Portfolio of Stock Blogs

Besides having a portfolio of stocks, do you also keep a portfolio of stock blogs? I do, and they have made me both a better investor and a better person. Here are some of the stock blogs in my blog list (visible on the desktop version of this blog).

BigFatPurse

BigFatPurse is one of the few blogs that I always read. I like it because it does not just talk about stocks, but also investor psychology which can shed some light into how investors work and how that translates to actions seen in the stock market. An example of this is their post on Skinner’s Rats and Value Investing – Part 2. I always believe that the stock market is like a "Matrix" and you can defy the laws of the "Matrix" by acting as what you would have in the real world. For example, why is it that people flock to the Great Singapore Sale but run away from the Great SGX Sale when both have mechandise on discount? When the post is not directly about investing, it allows us to see our own actions more clearly and hopefully make better decisions in the stock market. 

Investment Moats

Investment Moats is a blog that most readers are familiar with. I categorise it as a technical blog, because it usually has tables, charts and/or references from some other studies. You can learn a lot from technical blogs. On the other hand, they can also be some of the most dangerous blogs around. Just because a post is long and complete with charts does not make it accurate. I have seen some long posts from some other blogs that are plain inaccurate. 

Investment Moats does not have such issues, as it always gather facts to support its posts. In fact, it is the only technical blog in my portfolio. I especially like his series of posts on returns from insurance policies, such as Does your Insurance Saving Plans (Endowment) give you 3 to 5% returns? It gives us some ideas on the type of returns on insurance policies that we do not normally hear about. Finally, this is one post that I wrote after first learning about it from Investment Moats: You Don't Need To Be Good In Investing To Be Rich.

Rolf Suey

Rolf Suey is another blog that most readers are familiar with. I first got to know Rolf Suey for his insider views of the Oil & Gas industry. It is rare for an industry insider to be a investment blogger. I believe many people, including myself, have benefitted immensely from his views, which have proven accurate many times.

However, I did not immediately add his blog to my portfolio, primarily because in the second half of 2015, our market actions differed. As he was selling, I was buying. Eventually, I came to realise that the actions did not matter, because our circumstances were different. What is important is the thinking behind those actions. They are very sound and prudent rationale that I can benefit from.

Money Honey

If you run through the list of blogs on my blog list, you will see one that is different from the rest -- Money Honey. He regularly posts about charities that he supports and donates generously to them. In fact, he actually sets aside a separate "Not-For-Profit" portfolio to fund donations to charities. You can refer to the amount he has donated here. I am humbled by his deeds and his blog posts serve as a constant reminder to me to help others in need.

Conclusion

The above are some of the blogs in my portfolio. For a complete list of my blog list, please switch to the desktop version of my blog. As shown above, they have helped me become a better investor and person. Do you also keep a portfolio of stock blogs?

See related blog posts:

• The Value of (The) Boring Investor Blog
• Do Not Judge A Blogger By Short-Term Price Movements
• The Stock Market is a Voting Machine

The Value of (The) Boring Investor Blog

Today's post is No. 156, which makes it the 3rd birthday for this weekly blog. Usually, the post at this time of the year is on reflection and also some shameless self-promotion. Regular readers can skip this post without missing much. The topic for this year's post is the value of (The) Boring Investor blog.

The most direct measure of the value of this blog is the amount of advertising revenue received. For 3 years of efforts, the grand total of advertising revenue is... $78.20! This works out to be $26 per year or $0.50 per post! Applying a Price/ Earnings multiple of 12 times, the value of this blog works out to be $312!

There is another way to measure the value of this blog, which is the value that it brings to readers. Besides writing it, I also refer to my own blog from time to time, to remind myself of the actions that I have to take or the rationale for taking certain actions. Generally, the driving force behind this blog is about applicability. It attempts to answer, for example, whether a particular investment is a good one for investors. To this end, this blog has several themes running through it.

Research-based 

To determine whether an investment or a strategy is a good one, sometimes you need a lot of data and research to back it up. For example, do you wonder how the Dogs of Dow strategy would perform in Singapore's context? The answers to this and some other questions are addressed in posts such as the following:

• Portfolio Management: The Dogs and Puppies of STI for 2016
• Stocks: Case Studies of Unsuccessful Privatisations
• REITs: Do REITs Overpay for Their Acquisitions?
• Properties: Properties, the Population White Paper and the Land Use Plan
• Bonds: Benchmarks for Retail Bond Pricing

Experience

There are a lot of finance books that talk about how to pick and trade stocks. However, they do not discuss what investment strategy should you choose, or what do you do when the stock market goes into a bear market, etc. This is another area where this blog attempts to fill some of the gaps with posts such as:

• Investment Experience: The Evolution of An Investor
• Investment Planning: Experimenting with Investment Strategies
• Investment Planning: How Much Does One's Financial Independence Depend on One's Health?
• Investment Planning: The Big Picture During Bear Markets
• Stocks: How to Get a Multi-Bagger?

Personalised Calculator

Blogs are always static information. Thus, we can only talk about things that apply in general which may not be applicable to every reader. For example, is the UOB One account or the OCBC360 account better? The answer depends on the individual readers' circumstances. One of the things that I found out through experimenting is that it is possible to incorporate Javascript in blogs! With this feature, it is possible to take in individual input and produce output that are personalised to individual readers' circumstances. So far, there are only 2 web calculators on this blog:

• Savings: The OCBC360 or UOB One Calculator (Basic)
• Savings: The OCBC360 or UOB One Calculator (Advanced)

If you know of any ideas that can be solved using similar features, please feel free to leave a comment below.

Navigating Unchartered Territories

The world and our own circumstances are constantly evolving and we sometimes enter into uncharted territories. There are no experience to call upon to navigate these unchartered terrorities. For example, we now have negative interest rates that we thought were impossible only a few years ago. In such cases, we can only rely on understanding the facts, analying the second- and third-order implications and come up with an appropriate answer or solution. Some of the posts that address these issues include:

• Retirement: Concluding Post on Early Retirement
• Tax Planning: SRS Exit Strategy
• Insurance: My Considerations on Eldershield
• Savings: Will Bank Deposits Pay Negative Interest Rates?
• Investment Planning: Getting Ready for US Interest Rate Rises

Conclusion

That's all for my once-a-year rumblings. I hope this blog has brought value to all readers. To those who read through this post even though you know that there is no new information, I thank you for being willing to read whatever I write. Thank you. 

See related blog posts:

• Where it all began: The Beginning of the End
• 1st blog birthday: A Year's Worth of Blog Posts
• 2nd blog birthday: About Blogging and Investing

Increase Your Experiential Wealth This Weekend!

As you know, the South East Asian (SEA) Games are upon us this week. What do the SEA Games have to do with finance? Other than the fact that the tickets to some events cost money, almost nothing! Nevertheless, didn't we just discussed a few weeks ago about early retirement, where you could sleep a little later and engage in your favourite past-times? Well, catching the SEA Games live is also a form of living out your retirement lifestyle!

The first game I caught live was the men's individual squash final on Wednesday night. To be honest, it was the first squash game I had ever watched in my life. I knew nothing about the game before and after it. Nevertheless, that did not stop me from enjoying the game, watching the players running all over the court to return the serve, cheering the players for recovering a difficult ball and applauding them for playing a long-drawn rally. The atmosphere was simply fantastic, with everybody cheering and moaning at the same time. My conclusion to my colleagues after watching the game was: I felt younger :) So, I will be back this weekend catching the other games live, and I encourage you to do the same. The last time the Games were held in Singapore was 22 years ago, and it could be another 20 years before we host the games again.

Many a times, we spend a lot of time working over-time and analysing our investments, so that we could one day gather sufficient material wealth to retire comfortably. In doing so, we often neglect our family, friends, health and events happening around us. These are other forms of wealth, and they are more lasting and enriching than material wealth. Think about your last trip to a so-and-so country, are you filled with fond memories about the place, the food and the people? Now think about your last purchase of a so-and-so product, do you feel the same excitement as you first had when you held the product in your hands for the first time? Best of all, non-material wealth do not cost much to acquire. Our lives are made much richer with them!

See related blog posts:

• The Philosophy of Spending Money
• Concluding Post on Early Retirement

From Third World to First

This is a tribute to Mr Lee Kuan Yew from the perspective of a financial blogger. The more formal tribute can be found here. 

Mr Lee has often been lauded for bring Singapore from Third World to First World in one generation. In the process, he has also received a fair share of criticism for his actions. In a way, many of us in Generation X and older are also trying to do the same, striving to bring our own families from Third World to First World in one generation. I grew up in an era when we do not own our roof. We had to move from places to places every few years, hence, I often had to travel long distances to school. My daily pocket money during primary school days was a mere $0.30! And putting a son through 4 years of university education was a not-insignificant strain on the family finances.

When I graduated, things were better. We could consider ourselves in the Second World by then. We owned our own roof, thus bringing much needed stability. I could, in theory, own a car with my new-found job. But knowing that there were only 40 years to build up a nest-egg before retirement starts, I had to save. I am sure many like-minded financial bloggers would understand when I say it is a fairly single-minded, no-nonsense mission to build up a comfortable cushion for our families during good and bad times. 

We keep track of our daily expenses and cut out any unnecessary expenses. We save and invest for the future. We have a keen eye for details when it comes to extracting maximum value-for-money, including deciding where to eat, what to wear, which credit cards to use, etc. I would imagine for those bloggers with wife and children, they would subconsciously influence them to do the same, occasionally earning an authoritarian label from them ;) Sometimes, our family members would advise us to spend a portion of our reserves and live better now that the finances are better, but old habits simply die hard. We are generally not generous folks that contribute much to social safety nets, at least not when there are still external risks to be managed. As we grow older, we would scan for external risks that could deal a hard blow to our finances, such as rising medical costs if our loved ones were to get sick or high housing prices if we had to buy one. We do not always have a solution to these worries, except to keep on saving for rainy days, knowing that nobody owes us a living. We keep our worries to ourselves, because there are no added benefits in having more people worried about them. Very often, the people around us do not understand what we do, but it does not really bother us, so long as we achieve what we set out to do. And finally, when the job is done and it is time for us to say bye-bye to this world, we would like to leave in the quietest manner possible, because that is the way we have lived our lives.

From Third World to First World in one generation. Whether it is building up a nation or a family, it requires sacrifices and hard decisions. Not everyone will understand at that moment in time, especially when you are at the receiving end of it. But let's hope that one day when we look back, as we enjoy the fruits of many years of labour, we can appreciate and understand the intention behind those actions.


See related blog posts:

• Tribute to a Statesman
• A Moment of Silence for Mr Lee Kuan Yew

About Blogging and Investing

This is Post No. 104, which makes it 2 years' worth of blog posts for this weekly blog. I hope readers will forgive me if I blog about other things during this time every year.

Blogging has never been easy for me, despite this being a weekly blog. By Thursday of every week, I would have to think about what to blog for the weekend and after I have found a idea, I would have to think about the content and organise them to form a coherent post. Occasionally, I would also need to carry out some research to check the facts. There have been a few occasions where the facts did not match the hypothesis and I had to discard the idea and find a new one. Even when I start to write the post, the thoughts do not always flow smoothly. I have to review and re-write. It is often a 2 steps forward, 1 step backward process. When I have finally completed the post, I would read and re-read, to check whether the facts are correct and see if the sentences could be written in a clearer way. The process of writing the post easily takes 2 to 3 hours. So, if I am late in my weekly blog posts, that is usually what happens. 

Despite the hard work, blogging in itself is satisfying, knowing that I could share knowledge with other fellow investors in Singapore. If not, I could never have persevered till today. Not only that, I have found a group of like-minded bloggers and readers who appreciate my posts. I would like to take this occasion to thank them for their continuous support during these 2 years. 

Besides the inherent satisfaction of blogging, I also like to keep track of the pageview count on my blog after writing a new post. It is just like a film director who not only wishes that his film is good but also popular. A high pageview count would delight me, while a low pageview count would leave me a little discouraged. Every week, I would write a post, hoping that the pageview count would increase. Sometimes, I would think that a particular blog post was well-written and could attract many views, but it turned out to be disappointing. Sometimes, I see the pageview count of other bloggers numbering into the million and wonder when could I ever come close to it. Sometimes, I see new bloggers coming onto the scene and their pageview counts quickly exceed mine in a short space of time.

In a way, the pageview count is like the wealth we are trying to accumulate. Every week and every month, we would invest our savings to increase our wealth. Sometimes, we would think that we have made a good investment and deserve large returns, only to see it fall short of expectations. Sometimes, we see millionaires living in private condominiums and driving large cars and wonder when would it be our turn. Sometimes, we see people younger than us making more money than us. 

That is Life. As a "young" blogger, I can understand your frustrations. You often hear that you can get rich by working hard, spending wisely and investing your income, but you hardly see any results despite 2-3 years of living frugally. You saw everything that I mentioned above and wondered if it is still worth the efforts and whether you are on the right path. As an "old" investor, I can assure you that you are on your way to achieving your goals. Every step you take today might not seem significant today, but every step is one step closer to your goals. When you have reached your goals and you look back, I believe you would not want to have it in any other ways. If it was too easy, you would have lost interest and not appreciate what you have achieved. So, take heart and march on. Just like if this blog post is not popular, write the next one!

See related blog posts:

• The Beginning of the End
• A Year's Worth of Blog Posts
• The Value of (The) Boring Investor Blog

A Moment of Silence for Mr Lee Kuan Yew

This weekly blog will not be publishing any financial blog post this week as a mark of respect for Mr Lee Kuan Yew. Let's take this moment together to remember the contributions that Mr Lee and countless members of his generation have made to the Singapore we have today.

See related blog posts:

• Tribute to a Statesman
• From Third World to First

A Year's Worth of Blog Posts

I've reached Post No. 52 for this blog. While this does not seem much compared to other blogs, it nonetheless represents a significant milestone for a weekly blog. It means that I have accumulated a year's worth of blog posts. Blogging is hard work for me; I spend about 2-3 hours on average writing and reviewing the posts, mostly in the middle of Saturday nights. When research on a particular topic is required, a lot more time is spent in gathering the data and analysing the results. Nevertheless, the outcome from blogging has been gratifying.

I first started the blog to record down investment ideas so that the knowledge will continue to stay on long after I've gone from this world, but blogging has not been solely a one-way traffic for me to communicate with the world. I've gained much from blogging and the constructive comments that readers leave on the blog.

Firstly, blogging strengthens the investment ideas. Previously, they were all conjured up and evaluated in the mind. Most of the time, the mind only hears what it wants to hear. But by putting down the ideas in writing and working out the numbers in Excel, it forces them to be re-examined in greater details. Some ideas that could not stand up to scrutiny were thrown away. Other ideas were strengthened and reinforced with the greater scrutiny. Examples of such ideas are Properties, the Population White Paper and the Land Use Plan and Housing Loan Servicing - Cash or CPF?

Secondly, blogging forces investment ideas to be investigated. This is usually in search of blog ideas to extend the longevity of this blog. Examples of investment ideas that are a result from such investigations include The Dogs and Puppies of STI and Do REITs Overpay for Their Acquisitions?

Thirdly, after I started blogging, I also began to read more investment blogs. Some of the blogs are very instructive. I've added the hyperlinks to these blogs so that other readers can benefit from their writings. In search of new blog ideas, I've also picked up from where I left off many years ago to read investment books found in the library. A couple of books were re-read, such as the Security Analysis and The Intelligent Investor. The post on The Lost Art of Bond Investment is the application of an investment concept found in the books.

Fourthly, after searching for 28 years for the holy grail of investing, I seemed to have stumbled upon it. At the time of searching, I didn't know how the holy grail would look like nor what form would it take. All I knew was the idea that if Risk was my friend, I would have found the holy grail. Why? Because if Risk was my friend, I would not have to worry about risk, about market crashes. In fact, I would welcome Risk whenever he comes visiting, for that would mean an opportunity to gain more profits. For the last 28 years, Risk wasn't really my friend. Whenever the market crashes, I would book paper losses. Sometimes, the losses could be so severe that they were painful to look at. Sometimes, some losses never recovered and remained as losses for many years. Over the years, as we aged, our emotions and animosity for each other have reduced, but I still couldn't call him my friend. It was not until that I investigated further into passive investing that I found a way to make friend with Risk, that I could welcome him whenever he comes visiting. The results of this analysis can be found in the trilogy of blog posts on Portfolio Rebalancing - A Fine Balancing Act, Volatility is Your Friend and The Passive Portfolio.

Finally, looking back at the very first post of this blog, The Beginning of the End, I had originally wanted to share ideas that the financial world is really a "Matrix", and investors could defy the rules of the Stock Matrix with real-world common sense. It is with some regrets that I have not been able to expound on this theme more, only managing to touch on it with Shareholding Disclosure and The Stock Market is a Voting Machine. I hope to be able to expand on this theme with future posts.

It has been a long journey thus far. I am not sure how long this blog can last. I hope this blog has made a small difference to the investing community.

See related blog posts:

• The Beginning of the End
• About Blogging and Investing
• The Value of (The) Boring Investor Blog

Shareholding Disclosure

In stock recommendation reports, the stock analyst has to declare his shareholding in the recommended stocks. When he declares that he holds certain stocks, do you then treat his stock recommendations with some suspicion, wondering whether he is recommending certain stocks so that the rest of the public would buy and lead to a rise in the stocks that he holds? And if 2 stock analysts (Analysts A & B) both recommend the same stock but Analyst A doesn't hold any shares in the stock and Analyst B does, who would you believe in more? Most people would believe in Analyst A more, because he has no vested interest in his recommendations. However, should that be the case?

Analyst B puts his money where his mouth is. If the stock drops, at least he suffers a loss together with his clients. And when he is prepared to put his money in, he would be more careful in analysing the stock being recommended. If the stock drops, he would learnt where has he made a mistake in his stock analysis and would review the stock more regularly for any changes in prospects. For as long as he holds the stock, he has the same interest as his clients. In contrast, Analyst A neither gain or lose regardless of how the stock performs in future. He may have no vested interest, but that also means less alignment to the interests of his clients. While one might argue that a wrong stock recommendation would lead to clients not believing in him in future, this is rarely the case as investors generally do not track the performance of stock analysts. Stock recommendations are essentially an opportunity for investors to trade the stock short-term. Hence, for long-term investors, isn't it important that they consider whether the analyst holds the stock in the mid- to long-term?

As an analogy, imagine that you wish to travel to an exotic destination for a holiday. 2 travel agents (Travel Agents A & B) offer their travel packages to you, but Travel Agent A has never travelled there and will not be accompanying you on this trip. On the other hand, Travel Agent B has travelled there and will be on the same trip as you. Which travel agent would you sign up with? More likely Travel Agent B, because of his experience and his presence on the same trip. If this is the case, shouldn't investors believe in Analyst B more when it comes to stock recommendations? This is one of the paradoxes in stock investing.

Structured Warrants

Structured warrants were introduced in Singapore many years ago. They are synthetic derivatives created by investment banks and allow investors to gain in the price movement of a stock without the full capital layout. For example, a stock could be trading at $2.00 per share, which means that investors need to fork out $2,000 for 1 lot of shares. However, a 2-month structured call warrant could be created with a strike price of $1.90. The price of the structured warrant would be $0.16, or $160 for 1 lot of warrants. When the mother shares rise by $0.10, the structured warrant would rise by $0.08. While the gain on the mother shares is only 5% ($0.10 / $2.00), the gain on the structured warrant is 50% ($0.08 / $0.16). Conversely, should the mother shares fall, the loss is also magnified. Because of this leverage effect, structured warrants had been very popular with retail investors.

Although structured warrants are sold by investment banks, they do not lose with investors gain. This is because each structured warrant sold is backed by actual shares in the mother company. When investors buy a call warrant, the issuer will buy an equivalent number of shares in the mother company, so that any loss on the call warrant is covered by the gain on the mother shares. The issuer, which also acts as the designated market maker, stands ready to buy or sell any structured warrants that investors wish to trade. Hence, any movement in the price of the mother shares is quickly reflected in the price of the structured warrants.

However, what is not so obvious to investors is that any movement in the price of the structured warrant also has an impact on the price of the mother shares. A striking example happened sometime in 2005 in one of the structured warrants of Total Access Communications (TAC). Then, a pricing error by the market maker caused the structured warrant to be worth less than its equivalent of the mother shares. This created an arbitrage opportunity to buy the structured warrant and sell the mother shares for a risk-free profit, creating upward pricing pressure on the structured warrant and downward pressure on the mother shares. However, as the market maker maintained the price of the structured warrant, the end result was a drop in the mother shares. This event eventually passed as a pricing error and very little attention was called to the power of structured warrants to influence the price of the mother shares. However, this example shows that the power of structured warrants cannot be underestimated, especially when large volumes of structured warrants are traded on a single stock.

Rights, Bonuses and Share Buy-Backs

Back in the 1980s, stocks would go up when they declared a rights issue. The logic then was if you could buy more shares at a discount, it was a good deal. In the 1990s, this thought was found to be flawed and rights issues no longer caused stocks to go up. Instead, rights issues now cause stocks to go down as it signals that the company is not doing well and needs capital infusion from its shareholders.

Back in the 1990s, stocks would go up when they declared a bonus issue. The logic then was if you could get more shares for free, it was a great deal. Moreover, companies would only declare a bonus issue if they had been profitable for several years. In the 2000s, this thought was found to be flawed and bonus issues no longer caused stocks to go up by as much. The current wisdom is shareholders would still own the same proportion of the company even though they have more shares on hand. Stocks still go up by some extent, because there will be more dividends (due to more shares) and it signals that the company will continue to be profitable in the foreseeable future.

Back in the 2000s and now, stocks would go up when they declare a share buy-back. The logic is it signals that the company is profitable and generating cash in the foreseeable future and has no need to keep so much cash. And the higher the price at which the share buy-back is conducted, the more confident the market is of the company's future performance. Fast forward to 2020s, and this thought of higher buy-back price equating to better future performance will be found to be flawed as well. (The basic logic that the company is profitable and generating cash in the foreseeable future remains correct). Why?

It is because when companies decide to return cash to shareholders via share buy-back, the total amount of cash is fixed, but not the price at which the share buy-back is conducted. Consider a company with 100 million shares,  has $10 million to return to shareholders and its current share price is $10. It could return the cash to shareholders as a dividend of $0.10 per share, buy back 1 million shares at the current market price of $10, or buy back 0.5 million shares at double the market price of $20. All 3 approaches would achieve the same objective of returning $10 million to shareholders and the company would be indifferent to whichever approach taken. But the third approach would thrill the market as it signals that the company is likely to do very well in the foreseeable future (as compared to the second approach). This is far from truth, as the company's intention is only to return a fixed amount of cash to shareholders. If the company's prospects were indeed so good, why wouldn't the company's management take over the entire company? Unless the share buy-back is applicable to all shares, it would be prudent to ignore the price at which it is conducted.

It is fascinating to watch how the market reacts to corporate actions over the years. I wonder what would be the next corporate action that thrills the market in 2020s.

The Initial Public Offering

I begin the first investment-related post with the Initial Public Offering (“IPO”), as this is usually the starting point for most undergrads just starting out to invest in stocks.

Should investors invest in IPOs? The answer is: Depends. However, IPO should not be the starting point for new investors trying to learn about stock investing. IPO is like a lottery. The investment gain in an IPO depends on the demand for it. When an IPO is over-subscribed, balloting is required. For hot IPOs, the number of shares allocated is small even if you are successful in the ballot. Also, the price of the stock could either be higher or lower than the IPO price upon listing. Hence, the gain in an IPO depends on more luck than skills. Would being able to consistently make a profit in IPOs make one a better investor? Well, it only makes him a lucky investor. Just like being successful in lotteries does not make one a better statistician, being successful in IPOs does not make one a better investor. Furthermore, it might give the new investor a false impression that he is good enough and ready for bigger investments in the larger pool of seasoned stocks. In truth, there is no skills to be learnt from IPOs.

IPOs are also not the same as seasoned stocks because the operating environment and performance of the company usually differ when it is private and when it is listed. As a private company, it usually does not have access to much cash. Hence, profits as a percentage of equity (“return on equity” or “ROE”) is higher and the performance is more sparkling. But upon listing, new stocks are sold to investors to raise cash and this reduces the ROE. Hence, to extrapolate the performance of the company before listing to after listing is dangerous. Past performance is not representative of future performance.

Another reason why IPOs sometimes do not make good investments is because they select the best timing to list so as to get the best price for the IPO. This is usually the time when the profits are good and stock demand is high. However, the economy and public appetite for stocks go through cycles. When the economy is poor and public appetite for stocks wanes, the company’s profits and price usually suffer.

So, should investors always stay away from IPOs? No. It is similar to the situation when there is $10 on the floor. Do you pick it up? Well, look out for any danger, pick it up and quickly run before anybody comes after you.


See related blog posts:

• Investing Is A Life-Long Learning Journey

The Beginning of the End

Many years ago, a friend brought me to watch the movie “The Matrix”. I’m not sure if you could still remember the story, but Neo, the main character in the movie, was told that humans were reared as “batteries” to supply energy to the machine world. I pondered about this for a while, wondering whether the story could be true. While I found no plug behind my head to plug me into the Matrix, I did realise that we were all “batteries”. Since young, we went to school with the intended aim of gaining knowledge and getting good grades so that we could have a good-paying job and comfortable life. The exams that we took served to certify how good we were, whether we were an “A” or “AAA” battery. So, when we graduated with our “A” or “AAA” certification, we competed with each other to find a high-paying job and “power” the company in return. And when we have exhausted all our energy, we get “retired”, usually without much appreciation for the years of hard work put in. After all, when was the last time you said “thank you” to the batteries that powered your MP3 player which gave you so much entertainment?

It should not be this way. Going to school should be to gain knowledge so that it could be applied in a useful manner. It should not be for the sole purpose of getting the certificate, so that we could be certified as an “AAA” battery and “power” some companies in return for high pay. I look forward to the day that when our students graduate, they do not ask each other whether they have “found a job” with their certification, but whether they have “founded a business” with their knowledge. Many years ago, I recall there was a hue-and-cry in the newspapers over 2 graduates who set up a stall in a coffeeshop selling porridge instead of finding a high-paying job. I find nothing wrong with the choice that they made. They chose to “power” their passion with their knowledge and skills and gaining new experience in return. Whatever the outcome of their business venture, it would have been something gained for the 2 of them.

It is also not necessary that everybody must be a business owner (aka “battery driver”) rather than being an employee (aka “battery”). Just like the final episode of ”The Matrix” trilogy, everybody is allowed to choose whether to stay in the Matrix and enjoy the “succulent steak and sparkling red wine”, or leave the Matrix for the “bland but nutritious porridge”. There is also no escaping the fact that we are all “batteries”. However, we could choose what we power; it could be our family, religion, passion, and yes, even the company. Channel your energy to the area that is most dear to you.

I specially selected this out-of-the-blue “Matrix” post as the starting post for this “(The) Boring Investor’s Blog”. However, do not mistake this blog for a socio-political blog; it is actually an investment blog, because the investment world is really a “Matrix”. In the subsequent posts, you’ll see why is it so. Enjoy.

This is the Beginning of the End…


See related blog posts:

• A Year's Worth of Blog Posts
• The Great Retirement Challenge
• All Posts on This Blog