US markets have had a rocky start to the year. Meanwhile, the STI seems to have cracked a ceiling. We shall see.

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What A World
(Collaborative Fund)

Morgan Housel is such a great writer. I love this story in particular:

BlackRock CEO Larry Fink once told a story about having dinner with the manager of one of the world’s largest sovereign wealth funds.

The fund’s objectives, the manager said, were generational.

“So how do you measure performance?” Fink asked.
“Quarterly,” said the manager.

The gap between ideals and reality.

Efficiency makes you happy
(Klement on Investing)

Klement points out a study that shows a negative relationship between GDP per capita and hours worked per year. I think Singapore might be an outlier on the chart though. But the more important point of the post is that if we’re more efficient, it leaves us with more time to do things that we actually want to.

Why I think Stocks will Drop in 2022
(Financial Horse)

It’s usually not very smart to put out a forecast (particularly one based on macro views) that will live on the internet forever. I’m not saying that this forecast is going to be right or wrong (then, I would be making a forecast as well, no?) but I’m saying that this forecast could turn out to be entirely meaningless in the larger scheme of things.

Living Through a Crash
(The Big Picture)

Speaking of the larger scheme of things, Barry Ritholtz runs through some points on lessons learned from the big tech bear. Good lessons to heed which makes having a plan and sticking to it all the more important.

Exposing the Fraudulence of Elon Musk and Tesla
(Current Affairs)

How dare someone question the brilliance and supremacy of the great overlord, supreme leader, exalted patron of the dogecoin, and builder of rockets that will take us all to Mars?!

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Gosh, time flies. Many things have changed but some things still remain.

For one, Covid is still with us. For the everyday person, we’ve moved from Covid to the delta variant and now, to Omicron. We’ve done as much as we can as far as protection is concerned. Most people are already vaccinated and boosted. We’ve still kept our masks on and limitations on group sizes and certain activities (anyone remembers what clubs and KTVs are anymore?) are still a thing.

I hope 2022 will be the year where we move another step closer to the way things used to be. Maybe we’ll still have to keep our masks on (hopefully, we’ll move to masks on when indoors only) for a while more but at least we should be able to start to move back towards having the government take a more hands-off approach to things.

The markets

Things have gone splendidly well for the markets this year. What was it? 70 new highs for the S&P500? I don’t know if things will go as well next year but let’s hope they will. I haven’t positioned my portfolio for aggressive growth but I’m not positioned for a crash either.

However, the three scheduled rate hikes coming in 2022 should provide some pause. Will it crash the markets? I don’t think so. The market now is a completely different beast from the 2000s or in the lead-up to the Global Financial Crisis.

If anything, 2021 has actually taken some steam out of the more speculative areas of the market. Take Ark Invest for example. 2021 has been Ark Invest’s flagship fund worst year since inception with the fund falling 20%. With the coming rate hikes, it’s going to be even less attractive to be in the more speculative areas of the market.

What about the broader market like the S&P500? Some people argue that the S&P 500 is becoming increasingly concentrated in the big tech giants like Apple, Alphabet, and Microsoft. They aren’t wrong. However, those companies also account for the lion’s share of the profits in the S&P 500. (see the graph titled “Top 25 Firms” at this link)

Is that particularly speculative? I think not.

Personal Stuff

This year has been fairly quiet on the personal front. Life has been peaceful and while the delta variant made things suck for many people, I rather enjoyed the fact that Work-From-Home was the default for most of the year.

This was offset by the burdens that work placed on me this year. On top of the additional duties from a new appointment, I have been involved in one big project and was also asked to join a task force that involved some very senior people.

To be fair, no one does more work because they want to and the people I’m surrounded by are really smart people. The problem is when you’re a cog in a large machine and for whatever reason, someone far removed decides to make some changes and it cascades down. In fact, it would be a lot easier if we were dealing with machines because machines are a closed system.

The work itself isn’t difficult but it involves doing many little, annoying things. And I particularly hate doing annoying things. This is why my experience over the past year only further strengthened my resolve. I need to take my portfolio more seriously.

The good news is despite my relative inaction, the portfolio grew by 20-odd percent. However, it’s hit the limits of how fast it can grow even after constant contributions to the portfolio. Going forward, the portfolio will need to see more contribution from investment returns or growth will be minimal.

I’ve been looking into various portfolio strategies and coding little helper scripts that will help me manage my portfolio more effectively.

Next year, you’ll hear about how it’s turned out.

Hello 2022

So here’s my wishlist for 2022:

  • Markets will be neutral to bullish
  • Living with Covid will converge even further to Life before Covid
  • Less emails and MS Teams meetings
  • Good health and wealth for my loved ones

No matter what’s happened in 2021, I hope that 2022 will be good for you and your portfolio.

Happy boxing day!
Final weekend of 2021. Are you ready for 2022?

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Wood’s flagship ARK fund deep in the red, yet investors stay loyal
(Reuters)

Was 2020 peak Cathie Woods? The jury’s still out for now but I had a nagging suspicion that ARK was overhyped when I started seeing Cathie Woods featured on the panel of some event organised by a local investment forum. Then of course, Stashaway and Syfe both started offering funds that invest in ARK ETFs.

How well will the 2022 Stock Market Do? A look at Midterm Years and A Few Interesting Data Charts
(Investment Moats)

Tom Lee is still bullish. I don’t know what the future holds but I daresay that despite the S&P at record levels, I don’t feel like this is a top. No one I know is making easy money from this market. Everyone has been doubting the markets for a while now.

Or maybe everyone is in crypto.

How’s your paper thosai private degree doing ?
(Growing your tree of prosperity)

People that get a degree from a private university and succeed* do so in spite of their degree. This is a hard truth. So if you happen to be a someone thinking about whether you should get a degree from a private university, please do so knowing that the money you spend doesn’t guarantee getting a job that pays well. At the same time, getting a degree from one of these institutions doesn’t necessarily condemn you to a career of mediocrity either. It just means that the correlation is probably closer to zero.

*I use the word “succeed” in the conventional sense. By all means, if you have a different definition of success, you do you.

Last weekend before Christmas! Time to wind down for the year and think of what lies ahead.
Happy holidays everyone!

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Robots reduce income inequality, just not in the way we want
(Klement on Investing)

Uh oh…will we all become luddites?

A Tiny Number of Stocks Drive the Entire Gain in the Stock Market in the Long Run
(Investment Moats)

Gem is in the infographics.

Which degrees offer more/ less value for one’s money
(Thoughts of a Cynical Investor)

I’m not terribly surprised at this list. I guess computing will move to the top in the next decade.

Maureen Farrell on WeWork’s Investments
(Bloomberg – Masters in Business Podcast)

I love business stories like this. Very tempted to get my hands on a copy of the book to read the finer details on how ridiculous things were at WeWork when Adam Neumann was in charge.

Sorry! There wasn’t a “Best Things” last week because I was busy the whole of last Saturday. Anyway, what an exciting week it’s going to be with major markets seeing increased volatility due to the emergence of a new Covid-19 strain.

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This is why you don’t run off and join the circus
(The Reformed Broker)

Josh Brown’s take on the emergence of the Mu variant of the virus and its impact on markets.

No, the real inflation rate isn’t 15 percent
(Full Stack Economics)

This is also why you shouldn’t give two hoots about what smart people think outside their field of expertise.

Animal Spirits: The High Beta Crash
(A Wealth of Common Sense)

Looks like Omicron is just the straw that broke the camel’s back. The camel’s back was already straining under the weight of inflation fears and the fatigue from a party that has gone on for quite a while now.

No, it’s not the aging population
(Klement on Investing)

The money shot from this piece:

But this post is not just a rant about how economists make predictions based on flawed models. That’s really not news. Instead, this is a post about the solution to declining natural real rates proposed by this research: Rising inequality.

Going forward, this also means that as long as income inequality remains high, the natural real rate of interest should not rise. It requires a substantial ‘levelling up’ and reduction in income inequality to push the natural real rate of interest up significantly in the long run. And I for one, don’t see this kind of reduction of income inequality happening in the next couple of years.

Mid-November is always a reflective period for me.

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Experts From A World That No Longer Exists
(Collaborative Fund)

Morgan Housel makes a good point about how experts of the past may not be the best guide going forward, especially in areas where the whole environment is undergoing a seachange. Some behaviours are timeless (such as the pursuit of ‘fashion’) but certain things will change (e.g. what is ‘fashion’). Therefore, it may be useful to figure out what changes and what remains the same.

Which brings me to…

What Is Web3 and Why Are All the Crypto People Suddenly Talking About It?
(Slate)

I’ve been seeing a LOT of attention being paid to this space by those in their 20s and even early 30s. Most of it is really because there is easy money to be made. However, I haven’t exactly seen a lot of focus on what the economics of this will look like. From this article and this video on YouTube, it seems that the basic principle of web3 is about lots of competition and taking control away from a central authority or any one company. And I’m not sure if anyone realises that if that’s going to be the case, then ultimately there’s not going to be much economic profit to be made from such businesses. I’m optimistic about the future but I’m not sure if anyone who has an idea about what Web3 is about has thought through what it implies for the economics of it all.

MAS’ Ravi Menon on crypto, stable coins and CBDCs: is a “digital Singapore dollar” feasible?
(Vulcan Post)

You can be sure that Singapore’s version of a cryptocurrency is the furthest thing that is from the original intention of what a cryptocurrency should be. Not saying that it’s all bad. Just saying that it’s probably not what the original founders of this movement meant when they came up with the idea.

More than 50% of Young Singaporeans Surveyed Want Passive Income or Early Retirement
(Investment Moats)

I’ve been telling those I know that the older folks (boomers and Gen X) don’t realise that younger folks (millenials and probably Gen Z as well) aren’t in it for a lifelong career in a single place. I’m saying this from the perspective of a public servant and the corporate ladder in the public sector isn’t set up for younger folks (think promotions spaced many years apart and rigid HR rules). The underlying assumption is that if someone is in the service for a 30-year career, then early promotion will only lead to many years of stagnation because very few will end up rising to the ranks of senior management. Therefore, the solution is to space the promotions apart.

If anything, the bull market in equities and crypto has probably has inspired younger folks to develop a wealth machine or secondary income stream outside of their core work, making their primary income less and less important. Of course, the bull market will eventually disappoint but those skills and early barriers (such as having a brokerage account) will not be lost. Hopefully, there won’t be a major crash that mentally scars a generation of investors the way the Great Depression did.

It’s already November! Markets are roaring and at this point, the valuations on some companies make absolutely no sense. However, I don’t get the sense that insanity is widespread. While sentiment has been generally optimistic, I don’t get the feeling that we are in the endgame where everyone is making easy money.

Right now, it only seems that sensible people are starting to get FOMO at seeing their dumber neighbours (e.g. those all-in on TSLA, NFTs, and SHIB) make more than them.

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This why we need fiat money
(Klement on Investing)

This is why we need experiments like these – to demonstrate that certain ideas should just remain ideas. I also wonder how many of those crypto tokens out there actually have economists advising them on the economics behind those coins?

The United States Has Been Going Broke For Decades
(A Wealth of Common Sense)

Ben Carlson weighs in on US government spending and its debt.

Fear and Loathing in Cryptoland
(Of Dollars and Data)

I like Nick Maggiulli’s take on the state of what’s going on right now in cryptoland. In case you haven’t realised, I come from the old school where we think that investment returns must follow economic returns in the long run. Therefore, returns like those seen in DOGE or SHIB are obviously the work of unpredictable mania and for laughs.

Does that mean that all things crypto are useless? Of course not. It just means that we haven’t figured out what crypto is going to mean for the real economy (crypto hodl-ers cashing a little out to buy Teslas don’t count). Until then, expect lots of volatility in cryptoland.

Evergrande: Not So Grand Financial Statements?
(CFA Institute blog)

Great piece that picks apart some parts of Evergrande’s financials and how investors could have seen it coming. I personally think short-sellers are the top of their game when it comes to this.

Happy Halloween! The Covid-19 case numbers in Singapore nowadays are probably the scariest thing right now for most Singaporeans. I’m of the view that much of the fear surrounding the numbers come from a lack of a reference point. I’m also wondering why we, as a country, haven’t transferred more of the burden of being voluntarily unvaccinated to the unvaccinated themselves.

More on this next time if I have time.

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This why we need fiat money
(Klement on Investing)

This is exactly the kind of simulation we need to be doing in order to determine if getting rid of central bankers of having decentralised cyptocurrencies make sense. Thank you Jeff Bezos!

Explainer: Why living costs look set to increase in 2022
(today)

I wonder whether the columnists that our local papers ask to write on these sort of things actually know what they’re writing about? Or do they do a summary and copy-pasta from what are considered “trusted” sources? Take for example this gem of a paragraph:

Basic monetary theory suggests that an increase in money supply will eventually lead to inflation — something that some advanced economies could already be experiencing. The United States Federal Bank last month projected inflation for the whole of 2021 to be 4.2 per cent. Just 10 months ago, it expected inflation to be 1.8 per cent for the full year.

I’m not sure much of the inflation we’re seeing today is because of an increase in the money supply. Furthermore, isn’t the velocity of money being a bigger factor for inflation the more commonly accepted theory these days? Increases in money supply leading to inflation seem to be a very 70s thing.

How much to LEAN FIRE for parents with two teenagers in Singapore?
(Investment Moats)

Kyith provides further commentary and breakdown on the report that even has MOF talking. I haven’t looked at the report in detail but I suppose why MOF thinks the study’s numbers are “off” is because the median household monthly income from work in 2020 was $7,744 while this study suggests that the income needed for a family of 2 parents and 2 teenagers is $6,425.92 in order to attain a “basic” standard of living.

Another interesting point presented in the table is the monthly budget as a ratio of median income per worker which shows that for the family with 2 teenagers, the monthly budget for a basic standard of living exceeds the median monthly income per worker by 40%.

In short, the study seems to be suggesting that there is a fairly sizable number of households unable to attain a “basic” standard of living and for these households to do so, they have no choice but to have 2 working parents. No wonder it’s fashionable not to have kids in Singapore nowadays.

Singapore’s stabilisation phase extended until almost end November.

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Marriage Is A Terrific Investment
(A Teachable Moment)

This is what the studies seem to show. On a personal note, I agree with whatever’s been said. However, I also can see how being married to the wrong person can be a nightmare. I’ve been watching too much of “The Crown” on Netflix.

What are basic standards of living? Let the debate begin
(Thoughts of a Cynical Investor)

I think it’s a good thing that studies like this are beginning to get more mainstream attention in Singapore. Maybe it’s a reflection of the times but whether you agree or don’t agree with the conduct and findings of the study, I think we can all agree that at least this is one more thing to reference when talking about issues such as poverty or living a decent life in Singapore.

Things like using type of residence as a proxy for deciding how rich or poor a household is, is in my my opinion, going to become less and less useful of an indicator.

A Nobel memorial prize for turning statistics into insight
(Tim Harford)

I have Angrist’s simpler book and I still find it hard to understand. =(

But chalk up one more for the empiricists.

Long list of great reads. Hope you enjoy them as much as I’m enjoying the additional work that I have to do thanks to the MTF’s covid protocols.

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Jim Chanos: China’s “Leveraged Prosperity” Model is Doomed. And That’s Not the Worst.
(Institute of New Economic Thinking)

China is the engine for global economic growth. What happens if it slows down?
(Quartz)

When the Dragon stops spitting fire
(Die Weltwoche)

You may or may not agree with all the views but these are three good articles to make sense of how the whole China Evergrande thing fits into the whole Chinese macroeconomy.

DBS’s Take on Property as an Investment Strategy for Singaporeans Going Forward
(Investment Moats)

What does it say when what is effectively the country’s national bank comes out to be a party pooper?

Categorizing for Clarity
(Morgan Stanley)

(via The Big Picture) PDF article from Michael Mauboussin and David Callahan on reorganising cashflows to better reflect the underlying operations of the company. This is the kind of stuff that you don’t touch unless you have some background in accounting and it’s the kind of stuff that all those so-called “I’ll teach you how to pick stocks” gurus fail to even mention.

Deficits and (no) inflation
(Klement on Investing)

Budget deficits must lead to inflation right? Right? (cue Anakin and Padme meme)