US markets have been showing signs of weakness lately. Will this lead to an actual correction or crash? Or is it just a leg down before the it marches onwards to higher highs? Only time will tell.

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This Is How To Never Be Bored Again: 4 Secrets From Research
(Barking Up the Wrong Tree)

Quite commonsense I think. But as the popular saying goes, “sometimes, common sense isn’t so common.”

Four Considerations for Strong Investment Policy Statements
(Enterprising Investor)

Reference material for myself. If it helps you too, then I’m glad I did some good.

Diversity wins
(Klement on Investing)

For some reason, many people won’t get this. Wonder if the good folks from PSP like Leong Mun Wai will change their minds if presented with research such as this? I leave you with the money quote (emphasis mine):

the common result of economic research on the impact of immigration on job creation and wages is that reducing immigration leads to lower job creation and higher unemployment since companies have to pay higher salaries for workers in jobs that used to be done by immigrants (which on average work at 5% to 15% lower wages than similarly qualified natives).

However, the caveat is:

Similarly, if you introduce a point-based immigration system where you only allow highly qualified immigrants into the country but not unqualified low wage workers, the wage effect is minimal and the job creation is minimal as well. 

Ok, maybe the PSP folks have a point after all since they are arguing against the import of PMETs rather than immigration at the lower end of the wage spectrum.

The Big Stock That’s the Most Vulnerable
(A Wealth of Common Sense)

A good reminder that even when it comes to the biggest companies in the world, change is the only constant.

We’re now trying to live with Covid-19 as cases hit all-time daily highs in community cases. I sense a growing frustration with the government in terms of their warnings that Singapore may have to return to some form of restrictions.

I guess the problem is the government wanting to ease restrictions and yet not over-burden the healthcare system – one objective relies on treating Covid as endemic while the other relies on the restrictions that treats Covid as pandemic.

As a country, I think we’re going to have to choose if we want to have the un-vaxxed and those susceptible to Covid-19 take on the risk and cost of getting the virus or going back to a more normal way of life.

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Avoiding single points of failure in pandemic and life
(Abnormal Returns)

A pretty good way to think about life. Which is why the old ways of having a single source of income is such a bad way of operating. Unfortunately, multiple streams of income require greater exertion of effort or some intelligent allocation of capital. Many people just don’t know how to do so.

Inequality, Interest Rates, Aging, and the Role of Central Banks
(The Overshoot)

I heard about this from The Irrelevant Investor. Macro-forecasting is difficult but this is pretty convincing.

Good Insurance vs Bad Insurance
(The Wealthy Accountant)

Good primer on the usefulness of various types of insurance. US context but mostly applicable to any part of the world.

How the Options Market ends up Controlling the S&P 500 in 2021
(Investment Moats)

Do we need to blame Robinhood for this? Interesting dynamics. Also interesting the a part of the derivatives market has grown so huge as to influence the direction of the markets. Could be the kind of structural issue that causes problems in the markets later.

(Evidence Investor)

Yup…which is why you should never trust an investment course that promises you to pick stocks unless they show you an audited P&L of a portfolio of ALL their picks. The returns should be presented in terms of the rolling returns over a long enough time period.

Pretty sure 9 out of 10 of all the courses that I seen being advertised in Singapore fails to meet this requirement.

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Inflation in the Real World

Lately, many people in the real world have been predicting that inflation will make a return in a big and sustained way. This has left investors worried about what this means for the markets. Will the fed raise rates sooner than we think? Will companies be able to handle the increased cost pressures?

Ultimately, all those questions lead to one question – what does it mean for markets?

A friend of mine who works in finance asked the same questions and my reply was, “your guess is as good as mine.” I’m no expert and even experts seem to get the macro view wrong as many times as they get it right. Even when the get the event right, they can get the impact of the event wrong.

In short, macro-forecasting is a difficult task that Buffett and Munger would probably chuck into the “too hard” pile.

Inflation in the Cryptoverse

On the other hand, those in the cryptoverse seem to love and embrace inflation. “To the moon!” (together with a rocket ship emoji) is the common war cry and the latest fad is for inhabitants of the cyrptoverse to trade NFTs of any thing and everything.

Recently, NFTs of tulips have sold out, with some going for as high as $27,000. I don’t know what they’re going for in the secondary market but from what I can tell, this dutch-tulip-field collection on Opensea has NFTs going for way less. Are they the same thing? I don’t know and honestly, I don’t care.

All these come on the back of an earlier high in April 2021 where a guy, residing in Singapore, paid $69m worth of ether (or ETH) for a NFT.

What if the cryptoverse met the real world?

Now, I’m sure it’s occurred to more intelligent people but if crypto residents are really making all that dough that’s reflected in the price paid for those NFTs, then why haven’t we seen that sort of impact in the real world? After all, that same $69m spent on a beeple NFT could easily buy 10 to 20 luxury apartments anywhere in the world.

If someone was willing to splash all that crypto on an asset that is inherently unproductive, then why not splash it on more productive assets?

After all, I bet that’s what Elon Musk, the high priest of doge, was hoping for.

Get people to dump their life savings into dogecoin. Pump the coin. Make people feel rich enough so that they can buy more Teslas. After all, it’s common sense that wealth effects have a greater effect on discretionary spending like Teslas and McMansions.

My take

My take is that the cryptoverse with all its high-yield staking and farming is just creating illusionary wealth that is disconnected with the real world. Any attempts to extract that sort of wealth that has been created in the cryptoverse will simply crash the cryptoverse.

Furthermore, wealth in the cryptoverse is deeply concentrated in the hands of a few – whales as they call them.

Any market where prices jump in such short order is a market where the supply of the good/token/object is tightly held and therefore, any attempt to increase the supply will bring the price down quick and hard. The whales know this and therefore, the game is to hold onto your large positions, extract a little at a time, and hope that your bankers will provide you with some other form of liquidity if you should need it.

In short, markets in the cryptoverse are deeply illiquid. The wealth that has been created there is as illusory as the scarcity of the NFTs that inhabitants of the cryptoverse trade for kicks.

However, if the structure could change such that the levels of wealth there can be easily extracted, then perhaps we should be worrying about inflation a lot more.

Hello, I’m sorry for missing out on “Best Reads” last week but work called last weekend. Meanwhile it has been raining a lot more and my cats have been asking for more food.

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The Locker Room
(The Collaborative Fund)

The importance of culture.
And it’s not in the bullshit-y management consulting sort of way.

Why the Bezzle Matters to the Economy
(Carnegie Endowment for International Peace)

Ah yes, the bezzle. It’s a term that most economics students aren’t familiar with. Michael Pettis does a great job describing the concept and how it fits into the world today.

The secret to preventing killer heatwaves isn’t what you think
(Tim Harford)

It’s these sort of pop culture economics/sociology that made me rethink economics as a subject. Thank god for Freakonomics because if it were solely up to my ‘A’ levels, I never would have majored in economics. Anyway, this shows us the importance of community and social networks.

SGX first major Asian exchange to allow SPAC listings in S’pore, new rules start Sept 3 (Vulcan Post)
SPAC Rout Erases $75 Billion in Startup Value (WSJ)

Is this a sign that we have reached “peak SPAC”?

Time to Stop Believing Deficit Bullshit
(The Big Picture)

Good points made by Barry Ritholtz about those people who keep harping about the deficit. I recently listened to Howard Marks’ podcast episode titled “The Rewind – Us and Them“. Great one about the different kinds of investors out there.

I honestly thought the markets were going to see more action but oh well…it turned out to be relatively flattish.

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5 Simple Vital Ratios to Track on Your Financial Independence Journey
(Investment Moats)

I like this list. Not too complicated although there is a fair bit of tabulation involved. It’s halfway to being as awesome as Stewart Butterfield’s (co-founder of Slack and Flickr) 3 levels of financial freedom which are:

Level 1 – Not being stressed by debt
Level 2 – Not caring about what you order at a restaurant
Level 3 – Not caring about how much a vacation costs

Benchmarking Has Become Circular
(Enterprising Investor)

Another day, another article about the fad that is ESG investing.

The Best Advantage in Life
(Of Dollars and Data)

Someone actually did a poll on this. Anyway, as the saying goes: “It’s better to be lucky than smart.” The data also agrees that it’s better to be part of the “lucky sperm club”.

Inflation vs. Wages
(A Wealth of Common Sense)

The Great Resignation
(Growing your tree of prosperity)

Inflation two-fer (actually three if you count the GMO piece by Montier that is mentioned in the Ben Carlson post.

Both posts touch on the current situation that is the US labour market but Ben Carlson’s piece explores what it may mean for inflation.

Chris Ng offers a few explanations for the magnitude of people exiting the labour market. I think there are many other reasons but probably a big one is how well the US stock markets have been doing. This has probably led enough boomers and older millennials to be able to say “f*ck it” to their job.

The boom in cryptos has probably also led to many younger folk thinking that they don’t need a job. After all, why work in a boring, dead-end job when you can trade meme-stocks and NFTs?

The last thing to consider is whether wages going up now is a sign of the labour market playing catch-up as other costs of living like housing affordability are only starting to go up relative to history.

Welcome to Singapore’s annual month of air pollution. During this 7th lunar month, the gates of hell open and hungry spirits roam the earth once more. It’s also exam season for my school and lots of work coming my way for the rest of the year.

Meanwhile, markets continue to make new highs.

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How Overvalued is the Stock Market Right Now?
(A Wealth of Common Sense)

New post from Ben Carlson highlighting where the markets are at in terms of valuation. However, the caveat is that this rally has mostly been led by a handful of stocks. Valuations for the rest of the market (outside of tech) isn’t exactly at extremes; Valuations also have been led by fundamentals such as earnings which has actually caused PE multiples to contract.

Does this mean that the rally will continue to the sky? Of course not. On the other hand, does it mean that a crash is imminent? Your guess is as good as mine.

Hanging By A Thread
(Collaborative Fund)

A good reminder that a lot of major events that have happened could easily have NOT happened. More importantly, it’s also a reminder that many people that are successful (by whatever measure you want to use) are successful due to a combination of luck and skill. And sometimes, luck may play a bigger role than one might think, especially in environments that are less deterministic.

Temasek sells longest-ever Singapore bond with 50-year offering
(Yahoo! Finance)

Temasek has its haters but say what you like, this will probably turn out to be a good deal for Temasek Holdings. Being able to sell long-tenured bonds when interest rates are so low is something that mere mortals can only hope to do. The only thing I hope is that the buyer of these bonds aren’t Singapore taxpayers.

Managers and directors will not like this
(Klement on Investing)

Really funny research on how CEOs and directors are your typically alpha-males. Now, the next question I have is: what’s the level of survivorship in this? i.e. how many companies do better after getting a CEO that has highly correlated risk-taking traits?

Comparing the Performance of Some Robo Advisers (Full Year 2020/2021 Update)
(Investment Moats)

I’m on the sub-reddit (SingaporeFI) and there are absolutely tons of questions about robo-advisors in Singapore. I used to think that all the robos in Singapore provide nothing more than a low-cost and low-effort way to DCA and rebalance.

Lately, I’ve realised that the robos have been getting too smart for their own good (Syfe and StashAway seem to be the two biggest culprits here) by having more discretionary approaches such as dynamically adjusting weights or asset classes.

I guess if I had to pick a robo-advisor, I would pick the one with the lowest fees, invests in a fund that tracks a broadly-diversified index, and has a sound rebalancing policy. Any other feature and you might as well go pick a star fund manager.

Happy National Day long weekend! The coming monday’s a public holiday because we’re celebrating Singapore’s 56th birthday or more accurately, Singapore’s 56th year as an independent country. I hope you’re having a good break.

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My Investing Nightmare
(Of Dollars and Data)

Nick Maggiulli’s post is a great reminder that the performance of the US markets has been as perfect as it gets. It’s also a great reminder that our home bias may kill us.

The Need for Precision in an Uncertain World – SWR Series Part 46
(Early Retirement Now)

Another great piece that extends ERN’s series on Safe Withdrawal Rates (SWR). ERN has looked at the data of SWRs vs. the CAPE PE. Of course, this depends greatly on the CAPE PE having as much predictive or explanatory power for returns as it used to but based on ERN’s analysis and the current CAPE PE levels in the US, it appears that a safe SWR is a low one.

It started because he went to watch the sunrise. Now he’s a trusted confidant to strangers each morning from his bench.
(Washington Post)

Great story. I used to have my morning coffee at pretty much the same spot at my workplace and it was through this that I ended up having coffee while many colleagues had their breakfast. This helped me make many friends among colleagues or at least it helped me understand some of my colleagues on a more personal level.

I know some colleagues were afraid of being seen having leisurely conversations in the morning for fear of looking like they were slacking of but I think this one simple act helped me get a lot of work done.

To save you some time in case you’re here for that sort of thing, this is not going to be an analysis of Temasek Holdings’ latest review. Instead, it’s a piece about becoming (slightly) better at reviewing investment results.

Just last week, I made some snarky comments about a writer’s less than stellar effort to dissect the earnings report of GIC, Singapore’s sovereign wealth fund.

The points I made were that the writer:

  • Fails to mention what the benchmark is
  • Fails to point out standard fund metrics like the Sharpe or Sortino ratio
  • Just says that GIC’s fund can’t take more risk without explaining why

The same fellow is back with his take on Temasek Holdings’ performance so let’s see if this piece is any better than the previous one. To be fair to Michael Petraeus, let’s set up the context of his post. Michael begins with the following:

Last week, an opinion published on a Straits Times forum on July 17, alleging that Temasek’s record growth in portfolio value is actually low by global standards, began circulating in some Singaporean media outlets.

The question, asked by a certain Alfred Chan, is certainly valid. While returns of 24.5 per cent look good, why are they less than half of what global stock markets have achieved in the same time?

Source: Vulcan Post

Ok, so Michael begins the article as a response to one Alfred Chan’s question of why Temasek Holdings’ return for 2020 is only half of the global stock market’s. Michael goes on to make a few points on why it isn’t right to interpret Temasek’s results because of a few things:

  1. It’s not fair to compare Temasek’s numbers for just one year.
  2. Temasek invests across different markets from the composition of a global investment index
  3. Temasek’s cumulative results over 20 years have actually been better than MSCI world index’s results

What Petraeus gets right

Michael is right in that we shouldn’t compare the results of any investment or portfolio of investments on the basis of its performance in a single year. After all, markets don’t behave according to scientific laws or a calendar year and therefore some variation in performance could be down to just bad luck or have simply not paid off yet.

He is also right that you want to measure the performance of a fund or entity over different time period. Following the point made in the previous paragraph, investments can take some time to pay off. Hence, it only makes sense to look the longer term track record of a fund in order to determine whether the fund manager is indeed doing a good job or not.

What Petraeus gets wrong

To be fair to Michael, many journalists (unless they are financial journalists) are really bad at covering this sort of thing. I’ve seen many articles in the local paper that always reports the numbers from the press release without further analysis of the numbers. Perhaps they don’t know how to or perhaps they can’t be bothered to learn. It’s hard to say which is which.

In this particular example, the first big issue I have is that there is no mention of whether the MSCI World index (which Michael uses) is a good benchmark for Temasek’s performance. You wouldn’t compare the dining experience at a hawker stall vs. a restaurant. It just doesn’t make sense since both experiences are so different and so it is with any investment or portfolio of investments.

From Temasek’s own description of their portfolio, it appears that they have substantial stakes in both private and publicly-listed companies. As such, I question whether the appropriate benchmark is the MSCI World index which is an all-equity publicly-listed benchmark.

Also, the MSCI World index may not have the same geographical composition as Temasek’s portfolio. Temasek’s 24% weight in Singapore holdings probably puts it beyond the comparison of any global equity benchmark that I know of because global benchmarks typically weight their holdings by some measure such as market-cap which would automatically make Singapore holdings a much smaller part of the benchmark.

Therefore, it’s going to be impossible to conclude that Temasek, as a fund manager, is doing a good job or not because we haven’t determined what is a good apples-to-apples comparison.

Rolling returns

Perhaps the earlier point was too harsh. Temasek is too much of an outlier for us to be able to find a comparison. So let’s give Michael a pass on that one.

Michael’s other point was to use a 20-year comparison to show that Temasek returned 8% p.a over the last 20 years. As I said, I agree that if we want to measure longer-term performance, then a longer horizon comparison is needed and 20 years is pretty much a good gauge of long-term performance.

The quibble I have with this point is why the static 20 year performance from 2001-2021?

In fact, Temasek’s own review of their performance provides a 20 year rolling performance.

Source: Temasek Review

As you can see, while Temasek has produced 8% p.a. over the last 20 years, their performance over a 20 year period is vastly different between the early-to-mid 2000s and now. So while Michael champions their most recent performance, we should also be asking if their more recent performance is going to be any cause for concern.

In conclusion

If you really want to understand and appreciate the performance of any investment or fund, it’s essential that first you find a benchmark that is directly comparable in terms of mandate, investable and invested assets, scale, and scope. Failure to mention how the benchmark differs from the investment or fund is just going to lead to misleading comparisons.

Also, comparing longer-term returns should be viewed on a rolling basis in order to eliminate the effects of a starting year that doesn’t reflect the probable investing performance. For example, you wouldn’t want to view any performance for an investment that starts right after the end of a bear. Those performances that start or end with extremes mean are unlikely to be replicated in any given year.

Lastly, don’t trust any mainstream media outlet (you can spot those as they typically focus on news of the day) when it comes to reporting on financial results. It’s almost a sure bet that the journalist at these places have zero interest or aptitude for finance.

Yikes! 2021 is really coming and going. Before you know it, we’ll be singing “Auld Lang Syne”. But before that, it’s that time of the year where Singaporeans celebrate National Day. Not many flags being hung in my estate. I wonder if that’s the middle finger people are giving to the government for not catching the KTV clusters earlier?

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Don’t worry about inflation

A great look at the inflationary 70s. Of course, you can pick your explanation for the 70s to suit your guess of what’s going to happen next but let’s face it – no one really knows until we’ve lived through it.

Should we learn a thing or two from Communist China?
(Growing your tree of prosperity)

I’m with Christopher Ng on his point about Financial Advisors (FAs). Maybe I’ve got the wrong impression but it’s ridiculous how FAs in the US seem to be a lot better at actually giving financial advice on investing while FAs in Singapore seem to be product pushers with an insurance company focused on making the Million Dollar Round Table.

‘I Eat Rejection for Breakfast’: The Realities of Being an Insurance Agent in Singapore (RICE)

I actually thought RICE was doing a takedown of these fellas but no, sadly it turned out to be an advertorial. Anyway, the article is a usual fluff piece that people in the insurance industry tell you in order to get you to join them – the usual spiel about changing lives.

I put this here as a reminder that even what seems to be the less commercial media outlets need to survive and hence they’ll betray your expectations of doing a piece that paints a genuine look at reality.

Fraud on the Farm: How a baby-faced CEO turned a Farmville clone into a massive Ponzi scheme
(rest of world)

Now this is an interesting one. Gaming app linked to actual farms. You have to give credit to this guy for being creative.

Updated: Thanks to FI@ncb who left me a comment, I’ve updated the spreadsheet to account of inflation (if you want to factor that in) and made it a lot neater. – 7 Aug 2021

This post is inspired by Moshe Milevsky’s book, “The 7 Most Important Equations for Your Retirement“. In the book, Milevsky introduces seven equations that address different aspects of retirement planning. The first equation, which he attributes to Fibonacci, helps one easily estimate how long a sum of money will last given the following parameters: withdrawal, principal, and rate of return on principal.

If the parameters look familiar, that’s because the equation is essentially an NPER equation that one can easily compute using a spreadsheet or financial calculator. For those unfamiliar with the concept of Time Value of Money, the present value of a sum of money (PV) can be calculated if you have the future cashflows (PMT and FV), number of periods (N) the sum is compounded, and the rate of return (R).

Rearranging the equation to solve for N gives us an equation that relates the other four parameters to N.

Use cases

The use cases for this equation isn’t limited to trying to figure out how long a certain sum will last you in retirement. Someone thinking of early retirement and with an annuity that will kick in later (e.g. CPF Life) may use it to determine what is the level of wealth one might need in order to call it quits. I also find the equation useful in determining what is the minimum level of wealth needed in order to be free from worry about a lack of income.

Monthly Withdrawals of $5000 with various principal amounts (row) and rates of return (col)

For example, in the scenario above, I’ve assumed a monthly withdrawal of $5,000 (just above the median monthly income from work) and that the sum of money will reach zero. Based on the table, you can see that at very low rates of return (1-4% p.a.), there is no chance of the money lasting for 30 years. Even if someone retires at 65 and lives until the average life expectancy (let’s call it 84 years old), we’re still looking at a sum of at LEAST $750,000. Getting a slightly higher rate of return (6-8% p.a.) helps but even then, we’re still looking at sums of more than half a millions dollars.

Obviously, if you manage high rates of return for the many, many years to come, you’ll never have to worry about money (those cells filled with #NUM!) because you’ll always earn a higher rate of return that the amount withdrawn but let’s be conservative and think of likely or even worst-case scenarios.

From this table, I think the answer is clear. Returns have to be in the region of at least 6-8% p.a. in order to make retirement work.

Cutting expenses

One possible solution is to cut expenses. In a 2019 study, a team of researchers led by Prof. Ng Kok Hoe and Prof. Teo You Yenn found that the minimum household expenses by elderly couples to meet a basic standard of living are about $2,351 per month.

Using my trusty spreadsheet, if I change the monthly withdrawal amount to $3,000, we get the following:

Monthly Withdrawals of 3000 with various principal amounts (row) and rates of return (col)

What we can see from this is that by lowering the expenses and getting a return of 6-8%p.a., the principal needed ($450,000-500,000)becomes much less daunting for the average Singaporean.

For those who really want to quit their work but have a substantial amount of retirement savings that are locked up. If you can project how much you will receive from an annuity upon retirement (for example, in Singapore, we have CPF Life which starts paying out at age 65), then the number of years you need becomes even shorter. For example, if you’re currently 45 years old and have $500,000, that sum of money should last you for 20 years. That’s when you’ll hit 65 years old and be able to start receiving your CPF Life monies. Use this information at your own peril depending on how much you’ll be getting from your pensionable accounts.

I suppose one could also use the information in the tables to decide if you can pursue your passion of taking on a lower-paying job. For example, if your monthly expenses total $5,000 and your “passion job” pays $3,000, then you could set the withdrawal rate in the spreadsheet to $2,000 in order to see how long your money can last.


I did the above exercise purely for fun but at the end of it all, I think the main conclusion is to figure out a way to earn anywhere from 6-8% p.a. and to keep expenses down as far as possible to have a decent shot at financial independence.

If anyone wants to play around with the spreadsheet, it’s here. You can save a copy of it to your own Google Drive and mess around with it.