Posting from paradise this week.

Coffee with a view

Estimating Future Stock Returns, June 2019 Update (The Aleph Blog)

David Merkel is back! And really good piece on estimates for S&P 500 returns going forward for the next 10 years. Coincidentally, I was speaking with a friend of mine and I commented that passively managed returns will be low going forward given how low interest rates are.

The Cost of Waiting (Of Dollars and Data)

Maybe DCA needs a rethink after all. Argument applies to waiting it out too.

My thoughts on the “Upcoming Recession” (Early Retirement Now)

Or maybe not. Of course, this is for the U.S. markets. I really need to do a deep dive into ERN’s economic indicators post.

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The Financial Turing Test (Of Dollars and Data)

I really like this idea.

What would be the one question that you could ask anyone proclaiming to be a “financial expert” in order to find out if they were truly one? Maggiulli makes a good point that perhaps the question to ask is:

Imagine we could simulate the universe where each time you are born to different set of parents with a different genetic makeup.  Sometimes you are born a man.  Sometimes you are born a woman.  Sometimes black.  Sometimes white.  Sometimes smart.  Sometimes not.  Etcetera etcetera.  What would you do to have the highest probability of becoming financially secure regardless of your background?

I’m going to think hard about how I would answer this.

Are We Near a Recession? The Godfather of the Inverted Yield Curve Says It’s ‘Code Red’ (Fortune)

Nice to read about how the inverted yield curve came about.

Runaway Story or Meltdown in Motion? The Unraveling of the WeWork IPO (Musings on Markets)

Prof. Damodaran gives a brilliant breakdown on the WeWork IPO. Some choice quotes from the post:

To the question of whether WeWork could be worth $40 billion, $50 billion or more, the answer is that it is possible but only if the company can deliver well-above average margins, while maintaining sky-high growth. That would make those values improbable, but what should terrify investors is that even the $15 or $20 billion equity values require stretching the assumptions to breaking point, and that there are a whole host of plausible scenarios where the equity is worth nothing.

As WeWork stumbles its way to an IPO, with the very real chance that it could be pulled by its biggest stockholders (Neumann and Softbank) from a public offering, the question of what to do next depends upon whose perspective you tak.

1. If you are a VC/equity owner in WeWorks, your choice is a tough one. On the one hand, you may want to pull the IPO and wait for a better moment. On the other, your moment may have passed and to survive as a private company, WeWork will need more capital (from you).

2. As an investor, whether you invest or not will depend on what you think is a plausible/probable narrative for the company, and the resulting value. I would not invest in the company, even at the more modest pricing levels ($15-$20 billion), but if the price collapsed to the single digits, I would buy it for its optionality.

3. If you are a trader, this stock, if it goes public, will be a pure pricing game, going up and down based upon momentum. If you are good at sending momentum shifts, you could take advantage. 

4. If you are a founder/CEO of a company, the lesson to be learned from this IPO is that no matter how disruptive you may perceive your company to be, in a business, there are lessons to be learned from looking at how that business has been run in the past. 

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This past week, I attended three meetings of a very different sort. At work, I had the unfortunate opportunity to attend a meeting that was uninspiring, drab and just a pain-in-the-ass.

Outside of work, I had two meetings – one with a student that I taught a year ago and one with one of the founders of a startup. Both were inspiring, energetic and you could tell that they really believed in their ideas.

It’s my meeting with Dexter, one of the co-founders of a startup that I want to talk about.

My initial thinking

A few ago, Dexter reached out to me via email to ask if I would do a shout-out for their site, Initially, I was hesitant to do so as readers of this blog would know that I’m not one of those bloggers that are into squeezing out every single cent from a budget or tracking which cards gets you that extra percentage point of cashback.

In short, I’m lazy and I’m not sure if it’s worth the hassle of applying for a card just to squeeze out a few percentage points of returns. If you’re not a big spender, these extra percentage points could be nothing more than a few dollars a month. You would probably find it easier to reduce your consumption in some areas to save a few bucks a month. For example, you could reduce your consumption of bubble tea by 1 cup a week and save something like $15-20 bucks a month if that’s your goal.

Of course, the other reason is that my blog probably doesn’t get that much of a readership for the kind of target audience that would find WhatCard useful since traffic to this blog isn’t exactly high.

But I decided to meet up with Dexter anyway to hear him out and I was quite impressed with what I heard. At this point, if you’re wondering, we met over a beer and no, he didn’t buy me a beer to write this.

I’m writing this post because I think these young guys have a good idea going and it’s nice to show some support to enthusiastic young people, hustling to get ahead in life.


Anyway, back to business. is a site that allows users to compare which credit cards in Singapore gives you the most bang for buck in terms of getting cashback or miles.

The site allows you to search by merchant so you can decide which card to use before you pay or if you’re really looking to hack more miles and cashback, then you can decide which merchants to visit.

It’s free for users but I understand that takes a cut if you decide to sign up for (some?) cards when you click on the links on their site.

In short, you’ll find WhatCard really useful if you’re the type to maximise getting cashback and/or miles for your daily spending. From my observation, they also have a community page where users share and contribute ideas on how to hack their cashback and miles so that might be a good platform for keeping up to date on how to get the most out of your credit card spending.

Room for improvement

Dexter and team are aware of their current limitations and they have plans to roll out improvements in the future to address some limitations. In fact, Dexter shared that they plan to have a recommendation engine that allows users to know what cards give them the best rewards in terms of cashback and miles for their given spending profile.

I was quite excited to hear this because that would address the needs of people like me who want to even know which card I should sign up for given how I usually spend.

Other points I think they could do better include:

  • Optimising their site for mobile. It looks ok on the desktop but a little cramped on a mobile screen.
  • Showing you only the relevant info. Right now, searching for a merchant shows you the promo for every card but it’s probably more useful for you to know which cards, among those you already have, to use. Dexter tells me that they are already aware of this and it’s something they are working on.
  • Having a geolocation feature so that WhatCard can show you which merchants in the area offer the best rewards.


In short, is pretty useful if you’re already trying to optimise cashback or getting air miles on your credit card. The community page looks like a great resource for staying up to date on strategies to this end as well. There are limitations that the team is aware of and I think it’s a great effort from a bunch of young people in Singapore.

Linkfest alert! Somehow lots of good stuff to read this week.

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Millennials agree on the best way to invest—but they’re wrong (CNBC)

Never thought it’d be the same in the U.S. but real estate is probably most Singaporeans’ favourite investment vehicle as well. So much so that the government has to intervene in the property market in a HUGE way – something like 90% of Singaporeans stay in public housing and the government has slapped all sorts of taxes on buying and selling property for investment purposes.

I think it was Shiller that did a study showing that in the long-run, real estate price gains return roughly the same rate as real GDP growth which in a developed economy is probably 2-3% p.a.

The whole “I like it because it’s tangible” is a cop-out. The real reason is leverage and due to the fact that most people don’t understand opportunity cost.


I’ve never been a fan of Elon Musk. Too much self-promotion and hype.

Modern Monetary Theory (MMT) Has An Argentina Problem (Global Macro Monitor)

That’s right. The problem with MMT is when people lose faith in your currency. However, the U.S. case for efficacy might be more akin to Japan’s experience rather than Argentina’s.

Gold (in real terms) (The Big Picture)

Once again, a good reminder that many people don’t understand real rates of return and opportunity cost. I know of a senior colleague who held most of his assets in gold since the 90s and sold out during the GFC to rotate into REITs.

He wasn’t prescient of all-knowing. He just acted on the advice of another colleague. The funny thing is that he never compared how holding much of his wealth in gold compared to holding his wealth in equities for much of the 90s and 00s.

Lucky for him, he’s made more than enough to retire comfortably.

Financial Horror Stories (The Wealthy Accountant)

Extremely good read. Underscores the importance of understanding accounting as an investor. Seriously makes me think of learning accounting at a more in-depth level.

The Trump Narrative and the Next Recession (Project Syndicate)

Sometimes I wonder if Trump is trying to get the economy into a recession so that he loses the election. The article by Shiller gives a behavioural/psychological take on how a recession would cause Trump to lose the election.

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Given the increased volatility in markets, I thought I’d share some thoughts on the current state of the market. Note that this isn’t a forecast nor does it constitute advice to buy or sell any securities.


The STI’s PE10 (data here) is 12.2x which is pretty much the same as it’s PE (12.21x). That translates to an earnings yield above 8% which in my opinion, is pretty attractive.

If you’re wondering how this stacks up the past, the PE10 isn’t dirt-cheap. It was cheaper during the depths of the GFC in early 2009 and also once more in early 2016. However, it is cheaper than it was in 2013- early 2015 and cheaper than during the run up to the GFC in 2006-2007.

Also, 10-year bond yield have fallen really low. The SGS 10-year bond yield is currently 1.735% which means that spreads between the STI and 10-year bond have reached 6.46% which is some of the highest spreads I’ve seen since I’ve started tracking the STI PE10 vs. the SGS 10-year bond yield.


From a psychological/technical standpoint, markets are not down in the dumps. The 50-day SMA is still above the 200-day SMA and prices have not fallen all that much (only roughly 14% from its May 2018 peak and 9% from its late April 2019 peak). Also, with the August close, the monthly STI has now closed below the 10 period MA which is Meb Faber’s momentum signal to get out of the market.

Plus, let’s not forget that the Trade War isn’t going anytime soon even though, as of late August, it seems like Xi and Trump are trying to kiss and make up.

Trump faces re-election next year and if he’s playing to win, then it’s likely he’ll find some foreign powers to blame for America’s real or perceived woes. And we know that his go-to guys to blame for America’s woes are those that have huge trade surpluses with the U.S., namely, Mexico and China.

Also, a no-deal Brexit is also looming in October and with Boris Johnson in charge, it’s less likely there will be any sort of deal that can be reached and will tensions between Japan and Korea get worse? And who knows how the situation in Hong Kong will turn out?

Only time will tell.


I’m near-term negative but long-term positive because geopolitics and economic sentiment is bad but valuations are starting to look attractive. Of course, if you’re a DCA sort of person, then all of the above shouldn’t matter to you.

Sorry for the (slightly) late post. We’re into the last third of the year! Hope most of you have enjoyed the ride and/or done what you’ve set out to accomplish. Otherwise, there’s 4 more months to work on it.

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The Single Greatest Predictor of Future Stock Market Returns ( PHILOSOPHICAL ECONOMICS)

Post from a few years ago but probably still relevant. The link to the FRED data still works and if you take a look at it…you probably don’t want to be in U.S. markets at the moment.

Singapore faces rising tide of bad debt with record bonds maturing (The Business Times)

Always not a good sign when the bond market breaks.

“Stress is likely to emerge in sectors such as logistics, in addition to others that have already been struggling, such as oil and gas and construction, according to Angela Ee, a Singapore-based partner at EY with over two decades of restructuring experience.”

Guess we’ll find out.

Tong Garden family feud: Brother sues siblings for diverting business; they say move was to save father’s legacy (Asiaone)

Originally published in The Straits Times. It’s sad to see how family businesses get affected by in-family squabbling. Otherwise, they could do so much more. But I guess the fact that the brand is doing better than before is testament that the right decision was made by the other brothers. The one who originally ran the company and steered it towards bankruptcy is probably just sour grapes that his siblings did something he couldn’t do.

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TodayOnline published a piece in their “The Big Read” section which is interesting but not surprising.

The dreaded ‘R’ word — why Singaporeans need to start thinking seriously about retirement highlighted a few statistics which I thought deserves some attention:

  • Retiree households living in public flats here receive an average of S$1,522 each month for their retirement needs, with the bulk of it coming from their children or relatives.
  • Breakdown of the above: S$280 (~18%) from Central Provident Fund (CPF) payouts; S$485 (~32%) from familial transfers; S$180 (~12%) from personal investments; S$178 (~12%) from rental income including proceeds from subletting or Lease Buyback Scheme for example; and S$399 (~26%) from other sources, including pensions and government aid.
  • According to OCBC’s inaugural financial wellness survey: Around 65 per cent of Singaporeans are behind in accumulating funds to maintain their lifestyles after retirement, and 73 per cent are “not on track” with their retirement plans
  • The same OCBC survey found that 34 per cent of Singaporeans do not invest at all, and nearly half of Singaporeans also have zero passive income.
  • Market research consultancy Blackbox sampled 1,000 residents and found that 62 per cent of Singaporeans feel they are not saving enough for old age. This figure rises to 74 per cent among households earning less than S$2,500 a month.
  • The Blackbox poll also found that 43 per cent of respondents said they were relying mainly on CPF, while 38 per cent said personal savings and 17 per cent said investments.
  • Associate professor Ng Kok Hoe and Prof. Teo You Yenn did a study and found that by today’s minimum income standards, a benchmark of S$1,379 a month per senior is needed to meet basic standards of living in retirement.
  • Only 55 per cent of CPF members who turned 55 in 2013 had reached the Basic Retirement Sum (BRS). Those who set aside the BRS will receive S$730 to S$790 a month as of 2019.
  • CPF members without a property or who wish to receive the full monthly payout can choose to set aside a Full Retirement Sum which is two times the BRS. They will receive S$1,350 to S$1,450 a month as of 2019.

Thought #1: Average Retiree Households living in HDB are in trouble

If the average retiree household only receives $1,522 a month but the Ng and Teo study says that each senior requires $1,379 a month then it means that the average retiree household only meets about 55% of the Ng and Teo figure.

I wonder if anyone has come out to rubbish the Ng and Teo number but at the same time it makes you wonder about the pronouncement made by a certain senior politician about Singaporeans attaining “Swiss standards of living” or have we dropped that as a benchmark?

Thought #2: CPF is almost useless for a retirement scheme

If the CPF payout only contributes about 20% of an average Singaporean retiree household’s income, then what good is it as a retirement scheme? Note that this is for current retirees. I’m not sure whether the proportions will change for Singaporeans who are currently in their 30s-50s.

I’m pretty sure the problem is that too many Singaporeans use their CPF for housing and are/were banking on monetizing their house later on. This could come in the form of renting out spare rooms, downsizing to a smaller place or the lease buyback scheme.*

I think CPF should come out with a study on whether it’s smarter to leave your monies in CPF to compound over the same time frame as a 30-year mortgage or whether it’s better to bank it all on buying the biggest house you can afford to.

By the way, it isn’t my opinion that CPF is mostly useless for retirement. This was also in the article:

Speaking to TODAY, Ms K Thanaletchimi, the president of the Healthcare Services Employees’ Union (HSEU) and a former Nominated Member of Parliament (NMP), said: “The message should be stark and clear. CPF payouts should not be the main source of income for a retiree. It must be regarded as a complementary or supplementary source of income for Singaporeans.”

I find it quite disturbing though that official chatter is about how CPF is not meant to be the main source of retirement funds and yet the forced contributions to CPF make up a huge percentage of wages.

Although the CPF might argue that if you wish to get higher returns, you possibly could through the CPF Investment Scheme (CPFIS), the fact is that the forced contributions cause an unnecessary layer between a person and his or her funds.

At the same time, I can see how most people would have just spent any extra money that comes their way.

Thought #3: Younger Singaporeans in trouble too

If the OCBC survey is accurate, the personal finance and investing community has a lot of work in the future. We’re not even talking about how much passive income but if half of Singaporeans have no passive income, then it’s pretty worrying because as much as the Singapore government would like you to work as long as you can, passive income is the sort of thing that provides options in life.

And if familial transfer (~32%) make up the income for retiree households, then it’s no wonder that our birth rates are well below the replacement rate of 2.1.

That lack of future familial support also means that if younger Singaporeans are thinking for their future selves, then they better count on having governmental support.

I don’t know about you but I prefer sure things.

The Blackbox poll also shows a worrying disconnect since 43% of the respondents said they were depending on their CPF monies for retirement. But as the data on current retirees show, CPF monies aren’t going to help much unless you believe that things are going to be different.

Final Thoughts

I believe that I’m in a better place than most others but if you are a young person living in Singapore and haven’t thought about what happens when you stop working, I think you should.

The nice thing about the article is that you can use Ng and Teo’s number as a sort of benchmark. Of course, the $1,379 per senior per month is a nominal number so you can adjust that by an appropriate historical rate of inflation** to get a ballpark figure of how much you’ll need in 20-30 years time.

Finally, if you’ve been financially ok your whole life, I suspect you won’t have to worry much even when you’re older. But you probably might have to worry about whether your society requires you to do more.

* The lease buyback scheme contributes to about 12% of the average retiree household’s income which also shows that this hardly moves the needle in terms of adequacy.
** I should point out that the inflation rate for things like education and healthcare has traditionally been higher than things like food and electronics which kind of means that inflation rates for retirees is possibly higher than the rates reported by CPI.

No “Best Things” last week because I was stuck in this hellhole called “In-Camp Training” that all Singaporean guys have to experience. So I made up for last week with an extra-good list of reads this week.

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This is What Happens as Societies Become Wealthier (A Wealth of Common Sense)

A really good piece pointing out of the positives of the low interest rate environment that we live in today. I really think that there is no good or bad environment for investing. You just do what’s necessary given the times we’re in.

Geoengineering fun (The Grumpy Economist)

A few cool ideas to combat climate change. Woolly mammoths, oysters and some substance called olivine. What’s not to like?

How the Recession of 2020 could happen (New York Times)

Probably the most important part:

Often, a recession results when some widely held belief about the world turns out to be false. In 2001, it was that a technology boom would fuel the economy and the stock market indefinitely; in 2007, it was that the housing market would never melt down across all regions at once.

This time around, the belief in doubt is that the world will only become more stable and interconnected over time, and that trade, currency and diplomatic relationships can be counted upon.

Hang on for the ride.

WeWTF (Scott Galloway)

Good points about WeWork’s IPO prospectus made in very witty prose. I haven’t looked at the numbers in detail but WeWork’s indicative valuation seems ridiculous and I agree with the points made by Prof. Galloway. I’ve been warning for a while now about how easy credit has gone into private equity.

I fear that we might be in the last stages of the private equity bubble with all the so-called “unicorns” coming to the market. This year we’ve already seen some of the more famous names like Beyond Meat, Uber, Lyft, Pinterest list and if market conditions hold, WeWork will be another one of these that unprofitable companies that list.

Macro Tourist Likens Bond Bubble To Dot-Com, Real Estate Blowups In Sweeping New Critique (Heisenberg Report)

Minsky as applied to the bond market. Should read if you’re into crystal ball-gazing.

Stress and Anxiety (Matthieu Ricard)

(Update 1 Sep 2019: I fixed the link to the original post. Somehow left it out from before.)

The happiest person in the world provides three tips to better mental well-being:

Tip #1: Do away with your worries 
If there’s a solution, then there’s no need to worry. If there is no solution, there is no point to worry.

Tip #2: One thing at a time 
If you have many things to do, do them one at a time. You will work faster and better this way.

Tip #3: A bit of meditation 
If you are gripped by anxiety, make a pause for a moment and simply try to be aware of this anxiety.

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Cheap Money vs. Investor Psychology (A Wealth of Common Sense)

I’ve been saying this for a while (here and here) and I think WeWork is just another example of the times we live in. It’s funny how WeWork came up with their own metric to justify their valuations (or at least make their valuations seem less bad) but if you’ve read about what happened in the dot-com era, remember that at one point, analysts valued non-profitable tech companies on “eyeballs” (thank god the internet never forgets).

bItCoiN iS a SaFe hAvEn (The Reformed Broker)

‘Nuff said. Go read it for the takedown.

When Money Dies (Of Dollars and Data)

Great piece. Particularly on how The Market’s real returns in various countries is a better hedge against inflation than commodities like Gold. The article provides a logical and sensible take on what matters in the economy.

Krugman’s take on how Trump still doesn’t understand economics. Actually, at this point, I think everyone knows that Trump doesn’t understand much of anything except self-promotion.

But I particularly like Krugman’s take on how the U.S. has more to lose than China from the ongoing trade war.

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Today’s Reckless, Irresponsible, Politically-Motivated FOMC Rate Cut (The Big Picture)

Obviously, ‘today’ refers to the date of the cut but more importantly, it begs the question: “Was the rate cut even necessary?” Anyway, markets seem to be in for a bit of turmoil with the rate cut, Brexit looming and a general slowdown in trade thanks to Trump’s tariffs.

Stay tuned for more.

Winner-Take-All Phenomenon Rules the Stock Market, Too (Yahoo Finance)

Originally from Bloomberg and written by Barry Ritholtz. A great piece that highlights the research from Hendrik Bessembinder of the Carey School of Business at Arizona State University.

It also shows how difficult it is to pick stocks and why retail investors are really in over their heads if they think that they can do this better than the pros.

This isn’t to say that the pros do a fantastic job but as a retail investor, it’s much harder unless you’re able to dedicate a lot of time and effort to it. Even then, you’ll need some luck too.