Many people on my social media have been sharing the headlines produced by the latest edition of the Economist Intelligence Unit (EIU) Worldwide Cost of Living survey. For example, this is CNBC’s headline of the article.

CNBC's headline for the EIU Cost of Living 2022 survey
Source: CNBC

Here in Singapore, much of the focus has been on the fact that Singapore is tops in terms of being one of the most expensive cities to live in. The problem with this is that the results of the survey hardly apply to most people living here.

This is from Todayonline and I’ve also seen the same information in the EIU’s summary of their report (emphasis mine).

EIU — the research and analysis division of the Economist Group, which also manages the Economist newspaper — said that the survey has been designed to enable human resources and finance managers to calculate cost-of-living allowances and build compensation packages for expatriates and business travellers.

Source: Today

I’m not saying that things haven’t gotten more expensive over the last few years but I’m pretty sure that being the most expensive city in the world for expatriates and business travellers is not the same as being the most expensive city in the world to live in for the average resident.

It’s kind of sad in a way because when I used to teach students about CPI, we mentioned that the aim of CPI is used to measure how much more expensive things have gotten for the average household. Even then, the limitation of CPI is that not every household is an average one.

The problem is that it’s not in the interest of the media to interpret the facts and they are incentivised to sell eyeballs to advertisers. So anything that gets shared or goes viral is good. And one good way to get things to go viral is to get the masses riled up about something.

So yes, while the results of the survey may be true, the problem is that they may not be true for the average person. And people really need to pause and think about it first before getting angry or upset about these things.

Been hell of a week on the personal front.

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Huat ah! How I made $80,000 during the Chinese New Year holidays.
(Growing your tree of prosperity)

Christopher Ng makes some very good points in this post. I’m not sure if the point on EC still applies to the current generation. The problem I have with treating your primary residence as an investment is the fact that you will need to monetise it at some point – if you love staying there, you will be reluctant to cash out; if you only love it as an investment, it will be several years of tolerance before you cash out. Either option doesn’t sound appealing to me.

Wait for it
(The Reformed Broker)

Some good points but I don’t think this round is anywhere like the dot com bubble.

STUDY SHEDS LIGHT ON COGNITIVE DISSONANCE IN ACTIVE MANAGEMENT (TEBI)

It says something when the cook doesn’t even eat their own cooking. Having said that, we need active managers per the Grossman-Stiglitz paradox.

Best Reads CNY 2023 edition. Actually, I don’t have any links directly related to CNY.
May the year of the Water Rabbit bring you peace, prosperity, and happiness!

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The most important equation or why Bitcoin has to average 30% return a year to break even with the S&P 500
(Klement on Investing)

A good read on why we use geometric returns and not the arithmetic mean when calculating investment returns. I’ve heard of the term “volatility drag” but I never really understood it until I read this. Someone in the post’s comments point out that the equation presented in the post is an approximation and if you want to find out more, Kitces has a nice post on this concept. The quick takeaway from this is that you should never ever use the simple average when calculating returns that compound.

Why sanctions fell short of their objectives in the First Gulf War
(LSE blog)

Economic history buffs, this one’s for you. Whether or not this same analysis applies (or the extent that it applies) to Russia is a whole other question.

Bull or Bear?
(The Big Picture)

Barry Ritholtz nicely summarises the current sentiment in the market in one paragraph:

“It is noteworthy that most of the bullish signals are market-based or technical in nature. The bearish signals I am gathering for next week seem to be primarily fundamental or economic in nature…”

WHICH COUNTRY HAS THE BEST RETURNS IN 2023 IS IRRELEVANT
(TEBI)

A returns quilt for individual countries’ equity returns. I’m surprised that Singapore is in the top half of the list for so many years. 2019-2021 was tough.

The rise of the Finfluencer is something that I wanted to write about for some time so it’s timely that TodayOnline has a nice article on this trend.

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What is a Finfluencer?

The word ‘Finfluencer’ is really just a portmanteau of the words “finance/financial” and “influencer”. So you guessed it, a ‘finfluencer’ is just an influencer or online personality whose content revolves around finance. In a way, I guess this is the natural evolution of financial content on the internet – from financial blogs to finance YouTube channels and Fintwits to Finance on TikTok.

Don’t get me wrong. There are some good ones out there and these guys/girls mostly have a professional training such as a CFA Charter or professional background as an investor or financial advisor (the non-Singaporean sort) but there are many of them who come from other professions such as real estate, engineering or computer science.

The rise of the “anyone-can-do-finance finfluencer” was really fueled by the strong rebound in markets in 2020 where it seemed like everyone was making easy money from taking concentrated positions in stocks where prices and fundamentals were grossly mismatched. The interesting thing is that many of these ‘Finfluencers’ had never even invested a dollar before the bull (or bubble?) of 2020 and therefore, many of them had never experienced a full market cycle.

I say this with some certainty because of the few that I’ve watched on YouTube for entertainment research, almost all of them seem to think that market returns in 2022 were bad. I guess they weren’t completely wrong because if you’ve been in high-beta, “growth” stocks (I put “growth” in inverted commas because growth has been used far too loosely to describe some of these companies) then the pain actually started in 2021 and returns could be anywhere from -60 to -90%. The granddaddy of names popular with such “Finfluencers” is Tesla which was down some 60% at the end of 2022.

Some of these “Finfluencers” try to educate people on personal finance which mostly comprises money-saving tips, budgeting, credit card hacks, and so on. I guess these are useful to some extent but I’ve not seen one with a complete system of helping people with their finances.

What’s the problem with Finfluencers?

The more egregious offenders teach basic financial knowledge but in my opinion, most do so at the cost of oversimplifying concepts to the extent that blindly following these teachings could be harmful.

Take, for example, the 4% rule that many of these people like to throw around. The version of the 4% rule that many people like to tout basically says that if you withdraw 4% of your portfolio every year, you won’t have to worry about running out of money to spend.

A majority of these Finfluencers fail to point out that the 4% rule which originated from a paper done by William Bengen, is based on a portfolio of 50% intermediate-term bonds and 50% equities, and (conservatively) for a withdrawal of 30 years.* Unfortunately, that’s where the good news ends. Bengen’s paper was written in 1994 when interest rates were a lot higher than in the last 20 years.

Also, the 4% rule was based on US stocks and bonds. If your investments are in other markets or asset classes substantially different from that study, then you simply cannot use the results of that study. There are others who have updated their study of the efficacy of the 4% rule (see BigERN) and whether the 4% Safe Withdrawal Rates apply to international stocks.

I don’t know many Finfluencers, especially local ones, that have pointed out the same thing that I have with regard to the 4% Rule. The 4% rule is just an example and there is more insidious advice that have been peddled – such as using crypto brokers that have gone bankrupt, going all-in on a single overvalued stock and so on.

The problem with these Finfluencers is that there is an inherent conflict of interest. Many of them exist for the sake of generating clout and monetising that clout. The monetisation could be through advertising or referral fees. In short, their aim is to generate money through getting your attention and nothing gets your attention better than big misleading headlines like “Here’s how I 100x my investments!” or “How I used XYZ to get returns of up to 20%”.

Remember, these guys are not in the education business, there are in the entertainment business.^

Notes:
*In Bengen’s paper, he found that the portfolio never ran out of money before 33 years and in many cases, the portfolio lasted up to 50 years.

^Similarly, your financial advisor/relationship manager that earns commissions through sales of products is in the sales business. They may say that their interests are aligned because you’ll only reccomend more clients to them if they do well for you but you really can’t tell if the investment product they sold you will work out or not (odds are, it won’t!) until many years later. Meanwhile, these guys get paid a huge commission up front and in a few years time, these guys will probably have moved on to something else or to some other client.

Markets have started the year strong. Will this continue? Only time will tell.

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Inflation Comes Down Despite the Fed
(The Big Picture)

Barry Ritholtz breaks down why he thinks inflation is coming down even without the Fed’s intervention.

The Art and Science of Spending Money
(Collaborative Fund)

Morgan Housel’s writing is incredibly good and once again, he nails it with this piece. There are so many gems within the piece but in particular, I love the quote from Montesquieu:

“If you only wished to be happy, this could be easily accomplished; but we wish to be happier than other people, and this is always difficult, for we believe others to be happier than they are.”

ASSET MANAGERS AND THEIR CUSTOMERS WANT DIFFERENT THINGS
(TEBI)

It’s surprising to know that this is still an issue that exists today. After all, this was the key insight that drove Bogle to start Vanguard. I hope to get my hands on Ed Moisson’s book and see how many more surprises I find.

Meet the moonlight clan: Young Taiwanese who spend all they earn
(The Straits Times)

When real wages have barely increased and the price of an essential like housing goes up so much, can you really blame people for living in the present rather than planning for the future?

I didn’t realise that the TFR in Taiwan is lower than even in South Korea but I suppose that’s the other outcome of countries with high cost of living.

It’s been close to about three months since I started my new job and I don’t think I’ve ever felt this level of stress. This isn’t to say that stress is bad. In some instances, stress is good. It really depends on how you handle it.

But first, let’s rewind.

Why I left my previous job

For the last 10-plus years, I was a lecturer at a local polytechnic. I taught economics, some corporate finance, and some modules of lesser importance. Teaching was something that I did relatively well, the bosses liked me, and before I left, I was overseeing our small team of economics lecturers.

I really like teaching. The nice thing that happens when you teach is that you really find out if you truly understand something. If you don’t do a good job at it, it’s likely that the person learning from you will be left confused. However, the more you help people clear the confusion, the deeper your understanding of the subject or concept becomes as well.

I never understood this as a student but it’s all so clear now. Maybe that’s why some of the smartest people I’ve met have also been some of the most generous and patient when it comes to sharing what they know. Deep down, they’ve understood that teaching someone something is not a zero-sum game. The teacher learns from teaching just as much as the student.

I also had the good fortune to work with some great colleagues and through the work, I made some good friends. However, my job eventually included managing people who were difficult and resistant to change, and teaching subjects I thought were superficial, to say the least. With every organisation, it’s inevitable that there are some processes that could be improved but it’s also difficult to make drastic changes because there are so many moving parts.

More importantly, I knew that if I stayed at the same job for another year or two, I would never be able to leave. After all, who would hire someone who had mostly only worked in education? I may have the requisite knowledge but knowledge not applied is like a knife that has gotten rusty with age.

By some stroke of luck, I found a role in another government agency that was about investment management and so I took that leap of faith. It’s also good fortune that they wanted me instead of someone with more industry experience. I’m not sure why but my guess is that the private sector pays a lot better for people with the requisite industry experience.

Two-plus months into my new job

As I write this, I’m about two and a half months into my new job and it’s been rough.

Yes, I’m a CFA Charterholder but still, the learning curve has been steep. Learning to adapt to a new organisation, workplace, team, and demands of the job in a completely new field is like going from playing pro basketball to becoming a marathon runner. Even if you’re familiar with different parts of marathon running (e.g. the training methods, who the best runners are, race timings and so on), it doesn’t really help if you’ve never actually run a marathon before. Now imagine that but you’re not just running a marathon but a competitive marathon.

That’s essentially what I’m facing right now.

Learning the ins and outs of a new industry is one thing, but getting used to communicating the government way is a whole other ball game. But I came to learn about how institutional investors actually do their day-to-day work so I have no right to complain.

I also have helpful bosses and colleagues so that is a plus.

Opportunity within crisis

The thing with life is that how you respond to things matters a lot more than what life throws at you.

In that way, I may have matured a little because at my previous workplace, whenever unpleasant things out of our control happen, I ended up blaming the system or putting it down to people who had no motivation to do better. Recently, I’ve been turning (back) to meditation and mindfulness in order to help me cope with things and I’ve been getting a lot of clarity on how I feel about the events that happen.

This isn’t to say that I’ve suddenly gained mastery over my thoughts and emotions and I ride every event, pleasant or unpleasant like a surfer riding a wave. I’ve still found myself hit by waves of anxiety or existential dread whenever the stress builds up but I’ve been able to step back for a moment and acknowledge how I’m feeling. It’s somewhat like having an out-of-body experience where I can see that I’m feeling anxious about something, and in my anxiety, I’ve reflexively started having some thoughts or taken some actions to distract myself from the unpleasant nature of the task that awaits me.

I also started to change some habits. For starters, I’ve switched to having my coffee without milk. I’ve been joking that it’s because of inflation and while there’s some truth to that, it’s mostly because I drink a lot of coffee and in recent years, I felt a little bloated after having coffee with milk.

This doesn’t guarantee that I’ll do well at my new job but I think I’m developing some good skills to handle more of whatever life throws at me.

Be thankful

I’m thankful that I have this chance to experience and learn new things. I’m also thankful that my wife has been really supportive of this move so far. She’s had to buy dinner back several times or feed our cat masters while I had to work through the evening to get work done. I can imagine how much tougher things would be if I had to juggle this adjustment while there was chaos in my personal life so for that, I am thankful.

It’s a very hectic work at week for me. I hope things getting better.

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Trading a 2s10s Inversion
(Simplify)

Interesting article. I guess the money to be made from this trade is going to be more like the numbers in post-2000 era rather than the 80s given the level of rates now.

Latest Singapore Savings Bonds at 2.97% yield – Have interest rates peaked? Buy 18 month Fixed Deposit at 4.2% instead? (or T-Bills)?
(Financial Horse)

Read it for the commentary. And basically everything said in the commentary is the current consensus. Will things turn out different from consensus? I don’t know. All I know is that the consensus is probably more or less priced in already.

HEARTLAND BOY 2022 INVESTMENT PERFORMANCE REVIEW
(Heartland Boy)

I saw this post via 15HWW’s post. I’m just amazed at how many Singaporean retail investors were burned by crypto. Also, from Heartland Boy’s review, it also goes to show that stock-picking is hard. I learned a long time ago how hard it is and right now in my new job, I’m learning how hard it is for even pros to get it right.

7 decision errors in investment management
(Klement on Investing)

A nice list of the common decision errors made by investors and how to avoid them.

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It’s that time once more to look back on what has passed and to look ahead at what’s to come. 2022 has been a year of huge change not just for markets but for me on a personal level. I hope this post doesn’t turn into an incessant ramble. If it does, I apologise in advance.

Goodbye Bull, Hello Bear

The first obvious thing that happened this year is that markets turned from being great for all the bulls to the first real bear for many Gen Z investors. The S&P 500 peaked in December 2021 at around 4800 and has been on a downtrend ever since. For Gen Zs who were mainly invested (or should I say speculating?) in pseudo-tech (please don’t be in the camp that thinks, Tesla, Peleton, or Doordash are tech stocks), meme stocks, crypto, or TSLA, the pain is particularly acute. The Nasdaq composite peaked in November 2021 and is roughly down about 30% since then. Growth-at-all-cost stocks are down even more. Using ARKK as a proxy, these sorts of names peaked in early 2021 and are now down roughly 70% or so.

This is what I said about ARK Invest in March 2021 and I guess 2022 is when I take my victory lap

So rates have started rising and “markets” are spooked. I say “markets” because honestly it’s mainly in the high flying names of last year (e.g. TSLA, the ARK ETFs etc.) that have been hit. But honestly, even if those names get hit for a total drawdown of 50%, it’s going to be hard to say if it’s cheap to buy.

Best Things I’ve Read All Week (7 March 2021)

The main cause of mayhem in the markets was the series of Fed rate hikes that started in late 2021. Since then, the Fed Funds Rate has been hiked to around 4.5% (upper bound) and the Fed’s own expectation is that they will stop hiking when the rate reaches about 5%. It wasn’t so much about how much the Fed hiked rates but also how quickly they did so. At the same time, the Fed has also begun reducing its balance sheet which is adding to another source of tightening in the monetary system.

Where the Fed hikes rate to is now a foregone conclusion. The question on everyone’s minds is how long will they stay there?

The obvious impact on markets is the sort of thing you learn in a finance 101 class. As the risk-free rate increases, so does the discount rate on future cashflows for all sorts of investments and projects. This reduces the present value of future cash flows and has a greater impact on cashflows that are more distant in the future.

This basically explains why the broader markets have fallen anywhere from 20-30%. As to whether markets will fall some more or stage a sustained rebound from here, it really all depends on whether the economy achieves that so-called soft landing that Fed is hoping for. Therefore, 2023 will be all about how bad the economy gets – will growth and employment slow down drastically, or will many companies crash, burn, and therefore cause mass layoffs to become a feature that extends beyond the tech sector?

Crypto is tested

This will also go down as the year when Crypto, as an asset class, has its Global Financial Crisis moment.

From the failure of Luna and Terra, Three Arrows Capital to Celsius and of course, FTX. This will be the year that investors in crypto realise that no matter how much they hide behind the technology, the problems that they face in crypto as an asset class are pretty much the same problems that have existed in finance forever.

Alongside the failures of those companies, their high-profile founders Do Kwon, Zhu Su, Alex Mashinsky, and SBF have not basically been outed as either frauds or really bad businesspeople. The funny thing is, in finance, fraud is a feature of every hot new thing, not a bug.

Personally, I don’t think crypto is going away but this year has made it much harder for crypto as a mainstay asset class for mainstream investors. However, if you’re still bullish on crypto, you also have to recognise that after this year, you will live with more regulation or less liquidity. Neither of which makes for the sort of rocketship-like gains unless you can time the bottom.

Revenge of Inflation

For the first time in a generation, inflation is once again a thing.

First, a mea culpa. In October 2021, I commented on a Today piece that was done on inflation.

“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.”

Best Things I’ve Read All Week (31 Oct ’21)

As we now know, inflation came back in a big way. However, this wasn’t completely due to loose monetary policy but also in part due to the fiscal handouts to alleviate the damage caused by Covid and the war in Ukraine. The good news is that inflation seems to have peaked but the bad news is that many market watchers seem to think that it won’t come down to the Fed’s target of 2% that soon (for example, see Howard Marks’ latest memo “Sea Change“). This seems to be the likely conclusion given the tensions between the US and China that have led to onshoring or friend-shoring of supply chains and the other ongoing geopolitical tensions around the globe.

The good news for retail investors is that something always can be done. One, yields on cash or near-cash instruments have increased dramatically. In Singapore, this caused T-bills to be a thing, and bank are now offering interest rates on savings accounts that are higher than even the CPF SA. This is a sharp reversal of the pattern seen over the past decade or more where the CPF SA’s yield of up to 5% was seen as an acceptable bargain for keeping your money locked up until you reach the age where you’re allowed to then withdraw the monies from your CPF.

The question on everyone’s mind now is: how long will this last? I don’t profess to know but the consensus seems to be along the lines outlined above.

Working in finance

This year, I left the organisation and job that I had been doing for the past 10 and a half years. It wasn’t an easy decision given how comfortable I was in the role and I’m nearing the age where you don’t really start learning new tricks. Most people my age would have gained some level of mastery in their professional life and would be close to or entering the peak earnings phase of their careers. In my case, I was due to take over from my boss so in fact, career progression is something that was on the cards.

If that’s the case, then why leave?

The reason is that I couldn’t see myself doing my boss’s role or my current role for the rest of my life. I had also become jaded with certain aspects of the job and I guess that given my age, if I didn’t try to move now, then it would be never.

At the same time, I didn’t want to leave my job just because there was some dissatisfaction with it. The work environment and the colleagues whom I worked with were (mostly) good. So it was by some stroke of good fortune that I was offered a role that involved investments.

I’m two months into the job and frankly, I’m not sure how good I’ll be at this. What I can say is that I’m grateful for the opportunity to experience and learn what an investment professional does on a day-to-day basis.

Portfolio

This year has been an exceptionally brutal one for portfolios. While the drop in equity and bond prices hasn’t been particularly bad, the problem is that both major asset classes fell by double digits. This means that what is traditionally considered a diversified portfolio (e.g. a 60/40 stock, bond portfolio) has taken a hit when investors typically expect bonds to buffer against falls in stock prices. In short, bonds didn’t deliver the protection it’s supposed to have against a fall in equities.

Fortunately for me, I’ve been accumulating cash all through the year. The other fortunate thing is that I never participated in the mania in US markets so while my existing positions accumulated over the years took a slight hit from an increase in discount rates, this was relatively small compared to the buffer provided by a sizable cash position and large holdings in the STI.

In a year where the S&P 500 is down almost 20% and the STI is down 4.61% (before dividends), my portfolio[1] is only down 2.84% (without dividends) and 1.27% (with dividends). All in all, I would say it’s roughly in line with the total returns of the STI. More importantly, the numbers presented are investing returns which is just an indicator of my (lack of) skill in investing.

A layperson would probably care more about the size of the portfolio and this would include all monies added to the pot. I made a tremendous effort to accumulate more cash in the portfolio and I don’t know how I did it but this year will go down on record as the year where I managed to add around 30% of my take-home pay to the portfolio. This helped to increase the total size of the portfolio by 7.39%.

Which would you rather have? A -1.27% returns on investment or a +7.39% increase in your portfolio size because you deferred some present consumption?

This marks my 15th year in the markets. I guess with this current cycle, you could say I’ve lived through 3 major bears now (’08-09, ’20, ’22-?).

I can’t say if the next decade will be like the last one or if will it become a secular bear that goes sideways for a while but I know that my portfolio has increased from a tiny 5-figure portfolio to a more than respectable 6-figure one.

And this isn’t because I’m some investing genius. In fact, if I was more aggressively invested, it would be a 7-figure portfolio by now. The secret is that I simply saved money, added to the portfolio, and didn’t trade in and out of positions. Based on pure investment returns, my portfolio has grown 1.93x over the last 11 years while the actual portfolio size (including cash added) has grown 5.89x. Roughly speaking, investment returns were 6.16% p.a. while total portfolio size returns were 17.49% p.a.

My experience just shows that if you’re a young investor with little capital, the best thing you can do for yourself is to continue saving, investing, and letting the gains compound. For example, adding $10,000 per year to a $100,000 portfolio increases its size by 10% while adding the same amount to a million-dollar portfolio only increases it by 1%. When your portfolio is smaller, it’s far easier to negate bad returns simply by adding more cash.

As demonstrated, adding cash does little to move the needle on a bigger-sized portfolio but I will argue that for the vast majority of people, this won’t apply. After all, how many people reading this (both in Singapore and abroad) already have millions of dollars in their portfolios?

If you want gains, just do consistent work.

[1] My portfolio only includes stocks and cash that are in my investment accounts. I don’t include cash reserved for everyday spending, monies in my CPF account, or home equity.

Life

Finally, my personal life has been great. Despite catching covid sometime during Jul/Aug, my wife and I have been relatively healthy. I’m really thankful for my wife. We lead a relatively simple life compared to many of our peers – we watch way too many K-dramas, take walks along the park near our place, spoil our cats, and the most difficult decisions we have tend to revolve around where we should go to dinner.

Compared to many folks, we have been very fortunate.

We’ve also welcomed a long-tailed black friend that we saved from my parents’ place. And after we picked him up, we started seeing many signs that he was meant to come into our lives. Maybe it’s just confirmation bias or maybe it’s fate. Who knows?

Finally, looking forward

Following a brutal 2022 that has removed a lot of the excesses in financial markets, I am getting optimistic that investing steadily and consistently over the next 3-5 years in a broadly diversified portfolio will pay off in the longer run.

This year, I’m hoping to write more on financial literacy. I think it’s a topic that, despite the government’s best intentions[2], helps people lead better lives. Too many people fall into one of two categories. They either (a) fall prey to scams, frauds, or just bad financial advice or (b) become too afraid and conservative that the value of their savings erodes over time due to inflation.

Both categories of people are pitiful but at least for those who fall in (a), you could put it down to greed. For those who fall into category (b), it’s sad because it sounds like they are doing everything right – working and saving, only to end up finding it difficult to retire or they can only do so with some form of work, or end up feeling insecure about their finances without a job.

The good news is that this isn’t rocket science and so I hope to share what I know and combine that with a real-time case study of my own path to retirement.

I wish you all the best for 2023.

[2] I say this for a fact because at my previous job, some direction came at the top level for our students to complete some compulsory modules on financial literacy. I can’t say how successful these have been because I still witnessed many of my former students fall prey to the scams, frauds, and mania that surrounded Crypto, meme stocks, and NFTs. This just shows how difficult it is for you to learn something in class and then be aware enough of how it applies in the real world when the world is going crazy about something.

It’s a new year! Hope your portfolio does better this year.

Photo by Mikes Photos on Pexels.com

Some Stuff That (Probably) Won’t Happen in 2023
(A Wealth of Common Sense)

Contains several non-investing predictions but I think the key thing there is the nice graphic that shows how rare it is to get single-digit returns (both positive and negative) in the stock market.

History of Industries Listed on S&P 500
(The Big Picture)

I’m not sure what to make of this except that the US economy is a very dynamic one. Do the same exercise on the STI and you’ll probably find very little change there. For us, the banks still dominate and maybe that’s a reason why our markets have gone nowhere. Not that a Singaporean investor will be complaining about that this year though.

Retirement Income: Six Strategies
(Enterprising Investor)

Some of the strategies are a little technical but worth reading for an overview of the different considerations that one should account for when thinking of income in retirement.

It’s Christmas! Happy holidays.

Photo by Mikes Photos on Pexels.com

China’s Covid Reopening Won’t Be Enough to Save Oil Markets
(Bloomberg)

Bloomberg opinion piece on why China’s reopening isn’t necessarily a boon for oil despite what some people might think. The reasons stated are:

  1. Large part of China’s oil consumption goes into industrial raw materials
  2. China’s weak oil demand in 2022 is in large part due to problems in its property market
  3. Chinese oil consumption is more closely related to plastics consumption which is linked to global trade.

Commentary: Inflation is a silent killer of retirement planning. Here’s what you can do (CNA)

Inflation has been one of the big stories this year. I used to teach this stuff and one of the things we used to say in class is that CPI measures the consumption basket for an average household but not every household is an average one.

How has inflation affected you this year?

Demographics vs. the Stock Market
(A Wealth of Common Sense)

Good point made on demographics and how it may/will affect stock market returns in the future. The demographic problem will affect Singapore much more than the U.S.

The 2.7% Rule for Retirement Spending
(Ben Felix on YouTube)

Ben Felix gives a great overview of why the 4% rule should be put to bed. I’ve seen many Singaporean personal finance bloggers/YouTubers tout this rule without understanding the assumptions behind the study. Please check out his video for great insights into why you shouldn’t take Safe Withdrawal Rates too seriously either.

As expected, the Fed has raised interest rates by 50 basis points. The unfortunate thing for markets is that the Fed has indicated that the rate hikes may continue for a while longer.

Photo by Mikes Photos on Pexels.com

Central Banks around the world are fighting to get back down to 2 percent inflation. Why? Look to New Zealand (Grid)

Some years ago, a (now-former) colleague from another teaching department asked me why Central Bankers aim for a world with 2% inflation. Embarrassingly, I never thought of it and I couldn’t give a good answer.

Well, now I know.

The idea of formalizing a precise target came from New Zealand’s minister of finance Roger Douglas in the 1980s, who said in a TV interview that inflation should be between zero and 1 percent. While inflation had fallen, policymakers in New Zealand worried that the public would expect their inflation-fighting program to slacken.

“Douglas was very concerned in March 1988 that, with inflation moving into single figures … the public would expect the monetary authorities to ease up and settle for inflation in the 5 to 7 percent range,” Don Brash, former governor of the Reserve Bank of New Zealand, told Grid, and thus made the almost offhand declaration that his goal was essentially no inflation.

Implementing the target fell on Brash. In 1989, New Zealand’s parliament gave the Reserve Bank of New Zealand independence to operate as it saw fit but do so with the target the government decided upon. Early the following year, the government implemented an agreement with Brash to hit the zero to 2 percent target by the end of 1992. Brash recalled feeling surprised that the contract was with the governor personally and not the bank. But he soon got the message: While the government couldn’t fire the bank for failing to fulfill the agreement, it could fire him.

– Grid

Singaporeans Face Working Longer to Afford Retirement
(Bloomberg)

This seems to be a common sentiment among the younger crowd, especially with housing prices on a tear. This is the tl;dr from the article:

Singaporeans’ long-term saving plans are being jeopardized by inflation hovering near the highest level in more than a decade, insufficient wage growth, accelerating housing costs and other financial burdens from living in a city recently listed as the world’s most expensive alongside New York. In addition, a reluctance by many to put money in riskier, higher-yielding investments means nest eggs are falling short.

– Bloomberg

JPMorgan: Challenging 2023 But A Market to Accumulate
(Investment Moats)

Kyith from Investment Moats provides an overview of JP Morgan’s view for markets next year.

Vietnam factory workers laid off as West cuts imports
(Yahoo)

Anecdotal but a sign that global consumption is slowing.

It is not a Bad Time to Retire
(Aleph blog)

I’ve been hearing similar arguments from various people in the industry that since yields are higher, it’s never been a better time to get returns with much less volatility by shifting from equities to bonds. Also, another point I’ve seen somewhere else before is that retiring in the depths of a recession is the best thing that you can possibly do to stress-test your retirement. After all, if you can retire with your portfolio battered and bruised, you can certainly retire when times are good.