Archives for category: Best Things I’ve Read
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Gen Y Speaks: At 20, I ran a business with six-figure revenue. Here’s what I learned. (TODAY online)

I love how they’ve run a story on a local entrepreneur who’s candid enough to share her experiences. It’s also a nice story because the writer no longer runs her own business which is a nice contrast to the perspective that entrepreneurs must be married to their businesses forever and ever.

It’s like what I tell my students in economics class – opportunity cost tells us that if you want to start your own business, do it while you’re young because the opportunity cost of doing so is low.

That aside, one day I must rant about how we’re trying to promote and teach entrepreneurship in school. It’s my view that while the skills to be an entrepreneur can be taught, what ultimately makes entrepreneurs is their social and familial environment.

You can’t go out and run a business if putting food on the table is a concern.

3 property statements that don’t hold water (Property Soul)

To be honest, at some point in time, I believed in some of these statement myself.

I kind of learned that statement 1 and 2 didn’t always hold water when I saw my parents’ investment property become a liability instead of an asset.

Statement 3 is the most interesting one for me because I never really thought that hard about the backgrounds of the Asian families whose riches are so closely linked to property.

The other thing I like to point out about those who believe in Statement 3 is that property developers make their money building and SELLING property and not buying it as the common man does.

In short, it’s a different ball game.

Extreme Concentration of Global Wealth (The Big Picture)

Nice infographic.

And a sobering thought that the average Singapore should easily be in the top 10% in terms of wealth if you have a fully-paid up HDB flat and/or meet the retirement sum in your CPF.

Unfortunately for the pro-government types, people can’t eat bricks and their CPF statements.

The Earnings Mirage: Why Corporate Profits are Overstated and What It Means for Investors (OSAM)

Heard about this from this episode of the “Animal Spirits” podcast. I haven’t gotten through it but looks like a worthwhile read.

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Family Inc: Viewing Your Career as Investments (Investment Moats)

I think Kyith at Investment Moats is going through some sort of career transition and chanced upon this book. There is a nice bit at the front part of his post on the importance of human capital.

I written about it before (here and here) but it’s interesting to see how prevalent it is that people don’t consider their human capital as part of their net worth.

This is especially true when it comes to asset allocation. I know far too many people whose incomes don’t vary much and where the threat of redundancy is low with respect to economic cycles (think civil servants, doctors, etc.) and most of their wealth comprises spare cash in the bank or they lock up themselves up in some sort of low-yielding endowments.

On the other hand, it’s the very people whose incomes and jobs vary with economic cycles (think property agents, bankers, traders, business people etc.) that load up on risk assets with leverage to boot.

If there was anything that I learned some the CFA level 3 syllabus, if was this – that if your human capital is bond-like, you can weigh your financial portfolio more towards equities and vice-versa if your human capital tends to be more equity-like.

The Thing That’s Probably Blowing a Hole in Your Budget (A Wealth of Common Sense)

Ben Carlson has a great post on how a car is probably the worst of the three big forms of debt for the average American since a car is a depreciating asset while a mortgage and a study loan, arguably, helps you purchase an asset that increases your net worth.

A wise colleague told me the other day that he read on the papers that owning a car in Singapore is one of the major differences between comfortable retirement and a barely-there retirement for the average Singaporean.

Cars are darn expensive in Singapore and the COE only lasts 10 years. Also, public transportation is relatively affordable. So, yeah, I agree.

Double feature since there are on the same issue. NYT link via The Big Picture and the other sent by a friend.

It’s crazy to see how long and how low interest rates can go. But as I replied to my friend, it’s also this sort of environment that leads to asset bubbles as easy credit means that money has to find a place to be invested no matter how ridiculous the premise.

Initially, I thought that we were at the end of the cycle with all the new tech IPOs but it looks like the powers that be hope that this will continue for some time yet.

The other positive thing that this environment has going for it is that valuations, in general, are not at extremes, the masses aren’t making the easy money, and we don’t have the inflation necessary to force the hand of the central banks.

So perhaps, this party could go on for some time.

We’re halfway through the year! Time really flies, doesn’t it?

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The Fecundity of Endowments (Northwood Family Office)

A paper on safe withdrawal rates for long-horizon portfolios. The paper proposes a safe, simple, and dynamic approach to the safe withdrawal rate. Totally makes sense and I can’t imagine why no one thought of this before. (h/tip to Investment Moats for this)

Go read the entire paper. It’s only 8 pages long and not very technical.

Georgetown study: ‘To succeed in America, it’s better to be born rich than smart’ (CNBC)

I can’t say that I’m surprised at this finding.

I wonder if we’ll find similar results in Singapore or will we find that our much-vaunted education system is really a social leveller?

Some Good News For Retirement Savers For Once (A Wealth of Common Sense)

Ben Carlson breaks down the findings from a Vanguard paper and notes how stark the difference is between voluntary enrolment and automatic enrolment in 401(K) plans.

Ladies and Gentlemen, this is why CPF is forced upon you.

Unfortunately, along the way, the usefulness of CPF gets diminished by letting people use it for (overpriced) housing. Those who need CPF for retirement will have spent it on housing and those don’t…well, CPF is a drag on compounding wealth.

Lots on the economic and investment front this week.

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Tesla’s Travails: Curfew for a Corporate Teenager? (Musings on Markets)

From Prof. Damodaran comes this wonderful piece on Tesla’s valuation. I don’t read it so much for the accuracy of what Tesla’s worth but more for the thought process and analysis on what Tesla’s value should be.

How Many Hours Of Work Does It Take To Buy The S&P 500? (Global Macro Monitor)

Interesting way to value the S&P 500. Essentially, the higher the ratio of the S&P 500 to the average hourly wage from work, the more richly valued the S&P 500 is as it takes more and more hours of work to buy the S&P 500.

However, the average investor probably does not earn the average weekly wage.

Institutionalized nonsense (The Grumpy Economist)

The economic perspective on why the US labelling other countries as “currency manipulators” is wrong on so many levels.

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Elbow-to-Elbow in Jalan Kukoh: The Reality of Overcrowding in Singapore’s Rental Housing (RICE)

A good look at some of the poorest households in Singapore through the lens of a writer who has observed two families living in the estate. Singapore isn’t all about the stuff that you see in Crazy Rich Asians. Most of us live very different lives from what was portrayed in that movie.

However, the lives of those living in rental housing are even further removed from the experiences that the average Singaporean go through in a lifetime.

Not Efficient, But Effective (Of Dollars and Data)

Guilty as charged.

Too often, I think about efficiency rather than the likelihood of the job getting done. And ultimately, I think we want to get the job done rather than not get there at all.

For example, being fully invested in equities may get you to retirement in the shortest possible time due to the higher expected returns.

However, most people may not stick to the plan when they see huge drawdowns on their portfolio when the market crashes. This causes them to give up on investing and they end up worrying about money even after they have to stop work.

In short, maybe we need a rethink towards getting to our destination with the highest probability instead of getting to the destination in the quickest possible time.

Think effectiveness, not efficiency.

I’m really sorry that I neglected my blog. No “Best Reads” last week because I was busy with something.

But back to regular programming this week.

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From making waves to drowning in red ink: Hyflux, Tuaspring and how a business giant came undone (CNA)

A brief story of how Hyflux came undone. Maybe they’ll rise from the grave. Who knows? But the basic lesson is that regular folks who plonked a whole lot of cash into their bonds and subsequently lost it all kind of deserve to.

After all, we’ve seen this story before with the GFC, the dot-com boom and bust, the Asian Financial Crisis. To be more specific, Singaporeans should have learned something from the minibonds saga, NOL’s fall from grace, Chartered Semiconductors, and even further back, the Pan Electric Crisis.

Clemens on minimum wage (The Grumpy Economist)

Doesn’t matter which side of the minimum-wage argument you stand on. You will want to read this post to gain some clarity on the issue.

Fortune Analysis: The Tech Superstars Never Went Through Cash Like Today’s Big Burners (Fortune)

Great piece of research. Not the most academic but it does raise a lot of doubts on whether Tesla, Uber, Lyft, and Snap (basically representing the new-age tech) can be the next Google, Apple, Amazon, and Microsoft.

The short answer is no.

By the way, we have our own nonsense versions of the new-age techs here in Singapore in the form of Carousell, Grab, Honestbee (which seems to have one foot in the grave) as well as a host of others which have a much smaller user base (think: eatigo, Chope etc.)

Stop the Financial Pornography! (Of Dollars and Data)

Great, great piece!

Also, in Singapore, we have a proliferation of “how to get rich by buying properties with little or no cash down” kind of schemes being advertised (horror of horrors, our local paper even featured the people behind this scheme in an article, thereby giving them some legitimacy).

Read the article above and be aware that people who claim to have achieved some form of return, especially those in a short period of time with little capital, are not telling you the entire picture.

How To “Lie” With Personal Finance (Early Retirement Now)

Basic financial literacy stuff. Don’t skip it this unless you have had some sort of training in finance.

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How to Teach Basic Finance to Students (The Big Picture)

While the article is written in the context of the American Education System and Americans’ knowledge of financial literacy, the same can be said of Singapore and Singaporeans.

I like the points made on how financial literacy needs to be taught in order for it to stick . Namely, the lessons need to be hands-on, include repetition, and train critical thinking skills.

By the way, my school recently introduced financial literacy as a compulsory subject for students. However, I believe the execution leaves a lot to be desired.

Financial Superpowers (A Wealth of Common Sense)

Ben Carlson has come up with a great list of what it takes for someone to be financially well-off. It’s a great list but the last sentence of his post sums it up best.

Find me someone who is content with their life and I’ll show you a person who is truly wealthy.

What Makes a Great Investor? (Enterprising Investor)

From the official blog of the CFA Institute comes this gem which is really about how great investing is more of an art than a science. In recent years, the use of massive computing power to sieve through huge amounts of data has become very attractive.

With that, many people believe that the future of investing is largely hands-off and robotic. To be honest, I believe that this is best for those that do not do investing as full-time work. However, the necessary trade-off is that if you go with the mechanical approach, you’ll never be great.

The greatest investors need to be able to stay ahead of the curve and to zig when others zag. That’s probably not something a computer will be able to do just yet.

China bond defaults hit record in 2018. The 2019 pace is triple that (The Straits Times)

Uh oh. Look out below?

How gangs used Vancouver’s real estate market to launder $5bn (BBC)

Money laundering is fascinating me to no end. The article doesn’t really elaborate on how the perpetrators get away with it but it does highlight some of the reasons why the Vancouver real estate market has been a channel for these activities.

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A Definitive Guide to CAP Rates, Net Property Income Yield in Property Investing (Investment Moats)

If you can get past Kyith’s longform posts and his sometimes awkward phrasing, he provides very well-researched and in-depth articles. In this case, he has produced a piece that’s likely to be of interest to many Singaporeans.

Are financial literacy programs a waste of time? (Quartz)

Financial Literacy is one area of knowledge that many people could benefit from and as an educator, it’s begun to trickle into schools. This semester, I’m forced to make my students go through a financial literacy module but I’m not sure that the people who designed the module ever questioned how effective it might be.

Thankfully, I’ve found the wonderful Allison Schrager who is an economist by training and her area of research happens to be the economics of retirement. I’m also halfway through her book, “An Economist Walks into a Brothel” which is an interesting read. Not the best or most definitive on financial economics but Schrager tries pretty hard to show how basic financial economic concepts are applied through some interesting stories.

Podcast Ep#26: Lies Behind Property Ads In Social Media (Property Soul)

Another property-related piece and this one is interesting to me because we’ve been getting flooded with advertisements from property agents inquiring about our desire to sell our property given that it is reaching the minimum occupation period stipulated by the government agency that sold us our public housing flat.

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How Hard is it to Become a 401(k) Millionaire? (A Wealth of Common Sense)

Basically, the point of the article is that saving more at an earlier age gets you there much more easily. There’s also a guy in Singapore who’s an advocate for tapping your CPF to become a millionaire and I kind of pointed out that while I don’t disagree with the possibility of the feat, his explanation for getting there is a little ‘off’.

The 3 Levels of Wealth (A Wealth of Common Sense)

L1: I’m not stressed by debt.
L2: I don’t care what stuff costs in restaurants.
L3: I don’t care what a vacation costs.

Ben Carlson quotes Slack Founder, Stewart Butterfield on a simple heuristic to determine how wealthy you are. I think it’s a terribly useful rule-of-thumb to follow.

At this point in time, I’m definitely a L1 person. I’m not sure if I’ll ever progress to L2 because I keep telling myself how overpriced certain things are on the menu at some restaurants.

The Problem With Most Financial Advice (Of Dollars and Data)

A really good read about how some popular financial advice doesn’t apply to a wider population at large. I must admit that I’ll probably be guilty of this too because my experience probably doesn’t apply for the average Singaporean.

Happy Easter Weekend!

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Your home may be an investment but don’t expect it to fund your financial goals (Abnormal Returns)

A paper (highlighted in the post) has come up which finds that owning a house provides returns on par with equities but at a lower risk. I think many people in Singapore would agree with this but I’m not exactly convinced.

I’m still in the camp that the data on returns to property are hard to calculate because the data may not account for transaction costs, lack of liquidity and bad sampling due to infrequent transactions.

Getting rid of debt may actually make your brain work better (MarketWatch)

A study by researchers at NUS (nice one!) confirms what other researchers have found (you can read more about this in Mullainathan’s book, ‘Scarcity‘). This is precisely why those in poverty need more help than people assume.

Are Plastic Bag Bans Garbage? (NPR)

As much as I love the environment, I think we need to respect the data. After all, if bans on plastic cause more harm to the environment than good, then perhaps we need to hold our horses and reevaluate.

I’m not saying that we should stick to plastic bags but I’m saying that if a ban causes more harm than good, then perhaps we need to find another solution.

Alan Krueger, a master-economist for our age (Tim Harford)

Another obituary on Alan Krueger and it’s amazing to realise the breadth of the topics that Krueger applied his talents to. Every economics student should be inspired.