Archives for category: Best Things I’ve Read

It’s been a terrible week for me. I was pretty much in bed for the first two days of the week and I couldn’t eat much until Thursday. Thankfully, I’m feeling close to a 100% now.

Hope your week ahead won’t be anywhere near as bad as mine was this week.

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The Big Read: Cryptocurrency crash offers industry the reality check it needs (TODAY Online)

Great read on the aftermath (yes, you’ve read it first. I’m calling it an aftermath) of investing in Cryptos with accounts from those who had substantial (relative to probably their own net worth) skin in the game.

Good lessons abound and I wish I had kept better records or accounts of what was happening in ’07, ’08 and ’09. I was only in university then and beginning to start learning about the markets but I remember how some guys were trading warrants and making/losing 5-figure sums in the room that us Honours year students were given to use.

That was in ’07 and of course, we know what came after. I would have liked to remember a little better how I felt about the markets in ’08 and ’09 because the sentiment now in 2018 certainly fits those times better.

Of course, in recent times, we haven’t seen the participation of the masses in any widespread, crazy speculation (apart from a tiny group in crypto) so my question now is: What is the next shoe to fall?

As Singapore’s population ages, I suspect we’ll see this sort of thing start to pop up as well. I mean, we hear of elderly folks being conned of their CPF savings through various means (appealing to their vices, taking advantage of their less-than-once-stellar mental faculties etc.) but I’m waiting to see if it happens at the financial institutions level.

I suspect it’ll come from the financial institutions offering a product that isn’t actually designed to give returns much better than the risk-free rate but with all the “protection” of a bond. That sounds like Structured Products which kind of gave banks a bad rep but if you know of anything new, do let me know. It’s fascinating stuff really.

Russell Napier: Equity Markets and Structural Change (Enterprising Investor)

A plausible sounding narrative for where U.S. markets are headed in the longer term. Not optimistic but if it does happen, it would provide a good buying opportunity.

Could we Model Our Retirement Spending like Endowment Funds? (Investment Moats)

Sharing this not because it’s a new idea to me but I think it could be a paradigm shift for many people.

Most people aim to accumulate a certain sum before they retire and upon retirement, spend down the sum and upon their deathbed, leave the rest for their beneficiaries.

It’s not that I think that’s wrong but I think the pros of acting as if your money should last forever outweigh the idea behind spending it down.

For starters, aiming to have the accumulated sum grow/last forever means greater prudence in spending. It also means greater prudence in investing as it requires a proper plan for investing the money instead of sticking to investments that guarantee the principal at the expense of purchasing power.

The biggest downside is what the growing sum of money is meant to do. If the beneficiaries are too few, you end up with a generation of spoiled heirs who will eventually squander it all.

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It’s December! Christmas is right around the corner and soon, no one’s going to be in the mood to do any work.

Just kidding. My students have tests in a couple of weeks. They should be doing lots of reading and practice right now.

Here are some reads to start your week.

 

books on bookshelves

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How to Retire Forever on a Fixed Chunk of Money (Mr. Money Moustache)

If there’s anyone interested in FIRE, then you need to read everything MMM writes. This is a good overview of the strategy that anyone who retires early will have to follow. The article covers some other points like why MMM only holds stocks, should you worry about a bear market etc. You may not agree with all the points but nonetheless, those are points to consider.

 

The Biggest Myth in Retirement Savings (A Wealth of Common Sense)

A look at the U.S. experience with 401(K)s and the early incarnation that is defined benefits plans. While we gripe about CPF, the alternative may not be that great either. Note that Ben Carlson says this in a footnote:

1Here’s the Ben Carlson dream retirement system: Everyone who is employed is automatically enrolled in the government’s Thrift Savings Plan. The maximum contribution is $50k/year and this one account can be used as a 401(k), IRA, and 529.

Practically CPF.

 

Patient Capital: The Key To Long-Term Wealth Creation (Financial Samurai)

A particular important read in trying times.

With all the fluctuations in the stock market, it can be jarring to see your wealth rise and fall drastically from month to month. But remember, what’s important is not your wealth tomorrow but your wealth in 10 or more years time.

If you have the right strategy, patience and work ethic, you should find yourself much, much better off than you were 10 years ago. If you have, then continue doing what you’re doing and 10 years later, you’ll find yourself much better off than today.

A relatively relaxing week for me. If you’re a civil/public servant in Singapore, you would have also read the good news which was kind of expected since the projected GDP growth rate this year is the same as it was last year.

Anyhow, here are some reads to make your week better.

 

books on bookshelves

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The Unfair Advantage Of Discomfort (KC)

A read on how the person behind the Paul Mitchell brand made it.

In a former life, I would have bought the arguments behind entrepreneurial tales lock, stock, and barrel.

I’m not saying that grit, determination, and hard work is bullshit for those who want to make it big. What I’m saying is that over the years, I’ve come to believe that those three things are a necessary but not sufficient condition for success to happen.

In other words, you must have grit, be determined and work really, really hard if you want to succeed as a self-made person. However, what I’m saying is that you cannot believe that everyone who does the same succeeds.

But if this story inspires you, then by all means, run with it.

 

Most Money Advice Is Worthless When You’re Poor (Free)

An article from someone who’s obviously down and out. I can’t say I understand what it’s like to be in that situation but yes, I can empathise with the person.

I’ve said it before, it’s hard being poor and I think they need help. Particularly so in a country like Singapore where inequality, before any form of help, is high.

 

Debt: A Love Story (Wealthsimple)

It still escapes me how people who are earning so much can be so poor.

If you’re a doctor, lawyer or anyone earning above the median or average person and you’re poor, then all I can say is that you must have made some really bad choices.

The whole story is one of how “keeping up with the Joneses” is financially damaging. I guess it helps that I’ve never been one to care about impressing other people.

 

 

 

Light selection this week because I was reading the very good Atomic Habits by James Clear as well as a few articles on value traps in stock selection (more on these in the weeks to come).

books on bookshelves

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November Macro Update: New Employment Among Highest Since 2000 (The Fat Pitch)

A collection of statistics on the U.S. economic situation. Key points being that the U.S. economy is still going strong and therefore we can look forward to more rate hikes in the not-so-near future. The Fed didn’t raise rates in November but they are still expected to raise rates once more in December and three times next year.

Anyway, the money shot from this link is (emphasis mine):

Equity prices typically fall ahead of the next recession, but the macro indictors highlighted above weaken even earlier and help distinguish a 10% correction from an oncoming bear market. On balance, these indicators are not hinting at an imminent recession; new home sales is the only potential warning flag (its most recent peak was 11 months ago) but it has the longest lead time to the next recession of all the indicators (a recent post on this is here).

As Chuck Prince, former CEO of Citigroup famously said, ““When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

I guess the party’s still going strong in the U.S.

 

The New Three-Legged Retirement Stool: You, You, And You (Financial Samurai)

U.S. context but still very applicable to Singaporeans.

There used to be a lot more levers you could count on for retirement in Singapore. All civil servants used to have pensions (an auntie who’s in her late 60s was in the last batch that qualified for pensions).

Right now, I would say that Singaporeans have to rely a lot more on themselves. CPF is a decent system IF you have any money left in there after paying for your home.

If you have a big mortgage that is being paid off over the next 25-30 years, then you must hope for either (a) an increase in your pay and/or (b) an increase in home prices. That way, the burden of housing will decrease and there will be an option to cash in your home equity in your retirement years.

There is one more lever for some Singaporeans: hope that you inherit enough from your parents. For people in my students’ generation, this will be an increasingly attractive proposition as the demographics will be in their favour. Of course, this is provided there’s anything left after their parents spend on healthcare.

 

So what, we retired at the peak of the bull market? Here are seven reasons why we’re not yet worried… (Early Retirement Now)

A good take on sequence risk and it’s always good to point out that most people end up retiring at the top of the cycle. Subsequent drops in the market can cause a (temporary) drop in wealth and this may affect your standard of living in retirement.

What to do about it? Go on to the link to find out.

Very long weekend if you took leave on Monday.

Happy Deepavali to those celebrating it.

books on bookshelves

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Junk Bond Bubble in Six Images (Mish Talk)

You know what they say: always follow the money.

If you want to look for where the seeds of the next crash are, you don’t have to look any further than where debt has been building up and therefore, is more likely to implode.

With interest rates going up at a quicker pace as compared to past years, debt serviceability will become an issue for more risky borrowers. If the proceeds from borrowing went into (a) saving a sinking ship, or (b) unproductive assets, that will also be a problem for those who borrowed thinking that rates are low.

Mish’s charts also show what all this could mean for the equity markets.

 

What Today’s Trend Following Sell Signal Implies For The Months Ahead (The Fat Pitch)

I’ve heard of Meb Faber’s signal before but it totally fell off the radar for some reason. I think it’s because I looked at how the signal would have applied to the STI and realised that the whipsaw from buying and selling wasn’t my cup of tea. The findings from the paper are impressive though.

Anyway, if this is triggered on the S&P…

As the post says, there’s a fair chance (about 50-50) that we’re about to see more pain in the markets.

 

The Road To Burnout Helped Me Find My Purpose (The Physician Philosopher)

I read this via Minimalist in the City and the post resonated with me because for those of us who have been working for a while, it’s no surprise that there are shitty aspects to our jobs. Some people may love what they do but even then, they cannot deny that some parts of the job suck. For example, I may love to teach because I get to share and discuss stories and ideas but I hate to deal with all the administrative tasks that come with the job.

I don’t think I have, or even will, hit the burnout stage in my current job but there’s no doubt that I wouldn’t want to be there all the way till I retire/die like some of the older colleagues.

Fortunately for me, and unlike the doctor in the post, I didn’t have to wait until I started working to figure out that I had to build some sort of money machine in addition to the income that I’m getting from my job. It’s still a work-in-progress but I can definitely see it coming together.

If you love your job but haven’t thought about not relying on it for income, I suggest you start today.

Creative Destruction (Humble Dollar)

With the recent emphasis in Singapore on lifelong learning, I thought that this post is quite timely. It goes to show that being adaptable is a necessary skill in life because it seems that a core feature of life is the constant change.

With all the advancements in A.I and robotics, I suspect that both white and blue-collar jobs that are fairly routine will be the first to go. The good news is that the change will happen quicker in countries where the infrastructure was never laid and therefore more open to new forms of organisation. For example, think about how China was so much quicker to adopt mobile payments than more developed countries like Singapore or Japan. In fact, a lot of transactions in Japan still rely on cash. At least in Singapore, we have that dastardly system called “NETS”.

 

Public Pensions for Sale (part 1 of 3) (The Intercept)

Amazing account of how the people running some of the public pension funds sold out to Wall Street. Very long read but this is what journalism is about. Classic examples of information asymmetry and agency problems at work.

I guess this should be titled “Best Things I’ve Read All (Two) Weeks” because I didn’t post last week due to reservist. Reservist is a pain but…No buts. It’s a pain.

 

books on bookshelves

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Why The Best Predictor of Future Stock Market Returns is Useless (Of Dollars and Data)

I was quite excited to learn about this indicator. The indicator in question is the American Association of Individual Investors’ Asset Allocation Survey. Apparently, selling out of stocks to get into 5-year treasuries brings about better returns with less drawdown. The problem, as highlighted in the article is lack of outperformance over a period of easily 2-4 years.

However, I’m adding it to my list of things to watch because, while I believe market timing is futile, it’s a good psychological indicator to know when investors are optimistic (i.e. they move a higher proportion of their portfolio into equities) and when they are pessimistic.

How To Stay in the Game (A Wealth of Common Sense)

A good reminder that it doesn’t matter even if you have the best strategy if the strategy includes the risk that you get wiped out. I can’t even count the number of wise people I’ve read that have cautioned against the use of excessive leverage because of the double-edged nature of leverage.

Here are two of the best:

“The market can stay irrational longer than you can stay solvent” – John Maynard Keynes

“My partner Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage,” he said. “Now the truth is — the first two he just added because they started with L — it’s leverage.” – Warren Buffett

Corporate debt growth has exploded – The added macro shock sensitivity creates real risks (Disciplined Systematic Global Macro Views)

I’ve been reading Dalio’s and Marks’ latest books and their description of credit cycles are probably as clear and accurate as it gets. Guess what happens in the late part of the credit cycle?

Anyway, head on over to the link for more details on U.S. corporates.

5 REASONS MY PARENTS ESCAPED THE LOWER CLASS (AND NO, IT’S NOT HARD WORK) (THE GIVE AND GET: FOR FINANCIALLY FEARLESS SINGLETONS)

I read this via Minimalist In the City. I think most of the points made are extremely sensible and should be instructive for most people who want to live a reasonably good life.

My only gripe is whether the point about “being entitled” is accurate. I’ve seen people who don’t have much who hustle hard too. Maybe even harder than people who have more. Could it be a case where the people that hustle have a greater chance at social mobility and therefore, we sometimes confuse the cause and effect – that middle-class people hustle more?

 

Column: This is what happens when you take Ayn Rand seriously (PBS)

I must confess that in my undergraduate days, I believed strongly in the all-powerful nature of the free market. In recent years, I’m not so sure. After all, the free market can produce imbalances in market and political power that eventually cause itself to function less effectively than what is described in economics textbooks.

The Global Financial Crisis was a good example of how free-market ideals led to an asset bubble in the housing and banking sector which eventually imploded unto itself. The eventual salvation was a massive intervention that free-marketers would scoff at.

I’m not saying that the free market doesn’t work. What I’m saying is that we need to be careful in prescribing the free-market as a cure for everything. What’s important is making sure that market participants have the right incentives and are subject to the right checks and balances in order to ensure outcomes that are conducive for society.

I know. Easier said than done.

What a difference a week makes! Markets have rallied strongly to end September on a positive note. To think that just one week ago, we were hovering somewhere near lows for the year.

This shows us how fickle markets can be.

books on bookshelves

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Undervalued Financial Advice (A Wealth of Common Sense)

The advice in the post above may not seem like financial advice but it is. Coming off the back of the whole “monk vs. warrior” thing that had been the focus on the Singapore financial blogging community last week, the advice in the post above seems particularly relevant.

 

Uber drivers and other gig economy workers are earning half what they did five years ago (recode)

No surprises here.

What’s reported in the article is also happening on our sunny shores. The only reason why so many people signed up to be Grab and Uber drivers at the beginning was because of the money they could make.

Unfortunately, the money that drivers could make was not just coming from the fares that they earned but it was partially subsidised by the respective companies blowing through the money that they had raised from investors. At one point, I remember reading about how Uber burned through $330m in one quarter.

Now that funding’s getting tighter (remember when the Fed started accelerating their rate hikes?), guess all these so-called unicorns are going to find it harder to find cash to burn through.

So, little wonder those working for them are going to feel the brunt of it.

 

BBRG: Iceland Found Another Way to Clean Up a Financial Crisis (The Big Picture)

Full story on the Bloomberg page in the link above but go read it to understand how an economy works through a financial crisis. Alternatively, you can go check out Ray Dalio’s new book (Psst…It’s free!) which gives a good framework for understanding these crises and how to deal with them.

 

FOMO in China is a $7 billion industry (Marketplace)

Finally, we come to China.

This is insane. I never knew podcasting was an actual business in China. If you see what’s happening in the western world, podcasting is merely an avenue for someone with an online presence to make his/her presence felt even more greatly. There’s already so many people giving away what is essential advice for nothing.

I guess this is what happens when you have less competition. After all, many people in China don’t speak English well enough to listen to podcasts. Furthermore, cultural differences might be great enough to exploit as a niche market.

I’m pretty sure if enough people speak good enough Mandarin, Chinese people won’t be paying for podcasts.

We’ve made it through another week!

September’s almost over which means we’ll be heading into 4Q soon.

books on bookshelves

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The Housing Bubble Burst All Over Reality TV (The New York Times)

This is interesting because what we see on television reflects what’s going on with the world. This article shows how HGTV’s programmes (which I happened to watch a lot of while it was still on Starhub) changed as the housing bubble inflated and then popped.

The same could be said of how many crypto-related seminars and talks were being promoted last year as compared to this year. Lately, what I’ve been seeing is a lot of ads on Stock Trading which is probably a reflection of the U.S markets doing so well since last year.

 

Growth and well-being: policy should not be based on GDP alone (Microeconomic Insights)

Very economics-heavy post on the relationship between GDP per capita and ‘Welfare’. ‘Welfare’, in the article, encompasses many factors such as inequality, leisure, and consumption.

Singapore gets a few mentions in the article. From the mentions, it seems that Singapore’s growth model has remained the same since the 90s — lots of growth through investment and this comes at the expenses of leisure and consumption.

 

Paul Krugman’s latest opinion piece spells out what everyone’s been feeling about the markets — most of us can’t see any particular sector blowing up to the point of crippling the world economy.

Krugman also shows us why it’s important to study history because the recession of the early 90s was one that didn’t have a proximate cause but rather, it had many small causes.

I also like how Krugman cites Minsky as a source for his hypothesis. Minksy was overlooked by almost everyone until the Global Financial Crisis hit. I tend to agree with Krugman’s views. The world today is awash in cash that is flowing towards moonshots and we know that most moonshots don’t work out.

In other words, much of the money going into all the fancy new ventures won’t pay off. Fortunately, it doesn’t seem that people are using borrowed money to bet on moonshots. Much of the moonshots are funded by people who have money to lose. The question right now is whether the money that they can lose is due to a booming stock market and economy? And if so, then what happens when the economy starts to slow down?

Hold on, hand tight, and stay around for the ride.

 

The Psychology of Playing the Lottery (A Wealth of Common Sense)

An excellent piece by Ben Carlson that explains why poor people make poor choices. From the Bloomberg piece cited in the article, it shows that poor people spend more on the lottery than rich people. Gambling is a big thing in Singapore but I’m not sure if there are statistics that show whether poorer people spend more on the lottery than the rich in Singapore.

The good news, cited in Carlson’s article, is that someone’s set up a lottery to help poor people save more. Saving money in the account leads to a participation in a lottery. Unfortunately, the return on savings in almost zero for those that don’t get the huge payoff but I suppose it’s better than having them spend money on something that is statistically going to return less than zero in the long-run.

Maybe this will be the new model for Singapore Pools?

We’re into mid-September! It’s been raining a lot here in Singapore and the region’s experiencing a host of natural calamities (earthquakes in Japan, Super Typhoon in the Philippines and Hong Kong). Let’s hope we get better weather in the weeks ahead.

Meanwhile, here are some reads to start your week.

books on bookshelves

 

 

For Low-SES Students, Not Focusing on Grades is an Impossible Dream (ricemedia.co)

It’s PSLE (Primary School Leaving Examination) season here in Singapore and this is an annual affair that parents and students both love to hate. The PSLEs are a nationwide examination that primary school students in Singapore take when they reach Primary 6 (usually at age 12) and the score they achieve on this exam, for most students, determines the school that they will be able to attend for their secondary education.

Many people hate it because doing badly on these exams usually mean getting placed in a school that steers you towards a vocational kind of course at the Institute of Technical Education (ITE).

So, the biggest bugbear for most parents is that one exam at the age of 12 pretty much determines whether you become an accountant or an electrician. Of course, there are ways to go from the technical stream to the academic stream but imagine the sort of associated stigma you have from doing much worse than your primary school classmates or relatives in the same comparison group.

It’s because of this that a group of parents has come up with a movement called “#lifebeyondgrades” which is trying to show that what you end up doing as an adult doesn’t really depend on your PSLE score.

Unfortunately, as the ricemedia article argues, being able to do what you like with your life is a privilege of the middle-class or well-to-do. In Singapore, the way out of poverty for most people still lies in education. After all, that’s why the government likes to highlight the fact that some of our 4G ministers came from relatively humble backgrounds.

I’m torn on this.

On one hand, as a teacher, I can understand why parents want there to be less emphasis on grades and more on learning. In an ideal world, I hope for the same thing as well. On the other, I come from precisely the sort of background that the article calls “privileged”. I didn’t have to worry about not doing so well in school precisely because I had the family safety net to depend upon. I eventually did well in school but that’s another story.

Read and reflect.

 

A lady vanishes – In China, a movie star disappears amid culture crackdown (Channel NewsAsia)

In other news, Fan Bing Bing is rumoured to have been held captive by the Chinese Government for tax evasion.

I have absolutely no problem with governments going after their own citizens and charging them in the court of law for committing crimes but to have someone disappear is the stuff of dystopian regimes.

The Chinese government is even framing this as “cultural clean-up” with the Beijing Trade Association for Performances saying this:

the body would “purify” the city’s entertainment and performance sector and guide artists towards “core socialist values”.

Of course, China is no stranger to suppressing political dissent but of late, they seem to be a little more heavy-handed than usual. I’m pretty sure there are macroeconomic reasons like the trade war with the U.S. and the U.S. raising interest rates that are causing the slump in Chinese markets but doing things like this also hurt the image of China as a place that’s open for business.

Right now, China seems to be a place where investors better beware because the government (or is it just President Xi?) can easily come down hard on you at the turn of the hat.

 

The real Goldfinger: the London banker who broke the world (The Guardian)

Some financial history.

This is fascinating because the Gold Standard is from a bygone era and to many students of modern economics, the thinking is that the Gold Standard, just like communism, was abandoned because it didn’t work.

I’m not saying that we should return to the Gold Standard but if you think about it, some things were abandoned because they worked well until they didn’t. If that’s true, then there must also be some things that we do today that are a relic of the past and maybe it’s time to examine whether their time is up.

After all, some practices are a product of history. For example, the QWERTY keyboard layout came about because it actually makes typing slower and that was necessary when we used mechanical typewriters so that the keys wouldn’t get jammed.

What other things are there today that we should rethink?

Off the top of my head, I can think of a few:

  • The 42-hour workweek
  • Welfare being a dirty word
  • Mandatory retirement age
  • The PSLE

Let me know your thoughts in the comments below.

It’s another week! Markets were generally weaker this week and for the STI, we reached a PE10 earnings yield of 8% (intraday, at least) which is making me salivate a little. I managed to pick up Rutger Berman’s “Utopia for Realists” (see the general idea in his TED talk) and Dr Pippa Malmgren’s “Signals”. Both have been fascinating reads.

 

books on bookshelves

Read, read and read some more.

 

 

Soaring bankruptcy rates signal a ‘coming storm of broke elderly,’ study finds (abc News)

This is in the U.S. but we should expect similar economic forces to come our way as the boomer generation starts to retire.

However, PAP is as PAP does. Expect healthcare spending to increase and that no elderly folk will be left behind due to medical bills. It’s not good for politics to appear uncaring, especially to the first post-independence generation of the country.

Of course, the next generation must be prepared to shoulder the burden of greater taxes on healthcare spending. Either that or the folks at Temasek and GIC better work much harder.

 

GLCs and patronage: Understanding Mahathir’s position on HSR and ECRL  (TODAY)

It should be no secret for those who have been following Malaysian politics but I suspect that for many other people, they fail to see the connection between personas and the intricate links between them and various businesses.

Of course, it also helps Mahathir to have Singapore be a distraction for his own political purposes. To those that see Mahathir leading Pakatan to victory over BN as a good thing, I’m afraid they may have counted their chickens before they’ve hatched.

To the Singaporeans that wish for the same…lmao. It’s practically like how a big enough majority in the U.S. voted Trump in because they felt Hilary Clinton was more of the old order. The problem is that Trump’s not necessarily going to do a good job.

In some ways, I fear the opposition in Singapore is fairly inadequate to operate on the bigger stage. Despite what Low Thia Kiang said in 2017, my opinion is that there is currently no alternative to the PAP.

 

How to retire in your 30s with S$1.37 million in the bank (TODAY)

Ok, enough of the political links. I’m pretty surprised that a local paper chose to publish an article like this. It’s a U.S. story but it looks like the local FIRE movement may gain some more traction with this.

I’m pretty excited to see if more and more stories of Singaporeans retiring early will start surfacing. After all, Singapore is one of the most expensive places in the world to live in so we have that handicap against us.

However, if retiring rich and early is doable in a place like Singapore, then it can be anywhere else in the world. The math behind this is simple and well-documented so it’s a matter of picking your target and executing well.

The biggest thing I’m looking forward to when I quit my job is doing the things that matter most to one’s well-being. I would bake more bread, cook more, maybe try growing my own food, work out more and sharing the message that there’s more to life than doing mundane things.

Don’t get me wrong. At least my job isn’t a bullshit job but more than a few aspects of it is definitely bullshit which is done in order to satisfy auditors and to help senior management cover their asses when things go wrong. And you can’t blame them because all it takes is one person to make a mistake (real or perceived) and senior management gets questioned about their processes. And senior management, like the rest of us, have (bigger?) mortgages to pay and mouths to feed. It’s much simpler to make everyone do some bullshit work than risk their five-figure pay.