Archives for category: Economics

Well, well, well…the short squeeze on Gamestop (GME) shorts was a highlight of the week. I’m also trying to get out part two of my ‘State of the Markets‘ post, so please look forward to that.

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Why immigration doesn’t reduce wages
(Noah Smith)

I don’t think too many Singaporeans will be too happy to hear studies like these. It’s a bugbear of mine but way too many of the opposition supporters in Singapore also tend to be very anti-immigration. And typically, it’s for reasons that don’t make sense.

For example: “Immigrants steal jobs”.
The counterpoint to this is usually: “Could you or would you be doing those jobs that they’re here to do?”

And in case I get someone who’s not going to read the link above but is going to leave a knee-jerk comment anyway, let me just say that immigration is not a one-way thing. It’s not like immigrants come here, steal jobs, cause prices to go higher and in general, just take from the economy.

That’s not how the economy works.

Just Take the Money
(Of Dollars and Data)

It’s an important topic given how many people have yolo-ed into very concentrated positions and have much of their net worth in a single position.

Lost Passwords Lock Millionaires Out of Their Bitcoin Fortunes
(The New York Times)

I joked with a friend that this is why Bitcoin jumped. Basically, you have a chunk of would-be sellers locked out of the market.

Jokes aside, it feels like a lot of institutional money is pushing for Bitcoin to become the next gold. Various groups are moving in this space. Incumbents aren’t going to go down so easily of course.

We’re nearly there! 2020’s almost over. Hang in there if the year’s been a terrible one for you.

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Singapore’s poor productivity performance (

Two economists make the case that Singapore’s poor performance as far as productivity is concerned is due to deep-seated systemic issues. Worth a read.

Tai tai’s luck runs out, heading for Woodbridge? (Thoughts of a Cynical Investor)

Funny read. But also illustrates the point that I want to elaborate on in a separate post – dividends shouldn’t matter.

Attention Robinhood power users: Most day traders lose money (CNBC)

Also something I want to explore in a separate post at some time. Most people have no idea what their portfolio returns are and/or they don’t have a benchmark to gauge those returns.

Post-National Day Long Weekend edition

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How Turkish coffee destroyed an empire (The Economist)

Super interesting. No surprises but that’s why social media is the coffee shop of the 21st century.

Personal finance blogger explains why financially literate people don’t worry about 99-year HDB leases (

Not entirely right but it is a valid point. Will write a piece on property in Singapore one day.

The Economics of Home Ownership (A Wealth of Common Sense)

U.S context but probably 90% applicable to Singapore as well.

Aging Economies May Benefit Less from Fiscal Stimulus (IMF blog)

Uh oh…Singapore qualifies as aging too you know…Of course, Singapore’s probably better positioned to overturn that as we’re more open to immigration than say, Japan.

‘The biggest monster’ is spreading. And it’s not the coronavirus (TodayOnline)

Uh oh…Is 2020 the year that starts us down a Mad Max-like apocalypse?

Millennials Slammed by Second Financial Crisis Fall Even Further Behind (WSJ)

During the GFC, I remember reading about how my graduating cohort would be one of the unluckiest generations as we were graduating in the middle of a recession. Getting a job in the middle of recession was found to be detrimental to overall lifetime earnings.

Turns out we’re doubly unlucky.

However, you have to count your blessings where possible. If I didn’t graduate in the middle of a global recession, I probably wouldn’t have thought about a civil service job. If I never joined the civil service, I never would have met my wife.

By the way, if the above scenario for millennials play out globally, you can be sure that the Singapore government will become more and more left-leaning.

We’re into August! This year has been nothing short of bizarre and probably full of disappointments for many. I hope that you’ve been able to see at least some good in what seems like nothing but bad news.

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‘They’d Find Fraud, Fraud, Fraud.’ (Institutional Investor)

I’m not so surprised that many publicly-listed Chinese companies are engaged in fraud. What I’m surprised is how Chinese financial regulators seem to be part of the problem. And you wonder why China has a problem convincing more of the world to hold Chinese securities even if they allowed the world to.

Why Is Gold Rising? (A Wealth of Common Sense)

Beware the Hype on Gold (Morningstar)

Ben Carlson has a good article on some of the drivers of investment in gold while the Morningstar article takes a look at the past record of investing in gold.

You Don’t Need Alpha (Of Dollars and Data)

Nick Maggiulli makes a very convincing case that most retail investors shouldn’t be too focused on beating the market when keeping up with the market will be more of a game-changer when it comes to retirement.

Here’s how a retired dad can cover basic needs with around S$1,500 monthly payout, leaving personal savings untouched (

A terribly lousy sponsored piece from Mothership. Obviously paid to write on something that they don’t care about.

I hate how so many of these mainstream media outlets pretend to know about the product that they were paid to write about when they obviously don’t know enough to present an informed case.

In this case, they obviously neglect to mention that receiving $1,500 in 10 years’ time will fail to help the writer’s dad make the purchases listed in the table. $1,500 is a nominal amount while the prices listed for each of the expenses mentioned are in today’s prices.

It’s more likely that not that in 10 years’ time, $1,500 will buy the writer’s father much less than the writer thinks.

In short, you can’t ignore inflation.

Slow week. But there volatility seems to be picking up in the markets.

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My parents said you can never lose money buying properties in Singapore. They were wrong. (Dr. Wealth)

This is what every generation thinks of real estate—and what each has spent on it (Fortune)

Fortune article is behind a paywall but the chart there is the moneyshot. Anyway, point of those two articles is to counter the often-held belief that you can’t go wrong with property.

As with any asset class, market cycles matter.

How Millennials Can Close the Generational Wealth Gap (A Wealth of Common Sense)

Linking to this not so much because of Ben Carlson’s advice for millennials on what to do about the Generational Wealth Gap.

I’m linking to it because I think it highlights something we also see here in Singapore. A generational wealth gap that explains why those in their 40s and below feel this sense of injustice about many things.

Imagine being told that your life will turn out great if you study hard and do well in school only to find out that what used to be true no longer works and the future looks even more uncertain than before.

Intrinsic and Extrinsic Motivation (Benabou, R and Tirole, J)

I find this utterly fascinating because I have motivation problems.

No ‘Best Things I’ve Read’ last week because I was effectively hungover from GE2020. I was one of the minions on the ground. No GE2020 thoughts from me because those who have me on ig would know what I felt about this GE.

Instead, now that GE2020 is over, let’s get back to regular programming.

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Tesla and the Amazon fallacy (FT Alphville)

The Elon Musk factor is causing Tesla to rally hard. However, do not mistake Tesla for other tech giants. Remember the wise words of Keynes.

New research going back 120 years backs up Warren Buffett’s simple advice for investing (CNBC)

Buffett has fallen far off the top 3 of the billionaire charts… Either he has really lost his mojo or those that have recently climbed to the top have grown their wealth a lot.

Last I checked, Buffett’s wealth hasn’t changed that much. It’s the rest whose wealth on paper have increased a lot. And guess which is the prevalent sector that those people are in?

China’s regulators break down Xiao Jianhua’s financial empire, seizing Tomorrow Group’s insurers, trust firms and brokers (South China Morning Post)

Putting this here because this week in class, we were talking about tehe role of institutions and how no city within China is going to be the next Hong Kong. In fact, based on what’s going on in Hong Kong now, it seems like even Hong Kong will no longer be how it used to be.

This case is an example of why it’s going to be so tough for China to convince the rest of the world that it wants to be part of the global financial system.

Exhibit A

I don’t know. Maybe it’s a one-off thing but I’ve begun to notice a lot of so-called investment gurus in Singapore who have quite a following because they seem to be able to make well-reasoned arguments.

The problem with many of these so-called investment experts or gurus is that they either come from a non-investment professional background or they think that with the amount of advice that famous investment professionals on the internet, all they have to do is parrot the same thinking and things will work.

Gold! Gold! Gold!

Recently, I’ve seen some advice from Singaporean Investment experts advocating Gold as an investment in light of the times that we’re in. And they apply the usual arguments:

  • Gold is a hedge against inflation
  • Gold zigs while the markets zags
  • Gold will always be valuable

Now, while the points above may have some truth to it. Investors should also be aware of the potential pitfalls of investing in gold (see the link to the Of Dollars and Data post in tomorrow’s edition of ‘Best Things I’ve Read’.

Additional Considerations for SG Investors

While the usual pitfalls of investing in something like Gold are true for all investors, I wish to highlight another factor that many Investment Experts in Singapore often leave out.

Gold is priced in US dollars (USD).

Far too often, when recommending investments in foreign assets, many experts forget that currency matters. After all, a Singaporean investor starts off with Singapore Dollars (SGD) and therefore, all returns should be calculated in SGD terms. It probably will be the case that the investor cares about the returns in SGD as his or her purchasing power is in SGD terms.

Take a look at Exhibit A. It’s a chart of the SGD to USD exchange rate from 2003 to present day. Along the way, the USD has lost as much as 30% against the SGD and while it has climbed from the bottom, there’ no guarantee that the USD will appreciate further against the SGD*.

It’s not just gold

Now, before anyone thinks that this is a post against gold, let me throw in another example of a mistake when ignoring foreign currency flucuations.

Some years ago (roughly, 6-7 years if my memory serves me correctly), the local banks were encouraging many retail investors to take advantage of higher interest rates in countries such as Australia and New Zealand.

The basic idea was to convert your SGD to the either the Australian (AUD) or New Zealand (NZD) dollar, deposit it in a time-deposit in the banks there and earn the higher interest rates there.

Unfortunately, someone forgot to tell these investors that there is something called ‘Interest Rate Parity’. 1 AUD then used to trade for around 1.3 SGD but alas, now the almighty AUD trades for slightly less than 1 SGD. What seemed like an additional 4-5% return a year basically got negated by the 30% hit in currency terms.

It’s very basic but investors sometimes forget that (a) inflation matters, (b) transaction costs matter, and (c) local currency matters.

*In fact, the fundamentals of international economics tell us that with the US being a developed economy with a persistent trade deficit, it is more likely than not that the USD will depreciate in the long-run. More optimistic folk would do well to remember that the British Pound was once as high as 6 SGD for each GBP.

We’re heading into the second half of the year and here in Singapore, we’re finally going to see the Circuit Breaker (CB) measures being gradually relaxed. Fingers crossed that there won’t be another wave of infections so that we have to go back into CB.

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Don’t Expect A Quick Recovery. Our Survey Of Economists Says It Will Likely Take Years. (FiveThirtyEight)

Maybe we should be happy that a bunch of economists are predicting this since we all know that joke and weathermen, economists, and predictions.

This is the thing the bears hate most (The Reformed Broker)

I’m hardly the most optimistic person but Josh Brown has a point. If the market is all about the expectations game, then the bar for expectations right now are being lowered, making it much easier to beat expectations in the coming quarters.

Thinking About Investing and the Economy Post-Pandemic (Joshua Kennon)

I’ve followed Joshua Kennon’s blog for many years now and he is clearly a very smart person. These are his thoughts on the post-pandemic economy and the types of assets to own in this environment.

Forbes article on Kylie Jenner doing a Trump (Forbes)

It’s a super good read into the whole business of fashion and being an influencer. In the social media space, it’s a chicken-and-egg kind of thing if you want to get rich quick- one doesn’t get rich without being famous and one doesn’t get famous without being rich.

Hence, the only game in town is to pretend to be rich or richer than you are, ride on the publicity and make some dough.

By the way, this doesn’t just apply to celebrities. Lots of people in Singapore also doing this in the “I’ll teach you to get rich by XX” training course space.

Matt Levine’s comments on Luckin’ Coffee (link is to a WSJ article on Luckin’)

Matt Levine’s Bloomberg newsletter, Money Stuff, is awesome. I really like his commentary on Luckin’ Coffee which details the basic model that startups sell to investors as well as how Luckin’ perpetuated the fraud that it was growing so fast.

Apparently, it was selling coffee to itself.

If you have a Wall Street Journal subscription, you can check out the link to see how it was done.

It’s Mother’s Day! Happy Mother’s Day to all Moms out there.

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A “New Deal” for Informal Workers in Asia (IMF Blog)

The pandemic has really exposed class differences in societies. And I’m not optimistic that the spread will narrow. If anything, the recovery in the markets versus the real economy is already widening the difference.

As a good friend put it, I think the Fed is beginning to worry that their rescue of financial markets is not exactly making its way into the real economy. After all, if businesses have to remain shut, it doesn’t matter if they get loans or not.

MiB: Betting Against Fraud and China (The Big Picture)

I really enjoyed this interview. I tend to think of short sellers as bullshit detectives. They call out the suspect business models and especially the outright fraud that somehow gets through due to blind optimism. Chanos has been a particularly adept detective.

As Hospitals Lose Revenue, More Than A Million Health Care Workers Lose Jobs (NPR)

So much for defensive sectors.

Which Portfolio is Right for You? (Of Dollars and Data)

Great piece. It’s not great because of the conclusions but it’s great because of the analysis. Go read it.

Sadly, many investment bloggers in Singapore aren’t at this level. I saw a piece from a relatively unknown blogger who did a piece about the “Sell in May and Go Away” effect on the STI.

Analysis was total trash.

Yikes, it’s already May?

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Now is the Time to Retire (The Wealthy Accountant)

Well obviously not for all of us but good point on how if you’re planning to retire, then this period of time is the biggest acid test of your ability to do so. Conversely, those planning to retire because their fortunes soared (on paper) during the stock market boom years may have to rethink their retirement plans.

“Deaths of despair”: The deadly epidemic that predated coronavirus (Vox)

While Covid-19 is on everyone’s minds now, it makes sense to think about other underlying structural problems in society and the economy. I’ve always marvelled at economists who look at the data, realise something is afoot, and then go on to solve the mystery. This is one of those mysteries.

Vanguard and Fidelity investors didn’t flinch as the market tanked (Yahoo Finance)

Which is precisely why I believe that as bad as March felt, it wasn’t the worst. The worst has yet to come.

How Boeing Lost Its Way (The Big Picture)

Nice 20 minute video on how corporate culture is shaped by incentives and how short-term thinking can lead to long-term losses.

CPF: Imitate Oz? (Thoughts of a Cynical Investor)

Why Not Give Us Access to Our Own CPF Special Account in these Special Times? (Investment Moats)

Interesting points and maybe I will dig into the data to see what’s feasible but given the Singaporean mentality behind CPF, I suspect many will withdraw everything if they could.

If they are allowed to only take out a token sum (say $500 each month) they’ll complain that it’s too little.

Plus we don’t really want a run on CPF right because all those CPF monies aren’t exactly sitting around in CPF’s accounts and liquidating assets right now is exactly the worse possible time to do so.