Archives for category: Investing

It’s another birthday! And here’s what I wrote last year.

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Last year, I wrote about having failed spectacularly on many counts. I failed to stick to a healthy lifestyle, failed to pick up a craft, and failed to get into coding in a more concrete way.

I’m happy to report that this year I managed to chalk up impressive gains on all those goals and I’m going to share how I did that.


Eating and living healthier

Last year, I was saying that my weight hit an all-time high. I was wrong. In fact, my weight inched up even more after I wrote that post and in December, I hit an all-time high of 70kg.

Now, that might not sound like a lot but for someone my height, it’s definitely overweight. Not obese but overweight. That was the wake-up call for me and I started to research into a variety of ways to cut back on the weight gain.

In my research, I learned about something fasting, and in particular, something called “intermittent fasting”. The main positive about fasting is that it doesn’t slow your metabolism down as opposed to people who cut back on consuming calories. This explains why people who go on traditional diets lose weight but then put it back on as quick or even more quickly. The experience of some of those that went on the TV show, “The Biggest Loser” is particularly instructive.

Anyway, long story short is that (roughly) sticking to a regime of going 16 hours without food and then eating within an 8-hour window helped me shed 10kgs. Restricting your eating to an 8-hour window automatically means cutting out one meal. You could eat as many calories as a normal person within the window but that would mean eating more meals or mega-sized meals. I just cut out breakfast.

I’ve also cut sugar from my coffee as all the government institutions now require that coffee is served, by default, without any sugar. You have to add sugar to your coffee if you choose to.

I didn’t know if this regime was doing me harm on the inside or not. So, a couple of months ago, I had a health checkup done. The good news is that my health checkup results came back good. Nothing out of the ordinary. For the first time in a long time, I’ve also managed to score a “gold” on the physical fitness test that we National Servicemen have to do every year despite putting in the same amount of training as I’ve done in previous years. It’s not rocket science. It’s easier to run faster if you’re 10 kilos lighter.

Furthermore, limiting my meals have made me become more aware of whether I’m eating because I need food or because I want food. As far as possible, I eat only when I need to and not when I want to.

Having a cat around the house also made me adopt a more regular meditation routine. Every morning, after feeding him, I’ll take up my spot on the floor and try to get in 15-20mins of just being aware of my breathing.

One breath in. One breath out. One at a time.

I’m not sure if I’m experiencing any physical effects (like increased grey matter) as reported in some medical experiments but I think meditating more regularly has helped me gain some clarity into when people are tapping into their emotions and how to deal with people who are clearly in a heightened emotional state.



While I’ve slacked off the bandwagon of late, I’m happy to report that I finally worked on a project and I made a website where I can track and share the data I’ve collected in the STI’s PE10. The code is amateur and the website definitely can have better features but I think I’m relatively happy with it.

At work, I also wrote two scripts in python that automated some of the administrative work that we have to do. It’s a hacky way around doing some things and I’m pretty sure it’s not that kosher but who cares, it saves me an hour of mindless clicking. The other script probably saves my colleague 15 minutes of mindless clicking as well.



Now, I’ve been slacking off on coding because I’ve finally decided to put more effort towards pursuing interests in this area. I’ve been writing some stories (featuring my cat) and I really enjoy that but I’ve always been more of a visual person.

Problem is, I pretty much suck at art. Right now, I’m probably as good as a kindergarten kid when it comes to drawing.

I’ve been spending a lot of time on Youtube and I really, really like the style that comes with pen and ink drawing (in particular styles like this). For the rest of this year and next, I’m going to be making a conscious effort towards improving my drawing and my inking skills.

I also figure that in the next few decades, even if A.I. and automation can take over a multitude of jobs, the stuff that will be valued more will be the stuff that doesn’t seem impressive even if done by a machine.

For example, they may make machines that can cook food. However, a delicious meal cooked by a human being is always going to be more highly valued because it’s not something that anyone can do without some sort of training or experience.

Humans that can produce things with a degree of customisation or finesse to it will do well in the future. If your job is of a routine nature because you are producing things in huge quantities, then you probably need to worry about your future in the next 10 to 20 years. Owners of capital will prefer to own a machine that doesn’t ask more salary, take breaks, or fall sick.


Money matters

As for wealth, things are pretty much on auto-pilot. I know the markets have really sucked (especially outside the U.S.) which means that there are some bargains to be had but my approach now is really more of a systems-based approach.

My system right now is: save, invest broadly, rebalance as required. Rinse and repeat.

I’ll report on how things work out at the end of the year.


Lastly, it’s crazy how I didn’t remember what I wrote last year but so much of what I did last year was a continuation of what I wrote in last year’s birthday post. I managed to achieve certain things that I set out to do but I can assure you that when I wrote about it last year, I didn’t have a freaking clue how I was going to do it.

On hindsight and having read James Clear’s Atomic Habits, it seems that I got certain things right that allowed me to lose all the weight and keep it off as well as attain more regularity with meditation.

I’m not pretty convinced that we are limited by what we can imagine but getting to where we want to requires a paradigm shift in behaviour that can only be brought about by changing your environment to suit your goals. Will elaborate more on this in a future post.


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).

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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.


So check this out.

CNBC reported that Southern California suffers its worst housing slump in over a decade with home sales and prices much lower than the year before and historical norms. I’m not too surprised that prices are much lower than recent history because you have to remember that the housing boom of the first decade of 2000 caused prices to be inflated.

From the article, what’s more worrisome is this (emphasis mine):

LePage noted that while the median sale price was up 3.6 percent year over year in September, the principal and interest mortgage payment on the median-priced home was up 14.2 percent because mortgage rates increased about 0.8 percentage point over that period.

It appears that interest rate hikes are beginning to have an impact on the housing market in the U.S.


Mortgages in Singapore will get more expensive

In Singapore, things are still pretty ok. I haven’t heard much about homeowners complaining about the interest on their mortgage.* Most homeowners in Singapore are on some form of 25 to 30-year loan with floating rates so interest rate hikes in the U.S. will definitely hit home at some point.

The reason why it hasn’t hit home is probably due to some combination of the fact that we’ve allowed the U.S. dollar to appreciate against the Singapore Dollar (the USD has gone from about 1.31 since the beginning of the year to about 1.38) and the fact that regional currencies (like the IDR) are doing worse than us**.

If the SGD moves in line with the USD, we’ll kill our trade with Indonesia but if we don’t allow a full adjustment of the exchange rates, we’ll have to run our stash of USD in our reserves down. I suspect this is the middle of the road scenario that MAS prefers unless interest rate hikes in the U.S. start to pick up even more. When that happens, we’ll have less choice but to have rates in Singapore follow the path of U.S. interest rates a little more closely. If you want to understand the mechanism, I have a post on that here.

Back to interest rates, our 10-year Singapore Govt Bond yields have been moving up which is great news for the many mom-and-pop investors that love the Singapore Savings Bonds (SSB) but from the yields, you can also see that short-term yields are heading north (see the chart in the post).


Back-of-the-envelope Calculations

I’ve said it before. Singaporeans are obsessed with property.

Recently, two close friends of mine bought new properties for their own stay. A reasonable guess is that one of them took a loan of $1m and the other, a loan of $1.5m. This means that a reasonable estimate of their mortgage payments (assuming it’s a 30-year, 2% p.a. loan) comes up to $3,696 and $5,544 per month respectively.

Just picture that. The median household income in Singapore is $9,026 so obviously, my friends are doing much better than most people.

Both their spouses work (albeit one less than the other) but even so, to service the loans from their CPF contributions alone mean that their household monthly incomes must be $16,069.57 and $24,104.34 respectively. That’s certainly possible for two adults working white-collar jobs close to the peak of their careers. However, if their incomes are any less than those numbers, then they will be servicing a decent amount of the loan using cash.

My worry for them is that it doesn’t leave any room for bad luck or errors.

For the next 30 years, they will essentially have to hope that the family doesn’t experience any shortfall in income due to loss of jobs. It will also mean that they have to find a job that either pays as well or better in the event their current work environment is no longer as fulfilling as it once was.

Looking further down the road, if they use their CPF-OA to service the mortgage, then I hope they are putting some of their cash aside for life after work. If they are using cash out of pocket to service some of the loans, then life after retirement becomes a lot harder.

In any case, what my friends have done is ensure that for the next 30 years, they have to play a very strong offensive game. They have to continue to work as hard as they have or even more to find other sources of income.

Oh yes, and they have to hope that interest rates don’t go up much.


It all comes down to rate hikes in the U.S.

Which way the markets are going to move will depend heavily on future rate hikes. I’m pretty sure we haven’t seen the end of rate hikes because the U.S. economy has been reporting strong numbers on the employment front. That’s also what the markets seem to expect and the Fed could even throw everyone off by hiking more than expected.

The point is, I’m quite sure I’m not alone when I say that no one is expecting interest rates to get lower in the near future. If anything, we need to expect that interest rates will go up. And if you’re not comfortable seeing the interest rates on your mortgage go up at least a percentage point, then I guess you’re in trouble, my friend.



*This would apply more to investors that own private property in Singapore. HDB flat owners have the choice of taking the loan from HDB directly which pegs the interest on the loan to the CPF rate + 0.1%. I don’t think CPF rates will move up and cause more pain to flat owners with a mortgage.

**Against the USD, the IDR has depreciated more than it has against the SGD.

Very long weekend if you took leave on Monday.

Happy Deepavali to those celebrating it.

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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.

Sorry for the late notice but the PE10 has been updated.

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Following the selloff in the last week of October, the PE10 reached lows that we haven’t seen since early 2017. At a PE10 of 12.2x, that translates into a 10-year earnings yield of slightly over 8%.

It’s cheap but it certainly isn’t dirt cheap. Dirt cheap would be when the PE10 is hovering around 10x average 10-year earnings. That would mean that the STI would be at levels of around 2500 or so.

Having said that, there’s no guarantee that the STI will fall to those levels. The market has run up a bit since I took the reading so who knows where we’re headed. What I’m confident enough to say is: based on what we’re seeing in the market, we’re certainly close to cheap than expensive.


edit: I used the words “Mickey Mouse” and shoebox interchangeably.


A good friend brought to my attention this commentary about URA’s latest move to restrict the size of units in new private housing developments outside the Central Area.

Reading the commentary and the news when the restrictions were first launched, it appears that the main beef URA had with these “Mickey Mouse” apartments was that the proliferation of these apartments in certain areas would increase the population density and hence increase the strain on public infrastructures such as roads, MRT lines, and buses.

The commentary piece also seems to feature the downsides of shoebox units quite heavily:

  • Rental yields under pressure
  • Stagnant to falling prices for such units
  • Buyers who would easily have turned to a resale HDB if they had a choice
  • Sneaky developers who use such units to elevate the PSF of the project


What does the future hold for such shoebox unit owners?

In the light of rising interest rates, I would say that these guys are screwed. However, it bears noting that “these guys” are probably a small subset of the market. After all, who on earth thought that it would be a good idea to buy a Mickey Mouse-sized apartment in the heartlands to stay or as an investment?

Location is a big factor in property investment. Areas like Tanah Merah or Woodlands are one of the cheapest places to stay in Singapore. You can easily tell which areas are more prized thanks to the difference in HDB resale prices by area.

The next thing after location would be size. I think it would be quite universal to say that when it comes to living space, “more is better”. Of course, that reasoning can only be taken to a certain extent but shoebox units are starting from the other extreme. Try convincing people with one or two children to live a minimalist lifestyle.

While the article also mentions how some owners are optimistic that there will be less supply of shoebox units and hence it’ll raise the value of the units, my bet is that the rising interest rate environment forces more units onto the market and adds the existing supply of shoebox units.


Salvation for shoebox unit owners

The only salvation I can think of for shoebox unit owners in the heartlands would be an increase in the number of tenants.

These tenants could come from the longer-term stay because they’re here for work and on tighter budgets. This assumes, of course, that there are so many of them that they already drive rentals in the HDB market up to the point that shoeboxes become attractive.

The other group of tenants would be from short-term stay like Airbnb but oops, that market is also heavily restricted right now. Meanwhile, the property market is expected to continue to add more than 10,000 new private residential units every year (except for 2020) up until 2021 and vacancy rates are creeping up.



I’m pretty sure that with URA’s latest move, it’s signalled to the market that shoebox unit owners are screwed. Note that the restriction wasn’t a major move — it just inched the size development guidelines up by a bit and confined that restriction to projects outside the Central Area, but in that one move, it’s shifted the limelight to shoebox units and what the downsides of owning one are like.

I’m pretty sure that shoebox unit owners who can’t hold on to their property amid rising supply and vacancies are going to feel quite bad. If the shoebox unit is just a part of their investment portfolio, they’ll be fine. If it’s the ONLY part, they are going to feel quite a bit of pain.

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As of yesterday, I think we can finally say that sentiment in ALL major markets have turned. For those of us outside the U.S., I think we’ve been feeling this way pretty much since the 2nd quarter of the year.

Well, for those in the U.S. markets, welcome.

As of yesterday, the S&P 500 is a whisker away from correction territory while the Dow is also almost there. Asian markets have had it much worse; The Shanghai Stock Exchange (SSE) composite is officially in a bear. And so is the Hang Seng. The Straits Times Index (STI) is also a whisker away from bear market territory.


What the Market Giveth, the Market Taketh Away

Not too long ago, the markets proclaimed Jeff Bezos the richest man in the world thanks to the rising valuation of Amazon stock. As of yesterday, Amazon’s value fell below Microsoft’s, taking $11 billion off Bezos’ wealth.*

This isn’t to say that Amazon is a bad company or that they are in trouble. It just shows how stretched valuations were. Even with yesterday’s drop, Amazon has a P/E of 130. Just imagine how much Amazon has to grow each year for decades in order to justify that sort of valuation. The danger for stretched valuations is that any hint of danger to the growth justification story and Amazon’s value will get hammered, just as it did on Friday.

The other point is that those newly minted millionaires and billionaires have to be careful when they first ascend the lists. It’s usually during times of great optimism and growth that these people suddenly find themselves among the richest in the world. The problem is whether their riches will still be there when the tide goes out.

In retirement planning, this is known as sequence risk. It’s pretty often the case that many people retire at the top of the market cycle because that’s when their wealth is the most. The problem is whether their wealth remains at that level after the market cycle turns. This is important because if their wealth gets decimated due to the downturn in the cycle, then these new retirees may find it difficult to remain retired as their wealth would no longer be able to generate the kind of income they need to live the rest of their days without income from a job.


The Economic Story

Of course, what’s going on in the markets is a reflection of where economic reality on the ground and where people think the economy is headed. The sudden change in sentiment in the market while government bodies are reporting great economic growth numbers is probably a reflection that interest rate hikes have come home to roost.

Rate hikes have been a feature of the environment since late 2015 but it’s only with Powell’s recent moves that the hikes have started to hit a little bit harder. This is obviously the beginning and further rate hikes, which the markets have been pricing in, is going to hit harder.

In Singapore, we’re definitely going to get good GDP numbers for this year (that’s pretty much a given). The question is, what will the numbers for next year look like? Currently, MAS still expect next year’s growth to be quite decent (above 2.5%) but that could easily change if a global recession hits us.


What to do? What to do? What to do?

If anything, I would say that here in Asia, a buying opportunity is on the horizon. Valuations in our markets are undemanding. The STI’s P/E and PE10 are less than 15x. In fact, another drop of 300 or so points in the STI will see us at valuations on par with the depths of the Global Financial Crisis (GFC) and 2016.**

Of course, what you CAN do is constrained by your budget. If you were happily buying into the market in 2017 as prices rose and have been holding onto assets from then up till now, your hands are pretty much tied. If you have regular savings socked away, then you probably have enough bullets waiting for you to pull the trigger.

The other thing to remember is that even when you think things are cheap, prices could still go down further. Buffett is famous for being early. I remember seeing CNBC plaster his quotes about how he’s a net buyer of U.S. stocks throughout 2008. Of course, his game is a little different from yours and mine because he has this ridiculous cashflow from Berkshire’s operating businesses and insurance operations. You and I? We probably have savings from our salary as well as dividends or other passive income that could be cut in the depths of a downturn.

Anyway, long story short. It may be a good time to buy but you may have to live with being early.



*This is Forbes’ way of calculating how much someone is worth but let’s be realistic – Jeff Bezos himself knows that there’s no way he’s worth that much because if there was even news that he was trying to cash out his equity stake in Amazon to realise whatever Forbes says he’s worth, the stock would crash and he would automatically be worth much less. Billionaires know this and only the really insecure ones care about which position they are on the Forbes’ rankings.

** Not many people realise this but 2016 was one of the best times in recent years, valuation-wise, to buy into the markets. Markets in early 2016 were actually down about 30% from the highs made in 2015. We hit bear market territory but not many people realised it and the bear market was over pretty quick. Unfortunately, I know of many people who waited on the sidelines thinking that the markets would go down further even though its PE10 was already lower than that during the GFC.

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.


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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.


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.

This won’t be a complete run-down of the investment characteristics of the bond. If you want a detailed take on the attractiveness of the bond, you can check out either Financial Horse’s (link here) or Investment Moat’s (link here) post.

Instead, I want to comment on a few things regarding the media’s profiling of the bond and a hidden factor that not many people seem to be focusing on.

Media’s Profile of the Bond

On Wednesday, when the offer for the bond was first announced, many of the local media outlets ran the story with a focus on how the bonds return a “fixed 2.7%” per year. For example, Channel NewsAsia (link here) ran this:

The five-year notes, which will mature on Oct 25, 2023, offer a guaranteed fixed interest rate of 2.7 per cent, the Singapore state investment firm said on Tuesday (Oct 16). The interest will be paid at the end of every six months.

Now, my problem with this is that if the media has to highlight to the public that bonds return a fixed amount, then maybe what the public needs aren’t bonds but more investor education.

Plain vanilla bonds are pretty easy instruments to understand and if your target audience doesn’t understand bonds to the extent that they need to know that it returns a “fixed 2.7%” per year, maybe they shouldn’t be buying bonds in the first place.

I’m not sure if any of the media outlets bothered to explain why the bonds return a “fixed 2.7%” per year because, in the secondary market, they could possibly return more or less than 2.7%. Understanding this is crucial to understanding bonds.

The Main Risks of this Issue

While the media correctly emphasised Temasek’s credit quality in order to assure retail investors that they would most probably (I’d put it at 99.9%) get their money back upon maturity, the media didn’t point out that with high-quality bonds such as this, the core risk is not so much with default but with inflation.

If you subscribe to these bonds, the main risk, in my opinion, is getting back less than what you put in, in terms of purchasing power. If you have been tracking the core inflation rate, you’ll see that 2.7% isn’t even a percentage point higher than the recent core inflation rates of 1.9%.

Furthermore, if you have a huge chuck of change stuck in these bonds when the market crashes, there is an opportunity cost of deploying funds in the market. The bonds can be sold in the secondary market but at what cost? Will the bonds still be priced at par when the markets turn south?

In my opinion, that’s pretty unlikely because investors don’t fly to the safety of corporates in the event of a market crash. This means that the bonds would probably be priced below par in the event of a market crash.


Any investor considering the Temasek Bond will realise that the rate of return is better than a savings account and slightly better than a fixed deposit or the CPF-OA. But in return, you will be giving up the chance to effectively deploy cash in the markets over the next 5 years if there is a crash (which seems more and more likely by the day) as well as the fact that the return on the bonds may barely cover inflation.

airport bank board business

Photo by Pixabay on


The answer is simple — who knows?

And frankly, unless you work at CNBC, Bloomberg or the local paper, it’s not your job to find an answer. Despite what the media says that it’s Trump’s fault for starting a trade war, or it’s because of machines doing the trading that caused the fall, the point is that those are all conjecture.

No one really knows why the markets crashed on Wednesday and Thursday.

If it was Trump, then why did the markets wait till the 10th and 11th of October? Trade wars have been a feature of Trump’s presidency since he took office. If trade wars were the factor, then why did markets still go up before coming down?

Ditto for machines or any other reasons that the media provides.

The Good News

The good news is that investing in the market doesn’t take the IQ of a Nobel prize winner to do well. What it takes is a good sense of when we have value emerging in the markets.

Typically, value emerges in the emerge when prices go down. After all, the same burger from McDonald’s is the same burger whether it’s priced at $2 or $4. Value emerges at $2 because you get the same product that you might have otherwise paid $4 for in normal times.

Of course, the markets aren’t as simple as buying burgers. You have to question if the burger remains the same? Unscrupulous operators may reduce the size of the patty or cut back on the sauce. That’s precisely what could happen even if a stock gets cheaper. Maybe the stock is cheaper due to fundamental reasons. i.e. The company’s business is taking a turn for the worse.

Being able to see value means being able to see if the company’s fortunes are taking a temporary hit or a permanent hit. Or being able to see if the drop in price is much more severe than the downturn in the fortune of the business. This takes experience and a lot of study.

Proceed with Caution

Before anyone gets too excited, I’m not saying that markets couldn’t go down further. Heck, in Singapore, we haven’t even reached the commonly-held definition of a bear market which is 20% down from the most recent peak. In the U.S., markets aren’t even 10% down.

But what I’m saying is that if the current downtrend continues for a few more weeks, it will provide a buying opportunity that could rival some of the best times to buy.

Unfortunately, for that to happen, we’ll see some more pain for investors.