Archives for category: Investing

In case you haven’t been following the news, the property market in Singapore has come back to life (kind of) with quite a number of en-bloc deals. MAS (Singapore’s central bank) also had to come out and caution that there was a little ‘exuberance’ in the market. MAS also noted that prices have transaction volumes have picked up while interest rates have remained low.

The commonly used reference rate for housing loans stood at 1.1 per cent in mid- November, compared to a peak of 3.6 per cent recorded in 2006.

However, vacancies in the rental market have remained high. According to the article, MAS noted that there are some 30,000 vacant rental properties in the market. Redevelopment of the land sold through en-bloc deals, together with existing private property developments, could add another 20,000 units to the market (of course, not all would at to the rental market).

What bothers me is that interest rates seem historically low and we seem to be at the start of a rate hike cycle.* Almost every property buyer in Singapore buys their property with a long-tenured loan (think 25 to 30 years) and if you’ve just begun to start servicing the loan, you have to be prepared for the fact that interest rates may be on their way up and drive the lifetime interest rate on your property loan to a level more like 3-5% over the lifetime of the loan.

I’m not an expert in real estate but I’ve heard stories and I have three stories that point towards what’s going on in the property market. Namely, those problems are (1) property owners not expecting a drastic rate hike, (2) vacancy rates are high but understandably so because buyers paid a high price and therefore demand steep rents, and (3) prices are (still) high despite the recent rosy outlook.

Anecdotal Evidence #1: Not many people are expecting rates to go up drastically

I’m not sure how many people are prepared for that. Anecdotally, I’ve had a friend question if rates could even get that high and I was about to slap my forehead because this friend works in a bank. How could he not know what interest rates have historically been like? The interest rate on loans have typically been much higher than they are now and we’re at the zero-bound so unless you believe the world is about to go the way of Japan, you need to prepare for the fact that interest rates will most probably go up.**

Anecdotal Evidence #2: Plenty of vacancies in projects that didn’t make sense

On the other hand, there are some property buyers who seem stuck with a horrible investment. I heard from my boss (he’s an avid follower of the property market) over lunch that some investors in a certain property have problems finding tenants. The property sits atop an MRT station (one of the last stops though so it’s at least 30mins by train to town) and is one of those shoebox apartments (1 bedroom apartment) where the price paid per square foot is ultra high (~S$1700 psf) but the actual cost of the apartment is “low” (~ S$600,000 -700,000).

A glance at listings online shows that owners are asking for close to S$2,000 per month to rent a one-bedder. And I see plenty of listings for the project which means that unless someone’s listed his unit many times over or the same unit had to be listed again week after week, there are many apartments there begging for tenants.*** Whoever has a unit there better be happy letting it stay vacant or I can’t see why someone would choose to pay almost S$2,000 per month to stay in what is effectively a hotel room when you could rent a room in an HDB flat (of course you have to share with some flatmates) in a better location for one-third the price. You have to remember that someone who can afford to pay S$2,000 per month in rent must be making at least S$8,000 per month. Most Singaporeans don’t make that much (median salary is more like S$4,700) which leaves you with foreigners. Foreigners making that much have to be at least on some sort of expat package which means that they come with families and won’t be looking at one-bedders, what more in such a far-flung location.

If there is one property like this, there are more. And my guess is that owners aren’t too bothered by the lack of tenants as long as they have the ability to service the loan. Their ability to service the loan is currently helped by historically low interest rates.

Anecdotal Evidence #3: Property prices are still high (sorta)

The third story comes from a friend of mine. Recently, he bought an Executive Condominium (EC)**** located just across the street from my flat. What this means is that our location is basically the same as far as valuation is concerned. However, the price he paid is almost 3x what I paid for my flat for an apartment of a size about 90% of my flat.

When both our apartments hit the resale market (say in 10 years) which is subject to the forces of demand and supply, I’m not sure if he will see any further upside to the price he paid for his unit. Why? Imagine a potential buyer for his unit surveying the area. The buyer will easily find that 5-room flats (~ 1200 square feet) in the same neighbourhood can be bought for around S$500,000 (assuming prices of HDB flats in this area remain as they are now). If my friend is looking to sell his place for S$1 million, the buyer will have to seriously wonder if it’s worth paying double the price of a 5-room flat in a similar location for a slightly smaller unit that comes with amenities such as a swimming pool and security post.

The only other way to justify the selling price of the S$1 million EC is to assume that the prices of HDB flats in this area will jump so much that the premium for an EC shrinks to maybe 20-30%. Based on that analysis, the upside for buyers of EC at that price is quite limited while the buyers of BTO flats like mine are much more optimistic. On the other hand, the downside is quite limited for flat owners as opposed to EC buyers.

I know my friend didn’t buy the property as an investment (i.e. to make money) but it still points towards the fact that property prices in Singapore remain elevated and we haven’t seen a fall in demand like the likes of post-’97 or ’08-’09. As with any asset class, the usual adage is well-bought is well-sold.



*I’m not an inflationista. Rather, the fed has already begun the hike so it’s not like I’m being a Cassandra.

**I read that someone at the fed did a study showing how Amazon is a factor keeping prices low and I guess if this remains so, then interest rates may not need to be hiked.

***The truth is probably someone in between. Some agent listed the property many times and had to list it multiple times over the weeks. But still not a good sign, no?

****ECs are this weird scheme where the governments allow private developers to bid for land in their landbank to build a condominium development that is sold more along the lines of public housing. After 10 years, the development becomes private and is not subject to the rules that govern public housing. In essence, Singaporeans and PRs get to buy a condo for a discounted price.


With all my recent posts on bitcoin (here, here and here), I started thinking a little bit more about how people build wealth over time and I’ve come to realise that building wealth over time isn’t rocket science. It mainly comes down to what you spend your money on.

In general, there are three things in life you can spend your money on- one, things you consume immediately; two, things that will go up in value, and three, things that produce things of even greater value.

The first type of things – Cheeseburgers

Suffice to say, it’s clear that if you spend most of your money on the first type of things, you’re not going to get very far. Think of a cheeseburger. It tastes good when you eat it but after you eat it, it’s gone. It comes out as waste and gets flushed down the toilet. Even for things that last longer than a hamburger (e.g. a t-shirt), it’s clear that once the good is bought, it’s unlikely to be sold for at anywhere near the same price as when it was first bought. Therefore, if most of the things you’re buying are cheeseburgers, you’re unlikely to get wealthy.

The second type of things – Treasure Boxes

The next category of things is like treasure boxes. You buy one, thinking that it contains treasure and sometimes, they really do. People have gotten rich by being able to (through skill or otherwise) ascertain whether the treasure in the box is worth more than the price they’ve paid for it. Unfortunately, how much you can sell the treasure for in the future depends on how much people in the future are willing to pay for them.

Things like art or collectables are like this. You could pay $1,000,000 for a piece of art and in a hundred years, for reasons unknown even to the by-now long-dead artist, someone else may be willing to pay $2,000,000 for it. Or just as easily, it could be worth $100,000. Who knows.

The third type of things – Geese (golden, if you like) or Fruit Trees

Things like these produce even more wealth for you as time goes by. Geese can produce more geese if you don’t turn them into roast geese and fruit trees produce fruit that you can consume as well as, with a little sweat, use to grow even more trees. Starting with a pair of geese, you could get a whole flock. Or with a bag of seeds, you could get a whole orchard over time.

Don’t buy too many Cheeseburgers

This question is probably the one question that will determine how wealthy you eventually get. Obviously, you need to purchase some ‘cheeseburgers’. You have to have a certain amount of food, shelter and clothing for basic survival. For entertainment, you need some spending on simple luxuries like watching movies, an ice-cream, or even a holiday.

The point is, these things are all ‘cheeseburgers’. Consumed today and provides immediate satisfaction. The danger of consuming too many ‘cheeseburgers’ is two-fold. One, as you consume more ‘cheeseburgers’, you start to find that you need more ‘cheeseburgers’ than before to feel as satisfied as you once did. Driving a Toyota is cool when you didn’t have a car. Once you’ve had one, the next step is a Mercs or BMW even though its primary function is still to bring you from point A to point B.

Or take going to the club. The first experience is cool and exciting but after going to the same club many times in a week for multiple weeks and the mind starts to get bored. It’s the same with restaurants. With ‘cheeseburgers’, the mind needs that constant stimulation of novelty in order to feel the satisfaction derived from a ‘cheeseburger’.

The second danger is consuming ever-greater quantities of ‘cheeseburgers’ lead to an addiction that has unhealthy consequences. Indulging in too much food literally makes you unhealthy with the onset of obesity and the health problems associated with it. But buying ‘cheeseburgers’ like a more fancy car also leads to an unhealthy mental state like never being satisfied with what you have and always being envious of what others may have that you don’t. Using our earlier example, the Mercs or BMW takes on a second function of showing off one’s wealth.*

Treasure boxes or Geese?

Therefore, beyond the amount of ‘cheeseburgers’ needed for a sufficiently satisfactory life, we should be deciding whether to buy ‘Treasure Boxes’ or ‘Geese’. There isn’t a clear answer as to which one is better but we’ll look at the characteristics of each type. Both things will make you much more well off compared to people who only buy cheeseburgers but that will also depend on whether you have the knowledge, fortitude and good sense to know WHEN and WHAT types of ‘treasure boxes’ and ‘geese’ to buy. Let’s start with ‘treasure boxes’.

‘Treasure boxes’ contain objects of value. That value is decided in a market of buyers and sellers. In econ 101 terms, that means that whatever the value of the good is, depends solely on whatever other buyers are willing to pay for it and whatever existing sellers are willing to sell the good for. This also means that no one is really sure of what the ‘treasure box’ is worth and that its worth at any point in time is determined by what someone else would be willing to pay for it. In other words, it’s price is its current value.

A good example is the story of how diamonds came to represent love and commitment around the world. Prior to De Beers’ marketing campaign and control over the diamond market, no one would have bought a diamond as an engagement stone because diamonds were so rare and therefore reserved only for the super elite. However, as the supply of diamonds increased, the price of diamonds came down. De Beers, having substantial control over the supply of diamonds then restricted the supply in order to keep the price high while also paying to run a successful ad campaign that increased the demand for diamonds. However, for us, the more important question is: “Has the value of the diamond changed merely because its price has?”

And that is the thing with most treasure boxes. Without knowing what is inside, your best guess at its value is the price someone else is willing to pay for it and the price that the seller is willing to accept for it.

Making lots of money from treasure boxes in the long-run depends largely on having someone pay a lot more for your treasure box than what you bought it for. Many times, this can result in manias that drive the price sky-high when everyone wants to buy the “asset” due to greed which was probably fuelled by envy. After all, who likes it when you see your neighbour whom you probably think isn’t much more clever than you take a holiday in the alps while you are forced to work through the holidays? What more, he did it not by doing anything particularly clever or special. He just happened to buy (and sell) the right thing at the right time.

And finally, Geese

‘Geese’ are a special class of things. They can be traded just like treasure boxes but they can also be raised to produce more ‘geese’. If you keep a close watch on your ‘geese’, you’ll also have a good idea of whether your ‘geese’ are ill or your ‘geese’ are healthy.

And while ‘geese’ have a price in the market where there are buyers and sellers of other ‘geese’, that price is typically based on a value of what the ‘geese’ can produce over its remaining lifetime. For example, let’s take the example of a real goose. You can estimate the number of eggs a goose can produce over a lifetime. Furthermore, a goose can also be used for meat. Both goose eggs and meat are things whose value you could ascertain by checking out what goose eggs and meat currently sell for. Therefore you could roughly tell what the value of your goose would be. And if you so happen to come across an honest seller who is selling a goose for less than the value of the eggs and meat, you have found a good deal, haven’t you?

That is typically how the stock market works. You can roughly calculate the value of a company based on its current business and a plausible estimation of its future business if you know the industry well enough. And sometimes, Benjamin Graham’s Mr. Market comes along and offers to either buy or sell you a share of the company that is out of line with the estimate of the future business. In this scenario, price and value have diverged and there is a good chance that there is some profit to be made by taking advantage of Mr. Market.

Or, you buy cheap from Mr. Market and hang on to your ‘geese’ and have them produce more eggs for you over the years. You may want to consume those eggs or you could try hatching them to get more ‘geese’. That analogy is exactly how dividends are. You can choose to spend your dividends or you could choose to reinvest the dividends and have your returns compound.

Last word

I hope its pretty clear that spending most of your money on things to consume i.e. ‘cheeseburgers’ is a sure way to remain at your current level of wealth. If you want to get wealthy, you need to focus on buying ‘treasure boxes’ or ‘geese’.

If you choose to buy ‘treasure boxes’, make sure you know the market very well. After all, the price of ‘treasure boxes’ is determined mostly by demand and supply conditions for the item. There are also other factors like whether you use leverage or whether you can predict where that market is going. You may succeed but remember that it’s a zero-sum game. For you to win, someone else must have lost.

Personally, I prefer collecting ‘geese’. Right now, my ‘geese’ may be all equities but it could easily extend to rental properties or private businesses. I’m pretty certain that my own temperament is also more suited to collecting ‘geese’ rather than competing with others for ‘treasure boxes’ so this is what works better for me. Having said that, this is a much slower path to wealth as businesses don’t turn into an overnight success.


*Of course, the level of wealth can be an illusion. Many things can be bought on credit and give people the outwards appearance of wealth while their true financial situation only reveals piles of debt.

**To a certain extent, this is also true of ‘Geese’ but we’ll see that with ‘Geese’, we have other yardsticks for value instead of relying on price alone.

So, today’s that kind of day where there’s a bunch of interesting stuff on bitcoin.

First, there’s this fantastic piece by Josh Brown that sums up a lot of what “investing” in bitcoin right now is like.

For the Bitcoin price to remain at $9,250 it requires approximately US$16,650,000 per day of capital inflow from new hodlers.

That’s a snippet of a quote from a commentary he has in his piece. Together with lots of examples about how some penny stocks have seen an influx of investors just by becoming associated with bitcoin, how the bitcoin mania resembles the dot-com bubble (early 2000s) as well as Thanksgiving-fuelled bitcoin conversations. There’s a lot more where that snippet came from so if I were you, I’d go read the whole thing. (full link here)

Anecdotally, I shared something about bitcoin on facebook with the caption saying how the new wave of people with some money to buy into bitcoin are probably too young to remember what the last crash looked like. A former student who’s now serving his National Service (NS) commented saying how half his bunk is already in bitcoin and that one of them is a trader of cryptocurrencies and is saying that “the price will never go down”.

Now, we just have to wait till the mainstream media* picks up stories of how 20-something-year-olds have “helped” their parents “invest” their entire life savings in bitcoin.


*You know it’s too late to join the party when the mainstream media puts it on their front page. In 2007, there was a story of how a university student was making tons of money and helped his family invest their life savings. Subsequently, he lost it all. Personally, I saw many others like the student in the story when I was at the university in late 2007.


I was going to do a piece of bitcoin as an asset class but this morphed into a very long piece so I’m splitting this up into two parts. This part covers how to value bitcoin and a guess on what the future holds for bitcoin speculators. Catch up on part 1 here.

Putting a value on bitcoin

If bitcoin is unlikely to be the next form of a widely accepted currency, then why has the price gone up so much? Well, the short answer to that is that the price has gone up because the demand for it has done up relative to the supply.

In economics, the theory goes that there are three reasons why people demand any sort of money:

  1. Transactional purposes
  2. Precautionary purposes
  3. Speculative purposes

The above is for money in general but it’s useful to think along those lines for the demand of any particular form of money. And since almost all societies already have an accepted form of payment (the local currency or a foreign one), the demand for bitcoin is mostly confined to the last purpose- the opportunity cost of holding money is low, therefore, let’s hold in the form of a moonshot such as cryptocurrencies.

The next question, then, is whether buyers of bitcoins are buying it cheap, fair or at ridiculous prices? The only way to answer this question is to figure out what is the intrinsic value of a bitcoin and what is the price today relative to the value.

With asset classes as such bonds, equities or real estate, the typical way to value these assets is to ask ourselves: what are the payoffs (coupons, dividends, rental) over the remaining life of the asset, the associated probabilities of those payoffs and arrive at a value of the asset as it is today. Comparing that with the price one would pay for the asset, we can then determine if the asset is priced fairly or not.

In contrast, valuing an asset class such as commodities or foreign exchange is inherently more tricky. After all, before bitcoin, there was another commodity that was a darling for some “investors”. Unfortunately, this is what Warren Buffett has to say about it:

“I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils (NYSE:XOM) and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils.” – Warren Buffett on CNBC, March 2, 2011 (source)

If you think about the amount of utility by investing in an asset that doesn’t provide any income, then you better be darn right about the capital gains. Unfortunately, none of us are time travellers (if you are, please get in touch!) or have a crystal ball so betting the farm on an outcome that is speculative in nature is a fool’s errand.

Don’t misunderstand, I think gold has some utility. It has served as a hedge against inflation, is used in jewellery and as insurance in the event you need to escape your country but the price of gold beyond the costs associated with those options is pure speculation. bitcoin, I believe, has even less utility apart from being a conversation at a cocktail.

Prof. Aswath Damodaran has a fantastic post on bitcoin and cryptocurrencies and how to think about the definitions of various asset classes (read the full thing here) but I present his brilliant summary of my point:

 You cannot value Bitcoin, you can only price it: This follows from the acceptance that Bitcoin is a currency, not an asset or a commodity. Any one who claims to value Bitcoin either has a very different definition of value than I do or is just making up stuff as he or she goes along.

In short, what a bitcoin is worth is only as much as the next person willing to pay for it.

Will it end well?

This is where things get interesting. What I’ve covered so far shows that bitcoin has value only insofar as people’s willingness to pay for it and the willingness to pay for it, right now, seems to be pretty much only because people think that it’ll continue to go up further. Why would it go up further? Simply because it may gain widespread acceptance and be the currency (amongst many others, crypto or otherwise) of choice.

The last line hints at a plausibility of reality or what Howard Marks calls a “grain of truth”. Unfortunately, Marks was referring to how bubbles form and in his checklist, he listed nine bullet points that lead to a boom/bubble:

  1. A benign environment
  2. A grain of truth
  3. Early success
  4. More money than ideas
  5. Willing suspension of belief
  6. Rejection of valuation norms
  7. The pursuit of the new
  8. The virtuous cycle
  9. Fear of missing out

Of course, Marks was referring to the investment climate in general but when applied to just Cryptocurrencies, I think 2, 6 and 7 have either already been covered or are pretty obvious. What some people don’t realise is that 1, 3, 4, 8 and 9 have played out in some fashion.

The general investment environment has been pretty positive since Trump’s election with equity markets all up substantially since the beginning of the year (point 1). The price of bitcoin going up 700% in one year has already given plenty of laypeople some success (think bitcoin jesus and Ms bitcoin Mai) and that the feeling that the only way for bitcoin is up (point 3 and 8). After all, when civil servants (that’s referring to me, by the way) in the education sector start about bitcoin, beware.

As for point 4, the whole concept of Initial Coin Offerings (ICOs) just underscores how there is too much money floating around that people are willing to part with money* for nothing more than a digital representation to an idea. The worst part about the idea is that the startup is practically joining a space that is already crowded with a thousand other similar ideas. And that’s just in the cryptocurrency space. Softbank has a 100 billion dollar venture capital fund which just shows how much money there is floating around to fund ideas that are probably more moonshots than sure things.

As for point 9, there are now traditional Wall Street firms getting in on the boom (admittedly, they are just dipping their toes there) and there are cryptocurrency hedge funds and even fund-of-funds. If you don’t know what those mean, no worries. Basically, it just means that more money is being channelled towards cryptocurrencies.

Closer to home, just a few months ago, a student of mine was looking into buying bitcoin and while my school may not be looking to buy the currency, the fact that suddenly interest in the subject has increased drastically shows that no one wants to miss out on knowing what this exciting, new thing is all about. News about Google searches for buying bitcoin getting more popular than buying gold just strengthens the point that there are many people who are trying to get on board a ship that (perhaps?) has sailed.

Well, that’s just Howard Marks’ checklist. I saw a chart (it’s a little dated) that compared the rise in the price of bitcoin to other bubbles that have come before it.



The thesis here is that most bubbles increase a 1000% over 10 years before popping.

Well, from the chart, bitcoin rose a 1000% in just three years. And with the benefit of hindsight, we now know that the bubble hasn’t burst but has expanded further to 3700% since 1 Jan 2015.

So, that’s it from me. I think I’ve pretty much convinced myself that while the technology underlying bitcoin has its use, I’m not so optimistic on the token itself given the competition from existing currencies as well as new cryptocurrencies. And it’s ironic that the price of bitcoin is still quoted in USD so that says a lot about what our anchor still is.

Furthermore, the psychology behind bitcoin has pretty much fueled a buying frenzy (as evidenced by the exponential increase in price) and has checked off a lot of boxes that have plagued other manias before it. I’m not sure if the bitcoin/crypto boom is over but I’m pretty sure it’s not going to end well.



snarky notes:

*remember, money can be used to consume goods today or invested for surer returns.

I was going to do a piece of bitcoin as an asset class but this morphed into a very long piece so I’m splitting this up into two parts. This part covers what bitcoin is and the economics of money as applied to bitcoin. Part 2 is up.

First of all, bitcoin (or any other cryptocurrency) isn’t blockchain.

My thoughts are on bitcoin* which refers to the unit of currency and not Bitcoin which refers to the blockchain technology that the currency rides on. There is a difference and I believe blockchain has its uses but what I’m more interested in is bitcoin (as a proxy for cryptocurrencies) because that’s where people are putting their money into which has caused the price of bitcoin to be up some 700% this year alone.

First, what is bitcoin?

bitcoin is a digital token created by an unknown person or person(s) with the alias Satoshi Nakamoto. bitcoin can be used for electronic transactions and is created when computers (mining rigs) solve complicated mathematical problems.

As such, no one controls the supply of bitcoin and the theoretical maximum number of bitcoins is 21,000,000 bitcoins. Facilitating the transfer of bitcoins is the decentralised network that bitcoins transact on. People with mining rigs power the network in the same way people distribute content via a torrent file. Their systems provide the computational power needed to update the records anytime someone transacts using bitcoin. For this, the quickest one that solves the computational problems needed to confirm the transaction get bitcoin. This is essentially the process of mining bitcoins.

Bitcoin is set up to reward users for verifying transactions. Miners who package transactions into “blocks” receive two kinds of rewards: The additional Bitcoin they produce by using their hardware to solve mathematical problems (an income stream that will eventually cease since 21 million bitcoins are the maximum that can be mined) and the transaction fees paid by users to get their payments into blocks. – Bloomberg

In short, bitcoins are a digital form of currency just like how you would spend cash (e.g. USD or SGD) to buy virtual currencies in a game (e.g. “gold” in the mobile game, Candy Crush) which you can then use to purchase things. The only difference here is that it’s possible to use bitcoin to pay merchants that accept them rather than being restricted to only using “gold” (the candy crush currency) to buy power-ups or items in Candy Crush.

When making payment using bitcoin, the Bitcoin (deliberately using capital “B” here) network facilitates the transaction and every computer on the network gets updated with the same record of which account the bitcoin now belongs to.

Supporters of bitcoin champion bitcoin as a new currency for the following reasons:

  1. No one entity controls bitcoin and hence, can’t cause a debasement of the currency through undisciplined expansion of the money supply.
  2. It’s relatively anonymous because bitcoin addresses aren’t tied to a real-world address or name, although the public ledger will show how many bitcoins are held by a particular bitcoin address.
  3. A transaction is supposed to be fast and low-cost.

The economics of bitcoin

The problem with bitcoin is that being a digital currency, there is no shortage of other competing currencies. Existing competitors include all the other currencies in the world and there aren’t many technical barriers to entry for other digital currencies to enter the space. At last count, there were more than a 1000 cryptocurrencies in circulation.

bitcoin’s only advantage is the first-mover and top-of-mind recall when it comes to cryptocurrencies. In order to become a viable alternative, it will also need existing currencies to become shaky enough that they find alternatives. What comes to mind are countries that are experiencing bouts of inflation due to the government mismanaging the local currency. Even then, bitcoin has to contend with major currencies like the USD and Euro.

As a form of money, bitcoin may be portable (all you need is to connect to your digital wallet) and divisible (see here) but the first point requires internet access which could be stumbling blocks in countries where internet access is expensive.

Also, transaction costs for bitcoin do not seem to be as low as it’s touted to be. Due to the nature of how transactions get recorded, much computational power is required to solve the mathematical problems needed to record a transaction. Depending on the volume of transactions (which vary), this can cause bottlenecks and those with the computational power are starting to charge different prices in order to facilitate transactions. As I write this, the median transaction fee for a size of 226 bytes is 103,960 satoshis** or 8.30 USD. Try convincing merchants to accept or people to pay for a coffee, beer or sandwich using bitcoin if that’s the processing fee.

The biggest issue so far is whether bitcoin qualifies as a store of value. In economics, anything considered money should be a good store of value. Simply, this means that if I can buy 10 beers with 1 unit of this currency, I should be able to buy roughly the same amount of beers with the same unit of currency a week, month, or even, a year later.

And this is where bitcoin truly fails. In fact, the only reason most people have suddenly sat up and taken note of bitcoin is due to the fact that bitcoin has increased some 700% relative to the USD within this year alone. And within weeks of hitting 7000 USD, it fell to 6000 USD and then within a few weeks, shot up to 8000 USD.

While the increase in the price of bitcoin is good for holders of bitcoin, we have to remember that those who sold their bitcoin is kicking themselves in the foot. From a medium of exchange point of view, someone who used a bitcoin to buy a computer earlier in the year is kicking himself because he or she can now buy 7 while the merchant who accepted bitcoin (hopefully he/she didn’t use it to pay off a supplier) has now seven times more profit as compared to the start of the year by doing absolutely nothing! What kind of viable currency causes such changes in purchasing power?

While bitcoin, if accepted, will reap network economics (one phone is useless on its own but as more people have phones…), it seems unlikely to me, at this point in time, that bitcoin is going to be a viable alternative to a shitty currency.

Stay tuned for part 2.

Update: Part 2 is up.

snarky notes:

*Or any other cryptocurrency for that matter but bitcoin is probably the most prominent and manic example right now.

**Another reason why bitcoin is a terrible currency is due to the notion of divisibility. People hate decimals and having to come up with names like ‘satoshi’ for a fraction of a bitcoin just makes everything more confusing when thinking of the value of one thing relative to another. i.e. which looks like a better price for a pint of beer? 10 USD, 126,105 Satoshi or, 0.00126105 BTC?


Sorry for the clickbait-y title but what I’m about to say is actually quite true for almost anyone in Singapore with a half-decent job and of at least lower-middle to a middle-class family background.

And to show you that’s entirely possible, I present exhibit A- (although most Singaporeans in the financial blogging community probably already know) Mr. 15-hour-work-week (15HWW).

Mr 15HWW recently wrote a post, summarising his 7 years (so far) in investing and it shows you exactly how (link here) most middle-class people around the world actually accumulate a decent amount of money.

If you read his post, you’ll realise that for two people in their mid-30s (counting both Mr and Mrs 15HWW they pooled their resources together), they have accumulated a six-figure portfolio that is probably the envy of even some Singaporeans who should be retired or are near-retirement. The sum doesn’t include their CPF or their home*.

For many younger people about to enter, or just in, the workforce, a six-figure sum is something that seems out of reach but many people have been there and done that. More importantly, Mr 15HWW’s post reveals that it doesn’t take a genius to do it.

His returns in the market were only about 6% p.a., something that you could easily replicate if you blindly invested in an index-tracking ETF such as the STI ETF or the SPDR’s S&P 500 ETF.

The bulk of the increase in their wealth came from an amazingly high rate of savings. I really take my hat off to Mr and Mrs 15HWW because my own savings rate is nowhere near theirs. If it was, my portfolio would probably be 25% larger than it is now.

Most people think investing is complicated or they try to aim for the stars but very often, a simple investing plan of (a) saving a lot of money, (b) investing it and (c) letting it compound will lead to wealth that most people can only dream of.

So why do most people fail to get there?

Well, that’s another story for another time.


*You will be surprised at how many people are counting on their CPF to retire and how the government is encouraging a reverse mortgage on your HDB flat**.

**Ok, technically it’s a lease buyback scheme which means the HDB pays you to stay in the flat that you’ve already fulled paid up for. And I can see the merit in the argument that you might as well monetise an asset that you can’t take with you to the grave. Also, since HDB flats are on 99-year leases, handing it down to beneficiaries when you pass away means that the asset may not be worth much when it’s passed on.


So, a day after I wrote a report about SPH’s business, the company releases its results for FY2017.

As expected, results are better than last year, all thanks to the divestment of the online classified business which netted them a gain of about $150 million. No one really cared much about that though because, as highlighted by SPH in their press release, their operating revenue was down about $108 million, or 13%, from a year ago.

The difficult thing for SPH now is the fallout from their retrenchment exercise. It’s bad press (pun totally intended!), especially for the new CEO that hasn’t come in with that great a reputation.

While SPH hasn’t slashed the dividend by much, their payout ratio looks terrible. Of course, that little ^ mark matters. Their payout ratio is calculated based on recurring earnings. What does that mean? Only earnings from media and property (and now possibly the education and healthcare) part of the business are counted? If so, that leaves quite a bit of earnings from the investment side and this payout ratio can be considered pretty conservative. After all, with an investment fund of $1.1 billion*, you can get more than pocket change (relative to SPH’s core businesses) in interest and returns. Anyhow, I don’t have enough information to make a conclusion.



Are SPH’s dividends sustainable?

In short, I don’t think SPH’s results are anything out of the ordinary. Mr. Market apparently thinks the same way which is why there has been hardly any reaction to the release of the results. That’s it from me. This will probably be the last post in a long while on SPH unless something interesting develops.

*See their latest (FY2017) presentation slides, page 13.


Full disclosure: I own SPH stock.

Disclaimer: The report is meant to present a factual representation of the company’s business and is not a projection of how the stock will do. It is not meant to be an inducement to buy or sell the stock. As far as possible, I have tried to ensure that there are no errors. Any errors are my own. Please seek advice from an investment professional should you choose to use this information as part of your decision-making process on whether to invest in the stock or not.


So, I came across a report on SPH* that did a horrible valuation analysis on SPH. The main problem with the report is that they valued SPH on the basis that it was not a going concern, calculating it’s NAV and then taking a discount from there.

The report (more like blog post actually) also made simple factual errors like including Seletar Mall in SPH REIT…

So, I did my own analysis of SPH. You can download it for FREE. Leave me your comments and let me know how I can do better. (SPH (T39) report 10 Oct 17)

For those that don’t want to read through the entire thing, I’m listing some of the main points below.


  • The traditional media business is declining fast.
  • SPH is taking on more debt in order to fund other lines of business.
  • Other lines of business are not a sure bet.
  • New CEO not from industry nor has a good track record.


  • Market’s current pricing of SPH seems to expect the worst.
  • Media arm’s decline seems to be bottoming.
  • Debt levels are still sustainable.


  • Management is trying its best to diversify away from the media business


*I’m not even going to link to it because it’s so bad and they are obviously trying to get you to buy something from them

This August officially marks ten years of investing.

Ten years is a long time and I’ve learnt some things along the way. However, my investing journey is by no means over and I’m pretty sure there are many more things I will have to learn.

This post is going to be a reflection of the steps, missteps and lessons I have learnt so far. (Beware: long post ahead)

How I got started

Investing was something I read about from Rich Dad, Poor Dad. I know the book is controversial (see the criticism the book got) but that’s the first time I even got the idea of being an investor.

However, that idea never really took any shape until one day in 2006 when I saw a flyer on campus that the business school at the National University of Singapore (NUS) was organising a talk by Robert P. Miles. Robert P. Miles was invited to give a talk about his book, Warren Buffett Wealth. That was my first introduction to Warren Buffett.

Subsequently, I read whatever I could find about Warren Buffett and Value Investing. Of course, it didn’t help that I had no idea how to read a financial statement. By nature, I’m not one to go through the details with a fine-toothed comb and I was studying for an undergraduate degree in Economics. Not exactly the kind of major that teaches much about accounting.

Thankfully, the mid-2000s had some resources online. I’m forever grateful to Value Buddies and its predecessors (Wallstraits and subsequently, Afralug). Some of the regulars there have been generously sharing their wealth of experience and that really sped up my learning.

I bought my first stock (technically, it’s a unit since it’s a Reit) in 2007 and still hold it to this day. To be honest, I didn’t buy it because I had great insights or superior analysis of its financial statements. I bought it because I figured that Singapore’s ageing population will be spending a lot more on healthcare in the years to come. Thankfully, that investment has paid off handsomely.

Of course, that investment wasn’t all smooth-sailing. Buying in Aug 2007 meant that basically, I was buying at the top of the market. For those too young to remember*, Aug 2007 was as high as markets got before things started to go to hell. End 2007 to September 2008 was just a long descent into hell and Lehman Brothers’ collapse just caused everything to fall off a cliff.

Getting through the Global Financial Crisis (GFC)

The GFC seemed so long ago but anyone who lived through that would have seen their investments get totally wrecked. I’m pretty sure some of my investments were down by 50-75% at one point.

The silver lining was that having just started out in the market, I didn’t have a lot of skin in the game. In fact, that was the best possible time to commit even more money. So did I make tons of money from that period? Not really. There was always this constant fear of whether the market would go down some more. And by the time, the market was in an uptrend, you start worrying about whether another shock will hit the system.

That, however, provided me with a good understanding and experience of classic market psychology. It’s a lesson that not everyone may learn or may even learn too late. A very senior colleague of mine who made his retirement nest egg in the GFC by buying tonnes of stock at what was almost the market bottom basically sold out in May 2015. He was vindicated by the horrible second half of 2015 but practically missed out on collecting dividend income in 2016 and the run-up in late 2016 till now.** On the contrary, I stayed in the market and my portfolio is roughly 7% higher based on pure investing returns for the same period. In short, market timing is a difficult business.

Investment Record

First off, a disclaimer. I’m not putting my investment record here to brag or in hope that someone will recognise my prowess and give me a job. In fact, you’ll see that my record is nothing to brag about. My objective is to show that any average person can achieve decent returns in the market with a solid plan, plenty of patience and a decent understanding of markets.

In 2007, I started with a portfolio of roughly $6,000. This may not seem like much but I can assure you that it was a substantial sum to a university undergraduate at that time. Unfortunately, I was young and not smart enough to know what records to keep and where to keep them (this was all before we had cheap gigabytes and cloud storage) so I only kept records of how much my portfolio was growing. It was only in early 2011 that I began to keep records of both my investment returns (that is pure investing returns not inflated by me adding more money) as well as the actual growth of my portfolio.

From 2011 till now, my investment returns (capital gains and dividends reinvested) or what’s more commonly known as Compound Annual Growth Rate (CAGR) is about 7.51%. However, the actual growth of my portfolio is 18.85% p.a. for the same period.***

So what gives? As I’ve said before elsewhere on this blog, that big difference is down to mainly two things: (1) I started from a low base. In early 2011, my portfolio was below six-figure territory. Just by saving $1,000 a month, that would increase my portfolio by somewhere about 12%. (2) Savings are key to building your portfolio because that acts as a buffer or insurance. When markets are down, that continual addition to the war chest helps you add positions when the markets are cheap. When markets are expensive, you just build up your cash position to take advantage of when markets (eventually) get cheaper.

Obviously, as time goes by, your savings will contribute less and less towards your portfolio growth. The growth in your portfolio will come to consist of only your investment returns and that shouldn’t really be a cause for concern because when that time comes, you will probably have reached your financial goals. In fact, the more you save each month, the quicker you will reach financial freedom assuming of course that your spending stays the same after having zero income.

Three steps to get started

Step one, read as much as you can. You should not be reading about the theoretical or technical knowledge regarding investments but as much of the history, different schools of thoughts, and the different participants in the markets. In other words, don’t just know how to read the financial statements of a company and be able to do all the not-so-fancy calculations but start to appreciate how markets used to be and how they are now.

Also, not everyone in the market is an investor. Even among investors, there is substantial variation with regards to how long-term an investor’s view is. Get to know how traders and speculators behave because invariably, the siren song of being a speculator is tempting and you need to know when you call yourself an investor while acting more like a speculator. Traders have their place in the market but you have to know if you have brains and fortitude to be one.

Step two, just do it. I’m sorry for borrowing Nike’s slogan but there is really no better time to get started. As long as you are using money that you are prepared to do without for 10 years or more, being in the markets should not be an issue.

Step three, keeping learning and getting continuos feedback. Feedback doesn’t just come from the markets. You should seek out like-minded individuals who want to better themselves. is a valuable place. There are plenty of investment bloggers (e.g. kyith at Investment Moats, Dividend Warrior) out there as well who maintain a good conversation with people who leave comments on their blog.

Environmental factors

A note of caution for those trying to replicate my model. Your investment portfolio cannot exist in a vacuum. If my wife was a high-maintenance trophy wife, the portfolio definitely wouldn’t be where it is today.

Fortunately for me, my wife was raised in a very practical household with parents who are the most down-to-earth people one would ever meet. Our expenses are minimal and our housing expense is way below our means. In a world where mortgages can stretch up to 30 years, we only have 5 years left on your mortgage despite only having bought the place a few years ago.

Of course, circumstances vary among households but I believe that contrary to what most people say about the average person living in Singapore, we are living proof that staying in Singapore doesn’t have to be an exorbitant affair.****

What’s the end goal?

My personal goal is to have my portfolio provide enough income for me and my wife to meet our expenses. These could range from daily expenses such as utilities and groceries to one-off expenses such as medical emergencies and holidays.

Once that goal is met, we will have much more options on how we want to live our lives. I don’t know about my wife but I certainly would explore my creative side much more. I have dabbled in some of these things recently but I really would want to pick up some skills like drawing/sketching, creating web apps, dabble a little in simple DIY tech-related craft (like using a raspberry pi as a security cam), baking bread and cooking at a more advanced level.  Or as my students might put it, I want to become a pro at these things.

If you’ve been following this blog, you will realise the slowdown in postings. I won’t be blogging as much as before because of impending changes on the job front as well as this minor obsession I’ve developed on programming.

Good luck investing! Here’s to the next 10 years.


*I feel weird saying this but I do have some students who have just gotten in the market and for whom the GFC of 08/09 seem like a distant memory.

**Of course, financial planners will rightly tell you that your age profile matters when it comes to asset allocation. However, converting almost your entire portfolio to cash is not a valid retirement strategy either with interest rates on cash being so low and inflation for seniors (healthcare) being higher than the general inflation rate.

***My investment portfolio consists only of stocks and cash. I haven’t included my property, CPF monies and other assets such as insurance-based financial products that could be surrendered for cash.

****We are by no means extremely frugal people. If I wanted to go to that extreme, I would not have gotten a car and we wouldn’t be taking yearly or even twice yearly holidays to places like Japan, London and my favourite retreat off Bintan.

For the life of me, I can’t remember where I read it but I’ve found sources that provide more of less the same arguments that were made.

Basically, what I read was that automation hasn’t really caused job losses (yet). After all, if automation and robots were the reason for job losses, then why is productivity so low? In economics, productivity is measured as the output per unit of input. Inputs can be either labour or capital which means that if more and more jobs were automated, productivity should start to increase.

That hasn’t been the case, even in Japan, where robots play a huge role in manufacturing. In Japan’s case, there are alternative explanations (for example, see here) such as Japan’s corporate culture but that doesn’t explain the similar observations made in other developed countries.

Singapore’s attempts at increasing productivity haven’t been all that great either. So, where is the evidence that automation and robots are taking our jobs? Well, I think economist David Autor (nice, long essay) has made a very compelling argument that automation and robots, at least at this point in time, have not caused job losses or the end of employment as some people say they will. (For a nice background on what happens as technology replaces labour, see here and here)

The historical relationship between technological improvements and labour

It’s an indisputable fact. As technology has progressed, jobs have been displaced but that often leads to job increases in other areas. As farms used more capital (think tractors), the amount of labour on farms has decreased. That led to increases in employment in other sectors such as manufacturing. And as manufacturing started getting more high-tech, that also led to increases in employment in services.

Paradoxically, improvements in technology have also led to increased employment in the same jobs. The often-cited example in labour economics is the role of the bank teller. As ATMs were introduced, many people thought that that would spell the end of the bank teller. Interestingly, the number of bank teller jobs in the US actually increased after the introduction of ATMS. What gives? Well, it turns out that the ATM reduced the need for tellers per branch and that meant that the ATM made it cheaper to open up new branches. Since branches were cheaper, banks opened up more branches, increasing the need for tellers. Bank tellers were still necessary to perform certain banking functions as well as guide customers on how to use the machines.

What lies ahead?

If the above holds true, we should expect that the coming age of automation and robots will bring about some changes but it won’t necessarily spell the end of work as we know it.

(1) Augmentation of labour

First, automation and robots will definitely replace some jobs. Off the top of my head, in the more severe scenario, drivers (as an occupation) will no longer be necessary. Instead, they may be employed to sit in self-driving cars just to hit some emergency button or take over manual controls in the event the whole system goes down. In the less severe near-term scenario, drivers may still be needed to take over in certain driving conditions much like what goes on in modern passenger aircraft.

Any labourer lifting heavy loads (such as nurses or constructions workers) may use robots or exoskeleton suits that help them in their work. If it helps them to their work quicker, then obviously, there will be less of these labour needed given the same level of demand. However, it’s probable that nurses will see a greater demand given the level of ageing in developed societies while construction depends on different demand condition altogether.

(2) Growth in other/new industries

Let’s not forget that it’s not just blue-collar jobs that are at risk. In fact, due to the digitisation of information, software and AI can probably do repetitive, routine functions that people are used to doing. Administrative functions like filling forms, templates and other such bothersome activities can be automated.

As AI developed, even less routine jobs can be replaced. In the world of finance, trading, to some extent, has been replaced with AI and software. Robo-advisory, or being advised by software, is also increasingly being used by money management firms (see here).  The days of buying insurance directly from your insurer are here but dare we go one step further and leave the endowment and investing portions up to software as well? This would eliminate the so-called financial advisor whose only value-added service thus far is the relationship built between the advisor and client. It may be argued that many such ‘advisors’ exploit the relationship for a commission. While advisors may say that they bring clarity to the otherwise lengthy and complicated terms and conditions, it is difficult to take that stand when your income depends on it. Much better is the independent advisor who compares all the offerings available and provides balanced advice.

So, where are the likely pockets of growth? Leaving out the sectors that only the truly visionary can imagine (hyperloop anyone?), we can already see a greater switch to sectors that depends on creativity and novelty.

In Singapore, this has manifested itself in the form of various restaurants and cafes that offer products slightly different from each other. Some tout a special item on the menu while some brandish the fact that they were trained at famous schools, restaurants or bakeries or the fact that its the outpost of a celebrity chef. The ones that really get ahead though, are the ones that grind it out on the ratings (informally on platforms like Yelp or HungryGoWhere or formally in the Michelin guide). In retail, it’s even tougher. Competition based on price happens on platforms such as while a novel idea can help you out on Etsy, Kickstarter or Indiegogo.

In short, if you aren’t a big company reaping economies of scale (lower average cost of production as output increases) are opening outposts all across the world, it seems that for individuals, we’re back to the age of a craftsman where uniqueness and emphasis on dedication triumph mass production.

This isn’t unique to just physically creating products. We have robots that can now produce articles that transmit the facts of the matter. However, in the blogosphere or on YouTube (if you prefer), superstars are being made of those whose opinions provide clarity, prognostication or simply, a breath of fresh air. The software and AI haven’t gotten there yet.

Industries will change

If demand for goods and services change, obviously there will be winners and losers from it all. After all, what good is it to a manufacturer if costs are reduced by saving on labour but that also leads to a reduction in demand? In econ 101, we learnt that households provide labour and it is also households that form the demand for goods and services. So, companies and corporations have a vested interest to ensure that whatever labour is displaced gets employed once more. Hopefully, they get employed in a higher value-add job and therefore, draw higher wages than before. Realistically, that would take a lot of training and in meantime, the unit of displaced labour would depend on dissavings and/or handouts from the government.

The industries that will weather all these relatively well will be those that have income inelastic demand for their products. After all, even if one loses his/her job, one still needs to eat. Therefore, the basic triumvirate of food, shelter and clothing will do well. They will do even better if they are large enough to reap the cost savings of adopting new technology bearing in mind that labour gets cheaper relative to automation and robots as more and more labour gets displaced.

The likely scenario is that this pace of change will be more acceptable in developed, ageing countries where labour gets more scarce with each passing year. In developing countries, there might be possible problems as highlighted in this article. When you have a young, growing population without jobs, that’s just a recipe for disaster.