Archives for category: Singapore
Exhibit A

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

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

Gold! Gold! Gold!

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

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

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

Additional Considerations for SG Investors

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

Gold is priced in US dollars (USD).

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

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

It’s not just gold

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

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

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

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

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

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

Singapore General Elections are here! Grab your popcorn, sit back and enjoy the show.

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Singapore General Elections (essential reading)

Truth or Dare: A video about online falsehoods and Singapore’s POFMA law (Musings from Singapore)

What triggered me about the upcoming elections (Growing your tree of prosperity)

Lots of drama already in this edition of Singapore’s General Elections. PM Lee’s brother has come out as a member of an opposition party; A would-be PAP candidate has already withdrawn due to allegations about his character; Many of the old guard from various political parties retiring.

In a German Tech Giant’s Fall, Charges of Lies, Spies and Missing Billions (The New York Times)

I’m still trying to figure out how EY missed this. Was there really an elaborate and sophisticated fraud or was it just a willingness to turn and look away?

Higher Ed: Enough Already (No Mercy/No Malice – Prof Scott Galloway)

I think a lot of for-profit higher education is going to go under. It’s been a long time coming and well-deserved. Too many graduates in the workforce for jobs that do not require graduate-level training and too many graduates that honestly do not quite meet the mark.

Well, well, well…what a week. Amidst the chaos in the U.S and COVID-19, the stock markets have been on a tear.

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On the link between economic inequality and social injustice (The Reformed Broker)

How Big is the Racial Wealth Gap? (Of Dollars and Data)

Make no mistake, the social injustice in the United States is not just a racial one, economics also play a huge role. Money is power and the amount of resources held by a certain groups compound into huge advantages over time.

Massive Up and Down Moves in Stocks in the Same Year Are More Common Than You Think (A Wealth of Common Sense)

Many professionals have been caught on the sidelines of the massive move in the markets. But make no mistake, the returns to so many new investors may ultimately prove to be an illusion.

It’s going to hard to retool middle age PMETs (Growing your tree of prosperity)

Quite ironic that the guy making that post is doing so on blogspot but he makes good points about how, despite the government’s best intentions, that pretty much most of the retraining in high-tech areas are probably going to go to waste.

Case in point, I have a friend who spent a few thousand dollars “retraining” himself in Data Science only to find that his 3-month bootcamp is nothing more than a money-sucking opportunity for the trainer.

While unable to get a job in the area he retrained for, he eventually got a job doing the kind of admin-ish executive job that a graduate in any discipline would be well able to do in a government-linked organisation.

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For those who’ve been following me for a while, you’ll know that I really think that most Financial Advisors in Singapore have never really moved on from being anything more than insurance salespeople.

This latest post over at Investment Moats show what’s wrong with the Financial Planning industry. While the data collected by Kyith is by no means comprehensive and only shows what has happened many years ago, I highly doubt that the Financial Planners in Singapore today operate very differently from the late 90s/early 00s and I’ll explain why.

Don’t get me wrong

Before I go and point out the issues I see, I want to state upfront that this is by no means targeting the people who have chosen this profession or in any way about any particular financial planner. I personally know a few and they range from very experienced ones to rookies in the field and by and large, they are not bad people.

I also think that insurance is a necessary expense to protect against low probability but high impact events. The problem with the Financial Planning industry is how the industry evolved from dealing primarily with insurance to one that moved into advising their clients on all areas of their finances.

Proof is in the pudding

Source: Investment Moats

If you look at the examples compiled by Investment Moats, you’ll see that most of the plans (which look like endowment plans) are basically plans where people pay a regular premium in return for an amount that gets returned at the of the life of the policy.

In short, it’s a forced savings account that only matures some years down the road.

A cursory look at the returns per year (XIRR) shows that investing in any one of those plans returns any where from 2-4+ % which is my opinion is pretty weak if you think about the fact that interest rates have been much higher in the past.

The worst part of all this is not that the plans delivered as they promised. In fact, if you go back to the 2000s, I’m pretty sure the plans were being marketed with non-guaranteed returns that were much higher, probably in the 5 – 6.5% p.a. range.

A test for all financial planners

I’ve spoken about how the agency problem is a big one for financial planners in Singapore. Furthermore, the barriers to entry into the industry is low and once they are in, the focus on most training is in terms of sales and not actual financial literacy.

If you look at the returns of the above savings plans, you should probably realise that savers could do better by putting their money in the CPF SA*. Using the same parameters given in the example in Kyith’s article, I came up with a figure of $34,569.07 if the yearly premium of $1,228.80 paid over 20 years was compounded at 5% per year.

Compare that with the $28,317.13 received by the policy holder in Kyith’s story.

Therefore, my test is this:

If presented with a plan by your financial planner, ask them how many of their plans have actually paid the non-guaranteed rate or more and to show you the data.

Given the low-interest rate environments, if any of the plans presented show you non-guaranteed returns close to 5% p.a., you should run and hide.

And if they show you returns of less than that, then why bother since CPF presently gives you that returns but without the additional corporate risk and fees?**

If you have a financial planner that is willing to say, “hey, you can get protection from me, but when it comes to savings, my products aren’t exactly going to be the best bang for your buck.”, then do let me know.

*Less chance of default, almost equally long period where money gets socked away.

**I’m sure some of them will point out that the lower returns are due to the plans having some form of insurance as well. But if so, then why not just sell the insurance separately without the savings plan.

This post will come at a time where it’s of no further use to anyone because the deadline for selling the Rights Issue has come and gone but investors have until next Thursday, 28 May to decide whether they want to exercise the Rights and Mandatory Convertible Bonds (MCB).

In brief, the whole point of Singapore Airlines (SIA) Ltd. issuing a 3-for-2 Rights Issue, which gives existing shareholders the right to buy additional shares at a discount, as well as the MCB (295 Rights MCB for every 100 shares) is to raise a boatload of money in light of the COVID-19 situation which has all but brought aviation and its attendant industries to a stop.

The issues are designed to help SIA raise money but without the additional pressure on their liquidity since both issues (as well as the option for another issue of MCBs) aren’t obliged to pay out any cash out.

It’s a smart corporate move since the whole thing is backstopped by Temasek Holdings who is the largest single shareholder in SIA.

Question is: Is it a good deal for minority shareholders?

I was asked by a relative so I did some back-of-the-envelope assessment on the deal and this is what I think. I’ll look at the Rights Issue first followed by the MCBs.

The Rights Issue

Since this is a 3-for-2 Rights Issue, what this means is that if existing shareholders do not take up the offer, their positions will effectively be substantially diluted (40% of the pre-rights level)

So I took the Pre-Rights Issue share price and dropped it by 60%. From the price charts, you can see that on 22 April, SIA was closed at 6.06 while the next day it closed at 4.32 for a drop of slightly less than 30%.

I’m not sure why the market wasn’t fully pricing in the news of the Rights Issue but given the full dilution and assuming the pricing multiples stayed the same, then the price should have fallen to 2.42. Obviously, SIA’s share price hasn’t fallen to that level which means that the market is pricing in some optimism into SIA’s future post capital raising.

On 20 May, the Rights were selling for $0.45 and given that the Rights allows the Rights holder to buy SIA shares at $3.00 per share, then, assuming no transaction costs or arbitrage, a share of SIA should be worth $3.45. On 20 May, the shares were worth 3.57 (and they have increased to about $3.60 in the last few days)

This gives someone who bought the Rights a roughly 4% return if he/she exercises the Rights and if prices stay the same until 8 June when the newly issued shares start trading.

My personal take is that a projected return of about 4% is not worth the trouble given that SIA share price could also drop further.

The Mandatory Convertible Bonds (MCBs)

Now, this issue is somewhat of a different animal.

SIA has a right to call the MCB during it’s 10-year life and depending on when they call it, the return will vary from 4-6% p.a. The kicker is that if they don’t call it and let it mature, the MCB gets converted into shares at a price of $4.84 (at the current equity structure).

I think SIA pretty much has all the upside in this deal. If things look good and they have cash, they can call it early and pay a lower interest rate while if they need to conserve cash, they can always let it mature and dilute equity holders further. Also don’t forget that they’ve got themselves the option of raising more capital in another one of these MCB deals.

Although many investors may think highly of a 4-6% p.a. yield, I would hardly think of this as solid returns. Putting your money in a CPF SA or Retirement Account yields you pretty much the same (of course CPF could always lower interest rates but given that they haven’t despite the low interest rate environment of the past decade, you wonder if there are political constraints to this) but without the business risk involved.

In short

Putting more money in SIA at these terms seem like National Service . The dilution is real and the share price of SIA is not going back to levels like $8-10 with this current level of dilution. Using the EPS*, diluted by only the Rights Issue, of $0.231 and a multiple of 15x gives us a price of $3.47 which basically leads me to believe that the market has all but priced in any upside to SIA.

Also, this EPS is for the most recent year where SIA had 9 solid months and 3 shitty ones. Of the 3 shitty ones, only 1.5 (?) months of it was a complete shutdown on air travel.

The next quarter (Apr, May, Jun) will be positively worse in terms of earnings and even if air travel comes back, I doubt planes will be allowed to carry the sort of loads that they once used to unless there is a proven vaccine.

Life goes on

Unless you’ve been living under a rock, you would know that pretty much all of human civilisation is being affected by the Covid-19 situation and you would have heard about the various measures put in place by countries to curb the spread of the virus.

Here in Singapore, we’re into day 4 of what the government has called a “circuit breaker” which is effectively a lockdown of all non-essential services.

We’re basically asked to stay indoors unless you have to go out to buy groceries, get food, or to exercise. I can imagine that extroverts are already going crazy but for my wife and I, this is one of the blessings of life because we’re getting to spend a lot of time with our cats.

Reevaluating your priorities

From what economists and officials are saying, it seems that the economic damage due to the virus is going to be huge and the longer the movement restriction measures are in place, the worse it’s going to be.

Now, if you have been living from month-to-month, I wouldn’t want to be in your shoes. Life before the crisis was probably already tough and if you are/were in a job that is considered non-essential; or in an industry that is badly hit by the crisis (think: airlines or restaurants), then this situation is going to hit hard.

You have my sympathies but if you wish to survive, then you must apply for the help that the government is giving and be willing to take on jobs, no matter how menial, in industries that require the help (think: healthcare).

If you’re someone with millions or hundreds of thousands of dollars in the bank but think that you need help, fuck off. There are others out there in much greater need of help. Just because you can’t afford the loan on your Porsche or the mortgage on the apartment that was much more than you could afford shouldn’t really be the rest of society’s problem.

The virus is affecting low-income households disproportionately more than anyone else. In Singapore, this is playing out in the fact that the spread of the virus among foreign workers is much greater than among the general population.

Reevaluating your finances

March was a scary month for who had skin in the game. Even seasoned investors said that they had never seen markets come down so much in such a short period of time.

As scary as that was, the recent rally means that losses have been confined to the 10-15% range. In a previous post, I showed that typical bear markets usually take much longer to bottom out but that valuations would be ridiculously cheap by the standards of even the GFC or the AFC.

Now, the recent rally may be a head fake, or it may not be. Who knows? All I know is that valuations remain relatively cheap by historical standards and if you are looking to get into the markets, now is as good a time as any.

I have seen how some so-called gurus out there have seen their leveraged yield strategies blow up and it just brings to mind Warren Buffet’s saying that “it’s only when the tide goes out that you know who’s been swimming naked.”

Many of these so-called gurus who claim to be able to teach you how to invest are probably just a level above rank amateurs. You don’t have to pay hundreds or thousands of dollars to have someone teach you to buy the index, diversify your portfolio across at least 30 securities (but not too much more!) and rebalance the portfolio on occasion, say every year or so.

The advice in the above paragraph will save you time, money and effort plus you’ll probably do as well as, if not better than some of these investment gurus reaching out to the mass markets.

Reevaluating your life

If you’re in Singapore, I think the circuit breaker is a fantastic time to rethink your life.

If you feel lonely while working from home, maybe it’s a sign that you need some companionship.

If you’ve never exercised in a while, maybe the change in environment will help spur you into doing simple things to keep yourself healthy.

If you find yourself with lots of spare time since you save time travelling to work, why not pick up a new hobby like drawing or pick up new knowledge through the power of the internet?

Prior to March, I was still expecting to travel to see my brother but I guess the Universe had other plans for me when it burned down half of Australia and unleashed a virus on the world in order to prevent that trip from happening.

And with the whole Circuit Breaker thing going in, I guess it’s another sign that the Universe is telling me to spend more time at home in order to prepare for the Chartered Valuer and Appraiser exams that is happening in the middle of May.

Stay Safe and Stay Home

If you really want to help things get better, then the only way is to stay home and hope that the burden on the healthcare system is lessened. There may be lots of things that you can’t do right now but if you put your mind to it, there’s lots of other things you can do as well.

Just don’t waste it all on Netflix.

What a week! Can’t believe I had to say this again but the speed and volatility at which markets have dropped are nothing like what most people in the markets have experienced.

If you have holding power and are freaking out, here are some reads for you.

If you don’t have holding power and are freaking out, you should.

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Estimating Future Stock Returns, December 2019 Update (The Aleph Blog)

David Merkel’s model says that a buying opportunity is starting to emerge.

When Will Stocks Recover? (Morningstar)

Imho, still a little early to be putting out this headline but it gives a good overview of the kind of sentiment to look out for when expecting a recovery.

What If You Buy Stocks Too Early During a Market Crash? (A Wealth of Common Sense)

Ben Carlson runs a thought experiment. As for me, I find these times a good test of your investment plan. If your investment plan survives when all this is over, you’ll probably want to keep this play for future reference.

Financially Independent at 35 in an Unfortunate Way and It Can Happen To You Too (Dr. Wealth)

My only takeaway from this is the old adage of how more money is lost reaching for yield than at the point of a gun.

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Way back in January 2016, I wrote this post.

In it I added some more recent bear markets to the table that I had previously gotten from somewhere and updated it to try and crystal ball-gaze as to whether to things would be better or worse and this is basically what I said then:

2015/2016 – Oil, China, Commodities rout / 3539.95 (high in Apr ’15). Given today’s close of 2559.75, we have had a total of a  -27.7% drop over a total of 280 days.If we’re lucky, we’ll just have another 10% more of declines to go; If not, we’re looking at another 30%.

This bear has obviously felt more painful than the last one, especially so because things didn’t look very expensive from a PE10 point of view so I’ve been very early in suggesting that it’s not a bad time to get invested.

Oh, and how long more will the pain last? History suggests anywhere from 0-360 days. Either way, hang on for the ride!

I was pretty prescient as the post was dated 20 Jan 2016 while the market bottomed the very next day on 21 Jan 2016.

Unfortunately, of course, I was expecting the dour mood in the market to last anywhere from 0-360 days which meant that I only slowly bought into the market and by the time 2017 came around, I wasn’t fully invested and I felt that the market had run up too far.

The markets eventually topped out at close to 3,600 in June 2018 and never got back to that level. You could also argue that the more recent high is the 3,400 or so level made in mid-2019 but whichever level you pick, I think it’s right to say that we are way off those highs right now.

What’s next?

Those that have been following my blog for some time will know that I’ve been tracking the PE10 for the STI for a long time now and based on the PE10 measure, the STI in recent years has traded anywhere from 10.95x in Jan 2016 to 14.67x in May 2018.

Of course, the PE10 was lower than 10.95x towards the end of Jan 2016 but it’s close enough to give us a sense of how cheap things are and how cheap things could get.

I haven’t updated the PE10 since it isn’t the beginning of the month but the 10 year average earnings are currently about 260 which means that the current PE10 is just slightly over 10x earnings.

This is really the cheapest it has been for the data I have. Once again, the PE10 isn’t perfect and the data I have doesn’t track it perfectly but it gives us a good sense of the environment we’re in.

Could it get worse?

This is where some bear market history could be instructive.

Start dateEnd dateIndex startIndex end% changePeriod (days)EventSingapore Recession?
03/04/198515/4/1986690456.35-34%407US RecessionYes
08/11/198712/07/19871288.13595.77-54%118Black MondayNo
16/7/199010/11/19901304.49855.63-34%87US RecessionNo
17/2/199709/04/19982129.81805.04-62%564Asian Financial CrisisYes
16/4/201521/1/20163531.612532.7-28%281O&G blowoutNo
Singapore Bear Market History (updated until 2016)

So, if history is to be our guide, we need to ask ourselves which history looks similar to our situation? Is this more like 2016 or more like 2008?

If it’s 2015-16

If things are more like ’15-16, then expect the markets to drop at least another 10-15% from here and for the pain to last for another 5-6 months. I suppose the narrative in this case would be that no other bad news hits the markets and that the current narratives see the light at the end of the tunnel.

If it’s 2008-2009

First off, notice I didn’t say 2007. 2007 was the official top in the market, after which the market began a gradual slide amidst rumblings of trouble for financial institutions.

Then the panic hit in 2008 with the collapse of Lehman Brothers (September 2008) which followed the fall of Bear Stearns (March 2008). However, markets didn’t bottom until some 6 months later in March of 2009.

The difference between September 2008 and now is that markets had already fallen by some 50% from their levels in March 2008. Right now, markets have only fallen some 20+% which barely puts us in a bear market.

This scenario would probably play out if we start to see some sort of widespread credit event filter into the market as a result of the COVID-19 and OPEC+ situation.


Therefore, considering all scenarios. If I had to make a very, very rough guess, I would say that we should look for a bottom at around 1800-2200.

However, relative to even the GFC, valuations for the STI would be ridiculously cheap at those levels. Unfortunately, U.S markets aren’t cheap and that is driving a lot of market activity nowadays.

The thing that the market has going for it right now that is that markets have fallen so much in such a short period of time which almost makes it certain that we should see markets rebound hard in the coming weeks. In fact, the rebound might have already begun last Friday.

Regardless, watch the markets closely over the next 6-9 months. Chances like this don’t come around that often and don’t try to bottom fish because no matter how smart you are, you will probably never catch the market at the bottom.


The chance to get into markets at cheap valuations have come once again. It isn’t anywhere near as cheap as 2016 or 2009 yet but I’m sure we’ll get there.

However, things are probably only just getting started and will likely play out over the next 6-9 months.

WHAT A WEEK! Ladies and Gentlemen, Boys and Girls, if this is your introduction to a bear market, sit tight, buckle up and get ready for the ride.

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Some Helpful Datapoints in This Swift & Dreadful Market Fall (Investment Moats)

Kyith presents some good data points that may serve as a guide on where the market is headed.

How Long Does it Take to Make Your Money Back After a Bear Market? (A Wealth of Common Sense)

I’ll say more in a separate post but I think any one in their 30s-50s with a stable job is going to have the investment opportunity of a lifetime. It probably sucks though that many Singaporeans are busy paying off their housing and car loan and have nothing left over to invest.

Dead cat bounce, or buying opportunity of the decade? What happens next? (Financial Horse)

Like what FH says, I’m more worried that we’ve yet to see the worst of it because defaults haven’t hit the credit markets.

Been another wild week for the markets. Thankfully, we’re getting into the calm season as far as work is concerned.

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Feeling scared already? It’s not even a Bear Market yet! (Early Retirement Now)

I’m not sure about others but this is fairly early days if there is a major drop coming. If you can’t even take the volatility that we’ve seen in the markets the last few days, then you must be either (a) too young to remember how the markets were in ’08-09/ ’11-’12 or even ’15-16, or (b) you’re in the wrong game.

Markets will remain volatile as long as human incentives and behaviour are at stake. We can program the robots to do the tasks of trading and interpreting or even creating new signals but as long as the money belongs to humans, you can be sure that human behaviour will drive markets.

Why are young people so jelly about my Financial Independence? (Growing your tree of prosperity)

I’m not really sure why other people would be jealous of people who have been there and done that. Shouldn’t these people act as perfect examples of those who prove that what others think is impossible is actually possible?

I suspect that haters and disbelievers don’t want to confront the evidence in front of them because that would be an acknowledgement of their failure of imagination.

However, one should always be cautious. If you hear of someone getting rich quick through some clever scheme, the next thing you should ask for is evidence that it works. Typically, the scheme will have some stories of success so the next question to ask is “how likely is this scheme going to guarantee continued success?”

I suspect that it’s at this juncture that many investment/trading workshops out there will fail.

Xia suay: life insurance makes a person want to die isit? (Thoughts of a Cynical Investor)

My thoughts exactly.

The PAP government is pretty efficient and good when it comes to most things. Take, for example, how they’ve handled the Covid-19 issue in Singapore. Even if you are firmly in the opposition camp, you must give them credit for being able to marshal the necessary public resources in order to keep the situation in Singapore relatively contained.

However, whenever it comes to issues of social welfare, it seems that they have a imaginary bogeyman and to make matters worse, the figure in charge usually comes up with the lamest straw-man arguments.