Archives for category: Singapore

There’s a mystery in my current organisation that I’ve been trying to solve.

Currently, my organisation offers employees who reach the official retirement age of 62 years a one-year contract for the next three years. There is even an option to have that extended to 67. Of course, the employee has to meet certain performance requirements before these options are offered.

Some additional context

My organisation doesn’t offer a pension upon retirement. Singapore has a compulsory savings scheme called the Central Provident Fund (CPF) where workers have a certain portion of their monthly salary socked away until they hit a certain age.

Also, the colleagues in question are not low or even average-pay workers. They would easily be considered middle to upper-middle class folk for the last 20 or 30 years of their careers.

The mystery and my theories

The mystery for me is not what my organisation offers but why would my colleagues want to take that offer up in the first place. I have a few theories but none seem to be wholly satisfactory.

Theory #1: They need the money

One possible reason could be that some colleagues who work until 62 and beyond do so because they need to. In other words, if they retired at 62, they would have problems funding their retirement.

I’m not very satisfied with this theory because I’m pretty sure most of my colleagues have enough put away for the rest of their lives. Furthermore, most of their liabilities such as housing loan(s) and children’s education (yes, in this part of the world, parents usually pay for their education if they can afford to do so) would have already been settled.

Also, if you can’t afford to retire at 62 years old, then is another three to five years going to matter? It might also have been that many moons ago, these colleagues planned their retirement up till 65 or 67 and therefore, they are near the end but not quite. In that case, isn’t that level of planning a little suspect? What person plans to the exact year without having a buffer of some sort?

Theory #2: Retirement is boring

I can understand this sentiment. If you look around, there are many people who say that once their professional lives are over, their minds degenerate quickly because there is nothing to keep them engaged. This is a particular statement many elderly businesspeople make.

The flip side for my older colleagues is that interests can be cultivated or expanded. In fact, most of us have other interests outside of our professional lives. Wouldn’t retirement free up a lot of time to pursue those other interests in a bigger way?

Many older colleagues also tend to be grandparents and I’m sure their children would appreciate their help in taking care of the grandkids. Or maybe it’s finally time for my older colleagues to go out and see the world.

Theory #3: They love the job

Truth be told, there are some colleagues who fall into this category. They love the interaction with their students so much so that they don’t want to step away from it. However, the job isn’t all fun and games. There are many mundane administrative aspects to the job as well as the boring and utilitarian committee work that we’re all forced to be a part of. If they really love the job, they could always become a freelancer. This would allow them to focus on the teaching without having to be a huge part of all the administrative machinery.

If they love the administrative machinations, then that’s a whole other story but which begs the question- why not be part of an administration somewhere else instead? Other administrations would probably pay better.

Also, teaching doesn’t have to be confined to the classroom or the school. Sharing knowledge and guiding others happens digitally and in other venues such as religious organisations as well.

Conclusion

Those are my theories and none of them seems particularly satisfactory. From the viewpoint of a 30-something year old who’s been here for about five years, I can’t imagine why anyone would want to stay until 62. The only sane thing is that they really can’t bear to leave this place because of the joy of work. Therefore, my money is on theory #2 or #3 although there are some holes in that argument.

Having said that, if I could, I would go when I’m ready. After all, age really is just a number. If I was financially free, I would be doing what interests me or what is meaningful regardless of the amount of money it brings me.

So I woke up this morning (14 June 2017) to find the beginnings of a soap drama playing out on my Facebook feed. The entire blogosphere basically got into a frenzy about this news and the mainstream media was caught off-guard with the post released in the wee hours of the morning. This is just the beginning of the entire affair.

 

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The post that started the drama.

 

In case you missed it

 

So it appears that Lee Wei Ling (LWL) and her younger brother, Lee Hsien Yang (LHY) are not happy with PM Lee Hsien Loong (LHL) and his wife, Ho Ching’s behaviour with regards to the late Lee Kuan Yew’s residence.

The statement started off with some very serious allegations of misuse of power and harbouring political ambitions for PM Lee’s elder son. However, that part was very short on details and most of the statement centered around PM Lee and his siblings’ differences with regards to the treatment of their late father’s house at Oxley Road.

What does it all mean?

After reading the full 6-page statement and PM Lee’s response, here are my thoughts:

  • It seemed petty to be arguing over a house but I guess the larger picture here is not so much the house but LWL and LHY’s attempt to paint LHL as a power-hungry person to the extent that he is willing to go against his father’s last wishes. And in doing so, would be detrimental to the future of Singapore.
  • LWL and LHY are obviously not very good terms with LHL any longer. Going public with what is essentially a family matter is damaging to well-known personalities as all three of them are. Arguably, this is most damaging to LHL as compared to LWL or LHY.
  • The allegations of big brother being omnipresent are most probably exaggerated but if true, is a worrying sign of a paranoid personality who needs to be in control at all costs.
  • LWL seems to be the one with the least to gain or lose from this. LHL has quite a bit to lose- he can’t sue his siblings (can he?), those anti-PAP or even fence-sitters may see the allegations as somewhat truthful since it is ‘insider info’, the general public may question his ability to lead if he can’t even get his own brother and sister to back him, and most crucial, his son’s entry into politics, if at all, is now going to be tougher to push through. However, the upside is that he probably plans to step down sooner rather than later anyway.
  • LHY is the question mark here. Given that his son, Li Shengwu has also spoken out on the matter, could it have been a case of LHL not helping his nephew enter politics or is this setting the stage for Shengwu’s entry later on?
  • LWL and LHY’s naming of Lawrence Wong as a figure in all this, if true, just confirms most people’s suspicions that LHL’s cabinet has some yes-men in there. The question is who else and how many? Not the best vote of confidence for the whoever takes over from LHL.
  • In my opinion, LHL’s official response wasn’t the best. It sounded sad and defeated and although he tried to say that his siblings’ hitting the nuclear option tarnished his dad’s legacy, I’m not sure many people would connect the dots. After all, his siblings were accusing him of departing from the path his dad took and he didn’t really do much to refute what they said.
  • LWL and LHY were pretty nice actually that they didn’t bring in any personal anecdotes on Ho Ching overstepping her boundaries. Why? To help their big brother save some face? Or to not give LHL any ammo to sue them for? I guess we’ll never know.

I can sympathise with LHL because I have witnessed some drama in my own extended family. Of course, my own family is nothing like the Lees but the similarities in terms of the clash of egos and views are there. No one would ever wish that the full story gets out and to be honest, no one’s going to be interested anyway.

All in, LWL and LHY really hit the nuclear option with this one. LHY is never going to come back to Singapore after this and dropping this bombshell of a statement while LHL was away on holiday shows how much of a calculated move this was. Bringing LHL’s son into the picture also blocks his son’s entry into politics, if it was on the cards, for the short term. With the upcoming presidential election and next General Election, this release was designed to inflict maximum damage. As for LWL and LHY, I guess they don’t really have much to lose in the first place which explains why they did it in the first place.

The plot twist now would be that this was all done so that whoever manages to bring the family back together will be the next PM.

 

No, I’m not that gifted an investment writer to give you such a resource.

Instead, pop over to this gem by Investment Moats to learn more about Real Estate Investment Trusts (REITs).

The Sunday edition of the Straits Times has the Invest section which was the only real reason that I read anything in the Straits Times. I use the word ‘was’ because I haven’t gone through the paper in a very long time. The main reason is that I had access to copies of the Straits Times get a little more restricted and to be honest, the content in the Invest section seems to have gotten a little less useful.

Take the latest exhibit, The real cost of avocado toast. The article is obviously riding on the trend of bashing the guy who advised millennials to cut back on avocado toast in order to save for a downpayment on a house. The article does rightly point out that cutting back on certain habits every day and letting that extra savings compound will help you get quite a bit richer.

The problem with such advice is not that it’s wrong but that it doesn’t really provide you with a solution for getting it to work. It’s like telling an overweight person to eat less otherwise the chances of dying early gets higher. It’s good advice but the more important thing is how is the person supposed to use the advice to get results?

Since the article rightly points out that people need to cut back on certain habits, we must also acknowledge the fact that habits are hard to break. It takes a lot of willpower or an insanely good strategy to avoid going back onto the wrong path.

This is where I’ve found that it’s much easier to focus on how much you want to save each month and set up a standing instruction with your bank that automatically transfers that sum to an account that is relatively less liquid. i.e. You don’t normally use that account for daily spending.

Any monies that are left in the account after the automatic transfer to the ‘savings’ account is then left for spending. It’s that simple. People often think that this is not doable but I am willing to bet that it’s possible for the average person. After all, in Singapore, 23% of your monthly income gets put in your Central Providend Fund (CPF)* account and we’ve pretty much learned to live with that ‘savings rate’ of 23%.

So, try it. Start with transferring 10% of your monthly income to an account that you won’t touch unless you absolutely have to and have as much avocado toast you want with what’s left.

 

 

Recently, I came across an article about how a fresh graduate from SIM Global Education (SIM GE) who graduated with a University of London degree in Accounting and Finance has been trying to get a job that pays at least $2,500 a month. However, he has sent his resume out 40 times but only received a handful of interviews and an offer of a basic salary of S$2,000 with added commission from sales.

One of those clickbait sites that pass news off as politically charged nonsense basically took the article and even offered additional commentary on how even a S$2,500 salary would be below an average graduate’s starting salary. I’ve also seen further comments on forums about how S$2,500 as starting salary for graduates is a figure from 10 years ago.

The thing is, these people don’t understand Demand and Supply. The don’t understand product differentiation or inelastic demand either.

The simple fact is that the number of people graduating with degrees has gone up over the years. While the proportion of each cohort going to NUS, NTU and SMU may have been relatively stable, we have seen much more graduates from overseas and private universities.

At this point, some people may start to go along the usual anti-government stance of how many foreign workers we have on employment passes in Singapore but before one goes down that path, I suggest thinking of how many of those passes belong to workers in jobs that a fresh graduate can’t or won’t do. If you have those numbers, by all means, make an argument.

The other part of the article that I have a problem with is the implicit assumption that all universities are equal. They are not. A quick look at the University Rankings will show that and any prospective employee should know that any employer knows this. If employers know this, then any prospective employee with a degree from a lesser-known university should have spent their time in university not just studying but thinking of how to differentiate themselves from the bunch. For example, if I went to a business school known more for accepting students who can afford the tuition instead of acceptance due to meeting a stringent entry criteria,  I would have actively participated in business plan competitions, tried starting a business, actively networked to get to know and ask business people or C-suite personnel to be a mentor.

I suspect the student profiled in the article is a sign of things to come. Graduates, as a group, need to expect lower starting salaries in the near future with the increase in the number of graduates in the job market as well as the fact that more entry-level jobs can be automated.

Some days are more special than other. 5th May is a special day for me. This year, I witnessed some students graduate which is probably one of the few days in the year where my job really means something.

This year, I witnessed some students graduate which is probably one of the few days in the year where my job really means something. For most students, I only teach them one module: microeconomics and to be honest, I don’t really care if they remember anything that I taught. After all, how many of them will go on to become economists or even study economics at a higher level? It would great if they learned how to apply some microeconomic concepts to help them make better choices but that wasn’t really what the focus of the module was. What’s more important is that I hope they see me as someone they can count on if they should ever need my help. I wish them all the best and hope that they all realise that their road ahead is long so whatever they do, enjoy the journey and take the time to smell the roses whatever their ambitions might be.

5th May is also the birthday of the future Pirate King. It’s a happy coincidence because the 5th of May also happens to be the day I got married to the most wonderful person in the world. Before getting married and having a place of our own, I never imagined that I would be washing the dishes, changing bed sheets, mopping the floor, cleaning the toilet and cooking on a regular basis. As dreary as the word ‘chores’ sound, I’ve come to realise that doing chores isn’t so bad. It’s a moment where one can just focus on the task at hand and not get lost in random thoughts or “what-ifs”. It also lets one appreciate life a little bit better and I suspect that if the day should come, I’ll be a little more resilient as well.

This year, the Mrs made a remark (in jest or was it a hint that I didn’t get?) that I thought was quite cute. She said that in the past, I’d probably plan a nice surprise, at a nice restaurant while this year, I took her to a ramen restaurant (it was good ramen though). When we’re fifty, it’s possible that we may be at a hawker centre (if they still exist then) having fish soup.

But you know what? There’s no one else I’d rather be having fish soup with.

Holy cow! 1/3 of the year has come and gone. So how’s your portfolio doing?

I just wanted to share a great insight on investing prowess vs. building wealth. Obviously, the better an investor you are, the quicker you’ll build your wealth. However, for mere mortals like most of us, I want to assure you that it’s still possible to build wealth.

Enter exhibit A. (Actually, this is the only exhibit.)

 

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NAV per share (in blue) vs. Growth of actual portfolio (in yellow)

The blue line (NAV per share) shows how much $1 invested in the portfolio would have grown to. So naturally, this involves removing the effects of adding more cash to the portfolio which basically shows us how good an investor I am.

The yellow line (Actual growth) shows how many times the portfolio has grown by relative to the starting date. Of course, this includes savings and additional cash added to the portfolio.

If you’re aiming to be financially free, I can’t think of why building wealth would be inferior to being a good investor. Sure, being a good investor gets you there quicker and probably allows you to enjoy consuming more at the same time but if the goal is to eventually not have to worry about working for money, then getting a big enough portfolio that will allow you to live off a safe withdrawal rate (3-4%) should be your main priority.

My experience so far is that being an average investor will help you get there too.

 

PS: Of course, once your portfolio gets huge enough, your savings will hardly matter. An average household in Singapore makes something like 80-90,000 SGD a year. If the portfolio reaches 2 million SGD, saving half a year’s income (which is near to impossible for most people) will only move the needle by about 2%. Having said that, if your household can’t retire in Singapore on a 2million SGD portfolio with your house fully paid for, you have a spending problem.

An update on the Singapore property market. For background on this, read here. All data from SRX.

SRX_feb17

Using the price of HDB flats as the benchmark, we can see that prices for private property in all categories are at a sizable premium to HDB flats. Among the different classes of private property, the premium for private landed remains the highest although the index seems to be on a downward trend. For non-landed, it appears that resale units are at a lower premium than new units.

SRX_feb17byregion.JPG

As for sales of all (new and resale units) non-landed private property, it appears that the area commanding the highest premium to HDB flats are in the RCR (Rest of Central Region).

Of course, prices will vary for individual projects and units but from a macro perspective, it’s going to be much easier to bargain hunt during periods like the early 2000s and ’09-’10 where there was hardly any premium over HDB flats. In fact, times like 1999 would have been a godsend to property investors.

I guess my two main takeaways are (1) despite the Singapore property market supposedly being in a doldrum, private property prices are not cheap right now and (2) HDB flats do keep their value quite well being the cheapest form of housing in Singapore and therefore is a reasonable benchmark for evaluating priciness (or cheapness) of the private property market.

In not-so-latest news, Minister of National Development, Lawrence Wong came out to caution people from buying older HDB flats* in hope that the government places the flats under a SERS programme under which owners of the old flat get compensation in the form of cash (with the flat valued at market rates) or a choice selection of a new flat in the vicinity.

Of course, the good minister didn’t want his words misconstrued as “all other flats not selected for SERS, which make up a majority, have a chance of their value plummeting should the leases be allowed to run its course” so he came up with additional thoughts on why HDB flats retain their value.

First thing to notice is that the good minister did not say that HDB flats are a good form of wealth enhancement. He only said “store of value” which everyone who has done econs 101 would interpret as keeping its “real value”. In other words, any monies sunk into an HDB flat will retain its purchasing power should you wish to monetise your flat. If you make money from your HDB flat, then count yourself lucky.

The second problem, which other netizens have pointed out, is that Mr. Wong’s example doesn’t reassure buyers who bought older flats which have already run through a good chunk of the leasehold life. (For details, see this link)

This brings me back to a point I made some time ago. Most Singaporeans sink their CPF monies into their property. If your property is going to, at best, hold its value, you better think twice about counting solely on your property to retire.Even

Even monetising your HDB flat through the HDB’s lease buyback scheme where you trade the remaining years of the lease for a monthly income has problems. First, the payouts are not inflation-indexed. Second, inflation for retiree households tends to be higher as healthcare and transportation are two of those components in CPI that rise faster than the average component in the basket. In short, fixed incomes and rising costs don’t make a sound retirement plan.

 

Notes:

*HDB or Housing Development Board flats are Singapore’s form of public housing. The flats are of decent size (compared to places like Hong Kong), decent quality and generally cheaper on a dollar per square foot basis compared to private property. However, all HDB flats are on a 99-year lease from the government. At the end of the lease, the flat is returned to the government. However, with Singapore being such a young country, there hasn’t been a single case of whether the government pays any compensation for taking the flat back or the value of the flat goes to zero.

 

So last Friday, I was tasked by the Commander-in-Chief (C-I-C) of the Household to carry out a very important mission. My mission was to get my hands on a redeemable plush toy from a particular CapitaMall Trust-run mall.

First, some background. CapitaMall Trust has been running a promotion where shoppers can redeem a Disney Tsum Tsum plush toy. CapitaMall Trust being the smart buggers they are (disclaimer: I’m a grateful unitholder) decided to have different characters available at different malls so real die-hard fans would have to go spend at various malls in order to collect all six characters.

 

CapitaLand’s really making money out of these guys. Ok, they have to pay Disney licensing fees so I guess Disney’s the real winner here. Photo: Alvinology

 

So, my task was to spend enough to redeem an Eeyore Tsum Tsum plushie. I was given specific instructions to get it on Friday itself because that was the launch day and no chance must be taken that the target would be fully redeemed before I could get my hands on one.

Dutifully, I met the minimum required spending amount by 7:13 pm and took a queue number for my chance to get my hands on one of those adorable buggers. To my horror, because the mall has a system that allows you to key in your mobile number and the system will send you an SMS when your number is about to be called, I only realised at around 8 pm that there were some 200 people ahead of me in the queue. Even at 10-plus pm when the mall was about to close and the C-I-C arrived, my turn was nowhere in sight. Now, my palms were sweating. Worse still, the mall had stuck ‘fully redeemed’ stickers up on their wall adverts and it looked like there were only 50 more or so toys left to be redeemed.

 

Nearly thought we couldn’t get this fella.

 

The mall staff stayed back for a bit, trying to clear as much of the crowd as possible but it was only at 11 pm when the mall decided to throw in the towel and tell people to come back the following day. As soon as I heard that the mall’s system meant that we couldn’t retain our current queue numbers the following day, I realised that the turn of events meant that things were in our favour. Had the queue numbers remained, we would have some 150 or so people in front of us. If we stayed back to gripe about how the mall staff could have alerted us earlier, we would just be wasting time on the time we had already spent. In short, we would have fallen to the sunk-cost fallacy.

Also, the marginal cost of arguing with the staff was less than the marginal benefit from going home early to get as much sleep as possible so that we could hit the mall again the following morning.

Anyway, we went back early the next day, had a nice breakfast at Macdonald’s and were fourth in line an hour before the counter was due to officially open. The counter opened early and we got Eeyore within 15 minutes. Even better was the fact that we had so much time to kill before the next thing on our respective agendas for the day that we decided to catch “Beauty and the Beast” turning our morning into a proper morning date. It was one of the most fun things we’ve done in a while.

Despite my clickbait-ish title, I’m not saying economists have all the answers to help us deal with every situation in life. I’m saying that certain basic economic ways of thinking can help us make better decisions given the uncertainties of life. It’s inevitable that even if we make all the right decisions, the outcomes may not always be in our favour.