Archives for category: Singapore

I can safely say that almost everyone reading this blog would like to reach financial independence and retire early if they could. In recent years, this has caused many people to jump on the Financial Independence Retire Early (FIRE) bandwagon. There are also plenty of people who have probably given up on retirement.

Recently, I saw a post on Investment Moats on the exact same topic. The question was one that most people probably have — Can I afford to retire on $X of net worth?

The problem with such questions is that everyone’s situation is pretty unique. Not all people are married, not all people have kids, not all people have to the same number of kids, and not all people want the same lifestyle. This is why financial advisors still have their place in this day and age because some judgement is needed to assess a person’s financial circumstances.

At the same time, I thought that if there’s a benchmark or a guidepost for people, that would be a goal that people can work towards. I saw a fantastic post on Reddit that used average household expenditures to determine financial independence.

So I thought, ok, why not use data from the Department of Statistics Singapore to determine the average expenditure per person and the net worth needed to generate that annual expenditure.

I found data that separates average household expenditure by residential property type and what I did was to take the average household expenditure, divide it by the average number of people in a household and multiply it by 12 to annualise it. Then I took that expenditure number and multiplied it by 33.3 and 25 respectively to show what net worth you need to achieve FI if you’re an average person.

Here are the numbers:

Avg. Monthly Expenditure (by household type)* FI AMOUNT (PER PAX) 3% FI AMOUNT (PER PAX) 4%
TOTAL** 4724  $         566,880  $         429,455
HDB 3831  $         459,720  $         348,273
CONDO 8000  $         960,000  $         727,273
LANDED 10409  $      1,249,080  $         946,273

The nice thing about this table is that it determines what net worth you need relative to the average kind of living standard you want. For example, if you want to live like a person in an average HDB household that spends $3,831 per month, you would need a net worth of between $348,273-459,720 if your withdrawal rate is 4% or 3% respectively.

Please be aware that the table above shows us the average net worth needed per person. If you are the sole breadwinner in your household of two, then you need to multiply those net worth numbers by two.

Of course, doing so makes it seem more challenging and you might question if you’ll ever be able to retire but keep in mind that the average household expenditure need NOT be your expenditure. You can always spend much less than the average person. Life is not a game about trying to see whether you can buy more things than the next person.

This simple exercise should help give you a target to work towards but take not that it’s not scientific in that the numbers are absolute. Rather, they should serve as a guide and adjustments should be made to cater to your own situation.

 

Notes:

*The data is from the 2012/2013 Monthly Household Expenditure survey. To bring it up to today’s numbers, you would have to factor in the inflation rate for the last few years. Do not that inflation rates tend to be different for different income groups so use the right rate.

**The ‘TOTAL’ group includes households whose residences are not part of the other three categories. e.g. Non-residential shophouses etc.

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I have to confess. I haven’t been catching up on my online reading this week. Been trying to get through “Money Changes Everything” by William Goetzmann. It’s a fascinating read as you realise how modern civilisation wouldn’t have been possible without finance. Another way of looking at it is that finance shaped modern civilisation and basically, a big part of the way we live today is because of finance.

Anyhow, here are some other things you could catch up on.

 

The Nine Essential Conditions to Commit Massive Fraud (The Reformed Broker)

Speaking of financial history, Joshua Brown gives a fantastic overview of how financial fraud is committed. Against the backdrop of the 1920s and using the profile of Ivar Krueger, Joshua runs through each step, illuminating it with examples from Kreuger’s life (which is detailed in a new book) and other more recent examples such as Enron, Madoff and Elizabeth Holmes.

If you read only one thing on this list, this should be it.

 

Bloomberg: The Good and the Bad of Retirement Saving (The Big Picture)

Joshua Brown’s colleague, Barry Ritholtz provides commentary on Vanguard’s annual review on retirement savings in America. It’s shocking to see how different the average and median amounts in defined contribution retirement plans are. Despite the positives in this year’s review, one major point he makes is that Americans are still not saving enough.

I suspect we might find the same (albeit to a lesser extent) here. CPF contribution rates are high but most Singaporeans spend a good chunk of it on housing. I’m not sure the minimum amounts in the Retirement Account (RA) provide for an average standard of living.

 

Policies, politics and paranoia: Singapore Democratic Party chairman Paul Tambyah goes On the Record (Channel NewsAsia)

I don’t usually like to post stuff on politics and I’m surprised that CNA even got someone from the SDP to present their views. Dr. Tambyah makes some very good points in his interview and I suppose if Dr. Chee was smart enough, he should let Dr. Tambyah take over completely. Dr. Tambyah’s image is much more appealing one than Dr. Chee’s. Having said that, being too much of a nice guy may not be useful in politics? I don’t know.

 

books on bookshelves

Photo by Mikes Photos on Pexels.com

 

Last week, Minister for Education, Ong Ye Kung, spoke in parliament about the current education landscape. TODAY newspaper (which is doing a fantastic job btw) published an excerpt of the speech he made in parliament.

In the excerpt, Minister Ong addresses what he sees are two paradoxes in the education system — meritocracy and inequality.

You can go over to the link above to read the excerpt but there are two things he brings up in his speech that I want to comment on.

PSLE: The sacred cow that still can’t be killed

On the PSLE, he says:

Another common suggestion that was raised is to scrap the PSLE, one of the sacred cows.

I will admit that PSLE is far from a perfect system and it does add stress, a lot of stress sometimes, to some parents and students, and the Minister too.

But it happens also to be the most meritocratic, and probably the most fair of all imperfect systems.

If we scrap it, whatever we replace it with to decide on secondary school postings, I think is likely to be worse.

He then mentions that in Switzerland, students are assigned to secondary schools near their home and that 7% of students, presumably at their parents’ behest,  attend private schools which are the domain of the affluent.

I’m not sure why the Swiss model is necessarily worse than ours.

Assuming the public schools are of a high enough standard, what’s so bad about having most students attend a school near their homes?

As I see it, some positives would be:

  1. Kids don’t have to worry about a high-stakes exam before they are 12.
  2. Less time spent travelling to school equals more time for other things.
  3. Having more friends that also live in their community.

In the longer term, educated Singaporeans, especially those with experience living abroad, might think of staying in Singapore instead of leaving for greener pastures. I personally know of many people, all graduates, who have left or are seriously considering leaving Singapore for the sake of their kids.

I think the difference in the percentage of students attending private school between Switzerland and Hong Kong that Minister Ong cites is also more a reflection of the public’s perception of the public school system rather than an argument that scrapping PSLE will lead to the rich getting richer. Anyway, MOE should not worry about this as the current mantra is that “every school is a good school”.

 

Class Size: Smaller is not necessarily better for grades. Yes, but so what?

Minister Ong cites two studies, one done in Hong Kong and another done in Israel. I quote the bit on the Hong Kong study for readability:

Why then is MOE cautious on the issue of class size? Because how it is implemented makes all the difference. Let me cite you the results of a few studies to illustrate this.

They are done in overseas context, but nevertheless these are scientific studies and we should take note of the results.

In 2009, Hong Kong did a Study on Small Class Teaching in Primary School.

It put about 700 classes through an experiment over three years, varying their class sizes along the way.

The study found that however they vary the class sizes, there were no significant differences on performances compared to the territory-wide averages.

What Hong Kong did find was that where an experimental school or class did significantly better, it was because the principal was more experienced, took an active role in developing the curriculum, developing the teachers, and involved parents in the education.

Now, I’m not disputing the findings of the study but rather, I want to provide some perspective on interpreting the findings.

In my line of work, the classes I teach have increased by around 25% in size* from roughly 20 students to 25 students per class since I first joined. This is despite the decrease in the number of students enrolled in the school.

In short, the school has been getting more out of each teacher as the total number of hours we teach per week has remained the same but we have more students in each class.

The first thing that happens with more students per class is that the load for marking will increase. The second thing is that the administrative load increases — maybe it’s extra counselling you have to do because you have to chase students to complete a survey or there’s an extra counselling session to be arranged because a student is falling behind in school. Therefore, reduced class sizes will reduce the number of administrative tasks that each teacher has to do.

Which brings me to the next point.

Even if a smaller class size has no effect on achievement, it has an impact on other things. Achievement is usually measured in terms of a student’s grades. What if smaller class sizes lead to a closer bond between teacher and student? Better sanity for teachers? Less staff turnover?

Aren’t those other things important as well?

Maybe I’m being salty because they increased the parking charges but being too focused on the relationship between class size and students’ grades is probably a problem of measuring the wrong thing. Besides, isn’t Minister Ong’s own aim to de-emphasise academic achievements? In that case, why not measure class size against other things like staff and student welfare?

Unless the message is that those things don’t count.

 

Let me know what you guys also think in the comments below.

Notes:

*The class size is much smaller than what primary or secondary school teachers have to deal with and you may say that we had it good to begin with but I bring up this point to show what teachers have to deal with when classes get larger in size.

The focus has turned to the markets this week. Here are some things to catch up on.

gold link pocket watch

Compounding requires Absorbing Damage so You’re Never Forced to Quit (Investment Moats)

Kyith has a post that I think underscores that in order for compounding to work, it takes time. And throughout that period of time, things can (or should I say, will?) get pretty nasty sometimes.

For me, the interesting bit is that I never knew there was an ishares ETF that tracks the Singapore market. Kyith’s example about how buying this ETF at its inception* during the highs of the Asian Financial Bubble led to paltry returns over the next 21 years is also very illuminating.

In short, if you buy when markets are expensive, you will live to regret it.

 

New cooling measures: The show has just begun (Property Soul)

Vina at Property Soul has come out with her take on the new ABSD measures and what it means for the property market in Singapore. I’m pretty sure many of you may have already read this but FWIW, stay tuned to her site for more in the coming days.

 

Some Considerations For Investing Globally (A Wealth of Common Sense)

Ben Carlson has a great post on the case for investing globally. He’s written it from the perspective of an investor in the U.S. but of course, the same would apply for someone outside of the U.S.

What’s interesting for me is how the S&P 500 and MSCI EAFE (which represents investing in developed global markets) have taken turns to outperform one another.

While the simple case would be to invest equally in both and rebalance periodically, the more enterprising investor could invest in one, and then start switching to the other as valuations become relatively cheaper in the other.

Also, based on the table, might it be suggesting that in the next period, markets outside the U.S.? From a valuations standpoint, it certainly seems possible.

 

Mainland developers are ‘money mills’ that rely on spiralling asset prices (South China Morning Post)

Many people have been warning about credit bubbles in China for some years now. This opinion piece provides a look at the mechanism by which the credit bubble has developed. If this is true, then the stock markets in China may be on to something after all. And if it bursts, then expect HK and SG markets to be badly affected as well.

 

Wealth Is What You Don’t See (Fervent Finance)

Sustaining Wealth is Harder Than Getting Rich (A Wealth of Common Sense)

Finally, on the personal finance front, two different articles which highlight what should be obvious truths.

The first one makes the point that for most people, getting wealthy is a result of cultivating good habits with money — being frugal and thrifty are sufficient components to getting rich.

I personally know a few colleagues who have been mid-level civil servants for a good 30 years and right now, they would easily qualify for the top decile in terms of net worth. Yet, they watch every dollar. To them, the best meals are the ones in the hawker centre or coffee shops. They fly economy because it’s cheaper and they would never stay in a 5-star hotel unless it came at a good price. They are some of the most practical and humble people I know.

The irony is that some of the kids we teach think buying Yeezys or NMDs, which cost hundreds of dollars, and 80-dollar T-shirts show that they are rich. What they don’t realise is that the guy standing before them in the classroom could be worth millions, never have to work another day in his whole life but is wearing a $20 polo tee and sport shoes he copped at a sale.

The second one makes the points that getting rich and staying rich are two different things. You may have gotten rich through a lucky break such as riding the wave of an industry that’s experiencing unprecedented growth or an inheritance. But staying rich takes much more than that.

You can’t spend like a drunken sailor (which is essentially what Johnny Depp did) and expect to remain wealthy. This is why the Chinese have a saying that “Wealth doesn’t last three generations.”

In my life, I’ve seen how some of my extended family behave and everything is playing out according to the pattern above. In my family’s case, it may even be accelerated. The first generation built the wealth through sheer hard work and grit. The second generation has grown it (somewhat) but my generation, the third one, is pretty much spending it away.

 

 

STIjul18.JPG

Markets have been hit. Are you worried?

 

So, in February I wrote this:

I’m not out of the markets because I believe timing it is a futile exercise but I moved more money to cash/bonds as valuations got higher. In fact, I stopped buying anything after Feb last year.

This week, no thanks to the government increasing the Additional Buyer Stamp Duty (ABSD) on the sale of property, the markets fell roughly 2% on Friday alone. The STI is now down some 268 points or roughly 8% from the start of the year. From the highs of 3,577 reached in April, the market is now down 11.7% which puts us firmly in correction territory.

As mentioned in my February post, I stopped buying into the markets since February of 2017 as things were getting expensive and I basically enjoyed the ride up. I also started trimming some positions towards the end of 2017 as markets climbed. Selling UMS at what was nearly the peak for it netted some accounts a nice profit.

In case, you’re thinking that I made out nicely, I haven’t.

A couple of stupid decisions, like not selling Venture at its peak (I actually placed the order to sell it at $28 but it didn’t get filled) and not selling Starhub at all (this could be one for the history books) meant that my portfolio has been hammered somewhat. Not knowing when to sell has been one of my weak points and still continues to haunt me.

However, what I’m much better at is knowing when to buy. Thankfully, I’m (relatively) young and therefore being a net buyer is still the right way to go. By all the measures that I’m tracking (e.g. CAPE for the STI, difference between PE10 yields and the 10 year government bond, and some trend indicators), it appears that a buying opportunity is starting to appear.

A word of caution. Things are NOT dirt cheap based on valuations. We have seen cheaper valuations in late ’08-09 as well as ’16-early ’17. What many people don’t realise is that the market was much cheaper in early ’17 compared to mid ’10-’11 despite them being roughly at the same levels. This is because earnings had risen from 2011 to 2017 while prices barely rose.

This is the mistake that my senior colleague made. He was anchored on the price of the market and therefore, a level of 3,000 looked expensive to him in early 2017. This caused him to basically miss out on the upswing in markets in 2017.

If you think things are going to be as bad as they were in 2009, then based on current normalised earnings, the STI should bottom out somewhere around the 2,700 level. Expecting the STI to hit 1,500 as it did in the depths of the Global Financial Crisis is expecting the market to be hit CAPEs of 6x! That’s probably even lower than levels during the Asian Financial Crisis.

 

What do you all think? Let me know in the comments below.

In part 1, I detailed the most important takeaways from ‘The Intelligent Investor‘ (although in my haste, I left out the idea of Margin of Safety). In this part, I want to show you the parallels between the act of buying the book and investing.

This is essentially the second reason why I asked my younger brother to buy the book. I wanted to see what his thought and action process was like.

Reason 2: Buying stocks from a value perspective is pretty much like buying anything else

intelligent-investor-benjamin-graham

#1: Hardcover or Softcover?

Now, there are various ways to think about the difference but let’s take a look at the first factor that comes to mind — price.

Hardcover books are more expensive than softcover books although the first print comes out earlier than the softcover. In the past, I used to automatically buy the softcover version of the book since I figured that I was getting the same content for a cheaper price.

As the years have passed, I’ve come to realise that hardcover version of the book lasts much longer than the softcopy version of the book. Sadly, my own copy of ‘The Intelligent Investor’ is an example of this.

For things that you genuinely treasure, it never makes sense to consider only the price of the stock. In investing, the parallel to this would be buying stocks just by looking at price. Some people who buy stocks actually think that a stock that costs $10 is a more expensive stock that cost $1.*

The other parallel is to remember that sometimes, cheap stuff is cheap for a reason. Just like the book, a stock that sells for pennies (aptly called “penny stocks”) could reflect the actual fundamentals of the company.

#2: Borrowing before buying

Although I recommended that my brother buy the book, one other thing he could have done is go to the library to borrow the book first. You may say that he trusted me, as his brother and someone who knows a thing or two about the markets and therefore didn’t have to check the book out first.

However, borrowing the book is a smart thing to do if you want to know whether it’s worth spending your money on. In investing, this is akin to fundamental analysis where a would-be investor investigates the earnings, assets and cashflows of the firm in order to know what price to pay for the stock.

This could also be a good step before you decide whether it’s worth buying the hardcopy or just the softcopy, or whether the book is even worth buying at all.

Conclusion

In short, most people know exactly what to do when they buy a product. They check out the reviews, they compare the specifications between one product and another and they also compare where they can buy the good for the best price as well as other factors like delivery and any warranties from the manufacturer.

It’s strange that many people don’t do this when it comes to investing. They don’t compare the returns from one investment to another, whether those investments are guaranteed or the guarantee is merely a probability. They buy high for fear of missing out and sell low for fear of losing everything. Swayed by fluctuations in price, they hold investments for ever shorter periods of time.

It’s just weird.

Investment should be like buying anything else. Thinking of it as such will make you a better investor.

 

Notes:

In case you’re wondering, paying $1 or $10 for a stock doesn’t matter. What matters is how much you pay relative to the earnings per share.

grayscale photography of man praying on sidewalk with food in front

Photo by sergio omassi on Pexels.com

 

It’s been some time since I wrote about inequality and how the poor in Singapore have fewer options. Since then, there’s been a slew of commentary and in-depth articles on this topic (for example, see here for a piece from the ST).

I’m not sure why there’s been so attention on this topic lately but I’m glad that this topic is in the limelight. In fact, the Straits Times (ST) article that I shared above mentions three cases and how in each of those cases, the poor have terrible options that could either (a) hinder social mobility or (b) mean that they’re always living life on the edge and one unfortunate incident could push them over.

What Many Singaporeans (Still) Think About The Poor

For me, the gem is in the comments and discussions on the reddit page discussing the article and there are some people who still don’t get it that the poor face terrible odds when it comes to making it out of poverty.

The commentators who say that being poor is a result of terrible choices and that the poor should know better are typical of the government’s thinking that welfare is a dirty word and will lead to a crutch mentality*.

To be fair, the government has softened its stance in recent years (probably as a result of GE 2011) but structurally, welfare tends to be on a case-by-case basis as the government has this thing about appearing prudent.**

You can tell that the government still thinks welfare across the board is a dirty word because they like to mention that certain ministers came from humble backgrounds and despite that, they’ve succeeded. In recent years, the same goes for students who have done relatively well, or passed, national exams despite odds like less-than-average family backgrounds or illnesses.

Using Isolated Stories As Shing Examples of Self-Reliance Doesn’t Help

The problem with using isolated examples is that it gives a distorted view of how big a handicap being poor is. I’m not a privy to such data but I sure hope someone that’s doing the research is looking into it. We need the data and if the data shows that majority of poor people lead less healthy and/or have less chance at social mobility for them or their children, then we can call the bluff on the government’s use of isolated examples. Otherwise, the government can call the bluff on the activists, academics and critics calling for more help for the disadvantaged.

For me, I was quite convinced because I heard the economic argument by Nick Hanauer (see here for a later version of his talk). Think of it. How much stuff can rich people buy? Rich people may have wealth and incomes that are thousands of times that of poor people but they certainly don’t buy thousands of stuff more than a poor person. You don’t see a rich person with a thousand times more T-shirts than a poor person, do you? And Mr Hanauer was talking about the middle class. So what more the poor?

Like I said, I don’t have all the answers and I think most people in Singapore don’t either. What I’m aware of is the issues are not as simple as “self-reliance” or “to try harder” and I think many people need a paradigm shift from that idea. I’m glad that the mainstream media and the academics finally have time in the sun on this topic.

 

Let me know what you think in the comments below.

Notes:

* The irony is that these same people are probably the sort that expects the government to do something for every single situation. MRT breakdown? LTA’s not doing their job. Floods? PUB’s not doing their job. Kid failing in school? Teacher’s not doing their job. And as for the crutch mentality, guess what? We’re already heavily dependent on the government to provide housing.

** The irony of this is that our Ministry of Defence gets the lion’s share of the budget each year and no one questions the prudence of military spending because there’s always the boogeyman that someone is out to get us if we appear weak. I guess MINDEF can thank Mahathir for making a comeback. This argument holds more water now that there’s a different government up north.

Some weeks back, my younger brother wanted to learn about investing. I thought about it long and hard for quite a few weeks and eventually, I told him to go and buy this book – The Intelligent Investor by Benjamin Graham, the version with annotations by Jason Zweig.

intelligent-investor-benjamin-graham

Don’t call yourself an investor if you haven’t even read this

Who is Ben Graham?

Benjamin Graham is more famously known as Warren Buffett’s professor and former boss. Graham, together with Dodd, wrote the classic textbook, Security Analysis. Essentially, Graham is the godfather of Value Investing.

Graham biggest contribution was to popularise the idea that buying stocks should be a function of what you get relative to what you pay for. What you pay for is the price but what you get is a share of the profits and assets of the business. In essence, Graham popularised the use of the P/E (price-to-earnings) ratio and, together with Dodd, suggested normalising earnings before comparing with price, which is basically what Shiller’s Cyclically Adjusted Price to Earnings (CAPE) ratio is.

Anyway, I told my brother to buy the book for two reasons and this post is essentially for him.

 

Reason 1: It’s the right way to think about Investing

I don’t mean to offend anyone from what I’ve seen, too many people approach business and investing the wrong way. They learn wrong ideas and end up doing stupid things until they either realise it too late or never at all.

Many people think that investing is all about buying low and selling high and they fail to understand what it really means to buy a stock. From ‘The Intelligent Investor’, there are three important lessons to learn.

#1: Price is what you pay, Value is what you get

Buying a stock means buying a share of the business which is why stocks are also known as ‘equities’ which basically translates into ownership. The essence of Graham, which is at the core of what Buffett and other Value Investors believe, is that an owner of the business cares about the assets of the business and what earnings or cashflows those assets can bring the owner.

Now, the majority of “investors” in Singapore only care about price. They know how much they bought a share of Singtel for. And they know how much they can sell one share of Singtel in the market right now. Why? Because the price is the simplest piece of information to find.

Better investors can cite the earnings, cashflows or dividends that the business can bring in each year. But imagine you’re a business owner. Will those metrics be enough? You’d probably want to know other things: How your competitors are doing? What do customers think of the product? What are the largest components of the cost of production?

The first important lesson from Graham is that being a stockholder means being an owner of the business. If you only buy the stock based on its price and the hope that the price will go higher than the price that you paid for it, that’s speculation. And Graham made it quite clear in the book that therein lies the difference between investing and speculation.

The trick is knowing which activity you’re engaging in.

#2: Price and Value can, and will diverge

The second important idea from Graham is that the stock market is driven by emotion, short-termism, and irrational behaviour. He personified the market as a fellow called Mr. Market who quotes you prices on the stocks each business day.

As Buffett understood, the advantage investors have is that an investor can afford to ignore Mr. Market and take advantage of his over-pessimism or over-optimism. On days where Mr. Market believes that the world is going to end, he ends up quoting prices that are so low that it’s benefit to buy. On days where he thinks markets will keep going up forever, he’ll quote prices that are so high that the business will never be able to provide a decent rate of return for investors*.

#3: Price and Value will converge (eventually)

Of course, for Value Investing to work out, prices and value must converge. In other words, buying at prices that are low relative to value lead to good returns because the market will eventually recognise that the company is worth much more than the current price and therefore bid prices back up to what the company is actually worth.

The problem with this is that this recognition can take time. For example, prices of financial stocks remained fairly depressed following the Global Financial Crisis of ’08-09 and it was only until last year (2017) that bank stocks finally started to gain some favour again.

This is why the great economist, John Maynard Keynes, who was a pretty successful investor as well, said that the markets can remain irrational longer than you can remain solvent. This is why many investors caution against the use of excess leverage. For the majority of retail investors, leverage is something to be VERY careful of. If you choose to proceed, do so with caution.

On the other hand, prices tend to come down fast. So if you’ve bought at a very high price relative to value, don’t expect to hang on to your gains for long. Once again, taking on leverage by shorting the market is also not for the faint-hearted. There are many Value Investors who short Growth and have paid a high price for it. When you short, being early is (almost) the same as being wrong.**

I wanted to do this in one post but it’s gone on for a little too long. In the second part, I’ll show you the parallel between buying “The Intelligent Investor” and investing.

Notes:

*The classic example of knowing how ridiculous the market was when a dot-com CEO told his shareholders that given the company’s share price at the time, he would need to return them 10 years worth of revenues in order for them to just break even. I thought it was Cisco but I can’t seem to find a source for this. Cisco’s price to sales went as high as 37 though.

**For those interested in finance, go watch ‘The Big Short’. It’s accessible and the heroes in the show almost lost everything by being early.

The local paper ran this headline today in the ‘Me & My Money’ section.

He’s hit his goal of $1m worth of investments at the age of 26

I was really impressed until I read the sub-header

Full-time investor saw return of over 1,000% because of bull run in cryptocurrency market

My first thoughts were that his wealth is illusory and then my second thoughts were ‘ST is really getting terrible because crypto fever was at least half a year ago.”

Unfortunately, I don’t (and can’t) have access to read the entire article because it’s hidden behind a paywall but if the ST doesn’t caution that making money from a bull run is more a sign of luck than intelligence, this article may do more harm than good.

Thankfully, the crypto fever already seems to have passed so this sort of news shouldn’t attract a whole new wave of investors. Anyway, I don’t think Singapore is big enough of a market to move the crypto markets up in a meaningful way.

You have to admit that the ST running this sort of an article is like being late to the party. I would have expected this sort of an article to have come out late last year or early this year.

I normally say that if you see the local papers putting news of market crashes on the front page, then it’s time to go into the markets.

Markets in this region have been tanking and the STI has fallen below the 200-day EMA to the point that it’s about to pull the 50-day EMA below the 200-day. While this isn’t a perfectly reliable indicator in itself, this could present a good buying opportunity if this trend continues for another 6-9 months.

Anyway, if you’ve had a tough week, here are some reads to make it better.

 

‘Stingy’ millionaire donates S$3.35 million from S$20 million fortune to charity after his death (TODAY)

I’ve written about people like Agnes Plumb and Ronald Read. Finally, there’s an example from our local shores. Mr. Low Kum Moh was a sub-accountant who was born into a family of fishmongers. The secret to his wealth? Frugality and investing in the stock market over a long time-frame. This is pretty much the same story as the other ones I’ve featured here. The point of it all is that great fortunes can be made by people that most would consider very normal. The trick is to find a strategy that works and keep plugging away at it.

Which brings us to the second read.

 

In Praise of Incrementalism (Rebroadcast) (Freakonomics)

Freakonomics was the book that convinced me that economics could be interesting and that probably saved my university life.

In this episode of their podcast, they make the point that lots of progress in this world are based on incremental progress. The problem with most of us is that we tend to view great events or inventions as if they happened miraculously.

In particular, I love this example that their guest, economist David Laibson points out:

LAIBSON: One has the impression that it’s impossible to save enough for retirement — and to a certain extent, it is impossible if you start at age 50. But if you start early in life, and every year, you contribute let’s say 10 percent of your income, and maybe there’s an employer match, so now we’re up to maybe 15 percent, and you invest that savings in a diversified mutual fund, stocks and bonds, and you have low fees, and you keep going at that year in and year out, and you don’t decumulate prematurely — it’s amazing how that process produces millions of dollars of retirement savings. So it’s kind of hard to imagine how you go from what seems like a little bit of money each year to being a millionaire but that’s exactly the way it works when you work out the math.

Instead, most people often aim for that lottery ticket like buying bitcoin. Most people who do this put very little at the beginning (like a lottery ticket) and when it starts to pay out in a substantial way, they then proceed to bet the farm thinking that what has happened will go on indefinitely.

Unfortunately, this is almost always precisely the time when things start to go bad. Think of someone who bought bitcoin at $500 or $1,000. After seeing the price of bitcoin go to $10,000, they feel like a genius and proceed to place even bigger bets. Well, the bet may have paid off temporarily but look at how it’s turned out.

Which brings us to…

 

Bitcoin Bloodbath Nears Dot-Com Levels as Many Tokens Go to Zero (Bloomberg)

I’ve been writing about the problems with Cryptos since late last year (see here, here and here). To be honest, I’m not as pessimistic about crypto now as I was last year. Of course, there’s nothing fundamental to base my thoughts on but buyers are surely not as euphoric about cryptos as they were late last year.

I suppose the article compares the crash in cryptos to the crash in the tech sector during the dot-com era as prices in both situations have nothing fundamental to support them but I would argue that bitcoin is in a worse situation because, in case of the dot-com stocks, you could at least see if things were getting better based on a turn-around in cashflows and profits.

For bitcoin and cryptos, you have to track whatever these cryptos are meant to replace and see if those things are getting replaced at all.

Anyway, here’s the million-dollar picture from the article above.

bitcoinCrashJun18

 

Have a great week ahead!