Archives for category: Singapore

We’ve made it through another week!

September’s almost over which means we’ll be heading into 4Q soon.

books on bookshelves

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The Housing Bubble Burst All Over Reality TV (The New York Times)

This is interesting because what we see on television reflects what’s going on with the world. This article shows how HGTV’s programmes (which I happened to watch a lot of while it was still on Starhub) changed as the housing bubble inflated and then popped.

The same could be said of how many crypto-related seminars and talks were being promoted last year as compared to this year. Lately, what I’ve been seeing is a lot of ads on Stock Trading which is probably a reflection of the U.S markets doing so well since last year.


Growth and well-being: policy should not be based on GDP alone (Microeconomic Insights)

Very economics-heavy post on the relationship between GDP per capita and ‘Welfare’. ‘Welfare’, in the article, encompasses many factors such as inequality, leisure, and consumption.

Singapore gets a few mentions in the article. From the mentions, it seems that Singapore’s growth model has remained the same since the 90s — lots of growth through investment and this comes at the expenses of leisure and consumption.


Paul Krugman’s latest opinion piece spells out what everyone’s been feeling about the markets — most of us can’t see any particular sector blowing up to the point of crippling the world economy.

Krugman also shows us why it’s important to study history because the recession of the early 90s was one that didn’t have a proximate cause but rather, it had many small causes.

I also like how Krugman cites Minsky as a source for his hypothesis. Minksy was overlooked by almost everyone until the Global Financial Crisis hit. I tend to agree with Krugman’s views. The world today is awash in cash that is flowing towards moonshots and we know that most moonshots don’t work out.

In other words, much of the money going into all the fancy new ventures won’t pay off. Fortunately, it doesn’t seem that people are using borrowed money to bet on moonshots. Much of the moonshots are funded by people who have money to lose. The question right now is whether the money that they can lose is due to a booming stock market and economy? And if so, then what happens when the economy starts to slow down?

Hold on, hand tight, and stay around for the ride.


The Psychology of Playing the Lottery (A Wealth of Common Sense)

An excellent piece by Ben Carlson that explains why poor people make poor choices. From the Bloomberg piece cited in the article, it shows that poor people spend more on the lottery than rich people. Gambling is a big thing in Singapore but I’m not sure if there are statistics that show whether poorer people spend more on the lottery than the rich in Singapore.

The good news, cited in Carlson’s article, is that someone’s set up a lottery to help poor people save more. Saving money in the account leads to a participation in a lottery. Unfortunately, the return on savings in almost zero for those that don’t get the huge payoff but I suppose it’s better than having them spend money on something that is statistically going to return less than zero in the long-run.

Maybe this will be the new model for Singapore Pools?


We’re into mid-September! It’s been raining a lot here in Singapore and the region’s experiencing a host of natural calamities (earthquakes in Japan, Super Typhoon in the Philippines and Hong Kong). Let’s hope we get better weather in the weeks ahead.

Meanwhile, here are some reads to start your week.

books on bookshelves



For Low-SES Students, Not Focusing on Grades is an Impossible Dream (

It’s PSLE (Primary School Leaving Examination) season here in Singapore and this is an annual affair that parents and students both love to hate. The PSLEs are a nationwide examination that primary school students in Singapore take when they reach Primary 6 (usually at age 12) and the score they achieve on this exam, for most students, determines the school that they will be able to attend for their secondary education.

Many people hate it because doing badly on these exams usually mean getting placed in a school that steers you towards a vocational kind of course at the Institute of Technical Education (ITE).

So, the biggest bugbear for most parents is that one exam at the age of 12 pretty much determines whether you become an accountant or an electrician. Of course, there are ways to go from the technical stream to the academic stream but imagine the sort of associated stigma you have from doing much worse than your primary school classmates or relatives in the same comparison group.

It’s because of this that a group of parents has come up with a movement called “#lifebeyondgrades” which is trying to show that what you end up doing as an adult doesn’t really depend on your PSLE score.

Unfortunately, as the ricemedia article argues, being able to do what you like with your life is a privilege of the middle-class or well-to-do. In Singapore, the way out of poverty for most people still lies in education. After all, that’s why the government likes to highlight the fact that some of our 4G ministers came from relatively humble backgrounds.

I’m torn on this.

On one hand, as a teacher, I can understand why parents want there to be less emphasis on grades and more on learning. In an ideal world, I hope for the same thing as well. On the other, I come from precisely the sort of background that the article calls “privileged”. I didn’t have to worry about not doing so well in school precisely because I had the family safety net to depend upon. I eventually did well in school but that’s another story.

Read and reflect.


A lady vanishes – In China, a movie star disappears amid culture crackdown (Channel NewsAsia)

In other news, Fan Bing Bing is rumoured to have been held captive by the Chinese Government for tax evasion.

I have absolutely no problem with governments going after their own citizens and charging them in the court of law for committing crimes but to have someone disappear is the stuff of dystopian regimes.

The Chinese government is even framing this as “cultural clean-up” with the Beijing Trade Association for Performances saying this:

the body would “purify” the city’s entertainment and performance sector and guide artists towards “core socialist values”.

Of course, China is no stranger to suppressing political dissent but of late, they seem to be a little more heavy-handed than usual. I’m pretty sure there are macroeconomic reasons like the trade war with the U.S. and the U.S. raising interest rates that are causing the slump in Chinese markets but doing things like this also hurt the image of China as a place that’s open for business.

Right now, China seems to be a place where investors better beware because the government (or is it just President Xi?) can easily come down hard on you at the turn of the hat.


The real Goldfinger: the London banker who broke the world (The Guardian)

Some financial history.

This is fascinating because the Gold Standard is from a bygone era and to many students of modern economics, the thinking is that the Gold Standard, just like communism, was abandoned because it didn’t work.

I’m not saying that we should return to the Gold Standard but if you think about it, some things were abandoned because they worked well until they didn’t. If that’s true, then there must also be some things that we do today that are a relic of the past and maybe it’s time to examine whether their time is up.

After all, some practices are a product of history. For example, the QWERTY keyboard layout came about because it actually makes typing slower and that was necessary when we used mechanical typewriters so that the keys wouldn’t get jammed.

What other things are there today that we should rethink?

Off the top of my head, I can think of a few:

  • The 42-hour workweek
  • Welfare being a dirty word
  • Mandatory retirement age
  • The PSLE

Let me know your thoughts in the comments below.

bet black and white casino chance

The casino may actually provide better odds


Call me a traditionalist but I rather put my money where I can see the money.

When investing in equities, the money can easily be seen from the financial statements that publicly-listed companies have to provide. These records are also subject to an audit and hence, to a large extent, you can trust the numbers.

However, when the world’s filled with easy money, many people can raise money to fund what is essentially an idea. These ideas are typically moonshots and can fail for a variety of reasons. Of course, the payoff from taking these bets are huge.

Imagine being an early investor in Google, Facebook or Amazon. Now that Amazon has hit a US$1 trillion in market cap, I’ve been seeing the headline about how $1,000 invested in Amazon in 1997 would be $1,000,000 today. It’s stories like these that provide the lure of Venture Capital.

Unfortunately, as Ben Carlson highlights, even investing in Venture Capital funds that supposedly have the expertise to seek out the most promising startups can be an expensive affair. Even in the middle-of-the-road scenario, you may have been better off just investing in public equities.

What Billionaires Do Don’t Apply to You (Unless you are one)

This also brings us to the point about taking the advice of people who already have tons of money.

You can’t unless your income and wealth profile is like them.

In a separate post, Carlson also shares how J.P Morgan’s Jamie Dimon is against holding bonds and how personal finance guru Suze Orman holds very little of her wealth in equities.

The point is that what they do may not necessarily be suitable for other people? After all, how many of us can earn the income that Dimon or Orman do from work? In addition to their work, the amount of capital that they can put to work is so huge that the risk-free return from that is something most people would die to have.

It’s like what a friend told me before. If you have a $100 million, just parking that in the bank to earn 2-3% per year is going to net you a cool $2-3 million dollars to spend every year. Unless you plan to be like Johnny Depp, you don’t really need anywhere near that amount to survive each year. Therefore, you can easily take on more bets on moonshots that the average person.

The Role of Financial/Investment Advisors

This is where financial advisors need to really be kept in check so that they don’t recommend funds or products that their clients can ill-afford to invest in. In general, I think the regulators have some basic protection by specifying certain products as Specified Investment Products (SIP) and Excluded Investment Products (EIP) although the whole idea was probably a delayed response to the whole minibonds issue.

However, the list applies quite generally and the example that comes to mind is when the relationship manager from a local bank tried to advise my mother to go into gold mining stocks as a way to take advantage of the potential returns from rising gold prices. This was some years ago but fortunately, my mother checked with me and I basically told her that the guy was an idiot.

Obviously, the guy was just trying to earn his commissions and he probably wouldn’t have given that same advice to any normal retail banking client but still, it’s not like my mother’s account is at a level that would have allowed her to take moonshot bets.

Final Thoughts

At the end of the day, the more money you see being poured into businesses that have no profits or positive cashflow, the more you should be worried. If your account allows you to take bets on these moonshots, then, by all means, go ahead.

However, if you have neither the temperament for frequent losses and the account for it, then please don’t bet the farm on things that may not happen. If anything, the crypto-boom last should serve as a cautionary tale for everyone.

bowl chairs cooking cuisine

Just another lunch conversation


I met with a good friend for lunch and it’s always great to meet with him because the conversations and discussions that we have cut across the economy, investing and general business sentiment.

He’s not trained in business nor economics but I suspect he has a better sense of the economy than many of the economists sitting in their cubicles at the Ministry of Trade and Industry. After all, how many number-crunching economists go down to the ground to see how different industries are faring?


Simply because he meets with various business people across a wide range of industries and how other’s business is going, to a certain extent, will affect the amount of business that he does as well.

In his work, he also interviews people for positions and from his observation, the employment situation isn’t as rosy as it used to be. Interviewees are asking for less pay which is probably a result of prolonged unemployment. Of course, that could be a feature of the industry he is in but once again, it’s good anecdotal evidence to add to the headlines that we read about.

Higher unemployment rate, more retrenchments in Q2: MOM (full story here)

SINGAPORE: Singapore’s labour market saw higher unemployment and more retrenchments in the second quarter of 2018, although there was also employment growth and more job vacancies available, according to Ministry of Manpower (MOM) figures released on Thursday (Sep 13).

Observations around town

In meeting him, I also had a chance to take the MRT to town and I was surprised that the trains were fairly crowded for a time that wouldn’t be considered peak hour. It was also fairly crowded at the basement level of ION Orchard although the crowds were notably absent at Wisma Atria.

I haven’t been to Wisma for some time and at Wisma, I saw a “That CD Shop”. Last I remember, they used to sell music CDs and had quite a few branches in Singapore. Of course, their focus on more niche areas like jazz music. What’s interesting about their store at Wisma is that they focus on selling vinyl records and it’s housed together with a place called “Wonderland Savour”. From the displays of macarons and cakes that front the store, “Wonderland Savour” appears to be a place for desserts.

I’m not sure how successful the place is but it’s a clear sign that shopping mall tenants are moving away from retail businesses and moving towards businesses that provide a unique experience. Unfortunately, the experience nowadays seems to involve some sort of Food &Beverage.

Also, on the first level of Wisma, what used to be “The Coffee Club” has now become a “Fun Toast” outlet. I thought it was interesting that a place that used to sell high-end coffee has now made way for a place selling local kopi and food.


I remember reading an interview that the local paper did with a prominent local economist where the economist said that he likes to go observe how prices have changed at his local noodle stall when looking at inflation and in that spirit, I think he’s right.

In a recent interview, Minister for Finance, Heng Swee Keat mentioned about how he could easily observe how bad the global economy was doing by looking out the window of his office and observing the activity going on at the port at Keppel Road.

Unfortunately, how many people can translate those signals into giving them more insight into how the economy is doing? I think very few people do that well today and if you’re able to do so, you’ll gain a skill that very people have.


Final Thoughts

If you have any signals that you see in the economy today, do share them in the comments below.


Cindy Ng, a social worker, has written a nice commentary featuring some stories of the people she helps. In her commentary, you get a sense that even social workers feel that the schemes they help administer are like band-aids for something much more serious.

In order to qualify for many of the financial aid schemes, those receiving help need to show that they, in some way, have tried or are trying to stand on their own two feet as well. And quite often, they have to show it within a certain timeframe.

It’s quite a common refrain in Singapore that “welfare is a dirty world”. It’s so dirty that we have the term “workfare” which I would take to mean that one has to “work for the welfare”. No work, no welfare.



A scene from Fresh Off the Boat encapsulates how Singapore thinks about welfare


Paperwork, paperwork, paperwork

It’s the same even in the education sector. We have students who constantly need financial aid or bursaries and because the Singapore Public Service is the paradigm of being free from corruption, we make students reapply for the aid every single year in order to ensure that they still qualify for it. I’ve personally heard of students who either forgot to apply for it the following year or found it easier to go find some form of part-time work than to deal with all the hassle of application.

I would imagine that many of the students that qualify for financial aid qualify for other forms of assistance. Unfortunately, it seems that for every assistance rendered, the person receiving aid needs to go through an entire process of filling out paperwork in order to apply for it.

If I were a social worker, I’m pretty sure I would have got sick of all the paperwork that they have to help their clients fill up. Filling in forms, collecting copies of the necessary identification or documents in order to prove that they qualify, then submitting the documents and following up on the documents.

For the needy, just imagine the uncertainty that you have to go through while waiting for the funds to come. For one, it might not be approved. Two, there is the question of how long it might take. In the meantime, there are bills to pay and mouths to feed.

Universal Basic Income

Maybe it’s the recent influence of reading Rutger Berman’s “Utopia for Realists” but I wonder why can’t we just give the needy cash? Give it to them with no conditions attached and see how it goes from there.

For one, the amount of manpower saved on paperwork would be savings. Two, the government is already prepared to distribute the amount of money for those that qualify so why not just distribute it to those that are needy.

For example, we know that only the very needy qualify for one or two-room rental flats. In that case, why bother having them fill application forms in order to get bursaries for their kids’ education. Once they qualify for a rental flat, just give them a certain amount of money at the same time.

Some will argue that the poor can’t be trusted to make the right decisions. It’s as in Cindy Ng’s commentary. But saying that without doing a trial or evidence is just bad science. There have been some positive experiences in Kenya so might it not work on our shores?


Final Thoughts

I honestly don’t think Universal Basic Income will ever be tried in Singapore. Not from the government at least. The main hurdle is a political one. The government must always seem to be a steward of public monies and giving monies out freely is something that goes against everything the Singapore government has stood for.

This post is also more of a rant because (a) I hate paperwork, (b) paperwork is a waste of resources, and (c) I think the institutional help in Singapore is seriously lacking.

The idea is a very interesting one and I’m keeping tabs on how various experiments around the world will turn out. Perhaps one day, we can spare our social workers the ridiculous burden of filling out forms in order to secure aid for their clients.

It’s another week! Markets were generally weaker this week and for the STI, we reached a PE10 earnings yield of 8% (intraday, at least) which is making me salivate a little. I managed to pick up Rutger Berman’s “Utopia for Realists” (see the general idea in his TED talk) and Dr Pippa Malmgren’s “Signals”. Both have been fascinating reads.


books on bookshelves

Read, read and read some more.



Soaring bankruptcy rates signal a ‘coming storm of broke elderly,’ study finds (abc News)

This is in the U.S. but we should expect similar economic forces to come our way as the boomer generation starts to retire.

However, PAP is as PAP does. Expect healthcare spending to increase and that no elderly folk will be left behind due to medical bills. It’s not good for politics to appear uncaring, especially to the first post-independence generation of the country.

Of course, the next generation must be prepared to shoulder the burden of greater taxes on healthcare spending. Either that or the folks at Temasek and GIC better work much harder.


GLCs and patronage: Understanding Mahathir’s position on HSR and ECRL  (TODAY)

It should be no secret for those who have been following Malaysian politics but I suspect that for many other people, they fail to see the connection between personas and the intricate links between them and various businesses.

Of course, it also helps Mahathir to have Singapore be a distraction for his own political purposes. To those that see Mahathir leading Pakatan to victory over BN as a good thing, I’m afraid they may have counted their chickens before they’ve hatched.

To the Singaporeans that wish for the same…lmao. It’s practically like how a big enough majority in the U.S. voted Trump in because they felt Hilary Clinton was more of the old order. The problem is that Trump’s not necessarily going to do a good job.

In some ways, I fear the opposition in Singapore is fairly inadequate to operate on the bigger stage. Despite what Low Thia Kiang said in 2017, my opinion is that there is currently no alternative to the PAP.


How to retire in your 30s with S$1.37 million in the bank (TODAY)

Ok, enough of the political links. I’m pretty surprised that a local paper chose to publish an article like this. It’s a U.S. story but it looks like the local FIRE movement may gain some more traction with this.

I’m pretty excited to see if more and more stories of Singaporeans retiring early will start surfacing. After all, Singapore is one of the most expensive places in the world to live in so we have that handicap against us.

However, if retiring rich and early is doable in a place like Singapore, then it can be anywhere else in the world. The math behind this is simple and well-documented so it’s a matter of picking your target and executing well.

The biggest thing I’m looking forward to when I quit my job is doing the things that matter most to one’s well-being. I would bake more bread, cook more, maybe try growing my own food, work out more and sharing the message that there’s more to life than doing mundane things.

Don’t get me wrong. At least my job isn’t a bullshit job but more than a few aspects of it is definitely bullshit which is done in order to satisfy auditors and to help senior management cover their asses when things go wrong. And you can’t blame them because all it takes is one person to make a mistake (real or perceived) and senior management gets questioned about their processes. And senior management, like the rest of us, have (bigger?) mortgages to pay and mouths to feed. It’s much simpler to make everyone do some bullshit work than risk their five-figure pay.

abandoned broken cabinets demolished

Photo by Pixabay on

I read LIFT’s post on bullying (full link here) and he makes some very pertinent points that many people confuse bullying with racism. Bullying can arise for a variety of reasons and saying that it’s due to racism is mostly due to racism misses a lot of things. For one, it misses the point that it could be due to other factors such as gender, sexual orientation or socio-economic status.

Next, it also assumes that there’s no silver lining in being bullied. Now, this is going to be controversial but let me explain further.

I Was A Bully

In primary school, there was a classmate that I bullied. I don’t even remember how or why it started but it probably began with us just horsing around. Eventually (and don’t ask me how) it evolved into almost the whole class getting involved in it.

The bullying was mostly physical. We chased him down every recess time and when we got him into a corner, we would have a mass of bodies crush him against the wall. In our 11-year-old minds, it was horsing around. It never got to the point where there were punches or kicks thrown but still, imagine being chased down by 30 or so kids every recess almost every school day.

There were more silly things done to the point that his father called me up and warned me not to bully him again. I think that was the point when I realised that perhaps I had taken things a little too far.

Funny enough, the story ends on a good note because, in secondary school, we ended up in the same class and ended up being close friends. Till today, I consider him one of my best friends.

What’s the Upside to All This?

I’m not proud that I used to bully someone and I guess I’m lucky that my friend was resilient enough to withstand all the shit we put him through and not develop some mental illness or end up killing himself.

As for me, I think that being someone that treated someone unfairly in the past makes me more sensitive about when other people are being treated unfairly. And because I used to give other people shit, I don’t really have qualms about being difficult to people that deserve it. Too many people in Singapore grow up toeing the line and when people give them shit, they just suck it up until a point where they can’t take it anymore.

As for the bullied, if you’re like my friend, you end up developing a huge sense of self and you typically don’t let people step over you. Of course, it takes some sense to know when you need to step up for yourself because people are taking advantage of you and when you’re actually trying to take advantage of others.

My friend’s father also taught both of us that dialogue is the way to resolve any conflict. He was firm with me and yet also acknowledged that his son was at some fault for fighting back. In that way, I was lucky that I learned all this when I was only 11.

How many primary schoolers have the chance to learn lessons like these?


Final Thoughts

Bullying is not something society should condone but at the same time, let’s acknowledge that these things exist. The existence of these issues is a chance for dialogue and not tit-for-tat behaviour.

If you see someone being bullied, please stand up for them.

We’re into September! We don’t have seasons here in Singapore but September is always a special month for personal reasons.

Hope your week’s been good!

books on bookshelves

Read! Read! And read some more!


Why 35 to 50 Year Old Singaporeans Should Value Financial Peace More (Plus 6 Tips to Achieve More Financial Peace) (Investment Moats)

Fresh from the oven, Kyith over at Investment Moats has a piece that I think will resonate with many Singaporeans. It talks about how Singaporeans in their late 30s to 40s tend to find themselves in a precarious position if they get laid off in the private sector.

To be honest, it’s difficult for me to imagine the kind of uncertainty about job security that people in the private sector face. Job security in the public sector is such that I have colleagues who have stay with the organisation for 30-odd years. Those that choose to leave normally do so because greener pastures lie elsewhere.

With that sort of job security in the public sector, it’s very easy to plan for investments and the growth in net worth tends to be fairly predictable over time. Any of my colleagues that fail to retire wealthier than the average Singaporean must have either had some sort of huge burden due to medical costs or due to profligate spending*. Once again, this is the beauty of accounting for human capital in your investment plan.


Nose breathing in yoga may calm the mind by slowing brainwaves (NewScientist)

Full article hidden behind a paywall but first two paras provides the gist of it:

Take a deep breath. In some forms of yoga and meditation, people are supposed to breathe in slowly through their nose. Now we may know why it’s helpful: nerves inside the nose start firing in a similar slow rhythm, prompting parts of the brain to do the same.

And in a test, people who did yoga with slow nasal breathing seemed to enter a deeper meditative state than when they did so breathing at the same rate through their mouths.

No secret here but breathing through your nose supposedly has many other benefits. A book that’s been cited quite often on the supposed benefits of this is “The Oxygen Advantage” by Patrick McKeown. I haven’t read the book but I’ve been trying to consciously breathe in through my nose whenever I can.

What’s Your Type? The Myers-Briggs Test and the Rise of the Personality Quiz (The Ringer)

A review of the book that looks at the history of the Myers-Briggs test and how the test is mostly useless in terms of determining one’s personality.

I found this interesting not because of the test itself but that the education system is paying lots of money to hire consultants that base their training on some version of this personality test.

If it’s all so bogus, then what the hell are we paying them good money for?


Show me the incentives and I will show you the outcome (The Reformed Broker)

Josh Brown has a post that builds on how perverse incentives leads to perverse outcomes. There’s an example buried in the post about how a financial advisor in the U.S. ‘churned’ a client’s account to generate commissions (presumably also under the pressure to meet the sales quota) but the post is mostly about how Mao led a country towards the largest man-made famine in modern history. I have “Mao’s Great Famine” on my reading list after I’m done with “Utopia for Realists”.

I have more to say about financial advisors here in Singapore but that’s something for another time.



*Profligate spending doesn’t just mean buying bigger houses or cars than they can afford. It could also mean the unnecessary spending on things kids’ tuitions, enrichment classes and so on. IMHO, those things are really unnecessary.

airport bank board business

LOL. I didn’t mean to choose a pic of such an exotic exchange.


We’re heading deep into the 3rd quarter of the year. The STI’s been largely directionless while U.S. markets have continued to hit new highs. Nothing surprising here as markets outside of the U.S have been weak since the start of the year. It also reminds me of a post by Ben Carlson on how U.S. markets and World Markets don’t exactly have a one-to-one correlation. In fact, the correlation can sometimes be negative. A good reminder of why we need to be diversified beyond our home markets.

Having said that, it does mean that other markets are cheap relative to the U.S. If that’s the case, then where should you put your money?

I think the answer’s fairly obvious.

Check out the PE10 stats here.



Everyone’s favourite piece of paper

Francis Tay feels cheated.

The former Singapore civil servant says he’s lost almost S$50,000 in the implosion of Noble Group Ltd, the commodity trading giant. He also says shareholders like him have been let down by regulators whose job it is to protect them from the sort of crisis that’s brought the company to the brink.

‘I was cheated’: Tales from the collapse of commodity giant Noble – The Business Times

When I read the above, I immediately thought of the whole Minibonds saga that emerged during the Global Financial Crisis. Of course, the difference is that many of the investors who bought Minibonds thought (or they wanted to think?) they were buying something safe and that even in the worst case scenario, they would get their capital back.

In this case, investors in Noble are crying foul that the regulators didn’t do enough to ensure that Noble’s financial reports reflected economic reality. There were probably things that SGX could have done as the regulator but ultimately, based on the accounting rules at the time, it doesn’t appear that Noble did anything illegal.

What Matters Most

I was pretty wary of the commodity trading firms not because I suspected they were up to some financial shenanigans but because of the economics of the commodity trading business. It’s econ 101 that the commodity business is a low margin business. Net profit margin is typically in the single-digit range.

This means that the company’s survival depends heavily on cashflow and if the company wanted to boost returns, then they would probably use a fair amount of leverage to do so.

Obviously, if you live on the edge, the chance of falling off the edge should a strong gust of wind blow in the wrong direction becomes much higher. This is exactly what happened to the commodity houses such as Olam and Noble when short-sellers started to accuse them of accounting trickery. Add to that the downswing in the commodity cycle and you have a recipe for disaster.

Of course, in hindsight, we know that Olam has emerged relatively unscathed while Noble seems stuck in an eternal downward spiral which may eventually result in bankruptcy or some form of major dilution for existing shareholders.

Francis Tay really shouldn’t be moaning about his $50,000. If you plan to invest in a company, you need to be prepared to lose the entire sum should non-systemic risks like this come to pass. This is exactly the reason why people have a diversified portfolio. You diversify across asset classes and within the asset class, you diversify across holdings. Of course, there is danger in going overboard with diversification. As with everything, moderation is best.

Human Nature

By the way, Francis Tay should take comfort in the fact that he’s probably not alone. Few people curse themselves when investment decisions go bad and many pat themselves on the back when the decision goes right.

Also, I’ve heard of people who are trained in accounting and finance who buy into stocks with bad economics or products like the minibonds.* Aside, buying stocks with good economics at the wrong price may hurt as well.

Smart people can make stupid decisions too. It’s pretty common when you let fear and greed convince you of the narrative that you want to hear. That’s why I prefer to make a plan and stick to it. I know I’m going to do something dumb at some point. It could be thinking that I can time the market or that I’ve made some superior insight into a company. That might lead to bad behaviour like trading too much by going in and out of the market and in the process, incurring lots of trading costs. Or it could be that I bet the farm on my superior insight, only to lose everything.

Final Thoughts

Please don’t be Francis Tay. Unless you were coerced or misled by an advisor** into making a financial decision, moaning about your losses won’t make you a better investor. Throwing good money after bad is also going to make you poorer. And lastly, don’t buy on myths like “blue-chips are forever” or “Temasek will always save the day”. Please think of your plan and stick to it. If you can’t invest, then maybe it’s better that you buy a low-cost index fund or ETF. In fact, that’s probably the right choice for most people.



* I know a guy who used to be an audit partner who was telling me to buy tigerair and Singpost many years ago. Last I checked, prices never went above the price that he was telling me to buy at. I also know of a finance lecturer who bought the minibonds. Not sure if she thought they were capital guaranteed or she knew how it worked and she was just taking a bet.

** I have some things to say about so-called financial advisors too. More on this some other time.