Only 2 more weeks until Circuit Breaker is (hopefully!) over.

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Coronavirus Seemingly Tamed, Chinese Economy Starts to Recover (The New York Times)

Basically, even if supply comes back, where is demand? I don’t think demand is coming back so soon until we (a) get used to a new way of navigating life with Covid-19 and/or (b) a vaccine gets developed.

To combat climate change, release the brake (Tim Harford)

This is a pretty interesting way of thinking about things. Unfortunately, for the really big things, it seems like the government needs to be thinking this way for things to work.

Animal Spirits: Too Young, Too Dumb & Too Inexperienced (A Wealth of Common Sense)

I really enjoyed this episode.

It’s Mother’s Day! Happy Mother’s Day to all Moms out there.

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A “New Deal” for Informal Workers in Asia (IMF Blog)

The pandemic has really exposed class differences in societies. And I’m not optimistic that the spread will narrow. If anything, the recovery in the markets versus the real economy is already widening the difference.

As a good friend put it, I think the Fed is beginning to worry that their rescue of financial markets is not exactly making its way into the real economy. After all, if businesses have to remain shut, it doesn’t matter if they get loans or not.

MiB: Betting Against Fraud and China (The Big Picture)

I really enjoyed this interview. I tend to think of short sellers as bullshit detectives. They call out the suspect business models and especially the outright fraud that somehow gets through due to blind optimism. Chanos has been a particularly adept detective.

As Hospitals Lose Revenue, More Than A Million Health Care Workers Lose Jobs (NPR)

So much for defensive sectors.

Which Portfolio is Right for You? (Of Dollars and Data)

Great piece. It’s not great because of the conclusions but it’s great because of the analysis. Go read it.

Sadly, many investment bloggers in Singapore aren’t at this level. I saw a piece from a relatively unknown blogger who did a piece about the “Sell in May and Go Away” effect on the STI.

Analysis was total trash.

Yikes, it’s already May?

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Now is the Time to Retire (The Wealthy Accountant)

Well obviously not for all of us but good point on how if you’re planning to retire, then this period of time is the biggest acid test of your ability to do so. Conversely, those planning to retire because their fortunes soared (on paper) during the stock market boom years may have to rethink their retirement plans.

“Deaths of despair”: The deadly epidemic that predated coronavirus (Vox)

While Covid-19 is on everyone’s minds now, it makes sense to think about other underlying structural problems in society and the economy. I’ve always marvelled at economists who look at the data, realise something is afoot, and then go on to solve the mystery. This is one of those mysteries.

Vanguard and Fidelity investors didn’t flinch as the market tanked (Yahoo Finance)

Which is precisely why I believe that as bad as March felt, it wasn’t the worst. The worst has yet to come.

How Boeing Lost Its Way (The Big Picture)

Nice 20 minute video on how corporate culture is shaped by incentives and how short-term thinking can lead to long-term losses.

CPF: Imitate Oz? (Thoughts of a Cynical Investor)

Why Not Give Us Access to Our Own CPF Special Account in these Special Times? (Investment Moats)

Interesting points and maybe I will dig into the data to see what’s feasible but given the Singaporean mentality behind CPF, I suspect many will withdraw everything if they could.

If they are allowed to only take out a token sum (say $500 each month) they’ll complain that it’s too little.

Plus we don’t really want a run on CPF right because all those CPF monies aren’t exactly sitting around in CPF’s accounts and liquidating assets right now is exactly the worse possible time to do so.

Late post today.

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Ban parties not business (The Grumpy Economist)

36,000 Missing Deaths:
Tracking the True Toll of the Coronavirus Crisis (The New York Times)

Just some COVID-19 reads.

Margin of Safety by Seth Klarman (Novel Investor)

A summary of the main points of this classic by Seth Klarman.

Transcript: James Montier (The Big Picture)

Barry Ritholtz’s interview with James Montier. I am a big fan of Montier’s work and coincidentally enough, he mentions “Margin of Safety” in the interview.

Markets have been rallying hard. It’s crazy how much markets have rallied. Almost makes investors feel like March never happened at all…

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How the Worst Pandemics in History Finally Ended (The Vintage News)

Some pandemic history. Goes way, way back.

Economy-related links

How COVID-19 Is Wreaking Havoc On Our Ability To Make Things — Including Vaccines (FiveThirtyEight)

The Next Leg Down Will Involve Credit Cards (The Reformed Broker)

Why the Economy Will Struggle to Restart (The Wealthy Accountant)

Market-related links

What Could Cause Another Leg Down in the Stock Market? (A Wealth of Common Sense)

Why the Stock Market Hasn’t Even Gotten Cheap Yet (The Reformed Broker)

The Softbank Clause (Howard Lindzon)

I’ve said before that SoftBank was a disaster waiting to happen. Basically, it was the dot-com boom concentrated in one company. Check out the link for a list of its duds.

Basically, Masayoshi Son thinks that economics doesn’t matter.

Happy Easter Sunday! It’s a long weekend here in Singapore but it doesn’t really matter much for those on us that are working from home because we’re not considered essential services.

Sorry for not reads last week as it was a little bit of a mad rush getting ready (mentally!) to be cooped up at home for April.

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Words of Wisdom From William Bernstein (A Wealth of Common Sense)

Great interview with a legend. I read Bernstein’s book “The Investor’s Manifesto” and it is one of the better books on investing out there. Check out Ben Carlson’s interview with him.

When Dollar Cost Averaging Matters the Most (A Wealth of Common Sense)

I’ve always said that DCA is a fad that many people (even those that purport to be personal finance experts) get wrong. However, there is one situation where DCA works and that is when the market is heading south. This is one of those times.

Otherwise, most people are better off investing a lump sum and having a read on valuations.

The S&P 500 is mostly concerned with duration (chart) (The Reformed Broker)

Good point.

Economic Policies for the COVID-19 War (IMF Blog)

Quite interesting to see how IMF thinks of the current state of the economy. Basically, it seems like they are preparing for war.

Life goes on

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

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

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

Reevaluating your priorities

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

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

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

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

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

Reevaluating your finances

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

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

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

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

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

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

Reevaluating your life

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

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

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

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

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

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

Stay Safe and Stay Home

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

Just don’t waste it all on Netflix.

Markets are somewhat more calm this week but don’t be mistaken – we’re most certainly closer to the beginning of the bear than the end. As quick and sharp as the fall in the markets have been, bear markets don’t usually end in the same month that they start.

We haven’t even seen the damage pop up in the wider parts of the economy yet. Here are some reads if you’re in home quarantine or if you’re practising social distancing.

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Fight the Pandemic, Save the Economy: Lessons from the 1918 Flu (Liberty Street Economics)

The Fed’s New York Branch finds that:

Our paper yields two main insights. First, we find that areas that were more severely affected by the 1918 Flu Pandemic saw a sharp and persistent decline in real economic activity. Second, we find that cities that implemented early and extensive NPIs suffered no adverse economic effects over the medium term.

NPIs refer to Non-pharmaceutical interventions such as social distancing measures. If you’re worried about the impact of lockdown and social distancing measures on the economy, read the full post.

The Hardest Part of a Buy & Hold Strategy (A Wealth of Common Sense)

Just remember that buying and holding gold nuggets that have turned to turds is not a wise strategy.

Surviving Your Very First Market Crash (A Wealth of Common Sense)

This is for the beginning investor. I’ve been telling younger people that this is the best time to be in the markets. You rarely get to live through experiences like this without much to lose.

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

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

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

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

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

When Will Stocks Recover? (Morningstar)

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

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

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

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

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

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Way back in January 2016, I wrote this post.

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

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

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

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

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

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

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

What’s next?

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

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

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

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

Could it get worse?

This is where some bear market history could be instructive.

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

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

If it’s 2015-16

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

If it’s 2008-2009

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

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

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

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


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

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

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

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


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

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