Archives for posts with tag: Singapore

I’ve written before about how I think inequality and poverty is an issue in Singapore and that the poor need more unconditional help. (see here, here, here). It appears that the issue has been getting a bit more attention lately with Channel NewsAsia (CNA) putting this piece out some days back.

 

boy wearing green crew neck shirt jumping from black stone on seashore

Photo by ajay bhargav GUDURU on Pexels.com

Poverty in the spotlight

In particular, the piece highlights how the poor tend to make decisions that are less than best or what economists call, “sub-optimal”. Take the opening anecdote in the article.

Every time her four children passed by the provision shop downstairs, they would ask her to buy packet drinks for them. Every time, Mdm Mary Yeo would reply, “No, not today.”

The first time the divorcee received financial assistance from the Social Service Office, her first thought as she sat at home alone, pondering what to do with the money, was their wistful request the night before.

“I rushed down to the provision shop, and I bought quite a lot of drinks,” said the 47-year-old. “The next day, I bought (more).”

After three days, she had bought S$400 worth of drinks – 40 cartons – “because that same thing kept coming” to mind.

Now, 40 cartons of soft drinks is a ridiculously huge amount of soft drinks and the first reaction of many people would be to say something like, “See, this lady is poor because she’s stupid. No one buys that many soft drinks. Furthermore, if she lets her kids drink that much soft drinks, they are going to have other problems down the road.”

What the article did differently was to describe the process behind her thinking which changed the framing of the same issue from being “poor because she’s stupid” to “stupid because she’s poor.” In other words, they highlighted the fact that she made this stupid choice because she was so poor that she couldn’t even afford a simple treat like a soft drink for her kids.

I’m particularly impressed with the way the article presents the issue of decision-making and poverty because it’s a good contrast to the usual messages of how Singapore is a meritocratic society and provides an equal chance for anyone, regardless of background, to succeed.

 

The message we’ve been fed all these years

The message that we’ve been fed all these years is that Singapore is a place where your dreams can come true. All you have to do is study hard, work hard, and you’ll make it.

And very often, to prove their point, the nation-building Straits Times will highlight the fact that some of our high-flying people in government came from less than privileged backgrounds and succeeded despite the odds against them.

Even the education ministry, in its bid to move away from an emphasis on grades, has been profiling students who have either done well or passed the exams despite the odds against them.

Once again, the message is that you can make it if you try hard enough.

 

We need a new message

I think it’s time we need a new message. And that message is that as a society, we acknowledge that the odds are stacked against those who come from less privileged backgrounds. And since the odds are stacked against them, we need to make sure that they receive unconditional help as far as the basics are concerned.

And this is where I think the government is still behind the curve. Now, I’m not saying that our government doesn’t provide help to those in need. We have an entire ministry that oversees social and family issues as well as an army of social workers that work extremely hard to help families in need.

Unfortunately, it seems that in order to qualify for all sorts of help, there are layers and hoops to jump through. In other words, there are lots of conditions attached in order to receive the help they need.*

More importantly, having all sorts of conditions attached in order to receive help continues to send the message that poor people can’t be trusted to make the right decisions for themselves.

It’s also in the same spirit that former GIC chief economist, Yeoh Lam Keong has come out to question Minister for Trade and Industry Chan Chun Sing on why he exhorts the better off in society to do more to help the less well-off rather than have the government do more instead. Yeoh points out that an increase in spending of 0.8% of GDP would be enough to improve Workfare Income Supplement (WIS) and Silver Support Scheme (SSS) substantially.

 

Conclusion

I think Singapore has developed to the point where we can help the less fortunate in society more. We can step away from the old messages of “helping them more will lead to higher taxes”** or that “if you work hard enough, you will succeed”.

 

Notes:

*I understand the need for paperwork as the government needs to ensure that taxpayers monies are disbursed and used in the right manner. However, people need to recognise that additional procedures and paperwork create friction. At some point, the friction and inefficiency from the paperwork is going to outweigh any costs of the system failing. In other words, the inefficiency in the system has a higher cost than the abuse the paperwork is meant to prevent.

**Anyway, GST is projected to increase to 9% in a few years time. The rationale is that we need to increase revenues as the burden on healthcare will increase.

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edit: I used the words “Mickey Mouse” and shoebox interchangeably.

 

A good friend brought to my attention this commentary about URA’s latest move to restrict the size of units in new private housing developments outside the Central Area.

Reading the commentary and the news when the restrictions were first launched, it appears that the main beef URA had with these “Mickey Mouse” apartments was that the proliferation of these apartments in certain areas would increase the population density and hence increase the strain on public infrastructures such as roads, MRT lines, and buses.

The commentary piece also seems to feature the downsides of shoebox units quite heavily:

  • Rental yields under pressure
  • Stagnant to falling prices for such units
  • Buyers who would easily have turned to a resale HDB if they had a choice
  • Sneaky developers who use such units to elevate the PSF of the project

 

What does the future hold for such shoebox unit owners?

In the light of rising interest rates, I would say that these guys are screwed. However, it bears noting that “these guys” are probably a small subset of the market. After all, who on earth thought that it would be a good idea to buy a Mickey Mouse-sized apartment in the heartlands to stay or as an investment?

Location is a big factor in property investment. Areas like Tanah Merah or Woodlands are one of the cheapest places to stay in Singapore. You can easily tell which areas are more prized thanks to the difference in HDB resale prices by area.

The next thing after location would be size. I think it would be quite universal to say that when it comes to living space, “more is better”. Of course, that reasoning can only be taken to a certain extent but shoebox units are starting from the other extreme. Try convincing people with one or two children to live a minimalist lifestyle.

While the article also mentions how some owners are optimistic that there will be less supply of shoebox units and hence it’ll raise the value of the units, my bet is that the rising interest rate environment forces more units onto the market and adds the existing supply of shoebox units.

 

Salvation for shoebox unit owners

The only salvation I can think of for shoebox unit owners in the heartlands would be an increase in the number of tenants.

These tenants could come from the longer-term stay because they’re here for work and on tighter budgets. This assumes, of course, that there are so many of them that they already drive rentals in the HDB market up to the point that shoeboxes become attractive.

The other group of tenants would be from short-term stay like Airbnb but oops, that market is also heavily restricted right now. Meanwhile, the property market is expected to continue to add more than 10,000 new private residential units every year (except for 2020) up until 2021 and vacancy rates are creeping up.

 

Conclusion

I’m pretty sure that with URA’s latest move, it’s signalled to the market that shoebox unit owners are screwed. Note that the restriction wasn’t a major move — it just inched the size development guidelines up by a bit and confined that restriction to projects outside the Central Area, but in that one move, it’s shifted the limelight to shoebox units and what the downsides of owning one are like.

I’m pretty sure that shoebox unit owners who can’t hold on to their property amid rising supply and vacancies are going to feel quite bad. If the shoebox unit is just a part of their investment portfolio, they’ll be fine. If it’s the ONLY part, they are going to feel quite a bit of pain.

 

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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.

 

Notes:

* 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.

architecture asia bay bridge

Singapore

Singapore’s become quite well-known in recent months for a variety of reasons. First, we hosted the Trump-Kim summit in June. Now, we have our island represented in a major Hollywood film that is breaking barriers by casting an Asian leading cast; Something absent since the days of “The Joy Luck Club”.

This post isn’t about the movie.

Rather, this post is about how having more money than 90% (or is it 95% or 99%?) of the population doesn’t bring one peace and happiness. In a sense, life imitates art or in the case of Crazy Rich Asians, I guess Kevin Kwan really did paint a very real portrait of #richpeopleproblems.

Exhibit A: Audrey Tay

Daughter of The Hour Glass founders pleads guilty to taking drugs, driving offence (read the full article here)

SINGAPORE: The daughter of the founders of a luxury watch group pleaded guilty on Monday (Aug 27) to taking drugs, as well as to causing a car crash that uprooted a divider in 2015.

Audrey Tay May Li, the 45-year-old daughter of the founders of The Hour Glass, admitted to three drug charges and one charge of driving without due care or attention. Five other charges will be taken into consideration for sentencing.

ChannelNewAsia

The sad thing isn’t about how she consumed drugs but when CNA’s original post was shared on Facebook, her mother left comments in the post and you can tell that this family has been through a lot of drama.

Exhibit B: Shi Ka Yee

Ferrari driver, 73, pleads guilty to obstructing Orchard Road (read the full article here)

SINGAPORE: Ferrari driver Shi Ka Yee, who has been in and out of court for various charges including assaulting another driver, pleaded guilty on Monday (Jul 16) to obstructing Orchard Road with her car two years ago.

ChannelNewsAsia

If you search for this lady’s name, you’ll find that she’s been embroiled in quite a number of disputes that end up in the Courts. Rumours floating around the forums also link her to a former politician and her listed address is in one of the premier neighbourhoods in Singapore. But her behaviour’s probably one of a person who’s lonely and calling for attention. It just screams “Look at me! Don’t ignore me, please!”.

Money Can’t Buy You Everything

Both Audrey Tay’s and Shi’s case show that even with an obscene amount of money, happiness and peace can elude you if you believe that money can solve everything. Sometimes, as a wise bear once said, “Doing nothing often leads to the very best something.”

Sometimes, there is really nothing to be done. Working harder to make more money to buy things that you don’t need doesn’t bring you extra happiness. Once you’ve gone beyond a certain level of material comfort, more isn’t always better.

In both those cases, what’s probably necessary is a paradigm shift. A realisation that happiness comes through one’s own view of the world and that view is probably better served by surrounding yourself with friends and family that genuinely love you for the person you are and not the favours you can do for them.

If you find yourself hanging on to something that’s no good for you, the natural thing to do is move on.

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Is your housing expenditure detriment to your retirement?

 

Alternatively, this could have been titled, “An Ode to my CPF”.

I know I’ve given lots of shit to CPF (for example, “CPF monies: to depend on it for retirement is a pipe-dream“, the footnote in “Early retirement: some math“, or more recently, “What’s the economic logic behind CPF’s accrued interest policy?“) but think about it:

What if you had regular contributions to your CPF and you let it compound?

There is a group of people in Singapore that has spent so much on housing that they have barely any contributions to their CPF each month. Those that even have to fork cash out of their pockets to pay the mortgage are in truly dire straits. If you happen to find yourself in this situation, read on below.

A Very Personal Example

I happen to belong to the camp that has regular CPF contributions because my housing loan is so low that my monthly CPF contributions more than covers the monthly mortgage. Also, I will finish paying off my loan in another 4 years or so (background here).

So I decided to run the numbers on the following scenarios to see how much I would have when I turn 55 (the age that we can finally take some of the money out of our CPF accounts):

A: If I work for another 20 years
B: If I work for another 10 years
C: If I work for another 5 years

The assumptions I’ve made are as follows:

#1: Current contributions increase by $10,000 per year after our housing loan is paid off.

#2: Contributions remain constant over time. i.e. No increases in salary.

This is for easy math and anyway, I don’t expect my salary to increase drastically beyond the inflation rate so the contributions can be viewed in ‘real’ terms.

#3: CPF returns 3% across all accounts.

I’m assuming this despite having more monies in my Special Account (SA) at this point in time. I know the SA earns a higher rate of interest and combined sums (subject to a cap of $60,000) in your accounts earn an extra 1% but once again, this is for easy math and to set a floor.

#4: I’m starting with roughly $130,000 in both my OA and SA.

Numbers

Thanks to the magic of Excel:

Scenario        Final Amt at 55 ($)

    A                  $1,180,000

B                  $772,000

C                  $495,000

Final Thoughts

Obviously, the numbers above are not going to be representative of what another Singaporean might end up with. I’m making above the median salary although NOT much more than the Median Household Income. Of course, a major factor is that my wife also works and our household size is smaller than the average*.

I still believe that the CPF system needs a revamp. Way too many people are spending what should be their retirement savings on a property, either as an investment (which is still somewhat excusable) or on housing (gasp!). That’s probably one of the main reasons why only about half of CPF members can meet the retirement sum despite pledging their property.**

Also, one big sore point for many people is the Retirement Sum*** going up. There’s a good article on what the retirement sum may be like for younger people today when they reach 55 later on. Just eyeballing the table, it seems that based on my calculations above, meeting the retirement sum shouldn’t be a problem.

Very often, people forget that compounding needs time to work its magic but for compounding to work, there’s needs to be something to compound in the first place. If you spending all your money on housing, there won’t be anything left to compound. And if you want to turbo-charge compounding then you need both time and regular contributions.

 

Notes:

*I believe the average household size is 2.1 in Singapore. No, us having a cat doesn’t count.

**There are also other factors at play. I suspect that the labour force participation rate should explain quite a bit. Some (especially mothers) may have only worked very few years of their lives and hence have little in their CPF accounts. For example, my own mother practically stopped working full-time after she had me and my brother. By the time my youngest brother came along, she had already stopped working for some years.

***The Retirement Sum is the minimum you need to have in your CPF accounts so that the CPF can slow-drip the money back to you in old age so that you have enough money to meet your basic spending needs.

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I’m glad someone’s finally come out to put a stop to the nonsense that’s been going around on the internet. The hoo-ha started when property analyst Ku Swee Yong wrote an opinion piece in the ST which prompted a reply in the ST forum pages.

Basically, the debate was whether calling HDB flat owners “owners” accurate or whether it was more accurate to call them “tenants” since the leasehold term for an HDB flat lasts for only 99 years, after which, the flat automatically goes back to the government.

The forum writer’s reply was that calling HDB flat owners “tenants” is not good for national defense for psychological reasons.

The Big Question

So what’s the truth?

HDB owners vs tenants: unpacking the great illusion

[…]

So am I an owner or a tenant?

Both. What you own is a tenancy. Clearly, if you have a flat on a 99-year lease, you are a tenant (as opposed to a lodger) because you have exclusive possession of the flat. However, it is also clear that you are not an owner because your right to use the property exists for a fixed term – you will have to surrender your lease at some point.

So it is clear – you do not own the flatbut that does not mean you are not an owner of anything. What you do own is the tenancy. This is because a tenancy an asset that can be bought and sold and your freedom to deal with your tenancy fits with the idea of ownership described above.

[…]

The article that I’ve referred to makes a good case that HDB flat owners are still owners. It’s just that they do not own the flat itself but that they own the lease. After all, this is the effectively the same as owning a private property that has a land lease of 99 years.

Those that say that HDB flat owners are mere tenants forget that if you rent a place, you can’t profit from the sale of the place. Unfortunately, this is what HDB flat owners can do which automatically contradicts the fact that HDB flat owners are mere rentiers.

The Better Way to Think About HDB flats

Property, just like any other asset class, depends on a market of willing buyers and sellers to establish a price for the asset. A 99-year old piece of property ultimately has a quicker pace of depreciation built into it.

You may buy the official line about how HDB flats are a good store of value but that will ultimately depend on the generosity of the sole buyer of that asset at the end of its 99-year life.

Alternatively, you may treat it as a gamble on having the HDB flat be selected for SERS (Selective En-Bloc Redevelopment Scheme) and you get a new property in a similar location which would be worth a lot more than what you paid for the older property.

At the same time, remember that if you stay in your HDB flat, you don’t have to deal with the hassle of renting a place. The downside is that you have to pay for property taxes and conservancy fees.

PM Lee’s NDP Rally Message doesn’t change things

I wrote the previous two sections before Sunday’s (19 Aug 2018) National Day Parade Rally and it didn’t occur to me that he was going to touch on housing in such a big way during the rally.

PM Lee announced quite a few things that will impact housing in Singapore, particularly in the HDB market. I don’t think it changes much of what I’ve said above and the announcements were mainly to assuage the general public that their biggest asset would still retain its value. Notice that he didn’t say that HDB flats will be your goldmine, just that the flats should retain its value.

To be honest, it doesn’t change the dynamics much and you have to remember that the first generation of HDB owners have seen great capital gains for their flats only because Singapore’s economy has grown at an outstanding pace over the last 50 or so years. As the economy has grown, naturally the cost of living and the assets that provide these services must get more valuable.

I think the first generation of flat owners is going to benefit from HDB price appreciation. But what about the second and third generation? We have to remember that Singapore’s resident population is barely growing and much of the growth is due to new residents and permanent residents as our birth rate is below replacement levels.

For newer HDB flats to retain value when they get older, the housing supply will have to decrease or the resident population has to increase.  Perhaps, at some point, HDB will not build new flats in place of older ones.

Parting Thoughts

By the way, private property owners better hope that HDB flats retain their value. Otherwise, the private property markets will be hit as well. The markets, while distinct, are more related than people think.

After all, an apartment and a flat are ultimately just a place to stay. A fair number of private property buyers also come from HDB flat owners who have sold off their flats and wish to upgrade to a condominium apartment. If one type of property gets much cheaper relative to the other, prices will have to correct to narrow the gap between the two.

In summary, don’t forget that housing is an expense whether you own or rent the place. And if you’re into a property as an investment, don’t forget that you’re in it for the leverage and not the yield.

Been busy this week. I wish I had more commitment to code more. I’m trying to work on a property index data page for the local markets. This is based on my posts (here, and here) from some time back.

Anyway, here are the best things I’ve read all week.

 

 700 more days to FI (Minimalist in the city)

I chanced upon this blog from my google recommendations (thanks google!) and it’s nice to know how other Singaporeans are trying to achieve Financial Independence. I like how they’ve tracked and categorised every single expenditure (not something I would ever do because I’m just not that sort) and that’s given them a timer that they can countdown to.

The only flaw I see in their plan so far is this:

The objective is to have enough dividends generated from our stock portfolio to cover our annual expenses in 10 years time so that we could get out of the rat race and live on our own terms.

While dividends are much more stable than earnings, dividends are by no means constant. Companies can be forced to cut dividends or the tax code may change such that companies reduce the dividends paid. On the other hand, especially when you’ve already pared down to the bare minimum, expenses are pretty much fixed in the short-run.

We basically will be drawing on our savings account for our annual expenses and will get yearly top up from our stock portfolio returns dependent on the market returns and dividends for that particular year. The longest bear market for S&P 500 as illustrated below lasted about 2.8 years and the average bear market lasted between 3 months to 2 years. That’s the reason why we kept almost 3 years of expenses in savings and bonds to ride through any future bear market. This is to mitigate the possibility of force selling any of our stocks.

At the same time, most of our stocks are mainly in REITs and strong dividend paying blue chips which provides us with dividends even in a bear market like the one we personally experience during the 2008 financial crisis.

We could easily scale down our expenses with our minimalist lifestyle should there be prolonged bear market.

Lastly, we did not rule out going back to the workforce as we are highly employable working professionals. (I doubt we will reach this stage but just in case)

While I don’t dispute how long bear markets can last, I question the wisdom of depending solely on distributions from REITs and dividends from Blue-Chip stocks. Remember, distributions can get diluted and dividends can get cut.

No comment about point 2 but I suspect point 3 is a tad optimistic. Mid-career professionals who have been out of work for a while tend to find it hard to get re-employed. There’s always the choice of joining the gig economy (like being a Grab/Uber driver or a freelancer if their former professions allow for it.)

But otherwise, I think this couple is doing great! I hope the day will come when I share my own story as well. I’m not ready to share it yet but let’s hope that day will come sooner rather than later.

 

The Peter Principle is a joke taken seriously. Is it true? (Tim Harford)

What started out as a joke seems to have become truth in the business community.

The Peter principle states that “every employee tends to rise to his level of incompetence”. If someone is good at her job, she’ll be promoted into a job that demands different skills. If she’s good at the new job too, she’ll be promoted again, requiring yet another set of skills. One day, she will arrive at a job for which she is wholly unsuited, and there she will stick. Since when did a manager ever get sacked for anything?

Sadly, the Peter Principle seems to be born out by the research:

The authors of the paper discovered that the best salespeople were more likely to be promoted, and that they were then terrible managers. The better they had been in sales, the worse their teams performed once they arrived in a managerial role.

It’s pretty funny but real life seems to present lots of examples of this. My wife has been complaining about the management of her company and the Peter Principle seems to ring true for many of them. They may have been great at their previous roles but they certainly suck at their current ones.

Maybe the same’s true for the former SAF people at SMRT? =D

 

This Is How To Make Your Life Awesome: 6 Secrets From Research (Barking Up The Wrong Tree)

I’m pretty sure these findings are from same TED talk that I’ve seen before.

Anyway, a short summary of the 6 tips:

Avoid smoking and alcohol: Duh.

Years of education = good: Education seems to increase good habits (and being surrounded by smart, ambitious people never hurts).

Have a happy childhood: It’s huge. And surrounding yourself later in life with people who love you can help repair a difficult youth.

Relationships are everything: “Happiness is love. Full stop.”

Mature coping skills: Stop projecting and stop being passive-aggressive. Use mature defenses like humor when life gets hard. (Yes, immature humor is still mature coping. You’re welcome.)

Generativity: Build a good life, a well-rounded self and then give back.

STIpe10ScreenCap

It’s not much but I’m proud to say that it works and I made it from scratch (with a lot of dependencies and googling)

 

Finally, I got down to creating a page for the Straits Times Index’s PE10. Right now, it’s very simple. it just displays the latest month’s PE10 as well as the historical average and median values.

I’ve picked up coding for some years now but my progress was and still is, slow. However, it looks like I learned enough python and javascript to create a page where I can share the STI’s PE10. The page will be updated monthly.

What I did is really hacky because:

  1. I have to manually key in the STI closing price and PE.
  2. Run a python script locally to process the latest entry, calculate the PE10 and output to a json file.
  3. Upload the json file to the server for the page to retrieve the data, do some calculations for the average & median, and display it.

At some point, I hope to add a chart to the page so you can track how the PE10 has changed over the years and the subsequent capital gains based on a certain year’s PE10 ratio.

You can check out the page here or from the list of resources on my blog.

If you have any tips on how I can improve the page, please let me know in the comments below.

For most Singaporeans, we’ve been told all our life that if we study hard and get into university, we’ll be set for life. We’ll be able to get a decent salary, afford a decent house and after 30 years of work, we’ll be able to retire with enough savings to fund the remainder of our days.

It looks like some graduates can’t even get off the starting blocks.

Reality Bites

A recent Business Times article highlighted the plight of recent graduates who can’t find full-time employment and the chance that a large portion of them will end up being underemployed.

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some graphs go a long way. Source: Business Times Singapore

From the article, it seems that the picture is quite bad for graduates in certain areas like humanities and certain science courses, as well as the graduates from private degrees and external degree programmes (e.g. SIM, MDIS, Kaplan etc.).

One of the graduates interviewed basically fit this profile:

Meet Raymond Eng, 27

Over the past two years, Raymond has sent out about 300 applications, but has yet to find suitable full-time permanent employment. He graduated with a Banking and Finance degree from SIM-UOL in 2016, and has since been working on internships and contract jobs. His first internship out of university paid S$1,500 per month. According to Raymond, the market has an oversupply of graduates, and the influx of foreigners might have depressed wages.

The problem with his profile is what it doesn’t say.

He sent out 300 applications but how many calls did he get? I’m guessing that he got very few because he’s one of those that graduated with a GPA that barely made it and his resume shows very little else. If asked in an interview about he spends his free time, he probably answers “Netflix.” The fact that he had an internship which didn’t lead to a more permanent position is also telling.

Once again, all of the above is conjecture but it could easily be true.

Black Swan My Ass

I’m actually surprised that people didn’t see this problem with graduates coming.

Later on in the article, it quotes NTUC Assistant Secretary-General Zainal Sapari:

Of the 1,626 survey respondents, 70, or 4.3 per cent, had fallen into severe underemployment, earning less than S$2,000 per month, despite working full-time.

“These are the ‘graduate poor’ and it is a black swan in our labour landscape,” says Mr Zainal.

First of all, a black swan is an unknown unknown whose presence is felt only when you first see/experience it. By that definition, underemployment among graduates is NOT a black swan.

Second, haven’t there always been stories like that Ph.D. driving a taxi, or how graduate managers in their 40s get retrenched and end up in lower-paying jobs? If so, this phenomenon has always been there and it hardly qualifies as a black swan.

Ok, with that out of the way, I’m not surprised that the survey, while of a small sample, shows that there are graduates that are underemployed. With the increase in the number of universities in recent years, it’s no surprise that we have more graduates in the workforce. With a higher proportion of graduates, it’s no surprise that you’ll find more graduates either working in jobs that they didn’t really need a degree for or having difficulty finding a job that they want.

While some of the numbers could be due to business cycle fluctuations, we should have seen this coming. After all, this trend has been seen in Japan and Taiwan for some years now. Some years back, I already heard from a friend of a friend who’s Taiwanese that starting salaries for graduates could be around US$700 per month. For years now, there has also been the trend where Japanese graduates end up being employed solely in part-time jobs. These graduates are mostly from second or even third tier universities who might have been better off just going to a vocational school.

It’s a classic demand and supply problem — more university graduates equal cheaper university graduates.

Declining in Quality of Graduates

I graduated from university a while ago but even when I was in school, I wondered how certain people were admitted. I’m hardly the smartest person in the room but even then, there were some people who were struggling to understand the most basic of concepts. And this is NUS Economics’ students we’re talking about.

In recent years, SUSS (formerly SIM) has created more chances for people who otherwise wouldn’t have made it to university to get a degree. The average Singaporean becoming more affluent has also helped their offspring get a general degree from places like Australia that are very happy to accept foreign students who are veritable cash cows.

I’m not saying that there aren’t intelligent people studying in those places but on average, any HR gatekeeper is going to expect that they have a better chance with an average NUS/NTU/SMU student than an average SUSS/SIM student.

What’s bad about it is not where they’re studying but it’s that they’ve fallen for the lie that as long as they get that piece of paper, their life is set. Maybe that, or that they want to postpone being an adult a little longer and everyone knows that part of going to university is postponing adulthood.

What The Smart Ones Do

I have many former students who’ve studied or are studying at SUSS/SIM and the smart ones know that getting the degree is just a formality.

In other words, they aren’t betting on that piece of paper to do jack for them.

What they’ve done in their spare time is create businesses or work in part-time jobs to pick up skills that could lead to full-time employment. I know of one who started her mobile barista business while juggling her studies and the business seems fairly successful.

The other smart thing to do is to keep helping organise activities outside of class. Organising events typically require students to raise funds, approach businesses for sponsorship as well as invite VIPs to your event. These are all valuable skills that you could have picked up from a school, outside of the classroom. It’s also likely that you get less rejection as a student from a university and who knows, it may be through organising one of these things that you meet someone who can offer you an opportunity.

If you do what I’ve just described, it’s highly likely that you won’t find yourself in the same situation as this guy:

When Chris Lim, 26, graduated with a Bachelor of Business Management degree in December 2016, he didn’t expect that it would take him 10 months to land his first full-time job. After all, the Singapore Management University (SMU) graduate was “aggressively applying” and had sent out 70 applications in less than a year, only to be called back for less than 10 interviews.

He explains the Catch-22 he found himself in: some companies required at least one to two years of work experience for sales and marketing roles which, coming just out of university he did not have, and further, “they don’t teach you how to be a salesperson in school”.

This guy’s story sounds pretty much like the other guy.

He should have his school’s career counsellor look at his 70 applications and tell him what’s wrong with them. Furthermore, as I mentioned, sales and marketing skills could have been picked up from outside the classroom. The fact that he didn’t even think of this shows how passive this guy is. If that’s the case, would you want to hire him as to do sales for you?

Conclusion

The Minister of Education and his Ministry is right to shift the focus to skills in recent years. Unfortunately, not many parents think the same way. If you think a degree is your route to success, I’m sorry to say that you may need to rethink your strategy.

That strategy may have worked in the past but it’s no longer going to work in the future. The last time it worked is probably for my generation of graduates where we made up only about 30% of the labour force. As things go, the degree may become a minimum requirement for most jobs but it will not guarantee a job or success at one.

If you’re a young person, focus on picking up skills that play up your strengths and make you stand out from your peers. This is especially important if you can’t study and you’re going to end up with a degree from a second-tier school with a GPA that is a joke. The last thing someone wants to see is that you did badly in school because you were sitting around watching Netflix all day. If you did badly because you were going about running a business that brought you $2,000-3,000 of revenue a month, at least that’s excusable.

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.