Wednesday, October 07, 2015

Frugality isn't just about saving money

Frugality isn't just about saving money.

This article here says exactly what I'm thinking. To me, frugality is about being efficient, which means you spend the right amount of energy, time and money without wastage. And efficiency varies according to the different life stage that you're in.

For example, when I was a student with very little pocket money to spare, I'll go all the way to some cheap bargain sales at Peninsula Plaza to buy a pair of track shoes. There are many shops there that are in close proximity to each other, and you can bargain there, so it'll be easier to find something good and really affordable. But the downside is that to save that $20-$30 bucks, you might have to spend 1 to 3 hrs there. While I would certainly do that in the past, I wouldn't care to do it now. What had changed? My time became more precious, so spending 1 to 3 hrs to save $20 to $30 bucks is not what I would do now but is something I would gladly do in the past.

Efficiency can be seen as a percentage also. If I have $200 in my bank account, saving $20 is a big deal to me because that's easily 10% of my networth. If I have $200,000 in my bank account, saving $20 is just a drop of my networth - a mere 0.01%. No way am I going great length to save 0.01% of my networth, especially if it takes up a lot of my time. This can be easily applied to our free time too. During my student phase, there's school holidays, so I'm practically free for 15 hours per day, every day, for 1 month (not much homework in the past). That's a freaking 450 hours of free time. If I have to queue for 5 hours for a freebie, why not? It's just about 1% of my free time. However, when I'm working, and I only have 24 hours of weekend time free, spending 5 hours will take up a proportionally bigger 20% of my time. As a full time tutor, especially now during the exam season, I really only have about 8 hours of free time per week. Spending 5 hours to queue up? No freaking way. I'll rather spend the money and use the time to sleep.

So, time is money. When we're young, our time is cheap and we don't have a lot of money. Hence, we spend time to save money. When we're older, (hopefully) our time becomes more costly, and we have a lot of money. Therefore, we spend money to save time.

But habits can be hard to correct. Imagine a big part of your life you've been trying to spend time to save money. The cost of your time might have increased tremendously but you're still stuck to the habit of using time to save money. That would not be wise and efficient, because while you're a good saver of money, you're not a good saver of time.

Monday, October 05, 2015

For the Advanced Croesus Rights players

Alright, now that you've read the basics here, you can progress to more advanced stuff.

Nicholas Nasim Taleb (NNT) is my favourite modern philosopher and it's a good thing that he dabbles in the market too. His concept about antifragility - to make it out better when crisis strikes and not merely to survive it - is enlightening. So with regards to the rights exercise of Croesus Retail trust, how do we best capitalise on this?

First, you need to know the Theoretical Ex-Rights Price (TERP), which is the theoretical price of the stock after all the rights exercise. Since the price of the Croesus is about 80 cts (plus minus 1 ct), let's just say it's 0.80. The rights exericse states that you'll get 22 rights shares for every 100 mother shares @ 61 cts each. Hence the TERP = (0.80*100 + 0.61*22) / (100 + 22) = $0.766. Bear in mind that this is all theoretical and the TERP will vary according to which starting price (I picked 80 cts) you choose. I like to choose the price when the counter goes XR, but there's really no reason why you couldn't choose others.

Why is it important to know the TERP? To maximise your benefits from the rights exercise, you need to get as low a price for the shares as possible. This usually means you want to get as many rights shares at 61 cts as you can possibly get in order to get an average price per share below the TERP if possible. And there are 3 ways to do so:

1. Get as many mother shares before XR as you get. The more mother shares you have, the more entitled rights shares you will get, based on the ratio of 22:100. This is a lousy way to do so because it will give you proportionally the number of right shares, not more and not less. Anyway, Croesus went XR last Fri, so this option is not available anymore.

Scenario 1: I have 1000 shares which I bought at 87 cts, so I'm entitled to 220 rights @ 61 cts each. I'm a casual rights participant, and I just want to get it over and done with. Before 23rd Oct, I go to the ATM and pay $134.20. I will now have 1000 + 220 = 1,220 shares. 

My average price is : (1000 * 0.87 + 220 * 0.61)/1220 = $0.823 per share

2. Buy more nil paid rights during the nil-paid rights trading period. During the nil paid rights from 9th Oct to 19th Oct 2015, you can buy or sell the rights that you are entitled to. If you have 100 mother shares, you will have 22 entitled rights that have not been subscribed or paid for yet. Some investors, for whatever reasons, might choose to subscribe partially or not at all. So this period is important for these people to sell. Otherwise, if you don't subscribe by the closing date (23rd Oct 930pm by ATM), the nil paid rights will be rendered worthless.

This is so important, so let me repeat. If you do not wish to subscribe for your entitled rights (in our example, the 22 nil paid rights), you need to sell it between 9th Oct to 19th Oct. If you don't sell it, you'll just lose money that you're entitled to. You also need to pay brokerage like the trading of normal shares.

Now here comes the interesting part. You can choose to buy more nil-paid rights during the trading period also. If the TERP we calculate initially is $0.766 and the rights shares are priced at $0.61, then the nil paid rights should also trade at $0.156 (0.766 - 0.61 = 0.156). The equation is this:

Price of nil-paid rights + 0.61 = TERP

Now, the theoretical price of nil paid rights is $0.156, but the market price varies according to sentiments. If the price of the nil paid rights on the market is trading at less than 0.156, then it represents a good buy. If the price of the nil paid rights is trading at more than 0.156, then it represents a good chance to sell off any that you don't wish to subscribe. But remember, in total, your total nil paid rights = (entitled nil paid rights + nil paid rights bought during trading period). You need to subscribe by paying for both before 23rd Oct.

Scenario 2: I have 1000 shares which I bought at 87 cts, so I'm entitled to 220 rights @ 61 cts each. During the nil paid trading rights period, I saw that the nil paid rights are trading at $0.150, which represent a good value. I proceed to buy 200 shares at $0.150. Before 23rd Oct, I subscribe by ATM for all the entitled rights (220 shares) and nil-paid rights that I bought (200 shares), paying a total of $195.2 (420 x 0.61 = 195.2).

My average price is : (1000 * 0.87 + 200 * 0.150 + 420 * 0.61)/1420 = $0.814 per share (does not include cost of brokerage incurred when buying 200 shares @ $0.15)

3. Apply for excess rights shares. There will be people who do not want to subscribe to it and people who wants more of the rights units because it's cheaper than the mother shares. You can apply for more than the amount of shares allocated to you. For example, if you have 1000 shares and you are entitled to 220 rights, you can go ahead and apply for 500 rights shares. During the subscription period before 23rd Oct, you need to pay 500 x $0.61 = $305 first. The 380 shares that you are not entitled for but nevertheless applied for is called the excess rights.

But subscribing more doesn't mean that you will get all. Priority is given to those who wants to round off their odd lots. Since the board lot size is reduced from 1000 shares to 100 shares, there is less rounding to do. Those excess rights shares that you applied and paid for without success will be refunded to you automatically to the bank account that your ATM is tied to.

For hot counters (possibly this one), there's really no point subscribing for more than the amount of lots that you have. If you have 10 lots initially, you will likely not get more than 10 lots of excess. My rule of thumb is just to put in twice the amount of money that you are entitled to. If you have 1000 shares, you're entitled to 220 shares and you have to pay $134.20. Just apply 440 shares (220 allocated and 220 excess), paying $268.40 will be more than sufficient to 'tikam'.

Scenario 3: I have 1000 shares which I bought at 87 cts, so I'm entitled to 220 rights @ 61 cts each. I want to apply for excess rights and I hate odd lots, so I applied for 80 more excess rights through the ATM @ 61 cts each and paid $134.20 (for the entitled 220 shares) + $48.80 (for the excess 80 shares to round up a lot of 100 shares), giving a total of $183. Assuming I got all the excess 80 shares that I applied for, I effectively have 300 shares @ 61 cts each (220 + 80 = 300).

My average price is : (1000 * 0.87 + 300 * 0.61)/1300 = $0.810 per share

4. If you don't have any mother shares of Croesus, rights exercise present an excellent opportunity to enter before XR. Since the counter went XR last Fri, this option is no longer available, but for educational sake, let's just run it through.

You generally want to buy enough mother shares before XR so that you have the number of excess rights furthest away from one round lot of 100 shares. The table below shows some of the 'correct' number of mother shares you need in order to maximise the number of excess rights needed for rounding. Since priority is given to people who need to round off their odd lots, it's wise to maximise the number of excess rights needed for rounding, so that you will have the greatest probability to get them at a cheap price of 61 cts each.

As a counter example, If I have 4500 mother shares before XR, I'll be entitled to 990 rights. To round it to one full lot, I just need 10 shares, so that's not really good. 98 is the highest ever you are going to get based on the 22:100 ratio. For those mathematically inclined, the number of mother shares to own before XR to maximise shares for rounding is (5000n - 900), where n are the positive integers beginning with 1.

Again, this option is no longer available since Croesus went XR last Fri, so don't do it. With the board lot size changed from 1000 shares to 100 shares, this is getting less significant too.

Scenario 4: I've heard of Croesus but have zero shares now. I'm excited because Wong Fei Hong also have it. I want to maximise the number of excess rights that I have. Since greater priority is given to people who applies for excess rights to round their odd shares, I want to buy mother share now before XR so that I can have the maximum number of excess rights. Hence, I want to buy 4,100 mother shares so that my entitled rights is 902 shares. This will ensure that the chances of me getting 98 excess rights @ 61 cts is given the highest priority.

Before XR, I bought 4,100 shares at $0.81. I'll then be entitled to 902 nil paid rights. Before 23rd Oct, I go and pay up $550.22 for my 902 entitled rights and also subscribe for another 98 excess rights for $59.78, paying a total of $610.

My average price is: (4100 * 0.81 + 1000 * 0.61)/5100 = $0.770 per share (does not include cost of brokerage incurred when buying 4,100 shares @ $0.81)

In summary, regardless of which options or combinations, it's important to remember the following basic rights information:

1. Nil paid rights entitled to you need to be subscribed by paying 61 cts before 23rd Oct. As for the nil paid rights bought during the nil paid right trading period between 9th and 19th Oct, you will need to pay brokerage fees AND also to pay 61 cts before 23rd Oct. Failing which, it will be worthless after 23rd Oct. In fact, any nil paid rights not subscribed will be worthless.

2. If you don't want to subscribe or choose to subscribe partially, you need to sell off your entitled rights during the trading period from 9th to 19th Oct. Failing which, it will be worthless after 23rd Oct.

3. Any transactions using brokerage platform need to pay brokerage fees. Any transactions using ATM need only to pay a service fee of $2, if I recall correctly. Hence, there's brokerage fees to be paid for nil paid rights bought or sold during the trading period and there's no brokerage fees needed to be paid for application of excess rights because it's done over the ATM.

4. The difference between excess rights, nil paid rights entitled to you and nil paid rights bought during trading period is this:

For the Casual Croesus Rights players

Croesus retail trust is doing a rights exercise. The mother shares just went XR last Fri and I thought I should highlight the important points to remind myself to take action. I always remember someone losing a huge amount on rights exercise in the past because of some misunderstanding. I hope this won't happen to any holders of Croesus.

Here's the details from here:

The most important dates are the trading of rights entitlements, otherwise known as nil-paid rights, from the 9th Oct to the 19th Oct 2015. The second important date to take note is the closing date of the rights payment by ATM, which is on the 23rd Oct 930pm. Please do not forget to subscribe to your rights by paying for it, usually through the ATM, by 23rd 930pm. If not, all your rights will be rendered worthless!

For those who are new to rights, here's the main flow of events.

1. The company issuing the rights, called the mother share, will announce the rights issue. They will go cum rights (CR). If you buy the mother shares while you still see the CR status, you'll be entitled to participate in the rights exercise. After ex-rights (XR), you can't participate in the rights on any mother shares you bought from XR onwards. In other words, you're not entitled to any rights shares from this point onwards. The mother share, Croesus retail trust, went XR last Fri. So, if you only buy it today, you won't be participating in the rights.

2. After XR, in about a week or so, you'll receive a thick set of documents in your mail called the Offer Information Statement (OIS). In it, you'll get a set of documents detailing why they are doing the rights, the timeline (as shown above) and the way to go about subscribing for the rights. It's very detailed, so for first timer you should read all of it to get a gist of what to do. They even give different scenarios as an illustration, so really, go read it because it's very informative.

Inside the OIS, there is also a white form, I think it's simply called Form A or the ARE. In it, they will state the number of rights shares you are provisionally allocated based on the number of mother shares you have by XR date. Since this rights exercise is 22 rights for 100 shares @ 61 cts per rights shares, if you have 1000 mother shares by XR, you'll be provisionally allocated 220 rights shares. These 220 rights shares are known as nil-paid rights.

Why nil-paid? Because they have not been 'paid' up, or subscribed. You still need to pay 61 cts for each nil paid rights allocated to you. So, in our example above, since you have 220 nil paid rights, you'll need to eventually cough up $134.20 to subscribe for it. Thereafter, the nil paid rights gets transformed into normal shares. To differentiate this new addition of shares from the original mother shares, they call it the rights units. So after subscribing or paying up 61 cts for every right entitlements (or nil paid rights), they get transformed into normal shares (or rights units).

The last step on subscribing is important. Again, if you didn't subscribe and pay up, the nil paid rights provisionally allocated to you will be rendered worthless. And the last date to pay for it is on the 23rd Oct, 930pm, if you choose to pay through ATM.

3. How to subscribe and pay so that your nil-paid rights get converted to rights units? There are two ways - firstly it's through form A that is mailed to you together with the OIS. I blogged about this here.

The second and easier way is to apply through ATM. I always do it through ATM.

Just go to the ATM screen, click on other transactions, then look for something like “ESA – IPO applications”, then find the Croesus Retail trust. You’ll be guided to type in the amount of rights that you wish to accept out of the allocated (e.g you may be provisionally allocated 5000 rights but may want to accept only 2000), plus another separate screen where you’ll be guided to type how many excess rights you want to subscribe. Then you’ll come to a screen where they will tell you how much you have to pay. Make sure this screen you check carefully before pressing. I know for DBS you need to pay a service charge of $2.00, not so sure of other banks. If you applied through ATM, then do not send any forms! It’s done – just wait for them to mail you how many excess rights you’ve successfully got and how much you applied for.

On 3rd Nov 2015, the rights units will start trading as normal original mother shares. There will be no distinction between these two and the rights exercise is deemed to have completed.

That's all, three basic steps. Okay, ready for complications? There are 2a, 2b 2c etc and 3a, 3b and 3c etc, which I'll give fuller details in future post for more advanced rights participants. I'll share some information regarding excess rights, how to make the best out of the rights exercise and also the part about trading of the nil paid rights in near future post.

Monday, September 14, 2015

One in three

In life there's a big C that we're all afraid of. Reportedly, one in three will get this. The statistics are quite grim if you look at the person to the left of you and to the right of you. Out of the three of you, it's eeni meeni miini moh, so we'll see who gets the hot potato.

The hot potato happen to fall upon my mum's lap. It happened quickly and the whole family rallied behind her to quickly sort out the problem. Within 2 weeks, after countless blood test and consultation, she went through a small operation to ascertain the spread and another bigger operation to get her womb removed, so she should be on the road to full recovery. Thereafter, it's yearly checkup for 5 yrs to make sure that she is cleared.

It sounds like a bad thing, but really, it's one of the best thing that can happen to any person, should you survive that is. Why do I say that?

1. Immediately, there's a 180 degree change in attitude. My mum always complained to me about how she's always taken for granted. But this is nothing an extended hospital stay and a serious illness cannot resolve. People started realising that once the help is absent, the status quo is changed and they themselves will have to step up to shoulder the burden in order to bring the status back to normality. It's the fact that people had to do things themselves that they never had to do it in the past that makes them think about how hard and difficult my mum had been silently doing without complains in the past. I think this is certainly a 'life-changing' experience for her. Maybe it's only for the short term because she's ill? We don't know, but at least my mum can be grateful that people are appreciative of her efforts now.

2. Love need not be expressed out in three words. If you listen hard and intently, and recognise the language of love, it is there. Love is when you see someone constantly by your side before the operation, reassuring you that things will go well. Love is when you stay beside the bedside waiting for hours while the anaesthetic wears off. Love is when you gently brush the hair off the face and whisper softly to the ears while lying on the bed half awake. Love is when you're surrounded by your family and friends, all eager to see that you're eating properly and ready to support you come what may. That is the language of love; it can be silent and very expressive, if you listen hard and intently.

3. An unfortunate incident is an opportunity to bring out the best in people. If things are fine, everything just goes on with their routine life. We should be grateful when things don't go our way, because we have the opportunity to change ourselves and we can all come ahead better from all these. There's the usual disputes between family members in my family. I think a serious illness puts all these in the correct perspective. How many years do we have here? Out of that, how many years do you want to be unhappy and sulky and be angry with each other? If you see the little things in a broader view, I think you'll see that everything is just a blip in our life. Treasure the good and the bad things that happened, because it gives you experiences.

See? It's not really that bad isn't it? And what do I learn out of all these?

1. Get the best h&s plan that you can afford. When one is ill, recovery of health is more urgent and the last thing you want to think about is whether you have to wait a longer period. My mum met some patients who had been caught inside the bureaucratic web and had been bouncing around places to places until the cancer spreads more extensively than necessary. Some of them are surprised she went through countless body checks, MRI scans and 2 ops within 1 week (plus another week for recovery from ops) while they had been waiting for years. It's unfair and it's unfortunate but there's just more patients waiting for more subsidized wards than less subsidized ones.

2. Have a positive mindset. Life is a big ironic play, with actors like you and me. When one is unafraid of death, the likelihood of death falls. When one lives inside a cage of worry and anxiety, sometimes the fear and the negative emotions just suck you in and spiral you downwards. What you can do, you do your best. What outcomes you cannot control, you let go. Letting go is not giving up. The difference lies in who the master and the slave is - the situation or yourself.

3. Be vulnerable and let others take care of you once a while. First you can let them appreciate you more, and secondly, you allow them to grow and wean off you. If you don't let go, they can't build the muscles for their eventual flight. We all have to part someday.

Friday, September 04, 2015

Reflection on my 50k savings journey

AK posted my old articles in his fb and reminded me that I need to keep stock of my 50k savings challenge. While I kept good records intra-year, I wasn’t really paying attention to how I did inter-years, so I thought this is a good time to check back on my savings record since I started 7 years ago.

It was way back in 2009 when I started my 50k savings challenge. If it’s not for AK who posted some of the old articles in his facebook, I wouldn’t have remembered that it was THAT long ago. I still remembered that it was on a dare that I started this. I was chatting with someone on my cbox and somehow it went on to challenging each other to save up 50k for the year 2009. This was the post that started it all.

Back then, I was trying very hard to save 150k within a 3 years period for a property, wedding and possibly a car. There is a motive and there is a desire to do it, and so I went on to do it. In the process of doing so, I had to rewire some of the limiting assumptions that I had lived with. I started working more on weekends and started working earlier and ending later. I started paying more attention to my cashflow and tracked every cent that came in and flowed out. Due to the re-wiring process, the first year in 2009 was the hardest for me. Subsequent years are easier than the first and it gets easier and easier as the process to saving and earn more began to take root in me. You can read about it here.

For the second year in 2010, I wasn’t complaining that much. Things are getting more and more familiar and I already had prior knowledge of how to do it. The third year of doing so in 2011 is the most relaxing of the three years. That was when I didn’t even have to consciously scrimp and save. So based on experience, it’ll take 24 hrs x 3 yrs x 365 days = 26,280 hours to master the habit of savings subconsciously. If we assume that we are using 1/3 of the time to consciously think about raising your savings, it’ll take 8,760 hours to do so, which is close enough to the cliché 10,000 hours of mastery by Gladwell’s book Outliers. If you’ve not spent 10,000 hours to think consciously and obsessively about savings, then you can’t complain that you tried hard enough.

In 2012 I didn’t hit the 50k target. If I recall correctly, I was having a ‘break’ and was kind of burnt out from working like a mad dog for the past 3 years. I think more importantly, my short term goal of saving 150k for my financial bombs had been fulfilled so I was taking it easy for the time. The feeling is like training hard for a marathon and you survived and finished the long arduous run. Then what happens? There’s a sudden emptiness in me and I was devoid of a reason to work as hard as before. I still managed to save 28k on paper for that year, though I probably spent a lot more as the financial bombs ‘exploded’. This is the purpose of saving up for the past 3 years, so it’s very well worth it.

The next two years are not very good though. On hindsight, 2012 and 2013 are the worst year in my tuition career. I was busy doing some business that subsequently folded (don’t ask). I don’t have a lot of students during that time, which is both a conscious decision and also I re-entered the tuition market at the wrong time and season. It was no surprise that I didn’t hit my target. I still saved 25k, but again, I probably spent more because of investment in the business, which I separated from my savings. Savings for me is strictly total income minus total expenses. Investment, either in business or stock market is not considered an expense. The students just didn’t stream in as much as I wanted to, so I had to rely on a lot of positivity to tide me through. I had great fun though because I kept myself busy with lots and lots of reading, and had a lot of time with my wife to be a local tourist visiting all the touristy places like Singapore Science centre, Botanic gardens, zoo etc. It was such a fantastic time and I felt totally, deeply and infinitely recharged and ready for my next career bull run which I will it to happen in the following year 2015. Ironically, 2012 and 2013 are the years where I felt the greatest conviction that I can survive in this career. If I can survive in the bear run in my career, which is the worst in nearly 10 years of my career, I can have the attitude and methods to survive any years. Financially these 2 years are disastrous, but spiritually and mentally, I think I’ve become a giant. Things picked up towards 2014, and I managed to pull off 50k savings.

2015 was exceptionally well. I think because of my long break in 2011 and 2012, I was still feeling that drive and motivation to push myself beyond my limiting beliefs. I had broken almost all the things that I thought I couldn’t – like having 12 hours lessons on weekends, with just 30 mins of meal time. And most importantly, I wasn’t as stressed as 2009 when I first started the savings challenge. I think this time round, I really want to do this. So far this year, it’s only around Sept and I had managed to accumulate 50k of savings. I still have around 2 months more to earn a decent income before I finish my peak season for the year and should be right on track to save 60k this year, again breaking my self-limiting beliefs. I don’t expect to repeat this feat in 2016, but hey, a year of savings earned is a year of savings earned. I’m not going to argue with that.

I think part of the reason why I am motivated again to start saving up is because I wanted to accumulate 240k to start several plans, which is listed down in detail here. Motivation is extremely important to understand why I defer enjoyment and defer spending. As I mature, I’m also very comfortable spending on what I need and want to spend on. Money is starting to become more a means rather than an end to itself. This is an extremely important breakthrough for me, because I think this is very sustainable in the long run. Again, on hindsight, I think the long break from 2012 to 2013 is extremely important for calibrating my internal drive and motivation. Everything happens for a reason, and it’s only in the future that we can decipher its intention and reason.

So, in summary:

2009 – 50k
2010 – 50k
2011 – 50k
2012 – 28k
2013 – 25k
2014 – 50k
2015 – aiming for 60k

Do take note that the above are just savings, which is strictly defined by my total expenses subtracted from my total income. Before you start jumping career, take note that I don’t have CPF so my savings are naturally higher than people who are employed since they have to contribute a part to their savings. These numbers are not as good as it appears.

When I started in 2009, I wasn't sure I can do this for 20 yrs. Now, I'm pretty sure I can do it. And not only will I hit it being single and living with my parents, I'm going to hit it, exceed it, and being married and living in my own flat, and with kids, with a lao pok car and with a healthy retirement fund and still find time to enjoy life with friends and family. I owe it to myself to fulfill my dreams and not just be contented to just build sandcastles in the air.

Thursday, August 27, 2015

What I did when the Market tanked

Looking at the title, this is obviously a trap to lure people to read things that has nothing to do with the title at all, So don't say I didn't warn you lol

I was away from Singapore during the worst two days in Singapore's stock market history. As the world's stock market went tumbling down, I was sitting on a bed waiting for breakfast to be served. Do you ever have a feeling that the market always crashes when you're not around? It's like there's someone out there who just knew when to screw up the market when you're away on a holiday. Anyway, where did I go? I went Bangkok.

I always go to Fuji restaurant in Bangkok for my Japanese food fix. I'm pleasantly surprised to see them opening up multiple branches. The sashmi there is to die for, especially with the low price. 

This was less than a week since a bomb went off near the Erawan shrine (the four-face buddha), so of course, it's with a little trepidation that I leave the safety of Singapore. This trip was full of incidents that, if I'm more superstitious, I'll have totally abandoned it. Here's a list of problems:

1. The bombing incident at Bangkok, which occurred less than 1 week before the schedule departure. It's like some godly power telling me to abandon the trip.

2. Unable to change, or postpone the trip, because of work and some un-claimable clause from travel insurance

3. During the check in of the flight at Changi airport, it was discovered that my name isn't on the list despite having a printed confirmation slip from Scoot. It was with a lot of phone calls back and fro to some call centre at Philippines that another flight scheduled 4 hours later can be arranged. Half the day is gone by then.

4. After confirmation of the flight, it came to my knowledge that the hotel is not confirmed. So, this is the first time that I'm going overseas without confirmation of a place to stay.

5. Everything is settled once Bangkok is reached. But on our return flight, we realised that the baggage limit is reached. Why? Because the travel agency didn't include include it in, and we ended up having to pay another sum to settle the issue.

6. And the whole trip have to be marred by another flight delay by about 1h 30 min.

I seldom go on holidays, but when I do, I've the luck to experience all the cock ups known to frequent travellers, haha! Still, it was an experience to have it and perhaps some lessons to learn from all these 'mis-adventures' too. It makes me wonder why get any insurance in the first place lol! Thankfully, the insurance that I bought has this ubiquitous SG50 discount, so I'm paying $26 for two.

These glistering little packets of carbs with the golden sweet Thai mangoes,  poured with the slightly salty and warm coconut milk, is such a treat that I ate it everyday while in Bangkok

How is Bangkok like? I've not been there for a long while..perhaps by at least 5 years? I think the Bangkok now is more cosmopolitan. On the basic level, there really isn't anything different from Singapore. There's a lot more tourist, especially middle eastern ones, who are all clad in black with the women entirely covered except for their eyes. They are looked upon by the locals with a little bit of curiosity mixed with caution, especially in light of the nationality and ethnicity of the bomber in the recent incident near Erawan shrine.

This should cost about 60+SGD? Here's a very decent meal for 2 cost about 50+ SGD, including all the sashmi you ever wanted to try in Singapore but is deterred by the pricing. 

The locals are full of shiny examples from K pop celebrities, with their straight Korean brows, whitened skin and dyed curly hairdo. Almost every female I come across, which is about 9 in 10, all fully clad with make up. From the socialites dining in atas places near Central and Paragon area, to the cleaners and servers who work in the food court, almost all the females wore makeup. On more than one occasion, I saw the shopkeepers finding some reflective surfaces near their shop fronts and applying their mascara and lipstick. It seems clear that the South Korean wave had also hit this place, and pretty hard too. This is an interesting phenomenon to observe as an outsider.

One of the most glaring observations, other than the heavily made up female local population, is that there is apparently no people older than say 50 years old in Bangkok. If you see someone around that age in Bangkok, I can bet you my last Thai baht that they are tourist. Food courts (yes, they have that concept too, likely imported from Singapore since I saw Food Republic there as well) are also served by staff and cleaners no older than 40. It makes me think about the kind of people whom we hired back in Singapore. Where did the elderly folks in Bangkok go to? Why are the elderly folks in Singapore still working at their age? Again, the stark contrast in the age of the workers is something to take away from this trip.

I love MBK. It's a blast from the past with all these old tech gadgets. Going there is like going back to the 90s in Sim Lim Square, complete with counters filled with pirated games and DVDs. Look at the macintosh! 

While we are walking around, I wanted to try out some authentic Thai restaurant in the shopping district. After searching for a few hours, we came to the realisation that there is no authentic thai food. I mean, if a tourist comes up to me in Singapore and ask me where to find a restaurant that serves authentic Singaporean food, I'll be hard pressed to say which one. Likely I'll recommend hawker food, but again, what food best represents an authentic Singaporean food experience? This is a difficult question to ask, and a deeply ideological one at that. Our identity is often tied up with food, and perhaps Singapore is just like that - a rojak of different cultures all mixed together, with a spicy but unifying sauce of wanting to do better than the countries we came from.

Bangkok serves a lot more international food than its own food. Any type of cuisine that you crave for, you can probably find them there. But just like Singapore, there's an overwhelming bloom of Japanese and Korean food. Everywhere I go, I see Japanese food culture influence - Harajuku's ice cream crepe, thick pork broth ramen, Sushi bars and omu rice. I don't like Korean fare, and don't care to try any of it but I see Korean hotpot and buffet sprouting every corner. Will it take over their local cuisines? I think yes, eventually, though I hope not. I really love my tom yum and mango rice. Anyway, everyone should try the Japanese food in a proper restaurant there. The prices there are really value for money and we feasted on sashimi like a mad Robinson Crusoe on rampage.

I went there exactly a week after the bombing incident. There's a lot of people filming there. I can see at least 3 groups of filming going on there, with a lot more tourist using their cameras and recorders. Wife said one of the faces got chipped off, but I was too concerned about hurrying through that place to really notice.

On a side note, you can see that security is stepped up tremendously. Every junction and every entrance and exit of shopping malls are fitted with a guard and a metal detector. You have to open your bag every single time you enter. Army and police officers dotted the streets and malls, and the general feeling of safety is there. But for those who had been on guard duty, you know how safe these acts are. You can't check everything but it does bring a certain level of safety psychologically. Maybe that's all that matters. I still went to Erawan shrine, on the strong request of my wife, and prayed that everything goes well in our family and friends. Will go back to return our wishes and make more offerings of flowers and incense again, we promised.

Thursday, August 20, 2015

Aspial 5.25% bond - Good buy or Goodbye?

Aspial, the group that is better known for the brands under the group: Lee Hwa jewellery, Gold heart, Citigems, as well as the pawnshop that litters all over neighborhoods in Singapore like a blue plague - Maxicash. They are offering a retail bond, one of the rare ones in Singapore, at an interest rate of 5.25% per year.

The question on my mind is whether this is a good buy.

Bonds being bonds, are capital guaranteed upon maturity. But the guarantee of a bond is only as good as the solvency of the company issuing the bond. And we really just need it to last 5 yrs until the maturity of the bond in order for the bond investors to get their capital back.

I have such a hard time looking for annual reports at their main website that I have to resort to SGX's site for their financial information. There's even a missing file in their link for the annual report, tsk tsk. Usually I like to take my info first hand from annual reports, so this is quite an exception. Still, I must commend SGX's revamped site. It's quite useful to learn about a company in a very short time.

Here's the chart showing their debts and various ratios relating to debt:

Good or bad?

Their debts are just mounting year after year. But increase in debts is okay if their debts are just a small portion of their assets. Just how much of their total assets consists of debts (both long and short term)? In FY2011, it was 72%. Then progressively in FY2012, it went up to 76%, then FY2013 was 74% and finally FY2014 was 77.5%. So that's about 3/4 of their total assets. Okay, that's still alright, because perhaps that's how their business model is based on. Different industry have different debt levels to run smoothly and I'm certainly not an expert in deciding what the right level of debt is for their business to run. Debt can be a good thing in the right hands.

But can they pay their debts from the income and cashflow generated from their business?

Total revenue is kind of stable, but their net income isn't coming in as well. All their earnings ratio, returns ratio are dropping, as shown below:

Okay, drop in net income is still okay as long as their cash that it brings in is enough to pay upkeep the cash burn. So, do they generate enough cash in their business?

Cash flow from operation is just negative. It seems like most of the cash flow comes from financing, and that part of the cash flow contributes enough to have the net change in cash as positive. Verdict? Debts is their way of financing their business, which isn't generating enough cash flow from their business operations and they have to progressively borrow more to upkeep their cash burn.

This is not a good company to buy, if you ask me. The bonds, however, might be a different matter altogether.

Can they survive for 5 yrs? Likely, as long as they can continue to borrow money. Or if the banks are reluctant to offer them more cashline, they can resort to another one of these retail bonds, likely at higher interest rate in the near future when their cash runs dry. They probably won't die within 5 yrs, and might even enjoy a revival of sorts in their pawnshop business if the economy downturn comes in the near future.

I wouldn't let my parents get any of these though, because there's always a risk of default in bond in this unrated debt that they are offering. It's on a whole different level from the FCL bond that is offered to retail earlier this year at 3.65 %. Since the min bid is $2k, I might get in for a small amount, maybe 2k to 3k, which is only a tiny percentage of my portfolio.

Nothing more, and definitely, no show hand in this bond. Application had started already, and will end on noon Aug 26th, with DBS as the sole bookrunner. Trading of bonds will start on 31st Aug and investors will be paid semi annually on Feb 28th and Aug 28th every year, until 2020. News just came in that Aspial had re-allocated $25 million in bonds offered to the public to its placement to institutions. So now, the public tranche is $25 million, down from $50 million.

Wednesday, August 05, 2015

My personal inflation rate

Lizardo here did a very interesting take on the inflation rate in Singapore. He found that based on the official recent 35 yrs of history (1980 to 2015), the average inflation rate is about 2.22% (or CAGR of 1.97% pa) . A longer period from 1962 to 2015 gives an average inflation rate of 2.75%.

I think the official figures might not mean much to you, because it depends on the price of a basket of goods that may or may not be relevant to you. Hence, the concept of personal inflation rate is much more relevant and customised for individual's taste and consumption patterns. To get a good proxy of my own personal inflation rate, I thought that we can compare how my expenses rose over the years. It's not the best way to calculate it, but it's fairly good approximation.

I had my first track record of my expenses back in 2008. Back then, I wanted to try tracking in detail for 1 month, or at most 2 months. But before long, 8 years had passed and I have a full record of my expenses from 2008 to 2015. Everything is included here, including parent's allowance, mortgage, daily expenses, etc. Here it is:

For 2015, I annualised the expenses plus another x amt to approximate the usually more spending that occurs towards the end of the year

I highlighted 2011 to 2015 because that's the years in which I shifted from living in my parent's house to my own home with my wife. There's a huge jump in my expenses because there are a few financial bombs that exploded over that particular period between 2008 to 2010. There's a wedding (small bomb), there's a COV and renovation of flat, plus a first down payment (big big bomb) and there's a down payment for a second hand car (small bomb). All in all, the expenses are fairly huge but unlikely to occur again.

Thus, from 2008 to 2015, my expenses increases by an average of 6.9%. To remove the one-off cost of getting a flat and renovation, I also looked at the average increase from year 2011 to 2015, and it worked out to be 0.4%. How about CAGR? From 2008 to 2015, my CAGR is 5.71% pa, and from 2011 to 2015, my CAGR is 3.85% pa.

I think for all purposes in planning, I should use an inflation rate of 4% pa until I have more stable data of my expenses. No hurry.

Monday, August 03, 2015

5 ways to avoid emotional capitulation

I know quite a lot of people are sitting on a huge pile of cash, waiting to be deployed into the stock market when the situation presents itself. I'm always very interested in the psychology of investors and how they intend to cope with the volatility of the market. It's really easy to rationalise and say you will cut loss when the counter goes below a certain level and you will buy in when others are fearful. It's even easier to say that when your cash hoard is very high and you have very little skin in the market.

It reminds me of the difference between a chicken and a pig. When you're served breakfast, a chicken is involved while the pig is committed. A chicken will lay an egg and it won't be any more different before and after giving you the egg. On the other hand, a pig will have much more to lose when it gives you the ham.

Are we also like that? When we have huge pile of cash, we can say a lot of rational stuff and quote a lot of Buffett's sayings. That's because we're involved but not yet committed. When you put in a huge percentage of your networth into the stock market, it might be a different story altogether. Things that you thought you should do suddenly becomes so hard because a huge part of your emotional well being is tied to the money you've put into the market i.e. you have skin in the game now. Welcome to real life, committed pigs!

There's a few ways I can think of to mitigate this risk of emotional capitulation:

1. Research and read up really really in depth into the company you're buying. The level of commitment is directly proportional to the homework you've done into it, and not by the amount of articles you've read that is written by a stock market guru. I personally find that the more you know about the company you've bought in, the higher your confidence in buying an unloved counter. If you just follow others, a little spook will get you running and peeing in your pants.

2.  Invest passively into an ETF. Most of the fears comes from losing your money, and that can come from a company going belly up. Buying into ETF will remove that possibility of individual company going bust because an ETF rejuvenates itself by changing the components. It's like a hydra with the ability to regenerate another head when you cut off one of its many heads. That should provide some confidence in the solvency of the companies you've invested, and hence you can really put in a bigger capital when the going gets tough, instead of cashing out and running away.

3. Diversify your investment. Diversification can come in two forms - firstly diversification in terms of companies and industries, and secondly diversification in terms of timing. Unless you know what you're doing, putting 100% of your money into one or two companies can be a strategy to be a millionaire from a billionaire. It can work tremendously well, but it can fail spectacularly as well. For general folks, it might be better to have at least some semblance of diversification across different companies and different sectors. You can take this further by going into different countries, different assets etc. As for diversification in terms of timing, this is another strategy to enter the markets at different intervals instead of one concentrated timing. The underlying principle is that you can't pick the bottom, so dollar cost averaging will likely make your pickings better. If you're a trading god, then forget what I said here because it doesn't apply to you.

4. Just buy and forget. An ostrich approach will work well if you get into blue chips. Looking at all the gyrations of the price will make you want to act, whereas the correct action is simply to do nothing. So stop staring at the counters in your portfolio and get a life! Come back and see once all the smoke and gunpowder smell dissipates, and you might find a dead body or two, together with a handful of gems.

5. This last strategy is controversial. It's just holding a bigger percentage of cash. I know how useless cash is generating for your passive income, but it serves a purpose. It gives you the options to act on the opportunities that may come and this gives hope. From my experience, those who cut loss and run away from the market are those that are over invested either in one or two companies (lack of diversification) or over invested in terms of total networth. Imagine 80% of your networth is in the stock market and when it crashes, leaving only 40% left, you'll start to panic. Having a buffer of cash will help to stabilise the overall volatility of your portfolio and also allows you to keep on getting in on the good deal that comes in.  I seriously doubt I can invest 100% into the market, even in the deepest depth of the market, because that will make me very jittery. It's like telling a frugal man that he has only 1 week to live and he should spend all his money within that week. What if he somehow out live the week? Thus having some cash left over is going to be more calming on the mind, despite his one week dateline to spend.

So, are you going to remain chicken or are you going to be a pig?

Wednesday, July 22, 2015

How best to utilize the Singapore Savings Bond?

With the recent announcements of the Singapore Savings Bond (SSB) coming up in Sept, which is just 2 months away, there's a lot more thinking on my part regarding how best to utilise this new instrument to preserve and grow our wealth.

The advantages of this savings bond is widely reported in the newspaper. It's that you can cash in and liquidate the bond any time without price risk. For bonds, there is a maturity date and if you hold the bonds till maturity date, there is a guarantee on the capital invested. The price in between the purchase date (if you buy on par) and the maturity date can fluctuate widely, and possibly go down because of the near certainty of a interest rate increase in the short term, but you can sleep well on it. Because if you hold the bonds till maturity, you'll get back the par value of the bond. However, if you cash in early before the maturity date of the bond, you stand to lose (or gain) depending on the price that the bond is trading at that point in time. Well, the SSB don't have this advantage at all.

The other advantage is that the interest rate will pro-rate according to how long you hold. If you hold it for 1 yr, the interest rate of the investment sum will approach the 1 yr bond interest rate. If you hold it for 10 yrs, then you will get the interest rate equal to that of a 10 yr bond interest. Add to the fact that you don't have price risk when you cash out early, this serves as a quick and dirty way to hold your excess cash.

The last good thing about this is that it's guaranteed by the Singapore government. Ultimately, a bond is an IOU from the debtor to the lender, where the lender lends a sum of money to the debtor, with the debtor promising to pay the sum borrowed plus another interest to compensate the lender for lending. Hence, a bond is as guaranteed as the solvency of the debtor. If the debtor crash and burn, so too will your piece of IOU. In this case, the debtor for the SSB is the Singapore government. As good as gold, as they say.

Do bear in mind that you need about 1 month's time to liquidate the bonds. So, it's probably not good to leave ALL your extra cash inside. What happens if you have an emergency where you need a sum of money NOW? Got to think about that.

So how am I going to utilise this new instrument?

1. I'll first put in about 3-6 months worth of emergency cash in it as a first tranche. Since I'm paying my mortgage using cash, and I'm filling up my CPF with cash as an emergency hoard for paying my mortgage, and the CPF pays higher rates than the SSB, I'll likely put in an amount equivalent to 3 to 6 months of expenses WITHOUT including mortgage. I'll rather put my mortgage money in the CPF, thank you very much. Some people are funny, they are actually asking whether they can buy using CPF...

2. Next will be my war chest. Currently they are sitting in my POEMS money market fund, getting about 0.5% pa. If I put it in SSB for 1 yr, I'll get around 0.9% pa. For 2 yrs, it'll be about 1.2% pa and so on until 10 yrs, which is about 2.4% pa (and expected to rise too). Maybe I'll put in 2/3 of war chest inside here and will keep the rest as cash. The exact proportion I haven't worked it out yet..we'll see how it goes.

I'll put in my 3-6 months emergency cash in first, get to know how the system works, and see how to do it regarding my war chest. I'll be a great additional weapon to use, but I still wish we have more retail bonds lol

Monday, July 20, 2015

What would change if you earn $25k per month?

I saw a newspaper article today here that talks about the difficulties of older aged PMETs who are struggling to find work after being laid off in the last financial crisis. In the article, there are several examples of people earning (to me) an extremely high income. There's one getting $25k a month and another earning $9k per month. On Sunday Times, there are a few woman earning $10k and $9k per month, and wanting their significant other to earn as much, if not more.

When did salaries get so high? Is it so easy to get $10k and above per month now? Are they are the top earners or are they the norm? Wouldn't you want to earn $25k per month too?

But the real question is this: if they are earning $25k per month in the past, why are they still struggling to find a job now? Wouldn't they already paid up their debts, saved up a huge amount and semi retired with that high income? I guess not, hence they are in this current situation they are facing. The basic of being wealthy is really just to spend less than what you earned. That is the base of pyramid - the foundation. Without that, other things like investment or insurance wouldn't be able to come in and build a higher pyramid.

If you start earning $25k per month, what would change? In order to earn that amount, likely you are going to have a different set of friends and contacts who are likely earning around that income too. You'll probably start eating in a higher end restaurant since they are all eating there. You'll also likely to drive a similarly branded car in order to fit in. I think if you're going to earn this amount of income, you'll likely increase your expenses proportionally too.

Unless you don't mind being a social outcast. It's not so easy as saying if I earn $25k and I keep my expenses constant, I'll save a lot more and so on. There's likely going to be a lot of social pressures, likely coming from your new found friends, colleagues and perhaps your family too. To say no to all these, you really have to align what you want with your money. Do not belittle the social pressure of fitting in with your peers.

So, what should change if you start earning $25k per month? A difficult question to answer. Given a choice, perhaps it'll be easier to earn much lesser and fit in with an environment of people who are also lower spenders. I'm not so sure I have the willpower and the social strength to still earn that much and yet remain a social outcast. It's really not that easy.