Investment soul searching

I did more soul searching in terms of my investments education. I have changed my perspective drastically, even more so as the crisis unfolded right in my very eyes. Here’s a few important lessons that I wished I didn’t commit:


1. Mistaking luck for skill.

When the bull was charging at everything back in 2006 and 2007, I was blinded. I mistook skill for luck. I was dabbling in warrants even though I do not know anything about it, and trading counters like flipping burgers. The tragedy happened when I won, which emboldened me and I began to think that I had real skill. It didn’t take a few ups and downs to wash me out, since at that moment, I had no skill and had run out of luck.

What a humbling experience.


2. Disregarding dividends

After I stopped trading and deciding to see the market in terms of more fundamental aspects, I disregarded dividend stocks and wanted to go all out for growth. I thought that dividends giving stocks means that the company is at the matured stage in its corporate lifespan, hence it’s not going give me a lot of capital gains. Well, how wrong was I… I did not know the true relationship between value and growth – they are like a pair of chopsticks, and one couldn’t do without the other. In my desire to get maximum capital gains, I despised dividend stocks.

Little do I know that as part of the total returns of an investment, dividends are one of the most stable and significant portion contributing to it.

And when I realized how important dividends are, I swung to the other extreme of it. I bought dividends stocks without considering the price of the stock nor the prospects of future dividend payment. Both are equally sinful. So what have I learnt?

Do not disregard dividends when you buy a company. Yet do not buy a company solely on the dividends.


3. Not being satisfied with market returns

This is another humbling experience. When I started learning about valuation, I started to think that I know a lot. The safety of having an intrinsic value and subsequently buying below that value makes me feel safe in an illusory way. Thus lie the danger of knowing too little. I was at the top of the world and thought that I can get a return of 15% per annum.

Well, I still do not know if I can hit that kind of returns, but I certainly know that that is the average returns. This means that in certain years, one can get very bad returns which (hopefully) is offset by years with greater returns than the norm.

These days, I wondered if I will not do any better being satisfied with market returns. By market returns, I mean roughly 8-10% per annum over at least 10 years. For the effort that I put into my investment, and not seeing the results, I wonder if I am actually working hard but in the wrong direction. That’s discouraging, to say the least. Will it be better to satisfy oneself with market returns by buying into suitable instruments that mimics the market, and then allocate a small amount of one’s capital for such ‘luxuries’ as individual stock picking? Might not be such a bad idea at all.

To improve one’s situation, it is important to do a honest assessment of one’s current situation. Once you know where you stand, then you can plan to move forward.

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Singpost 3Q08's result

Singpost announced their 3Q08 results today. As usual, their results are just that...boring. It's not doing exceptionally well, nor terribly bad either. It's just plodding along, so to speak. A few pointers to take note:

1. 3Q08's operating profit falls 1.2% compared to 3Q07. However, if excluding all extraordinary items, the net profit for both 3Q results are nearly the same.

2. Comparing 9M08 to 9M07, the operating profit dropped a little too (0.7%). Again, excluding all extraordinary items, the net profit for 9M08 is a little better, being 7.5% above 9M07. As mentioned, Singpost's result is nothing spectacular but nothing to worry about too.

3. I noticed that for 3Q08, the selling expenses went up nearly twice as much (43.5%). However, the absolute amount is quite insignificant, being just around 4% of the total expenses incurred for the same quarter. It's stated that they provided more in terms of doubtful doubts in view of the bad times. Singpost do need to curb their expenses though. The revenue for this quarter is up 1.6% from the last year, but the expenses expanded by 5.2%. Of course, this naturally dragged down the net profit for the quarter.

4. Diluted EPS for the past 9M08 is 5.891 cents. Today's closing is 77 cts. Thus, the PE is 9.8x based on annualised EPS for the past 9 months. For singpost's standard, this PE is actually quite low already. Still, in this kind of times, sub-10 PE is quite the normal. Maybe even sub-5.






5. Current assets for this quarter is 1.05, compared to 0.90 last quarter. There is an increase in the percentage of cash/cash equivalents over the current assets this quarter. Singpost increased its cash/cash equivalents to current assets from 57% last quarter to the present 62%. Since they do not hold much inventories, quick ratio is pretty irrelevant here. In my opnion, nothing to worry about them being unable to meet short term debts.

6. Long term debts consists of unsecured bonds, expiring on 11th April 2013 with fixed interest rate of 3.13% pa. This bonds actually forms a huge part of their total liabilties (58.3%), so it's important to see how they are able to pay for it when the time comes. There are still 4-5 years more to go before it's due, so I don't think there's a concern about that now.

7. Cash flow from operations are still coming in (a total of 63 mil). I doubt they are going to go into any major investing in their PPE, so net cash should still be positive. The major outflow of cash comes from payment of dividends to shareholders. It's 'bleeding' 24 mil this quarter. Overall, there is around 29 mil of cash entering their coffer this quarter, bringing their total cash/cash equivalent to 131 mil. If they are going to pay a special dividend next quarter (which they normally do, usually to a tune of twice the quarterly dividend i.e. 2.50 cents per share), it'll take away around 48 mil.

Is it likely? I think so. The payment period of their bonds are still far away, and they are still getting in a good cashflow of 60+ mil. Then again, last quarter was the better quarter for Singpost due to the holiday seasons, so 4Q might be slower. Still, there's still a good chance for them to pay special dividends next quarter. Let's see how the situation goes. At least 1.25 cents per quarter is their dividend policy, based on my buy price, I should be 'guaranteed' a yield of at least 4.2% pa.

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The mechanics of learning something new

My story into the stock market is not exactly a standard one. By standard, I mean those who saw people earning lots of money and wanted to get into it. I was never attracted by the returns of the market, and back then when I started, I was not aware of how much is a good return anyway. I was more pushed into the market then pulled by it. Why so?

When I decided for myself back in 2006 that I needed to get an insurance, since I spent a good part of my life without any to begin with. I met up with my insurance agent and was subsequently was presented to take up two policies - one a whole life policy and another an investment linked policy (ILP). Not that I know any better back then. I have no clues to the differences between a whole and a term life, much less an ILP. The story is long and I've no wish to say it here, but let's just move forward and say that in my good fortune, I only bought the whole life without the ILP.

This got me really frustrated because having being bombarded by the agent on the good returns of ILP and such, I felt really stupid not knowing anything about it. I then realised that in all my life, I've no clues as to the fundamentals of financial planning. This nusiance of not being in the know pushes me to open a trading account and to begin learning.

It was hard learning up all the jargon and technicalities of the market. There wasn't any good resource (esp in Singapore) to begin learning. I have to trip and fall all the way to be a bit more knowledgeable in this area.




It seems like recently, I'll have to repeat this whole process of learning something new again. A new phase in my life had begun this year. I've decided to find out all that I can about the property market, as I wish to have an investment property in the near future. Again, I felt the stinking feeling of not knowing anything about the property market, and I have to feel and grope my way in the darkness. However, this time there's also a few knowledgeable folks (like dream) guiding me along. Utmost gratitude to him.

I wish to pen down my goals here, to whip me more into action and to have the motivation to carry on what I'm already doing.

1. Save $50,000 by end of 31st Dec, 2009

2. Finish all the blog articles in my bookmarks

3. Have a working knowledge of all there is to know about the property market, including but not limited to mortgages, property index, tenants, contracting, prospecting properties etc.

Looks like to survive in these modern times is not easy at all. You have to be a part-time fund manager and a part-time property agent in the process. I wonder how many more 'part-timer' roles I'll have to adopt to ensure a decent life and a good retirement in the future. Let me just end this with the key to learning something new: Learn something when the nuisance of not knowing becomes too unbearable.

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Cbox premium subscription

The 6 months trial for the cbox premium is almost up. The subscription will cease on 8th Feb, 2009. Since I started this premium version, acting on the shareholder's vote upon the issue of the Circular, I must say I'm quite happy with the premium version of the cbox.

1. The premium cbox have the auto refresh function which I found it to be extremely useful. In fact, I would pay just for that option alone. Add to the fact that there is a noticeable 'click' sound upon arrival of new messages, it certainly makes going back to the normal cbox unbearable.


2. There is a lot more storage for past messages. The cbox is flowing as fast as the prices of DBS R shares, that at least 600 messages flow past per day when I returned to check every night. I think the actual messages is closer to 800-900, which is nearly 38 messages per hour. The cbox is active from 0830 till around 0300 in the morning, a total of 18.5 hours. This means almost 1 message is sent per minute.


3. The content of the cbox changes according to time and of course the crowd. In the market hours, the content will be dominated by traders. Towards the evening and night, it'll be more investing and lifestyle related. So much to chat?! haha :) The more valuable thing coming from the premium cbox is that I've been a bunch of superfriends.

I think I'll just sign up for another 2 years of the service. It'll cost $2.19 SGD per month, based on an exchange rate of 1.50 USD to 1 SGD. This is sustainable, since the ad revenue from the blog should be more than sufficient to cover the running costs of the cbox premium.

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Paid lessons from the Market

A lot of things have changed for me since I switched from being a trader to an investor want-to-be. I must have mentioned it before, that in the past two years of being in the market, I've learned more about myself than I could have imagined possible. I thought I already know myself quite well....well, in the face of the markets (whether in bullish or bearish times), you'll also see yourself in a different light, I'm sure.

Here's some of the lessons that I've paid to Mr.Market to tutor me. I think the lessons are not unique, as I'm sure many of those who had been in the market long enough would have known. Not in any order of importance, here it goes:


1. It's important to realise if you're trading or investing. This is especially important to those hybrids or those trying to convert from one to another. The worst that can happen (to me that is ) is that when you're investing, you start to trade your positions and flip it like burgers in a fast food joint. Or when you're trading, you start to hold it like an investor. Both methods have different entry points - for investing, you do want to get the lowest price possible but for trading, you might have to buy while the trend is up, not neccessary at the lowest price.

Take my painful longcheer lessons. I thought I'm investing, but when the price drops below my buy price, I do not want to take the losses. I convinced myself that I'm in for the long haul and tried to find 'fundamental' news that China is going to roll out their new 3G network soon. Didn't Warren Buffett buy and hold too?

Bullocks.


2. Take people's advice with a pinch of salt, or not at all. The advice is free, but whether it is applicable to you, only you can tell. This applies to all sorts of advice, including but not limited to those from your relatives, your close friends, experts, TV personality, financial advisors, brokerage reports and analysts. I'm asking you to be skeptical but not cynical - and that's a huge difference. Part of being open-minded is to allow yourself to be in a position of doubt, to be uncertain of your own situation and yet not be confused.

When I started out, I tried to get my hands on all sorts of brokerage reports. I thought that since I'm a newbie, who am I to question the professionalism and expertise of those reports. I believed, I bought, I suffered. As for analysts, if you can change your positions as fast as they can change their target price, go ahead and listen to their recommendations.

By the way, my blog is also contributing to the noise level.




3. Do not be fooled by the certainty of numerical analysis. In valuation of a company, I'm all too quick to calculate this mysterious and elusive figure called intrinsic value. Why? As long as you buy below this intrinsic value by a certain level of margin, you're good. It can even help you find your returns into the future by projecting the dividends, PE, EPS and revenue etc.

Sorry to disappoint, but it's not easy at all. I learned that intrinsic value is such a misnomer. It should be more appropriately termed intrinsic-range-at-this-point-in-time. This holy grail in investing is a function of PE, EPS, future prospects, competitive advantages, macro-socio-economic situations, among others. The uncertainties attached to each of these inputs are unknown and each itself is a function of time. Hence, to be able to rationalise a value of a company up to 2 or 3 decimal points is really pushing it.

Numbers give the illusions of certainty, do not be fooled by it.


4. Spend more time on your career, it gives the best returns for most people. This is often not mentioned. Earning passive income from investing is all good and well, but where does the first drop of money comes from? It had to come from work itself. Spend more time earning as much as you happily can and savings as much as you can comfortably is the key to wealth.

The three pillars of financial management (at least for myself) is this: Savings, Protection, Investments. The order is chronologically and logically arranged. If you take your take-home pay and spend all that is necessary to keep your life in order, that is your savings. After amassing your savings, you need to protect it from unforeseen circumstances, hence you need insurance. Then AFTER all these, you can start looking at investments. Do not skip the order, e.g. invest before one is suitably insured.

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Superfriends Forum

If you've been visiting my blog, you'll notice that there is this queer advertisement just above the cbox that reads SUPERFRIENDS.




Welcome to the SUPERFRIENDS FORUM! It's an extension of the cbox - a place where superheroes (and perhaps supervillians) gather. It is born out of a wish to have a private space of our own for those regular users to post things which are otherwise hard to put in the cbox. I know, the cbox flows faster than the ticks of the oil futures so it can be hard to follow. Hence, do join the forum for more information on where the next superfriends gathering is and so on.

I've no idea what sort of forum that will be, but let's take the back seats and let the forum grow organically on its own instead of planning for it. I'll like to take the chance to sincerely thank our superIT fren - Vault dweller - for his hardwork as the resident IT guy. All bow to him!

(I'm so glad that the blog is growing on its own accord without me. Like Vault dweller mentioned, it's a nice warm feeling to work on some little community project where all the like-minded folks gather. Hey guys and gals, you make my day!)

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Exclaiming my disclaimer

As I was replying to the constant stream of people who are asking me questions on the DBS rights issue post, I suddenly thought of this: What if I'm doing more harm to them than good?

The comments and the questions kept on streaming day in and day out, and I just kept replying them. But somewhere in the 30th to 40th comments out of the present 68th comments, I reflected on the usefulness of it all. It's quite obvious from some of the questions that most people do not read the offer information statement (OIS) issued by DBS. There is a whole lot of information that pertains to almost any situations that anyone can think of, but somehow, perhaps the thick tome of the electronic bits and bytes (constiting of a total of 166 pages, mind you) does not make a leisurely read at all.

So why do I think I'm doing more harm than good?

1. I'll be breeding laziness. You know, it's so easy to ask questions, but to dig them out yourself is not all that easy. Just ask someone, it's infinitely easier.

2. I'm not an expert, so I might give information that to the best of my abilities is known to be the truth, but is in fact false. I mean I won't mislead others purposely, but to be frank, I didn't even read the whole of the OIS. I only read certain sections of it to find the information I needed to answer some of the questions. The rest is based on a mix of my past two experiences dealing with rights issue and common sense. What if I thought I was right but turned out to be wrong, and someone suffered financially because of it?




So for those who still have questions on the rights issue, do keep them coming. But mind this big disclaimer, I'm not a qualified advisor. Hey, if you win or lose money, I don't take responsibility lah, ok?

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Nuffnang sent me a cheque!

After a long wait, I finally got my cheque in from Nuffnang :)

It's had been a rather long wait. Since I've cashed it out on 17th Nov, 2008, I've been waiting till 11th Jan 2009 before it was sent to my home address. Well, in a way, I deserved it because I wasn't aware that they only process the application for cashing out at the end of the month. So from 17th Nov to end of Nov 2008, the application is just waiting in a 'queue' to be cashed out. After that, the whole process will take 1 month, so that covers the entire Dec 2008. Once processed, it'll take at most 3 weeks for the cheque to be sent to my address. So for mine, it took slightly less than 2 weeks.

The amount is $129.55. Okay, why so much right? I can actually cash it out once I've accumulated $50. Since I've got to pay a administrative fee of $1 for every processing, I might as well save $2 for accumulating up to $130 there before cashing it out. I wanted to wait till $200 before cashing out but was not too sure how credible Nuffnang is, since I've no prior experience on collecting any real money from any advertorial companies. NOW it's confirmed - they do pay money!

I checked...I took a period from 16th Dec 2007 to 15th Nov 2008 before I clocked up this amount of ad revenue - roughly 11 months. So, that means I get around $11.78 every month, or $0.39 per day. Erm, not exactly a lot, but well ... it helps to pay off some bills and offset the premium cbox subscription! What's more important is that I get paid for doing something that I like and do everyday :)

Actually I should not count my eggs before they hatch - what if the cheque bounce?? Haha :) Just kidding Nuffnang guys, don't really go and make my cheque bounce!!




The cheque was enclosed in a 'postage prepaid envelope for standard regular mail up to 20g' - it's stated at the back of the envelope by one of the companies that I have a partial ownership in, Singpost. The stamp was already printed onto the envelope, which I thought was such a great idea because it saves the sender trouble from finding a stamp and affixing it onto an envelope. Nuffnang had their logos printed onto the envelope itself, with a cute message at the bottom, screaming loudly in capitalised bold - "NUFFNANG!!! YOUR MOOLA HAS ARRIVEDDD!!!!!". Not bad lah, didn't know Singpost had such a service. Maybe next time if/when I open a company, I can consider using such a service, haha!

The cheque was actually handwritten in those black ballpoint pen. The script is neat and very straight, meaning that it's not slanted to the left or the right. It's all in bold, and pretty small too. Not sure if the signature is by Ming, the co-founders, but it sure reads like it. Having read some fengshui book by Lilian Too on everyday fengshui, I would say the signature is not too 'uplifting'. An auspicious signature should be upward slanted in both the beginning and the end. In this signature, the first stroke is slanted diagonally to the bottom left. Afterwhich, the general direction of the signature goes diagonally to the upper right but towards the end, it went straight vertically down to a level below the beginning stroke. There's even a cross to mark the 'gravestone' ending. In technical analysis, we call this formation a doji - signifying uncertainty in the trend. The ending broke the 'support' formed by the beginning stroke - not auspicous at all, isn't it?

So, Mr/Miss Nuffnang co-founder, if you happen to read this, contact me for a small tip on how to change your signature to ensure that you HUAT everyday! There's still some advertising space above, so maybe if you want you can put your ads there too, hoho!

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Can't get credit

This is my complain letter to those credit card issuing companies.

Hey you! You enticed me to sign up for credit cards, with your staff standing around bus interchange and shopping malls, snatching people from the main crowd and huddling them to a corner to ask them to sign up. I obliged and filled up the forms and all, giving you all my private information pertaining to my income, NRIC, address and even banking statements. You said oh, no problems, even for self-employed as long as your income exceeds $30,000 per year and sent in 2 years of tax returns (I do pay taxes obediently, in case you are wondering), not a problem.

Then look what happened? For Maybank which I applied, that's the worst. I sent in, waited for 1 month, then I was sent a letter to tell me to give them a copy of 2 years worth of tax return, which I did but I photocopied the 2 pages in one single sheet of paper. Hey, if you can't read, not my problem right? Be fair! Then they also asked me to send a photocopy of my bank statements and return to them, which I also did in the end. SO, after another month of waiting PLUS emailing to the customer relation officer who waylaid me to sign up for the card, I was told that Maybank is unable to give me the card. No reasons, thank you, see you again, have a good day.

I thought what kind of service is Maybank offering to me man, but dismissed it as a one-off incident. Then, my gf got waylaid by Citibank's staff who are stationed near MRT stations. She was waiting for me at the MRT when they huddled her into their workstations to sign up for two cards. I entered together with her and was told by the customer service officer to sign up too. Oh well, no harm, try signing up. And I did, and the same thing happens. But Citibank is much FASTER. I was given a reply within 3 working days, which I must really kowtow to their efficiency. They rejected my application, no reasons given again, but hey, at least I don't have to wait 2 months before I was given the inevitable. I'm cool for this incident.




This afternoon, Stanchart called me to ask me to sign up for loans. On and on the person extolled the joys of being in debts for ANYTHING you want to buy. Freedom to buy beyond what you earn, isn't that great?! Hey, ever discovered the fact that banks only wants to lend money to those who can afford to pay for it? I've totally no desire to borrow any funds to buy anything that I don't need, thank you very much. I complained my 'buay song-ness' to the customer service officer about my credit card application woes, and she said, OH, no worries, Stanchart is alright. She had customers who are like me too, but managed to get a credit card too. OKAY, I'll apply for one, just to test it out.

Woe be on Stanchart if that's not the case!

I pondered more deeply at the irony of it. I am self employed and will never get the axe from any employer who wishes to 'protect shareholder's interest' by cutting staff cost. I will never be subjected to unforeseen circumstances like the CEO run away or the CFO eat money type. I'm safe you know. Compare my situation to people who have high pay, borrows debts, but subjected to the whims of their employers? Hello? Am I really a credit default risk?

(This is really my ramblings...heck, I don't even need a credit card, save for the discounts that comes with it. Enough for now..)

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Bear bullied me :(

I spent a great part of my day programming the excel spreadsheet that tracks my life - tuition, investment portfolio and cash flow/balance sheets. The last two spreadsheets caused a great deal of hardwork because I discovered I made a few grievous mistakes.

1. I discovered that I had forgotten to average out my hongguo portfolio after buying in a tranche at 0.250. It means that my average buy price for Hongguo is at 0.40833 and not 0.4850 which I had mistaken for the past 4 months or so! This in turn affected my net worth calculation for my balance sheet.


2. This one is serious. In my balance sheet, I'd realised that I double counted my earning/losses. This is because I had put my investment portfolio and bank accounts inside the balance sheet, so imagine this: I gained $100 as a result of a dividend, so my investment portfolio will register $100 extra but at the same time, my bank account will also register another $100 because the dividend is transferred over there by CDP. As a result, my net worth calculation registered $200 for every $100 of earnings! The same applies for losses!

Sloppy thinking resulting in sloppy accountings. This is so serious because I took so long to realise - a year in fact! To correct for this, I added back my retained losses and subtracted off my dividends earning. I'm glad I know some accounting from my self-reading, otherwise this kind of stuff will drive me nuts!


3. I had inadvertently overestimated the cash value of my insurance policies. Only my whole life plans have cash value (and only after the 3rd year onwards) but I had put all the premiums that I put into ALL policies, including those without cash value like hospitalization and surgery (H & S) plans, into my asset column. This resulted in overestimating my net worth by at least xx, xxx figures!

I corrected this error by counting only the surrender value of those insurance policies that have cash value. I only counted the cash value of the guaranteed portion, excluding the non-guaranteed portion. Call me a conservative old fool.




With these mistakes, the past year record of net worth is basically zilch...worthless information. Not a problem, I'll start monitoring from scratch again. Net worth is just a figure, I don't feel poorer after writing off my insurance assets, nor richer by getting an extraordinary gain of xx, xxx amount after accounting for my duplication in earnings/dividends.

Though it's just a figure, it still had to be accurate and reflects my financial standing in a manner that I am comfortable with. This game of wealth has its rules to obey, and the first rule is to be truthful to oneself. If you do not know where you stand, how do you know whether you've reached your goals?

Here's my score card (2 s.f.) so far:

1. Singapore portfolio : 26k unrealised losses, 23k realised losses, 45k capital in stocks

2. HK portfolio : 9.3k unrealised losses, 29k capital in stocks

3. US portfolio: 1.3k unrealised losses, 10k capital in stocks

4. Net worth : 118 k. (I know there are many definitions. For mine, it's the money that I have if I liquidated everything and paid off all my debts now)

Shocking? I need to increase the current asset of my asset by 50k this year. How to do that? Just save $4.2k per month LOH. Just? Yea, just.

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