Bigscribe's localized Crowdfunding guide

Bigscribe recently released a guide on crowdfunding which I thought was a very good introduction to this new fintech phenomenon. I don't think there's any guide out there that caters to the local context and introduces crowdfunding to Singapore's retail investors or lenders. You know how the internet disrupted existing framework when Uber started connecting passengers and drivers and bypassed the traditional method of getting a taxi. Well, in a way, crowdfunding seeks to connect investors or lenders to companies and bypass the traditional framework in which such things work.

I will highly suggest anyone who wishes to even dabble in crowd funding to at least read this guide to get the general inkling of what to do and what not to do. You owe it to yourself to find out as much information about crowdfunding before putting your money into it. Besides, the book is free to download here, and it's not a long read anyway. You can finish the entire ebook from cover to cover if you read it slooowly for an hour.

If you're even remotely interested in crowdfunding as an alternative way to get a better returns for your cash, you can read the interview of two persons who had actually particpated in crowdfunding as an investor and decide if it is worth the risk. I thought their sharing of the pitfalls and the maximum allowable percentage allocated to crowdfunding (and the reasons) is worth a read. They also shared their criteria to evaluate which projects are the best to invest and which are better left alone.


Wait for what? Go and download lah! Subscribe to Bigscribe!

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New perennial 4.55% 4 yrs bond - Goodbye or good buy?

Looks like yet another bond offering in the local retail bond market. It's always the same few players offering bonds, and this time it's by Perennial Real Estate Holding (PREH). They just offered a 3 yrs 4.65% bond in Oct 2015 that I blogged about it here and now they are back at it again.


This time round, it's a 4 yrs 4.55% bond. Let's see how it compares with the currently traded 3yr4.65% bond.

Last close price of 3yr4.65% bond: $1.012
Par value of bond : $1.000
Capital loss from buying above par: $0.012

Total no of coupon payments left: 5
Payout for each coupon payment: $0.02325
Total returns upon maturity: 0.02325x5 - 0.012 = $0.10425
Total % returns: 10.301%

Maturity date of bond: 23rd Oct 2018
Today's date: 20th Apr 2016
Total holding period: 916 days or 2.51 yrs
Average returns: 4.10% pa
Yield to maturity: 4.22% pa


Here's the chart of how it performed since listing.

Screenshot from Investingnote

The gap down around mid April 2016 is due to the XD for its first coupon payment to be paid out at the end of April this year. It didn't go below its par value at all since listing, even during the severe drop around the start of the this year for STI. The newly listed Aspial 5.3% bond didn't share the same fate - it's now currently traded below par. Even the older Aspial 5.25% bond is trading below par too.


Good bye or good buy? I wouldn't buy it. 4 yrs seem to be a little long given the potential increase in interest rate in the near future. In 4 yrs time, it's bound to be a certainty, just a matter of how much it'll increase, so for those who are buying, be prepared to hold till maturity. Your capital might not be preserved if you need to cash it out for stocks purchase, for example.


I guess you have to ask yourself whether there are better alternatives out there - like those stocks with bond like qualities haha

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Post-rights price recovery period for reits

If you get into reits, make sure that you have some spare warchest to prepare for rights issue. It's not a matter of if, but a matter of when. In the past, if you do not have any reits yet, I will recommend buying the mother shares during rights issue so that you have the ability to hack your way to capitalise on the excess rights application process. I blogged various articles in this blog but let's just put down the two most important ones:

1. How to get the most out of a rights exercise
2. How to hack AIMS AMP Capital Industrial reit Rights Exercise

But recently with the change of the board lot from 1000 shares per lot to 100 shares per lot, I think this strategy is getting outdated. The amount of excess rights will be based on the lower 100 shares instead of 1000, which means you won't get much out no matter how you hack it. It's about 10 times difference. Not very effective.


If you look back in the chart history of those reits that had undergone rights exercise, you'll see that the price will drop immediately following the date of announcement of the rights. Then, it'll start to rise up. This happens every single time - the key difference being how long the drop will be, and how long it'll take for the price to go back up to pre-rights price. This means that if you have not bought any reits yet and had intention to buy, buying during the rights exercise, specifically after the announcement of the rights, will be a good time to take advantage of a short temporary inefficiency to get some. You might want to ignore all the rights and just get it after the mother share goes XR. It'll be less troublesome and you'll likely get a lower price out of it anyway.

Take note that the price are all post rights price. It's too troublesome to convert back to pre and post rights price, but this doesn't dilute the force of the argument 

The table above shows the rights exercise I've taken part in recent years. Here are some observations:

1. It takes anytime between 1 month to 1.5 yrs to get return back to pre-rights price. This means you have plenty of chances after the announcement of the rights to get the reits, assuming that the fall of the price is solely due to the rights issue. In real life, it's most definitely not. There are macro trends and various other factors that contribute to the rise and fall of any stock prices. And, the sooner you get it, the faster you can be entitled to the stream of income from dividends declared. So wait, but not too long.


2. Aims took the record for waiting 1.5 yrs to recover. It may be an outlier, considering that from my limited list of rights exercise participated, most take about 1 to 2 months to recover back. Talking about reits or trust here, not companies. ARA is not a reit, though it's a reit manager, so probably will be more enlightening to compare the rights issue of non reits companies separately.


3. The other factor I didn't take into account is the dilution of each rights. Some are diluted more, some are less, and I think that might be a contributing factor in deciding how long duration before the price goes back up to pre-rights price. I'm not an academic, so I'm just interested in the final verdict of what to do.



And what do we do? If you haven't had any shares in a reit, consider buying after XR and skip all the excess rights and what not. The price is likely to be cheaper even with all the excess rights included in. If you already had shares and wanted to accumulate more, consider waiting for them to announce rights. The risk is that your cash will be rotting while you wait, and the other is that some reits just don't have a habit of issuing rights - like Suntec. So you can wait till the cows come home lol

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Ticking one box every week

I watched a ted talk recently regarding procrastination. We all do it in various degrees all the time. There are two kinds of situation where procrastination can be seen as a boon or a bane. The first kind is when there is a deadline, and when it's drawing nearer and nearer, the panic monster in us suddenly awakens and make us do the necessary things to get things done. Then there's another kind where there's no obvious dateline. This is where the panic monster do not appear.


A good example is like exercising or eating a healthy diet. There's no dateline for such things, and so we tend to procrastinate the good but painful life choices until well, it's too late. The speaker suggested we look at the picture that I've done up below.

Each box is a week of our life. There are 4,680 such boxes in it, enough to tick one box every week from birth till we're 90 years old. Some of the boxes are shaded and some are not yet. I'm sure you know why some boxes are shaded and why some are not.


Life itself is a deadline, and you can say it's the biggest deadline here. Live life fully and don't regret not doing the things you want to do. Create meaning in your life.


And start right now because we don't really know how many boxes we have left.

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China - the origin of the next crisis?

Financial times had a very good video that I thought will be good to share here. It's about 15 mins long and it talks abut the end of the China's miraculous growth which is fueled by the influx of migrant workers streaming into the factories and offering their labour for a low wage. This video shows the plight of the migrant workers as the economy slows down and what they intend to do when they go back to their rural villages.

As I watch this video, I was quite taken aback by some of the things in it - things that you don't expect to happen for China. They talked about the increase in the wages of workers there but factories not having enough orders, so a portion of the factories went bust and the workers have to seek employment elsewhere. They are not talking about Singapore, but about China. I mean, we have pretty high wages and fixed cost of rentals and so the cost of manufacturing in Singapore is considered high. That's why you don't see a lot of lower end manufacturing factories (making shoes, t-shirts etc) over here. But isn't everything made in China these days? If even China factories are facing a downturn in orders, then who are taking over the orders? Which country has even lower cost of manufacturing than China? You will have to watch the video to catch a hint of it.


The second thing that shocked me was how fast economically China had progressed since the last 30 years. I think they are currently facing the situations that many developing-turned-developed countries faced as they progressed - that of higher expectations by their labour force and also the higher cost of living and wages, which will mean that they are no longer attracting new investments that are okay in the past because everything is relatively cheap. As many countries around the world are annoyed by the influx of China migrant workers going into their country to seek better paying jobs, the Chinese are also facing cheaper and harder workers from other countries going into their borders to seek better job opportunities. I totally didn't expect that. But I guess globalization is like a knife - it really cuts both ways.


The last point I'm going to talk about is an interesting financial/investing topic - that of the impending failure of the Chinese economy as it heats up and bringing the world economy down with it. The talking heads had been saying that since I first started investing in the stock market in 2006. They had been speculating that China will be the cause of the next crisis. But it didn't happen and the great financial crisis happened over at US side as their mortgage-debt-housing market exploded. Then the Brazil/Spain/Portugal/Greece saga over at the EU side came to dominate the scene. And now we're back one full circle to point at China again? You really have to watch the video to find out a little more about it, or the link here to read up.


I think it's better to just know what we're going to do should something major happens, instead of debating to no end where the next financial crisis will originate. I know what I'll do. I'll freaking save up and build up my warchest now so that I can declare war! LOL

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Salted fish resurrected!

I blogged 2 years ago here that my salted fish have resurrected (咸鱼翻身). But shortly after that, it went limp and died again. It's only recently in 2016 1st quarter that I saw signs of life in the salted fish. By now, the salted fish is extremely fragrant because it had been salted for 6 long years!

Here's a chart to show you what's happening in the last 6 yrs. They had a consolidation exercise of 1:5, so the price is multiplied by 5 from my last posting. The chart is taken from Investingnote, a charting software that I really like very much.

I bought it at post consolidation price of $1.275 around april 2010, which is the nice little peak that you saw on the chart above. It's based on rumors of this company going to be taken private but obviously it didn't happen. So it went down to about $0.50+ before going to its first resurrection, which I didn't sell because I was greedy. It went down again and up for the 2nd resurrection and I didn't do anything also. Then suddenly this is all over the news, with several brokerage firms reporting on how well it is doing and so on.


A good company bought at the wrong price is still going to suck, so just shut up and give me back my money. I sold today at an aggregated selling price of $1.1395, making a loss of $0.1355 per share, but it is made better by the dividends received amounting to $0.165 per share.


Buy price: $1.275
Sell price: $1.1395
Profit: - $0.1355 per share
Dividends per share: $0.165
Total profits: $0.0295 per share

% gains (exclude brokerage): 2.31%
% returns (include brokerage) : 2.2%
Period of holding: nearly 6 years!
Ave returns per year: 0.37% pa


A few lessons to take away from this 6 yrs:

1. Don't invest based on rumors. This is the last straw, and I've never done it since.

2. Dividends is an important part of the returns while waiting for a catalyst to happen. In this case, it forms an overwhelming huge % of my returns. Without it, selling at my current price will result in a loss.

3. If you don't need the money, you might want to reconsider cutting loss. Salted fish might be resurrected! If you are going to sell, then don't look back and reinvest it. If you're going to sell it and hold the cash, reconsider. Basically there must be a better use of the money you are getting from selling it. Then again, if you're good at stopping your losses, you also won't reach this stage lol

4. A good company at a lousy price is a lousy investment. Conversely, a bad company at a great price might end up to be a great investment. Valuation and price matters.


With this, my last salted fish had either been eaten with plain rice or resurrected and released back into the big ocean. Old already, I hope I don't have to eat any more salted food because it's bad for health!

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My top 5 biggest expenses in 2015

Just out of curiosity, I wanted to find out what's the top 5 biggest expenses I had last year in 2015. I had been tracking my personal expenses for a number of years. Initially I was using excel spreadsheet but it progressed to YNAB (Why you need a budget), so exporting the data out to analyse didn't take long.

Before I embarked on this exercise, I tried to think of my top 3 biggest expenses. I knew that mortgage is definitely the biggest expenses. I kind of think that food and parents will take up the next two rankings, but let's have a look:

Top 5 biggest expenses in 2015 (excluding tax):

1. Mortgage - $12,078

2. Food - $6,263

3. Insurance - $6,006

4. Parents - $4,040

5. Transport - $3,632

Total: $32,019

Without doubt, mortgage is the number one expenses for me

I know the bulk of you will not consider mortgage because it's paid through CPF, but for me I pay them through cash. In fact, when I consider my expenses, I don't split up into CPF or out of pocket cash. Both are cash to me. This is relevant because my hospitalization plan is paid from my CPF medisave account, but I still included it as 'cash' expenses.

Mortgage taking the top spot is not a surprise. This is only my share of the mortgage, and I have to fork out 1k per month servicing the loan. Technically I paid up more since I do partial capital repayment every year end to shorten the duration of my loan and save up on interest. This one wins hands down. Is there any way I can do to reduce this? I don't think I can, unless I downgraded my flat. It won't happen, as far as I can tell, in the next 15 years. Since mine is an old flat more than 30 yrs, I think the chances of me cashing out to sell is greatly reduced as time passes. Have to suck it up, no choice.

Food is split up into hawker/food court/coffee shop type and restaurants type. The hawker variety of food amounts to $3,944 and the remaining $2,318 consists of restaurants. On a per month basis, it's $329 per month ($11 per day) for the former and $193 ($6.43 per day) for the latter. This is the area that I know I can reduce further, should I encounter difficulties in cash flow. I can reduce the restaurant trips to 0, and reduce the hawker food expenses down to $2.50 per meal, so it'll amount to $225 per month. This will drop my food expenses from $6,263 to just $900 per year. I'm obviously not going to do it unless necessarily, but it helps to know I have this buffer than I can cut down should I need to.

Insurance works out to be about $500 per month, consisting of:

1 x limited premium whole life plan $100k

1 x unlimited premium whole life plan 50k

1 x term plan $100k

1 x hospitalization plan (Private hospitals)

1 x disability income

1 x property mortgage plan (i.e. 30 yr decreasing term plan with 500k initial)

Can I reduce this further? I suppose I can. For example, I can stop my two whole life and surrender it, getting some money back and use that money to put it into a term plan with higher death coverage. Those two amounted to about 70% of the premiums paid for insurance, so possibly I can reduce the insurance amount from $6k to about $4.5k (probably less) with even more coverage. The reason I bought whole life plans is because I bought it before I knew I can save up the money myself. It's good as a backup in case my investment didn't work out as planned. If and when I have children, I'll have to boost my insurance coverage with term plan and that's about it. Again, it's good to know I can reduce some expenses should I need to, but seriously, I'll rather reduce other things than this unless absolutely necessary. It's like those last minute trump card encased in a glass container that I will break and throw in an emergency.

I gave my parents some allowance, amounting to about $330 per month. This amount varies every few years and I didn't include the bonus ang bao that I gave to my parents during birthdays and chinese new year. So, this is probably an underestimate, or more like a fixed 'salary' to my parents as opposed to the more variable 'bonus' given during big occasions. My sibling contributed another amount (I don't bother to ask) so we sort of share the monthly upkeep of our parents. For those who do no have siblings, I suppose he or she will have to step up and give a little more. Okay, maybe 100% more, to make up the income for the missing sibling. I compared with my wife, who don't have siblings, and indeed, she gave about 100% more than me. Ouch. 

Can I cut on this? Absolutely not. This is one of those expenses I'm adamant on having it regardless of my financial circumstances, so it's not negotiable. I'll have to cut on other areas to make up for this essential expense.

Lastly, transportation includes both the total expenses of owning a 2nd handed car plus public transport. These days I don't really take public transport much because I work at home, so it amounts to about $200 per year (based on ez link top ups), so it's about $16.7 per month. Really bare minimum already. The rest of the $3,432 is for the installment of the car plus all the running costs and maintenance. Since my wife is the one driving, she's paying the bulk of the cost. For my share, it's $286 per month or $9.53 per day. That was for last year, where I still have to pay $179 per month for the installment for the car. Should I need to reduce this expense, I can choose not to drive and just pay for the parking costs, which is about $70 per month. For extremely light driving, I think it's possible to keep the cost around $1,500 per year. Assuming my public transport cost will double to $400 (not really possible, but let's be conservative), my transportation cost will drop from $3,632 to $1,700 per year.

Interested to know what's no 6 and no 7 down my list? Here we go:

Top 5 biggest expenses in 2015 (excluding tax):

1. Mortgage - $12,078

2. Food - $6,263

3. Insurance - $6,006

4. Parents - $4,040

5. Transport - $3,632

---------------------------------------------

6. Gadgets - $1,354 ($112 per month)

7. Vacation - $788 ($65 per month)

Gadgets I admit is part of my play fund, where I allocate a small sum every month so that I can spend on unnecessary wants without guilt. This can obviously be cut down to 0 should the need arises. Vacation is not a big need or want item for me. I can camp in Singapore (or even at home) for a very extended period of time without becoming unbalanced or feeling deprived.

In summary, how much can I cut? To tally up, I can reduce my top 5 expenses from $32k to $23k, which is about 9k per year or $750 per month. And this is just the first round of cuts I can do without feeling much deprivation and suffering. That's good. I don't want to live just on the edge, I want to enjoy life a little to hedge against a short life and yet not derail from my long term plans to hedge against a long life. This little exercise allows me to see clearly what are the fat areas that I can bank on during lean times.

I realised I'm not that frugal afterall, haha! 

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Hedonic treadmill

I read this wonderful article here that talks about how we derive pleasure when we first upgrade our standards of living but eventually getting so used to the the experience through repeated use that it offers no more pleasure. In other words, you get back to the same pleasure level before you started this hedonic treadmill, and you have to go look for better and better pleasures, and yet getting nowhere. After reading the article, I learnt the name for such a vicious cycle. What an apt name!


But I say we can trick ourselves to hop onto the abstemious treadmill and derive greater and greater pleasure on the simple things. First of all, a dictionary definition of abstemious:

Abstemious (adjective)
1) sparing or moderate in eating and drinking; temperate in diet.
2) characterized by abstinence.
3) sparing

Abstemious, in other words, is the direct opposite of hedonistic. A hedonistic lifestyle would be to seek maximum pleasure, whereas a abstemious one would be to simplify and reduce. Now instead of seeking greater and greater pleasures and eventually getting numb to the new experience and thus hopping onto the hedonistic treadmill, I suggest we reverse the whole process.

I say we simplify our lifestyles and eventually we will get numb to the new experience of a simplified lifestyle, and we go on and simplify it further, leading to a virtuous cycle which I termed abstemious treadmill. I believe this is where we would really find a lot of pleasure in the little things that pop up because we're so used to so little. Imagine not having salt and sugar in your diet for 1 month. At first you'll feel that your food taste very bland, but after a while, you start tasting all the natural flavors of the ingredient. And once a while when you do eat food with just a little sprinkling of salt or sugar, you'll feel that it's very salty or very sweet. It's the same food we're talking about here but we're no longer talking about the same person tasting the food.


I mentioned this because there are people who thinks that living a frugal life is a very sad life. Earn and save so much money but you deprive yourself from enjoying the pleasures of life. Life is short, so YOLO-ing your life is not such a bad idea. But a frugal person is already jogging on a abstemious treadmill. He had reduced his lifestyle to something that is simpler than the people who are around him, and he is not suffering and yet he found great pleasures in it. How can the crowd who are invariably jogging on their own hedonic treadmill understand him?


Well, they can't. They will wonder what strange beast this frugal person is, and how different he is from the rest of the world, and how odd. Doesn't matter eventually, we're all running our own race.

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