The velocity of money

I was re-reading this book by Garrett Gunderson - Killing Sacred Cows. It's a very wonderful book with very refreshing concepts, so I make it a point to revisit some of the concepts espoused in the book every year when I have the time to do so. It's so easy to read that if you only have time to read one financial book this year, make it this one! You can have a sneak preview of the book here. Since it's the preview, not all the pages are shown, but I think it's enough to showcase it's attractive typesetting and page layout.

I remembered this particularly interesting concept, called the velocity of money. It is borrowed from the discipline of economics but in this case, it's applied to the field of personal finance. Basically, it's just an equation that is somewhat similar to the the mathematical form of efficiency. No wonder the concept feels similar to productivity.

This is extracted from the book Killing Sacred Cows by Garrett Gunderson

Basically, the concept is talking about how to keep input at a minimum while increasing as much output as possible. The point here is how to continually extract more output and yet at the same time reduce your input. One example of this is to use the savings you had to buy into financial instruments that gives you a passive income. Then you use the passive income to buy more such instruments that will generate even more passive income. While the input remains the same (which is the initial amount of savings that you put into the instrument in the first place), the output keeps getting higher and higher. This is because the principal and the interest both earns you an interest, thus creating a self feeding loop - exactly how compounding works.


Another example will be a business like ebay. When it started, there are not too many buyer and sellers. An effort is spent to set up all the necessary infrastructure for the ebay business to begin. Once time progress, more sellers come into ebay to hawk their wares, which in turn attract more buyers. Seeing more buyers attract even more sellers and so on, creating a self feeding loop. The input is minimized but the output is exponentially increased.


I guess it works for the tuition business as well. As I begin the career, I have to read up on a lot of stuff to have the knowledge. All these are just one time effort. Once I get some students, a proportion of them will turn out to have excellent grades, which in turn will attract more students to come in based on recommendations and so on and so forth. These kind of network effect is not proportional to the initial effort that is put in, hence it's very powerful.


The book mentioned that net worth is like stored potential, while cash flow is like a tap with running water. Having a high net worth does not mean that the person will have high cash flow, but the potential is there. It's like you have a lot of cash sitting in the bank, with little debts (high networth). Cash has low velocity because the output (the interest earned) is very little. If one just utilizes the cash to do create value (here, value is defined loosely as something that is in line with your Soul purpose), then it'll have a higher velocity of money.

Again, liberally taken from the same book

Now, seriously, I think that is a refreshing concept. As of all good speakers and good books, it's not that you do not know the concept that is at work here. It's the flair and the way the concepts are illustrated that makes it refreshing. As of above, so shall below. While the velocity of money is essentially a concept used in the financial field, I guess one can equally apply it to life in generally. I think the concept of the velocity of money forces one to think critically on out to increase the output value of every dollar that is utilized, so as to increase productivity.


Food for thought... would you rather have a high net worth or a high cash flow?

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Phillips MMF

It seems that Phillips Money Market Fund (MMF) is giving lousier returns as more people are aware of it, or simply because that they are fleeing the more volatile stock markets and trying to flock into the safer cash funds. I've been using it since May 2007 and I also tracked the NAV value of the fund since then.


The returns per month for the following years are as follows:

2007 : 0.167% per month --> 2.01% per yr
2008 : 0.111% per month --> 1.33% per yr
2009 : 0.087% per month --> 1.04% per yr


You can see that the returns are dropping. From the fact sheet, I also saw that it is attracting more and more people into the funds, so perhaps there is so correlation. Perhaps they are finding it harder and harder to get the yields as their fund size grew bigger, or maybe it's the fact that the general low interest rate environment makes it hard for them to give us anything more competitive (they invest in low volatility assets like sgd deposits, govt bonds etc).

Can you see the obvious change in gradient over time?

Here's the figures for this yr, 2010:

Jan : 0.071% per month
Feb : 0.088% per month
Mar : 0.053% per month
Apr : 0.044% per month
May : 0.053% per month


The average monthly returns had dropped since the start of the year, giving an average of around 0.062% per month. This means that if all else remains as it is, I'll be looking at around 0.8% per year, which is under 1% per year.


Pathetic you say? Yes, it is. But I guess that's the price of 'safety'. It can't even beat inflation, which is at 3% per year. But for those who needs the liquidity (like me) and cannot safely put it into higher yield assets, I suppose this beats the even lousier interest rates for savings accounts. I think even for fixed deposits, you need a higher deposit amount and longer lock in period for this kind of returns. So, in comparison, it is still okay lah.


One thing about it is that it is not guaranteed, unlike banks. Given the low returns for the MMF, it's been a long while since I've put in any fresh funds inside. Most of my savings are put into my savings account now, because the higher returns is not worth the risk of Phillips going belly up.

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A little reflection

These days I hardly look at the market. I remember when I started, I keep staring at the prices, as if by some eye power, I can change the prices of the stocks that I owned. These days, it's just a waste of time.


I suppose as I get more mature and hopefully wiser, my feelings and emotions are kept more constant. There are a lot of things that require my time and presence, and I certainly do not want to spend my life staring at numbers jumping on the screen. It's such a far cry when I first started (on the wrong foot obviously) in the market by trading with warrants. It requires so much time and effort, with my emotion going up and down according to the ups and downs of the ticker. It's very stressful, not to mention distracting, when you have a job to do as well.


I think going forward, I would reduce the time spent on looking at the watchlist. I foresee that I can only get more busy in my work, thus more of my stocks holding had been changed to hold more dividends. Basically I intend to hold more dividend yielding stocks, such as reits and the standard 'defensive' fare, and leave a few bullets here and there to either buy more upon crisis, or trade when I see the opportunities. Unlike in the past, I completely realise that the trading game is not for me, and that is after having experimented with it for myself. I also realised that I cannot be those steadfast investor as well, because it would have completely bore me to dig deep into the statements to find out the business.


I think the self realisation of what you can do and what you cannot do is important, because that will shape your style of investing/trading. To find out the viscosity of honey,  you cannot look at a static jar of honey. You must tilt the jar to one side to find out the dynamic properties of honey. Likewise, you cannot know your risk appetite by filling out some questionnaire, you have to try it out for yourself in the market.

You cannot discover the dynamic properties of honey by staring at it statically

My main income has been, will be, and will always be my main job. Knowing this, I think I would not spend so much time searching the ocean for that one multi-bagger stock that will yield me tremendous profits. Neither will I stare at the ticker all day just to get the perfect entry and exit. I simply do not have the time for such things. I realised that a day will come that I cannot work anymore, I would have to rely on secondary sources of income, and that will have to be from my investments. That will be my second line of defence. I think I would focus on building up a nice passive income to prepare for that eventuality.


It's very different when I first started out because I shun dividend yielding counters, thinking that I'm still young and I should aim for capital appreciation. I can afford to lose blah blah...how foolish of me and nobody told me so. Still, without the past me, there will not be the present me.


May fortune smile on you in the market.

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SGX - trade review

I was reviewing some of my past trades. This is one of them. The counter here is SGX. It's not exactly good for trading because the cost of 1 lot is quite high, so while the absolute value might be the same, a higher amount of capital is tied up in case the trade goes wrong. But I do like the cannot-die type of company for trading, so SGX fits perfectly.

Here's my two trades all depicted in the chart shown below:

What a roller coaster ride we have here...

I had 2 full round trips of SGX. The first was in 15th June 2009, bought at a price of 7.54 (the chart did took into account the drop of the price after its final dividend declared, hence it looks 'funny') and sold on 23 July 2009 at a price of 7.84 (again, the chart took into account the drop in price after its final dividend). Since the holding period is rather short, I did not get to enjoy any dividends declared.

Profit: $0.30


The second trip was in 5th Nov 2009 bought at a price of 7.88 and sold on 14th April 2010 at a price of 8.05. I managed to hold for a round of dividends declared at 0.0375, hence it boosted up my profits a little.

Profit: $0.170
Dividends: $0.0375
Total: $0.2075
Over profits for the 2 round trips:  $0.5075


This is only round 2 and hopefully many more to come. As you can see, my TA skills is not sharp. My entries and exit are less than commendable, but that is the nature of playing a probability game. On hindsight, I should have entered and sold at so and so price, but trading on the right edge of the chart is more difficult than looking back at it after trading it.


The closing price of SGX is 7.33 as of now. So, if I had bought at 7.54 and kept it till now, this will be what it looks like:

Profit: - $0.210
Dividend: $0.2675
Total: $0.0575


I'm not showing this to compare the buy-and-hold strategy versus the in-and-out strategy, because I know fully well that by selecting the appropriate time frames, both strategies will turn out to be winners. There are obvious advantages to both strategies and I would like to employ both of them. For example, if I had bought say 10 lots of sgx, I would have put half as a buy-and-hold positions and the other half as a trading position. The percentage can change according to the times, and need not be fixed in stone.


But I want to make it clear:


1. Buy and hold doesn't mean that you'll make money. Holding it long term doesn't mean that you'll make money. But if the company gives off a good dividend, it makes it that much easier to hold it longer. If the dividend is 10% per year, just holding it 10 yrs will recoup all your capital sunk in, never mind the capital appreciation or not. That's the wonderful thing about holding dividend yielding companies over the long term. But of course, there's a lot more things involved...10 yrs is a long time and they might not be around, that's why there's still a need to monitor the financial health of the company.


2. Using TA doesn't mean that you can catch the top and the bottom. If you can catch the approximate top and bottom, I think you'll boost your profit potential tremendously already. Of course, a lot depends on the person too - the mind, money and method. Fear makes you hesitant to buy when a signal presents itself while greed makes you hesitant to sell when the target price presents itself. These are all monsters that you have to face it if you're in the market.


Good fortune in the market :)

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Lazy sunday

This is one of those lazy Sunday that I didn't have to work and have the time to read newspaper at a very leisurely pace. This is so unlike the past few weeks where I've to scan the headlines and basically leave it at that. So, naturally, my eyes focused on the investing segment of the Sunday Times. This person was giving 5 tips on how to invest despite the bear.

My first impression is that how come nobody is giving tips on how to invest despite the bull. Perhaps it's our natural inclination to see prices rise up. Even the major stock exchanges in Germany and US are setting up measures to prevent short trading in case the market plunges too fast and too soon, but they did not do anything to prevent long buying in case the market rushes up too fast and too soon. Quite bias, don't you think?

Anyway, here are the 5 tips. Having nothing better to do, I thought it'll be a good idea to reflect on how these tips are useful to me or not.

1. It is better to remain focused and stay invested during volatile times.

It further elaborates by saying that over the long term, you can ride out the volatility. I hate it when people say that. It oversimplifies a lot of things. So do we stay invested in one company over the long term or do we put all our investing money in the market (regardless of the companies actually invested) over the long term? From the people I talked to, they seem to think that the former is the way. They then quote Warren Buffett doing that too (if you think so too, read more about him).

In my opinion, I think that staying vested in the market for the long term is the right thing. But you need no stay invested over the long term on the same companies. Just do the necessary adjustments from time to time.

2. The three Rs: Revisit goals, review portfolio and rebalance your investments.

Ok, this I agree. I made a mistake in the past of not reviewing my investments. A good profit thus turned to a very bad loss. I guess everyone does that kind of mistakes. It's a very very good idea to rebalance your investments. It's like a garden full of plants that you want and a lot of weeds. Just take out those weeds so that you can clear more space to grow the plants you wanted.

3. Spread out your risks, diversify

The article says to diversify across different asset class. Ok, it's great advice. But to a common retail investor, it's hard to do spread out your assets into more than 2 classes, unless you have a lot of bullets to fire everywhere. To me, if you have less than half a million to invest, you might want to concentrate on just one or two asset class. Perhaps stocks and bonds? If you have more than half a million, then capital preservation might play a more important role, hence the need for a more robust portfolio to weather the shit in life. Stocks, bonds, properties, commodities might even out just nice.

Please don't quote me Warren Buffett's style of focusing. You're not him and he's not you. Besides, he has many many more companies than you will ever have.

4. Have a balanced portfolio

Erm, isn't this tip the same essentially as tip no. 3? I guess the author elaborated more on using the funds approach. Coming from the head of UOB deposits, investment and insurance branch, I guess it's normal to talk about this.

5. Market corrections can mean opportunities; use dollar cost averaging to smoothen price swings

I'm not such a big fan of blindly doing DCA. I believe that the market can be timed, not precisely, but approximately. We do not have to buy every month because we cannot time the market. Just do DCA with some chartings, and I think you can do a lot better and save yourself on the transaction costs.


As with all articles, they never never talk about selling. It's all about entering the markets and giving the impression that by holding long enough, you'll have a good return in the end. To me, selling is the other half of buying, and there really is too much literature on how to buy and when to buy. How about doing a DCA on selling? As market goes up, you sell a little more and a little more so as to average up your selling price?

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The flight of Icarus

I would like to share a Greek mythology with you. This is not about Odysseus nor Sisyphus - it's about the story of Daedalus and more importantly, his son Icarus. You might not have heard of Daedalus but surely, you must have heard of the Minotaur. The Minotaur is the half man half bull creature that is found in the Labyrinth of Crete. There is a great story of how Theseus, the 'real' son of Poseidon (not the Hollywood fake version of Percy Jackson), survived the labyrinth and defeated the Minotaur. Daedalus, the craftsman who built the labyrinth, had to escape with his son Icarus. He thus built a pair of wings, one for each of them and gave his son strict instructions not to fly too high up near the Sun for the wax on the wings will melt and he will surely perish.

Icarus's over-confidence got the better of him

Icarus followed his father closely in the beginning, never straying too far from him. However, the adrenaline that surely must have pumped in his veins made him high and most importantly, made him forget about the dangers that was warned by Daedalus before taking on this journey. The initial cautiousness gave way to recklessness as Icarus flew higher and higher up the sky. So confident of his own ability to control his flight that Icarus could no longer hear Daedalus's warning.


Alas, it was too late. As Icarus flew higher up towards the Sun, the wax that attached the wings to his body melted and soon, he was flailing his bare hands in vain as he dropped like a stone into the sea.


Moral of the story:

If it's quite a bullish time, always be careful when the price of your stocks go higher and higher. Icarus had forgotten that the half-bull had been killed by Theseus and ignores his father's warning not to aim so high up the sky... to his own peril.

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Reality check 2

This is more of a personal reminder not to over invest in the market. There's a lot of uses for my cash these days and the problem becomes a little bit more thorny when the market is showing more value these days, after crashing and crashing when the Olympian Gods turned their backs on the troubled Greece. Better do a little back-of-the-envelope calculation to ensure that I have sufficient cash for immediate use.

Here's a quick breakdown:


1. Housing - 110k

This gets a little bit more troublesome since I entertained the idea of getting a 5 room flat. This is different when I started writing about some details with regards to the amount of cash I needed. Just based on 4 room with a price tag of 400k, I need around 60k cash. If I get a 5 rm, which cost around 500k, I think I need to raise that amount to 110k cash.


2. Wedding - 32k

A few things are set in stone. I already got the suffer rings and the package, and paid for a deposit for the hotel. What's left are some miscellaneous and the rest of the banquet. For worst case, I do not assume that I can get back anything after the banquet. I know I know, I'm sick.

Suffer rings + Package + deposit = 9k
Miscellaneous = 5k
Hotel banquet = 18k

Maybe I should dangle a carrot in front of me while carrying my burden...

Drum roll please....... Ladies and gentlemen, I need 140k by end of the year. Hmm, based on what I have now and my savings target by end of the year, most likely I will be able to hit 85% of the target without any help from the market. THAT is quite reassuring. This means that I can tap maybe 10k of my reserves to average down some holdings, but when the market rebounds, I'll have to take an equivalent amount or more of my capital out. In other words, USE SPARINGLY.


Okay, by next yr, I would need to renovate and furniturised my new home. Based on the estimate I did in the previous post, I would need 50k. But that's another 365 days more to go - I'll just walk ahead by putting one foot ahead of the next. The situation might change drastically by the end of the year, so no point planning so far ahead.

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Of rainy days

I was walking my way to work and when it was about to rain. Not just the typical afternoon showers but it was this gigantic, monstrous, end-of-the-world kind of rain. The clouds are so dense with water vapor that it seems as if the mothership from Independence Day are coming to consume all lifeforms on Earth.

It seems that I'm going towards Mount Doom

I was just enjoying the sights, sounds and smell of the impending rain. I was so suitably impressed that I took a picture of it to keep, and that's the picture you see above. Believe me, it's much worse when you're actually there because it seems that the darkness is about to touch and consume you.

However, since I vowed to myself never to be delayed by rain or shine, I just marched on.

Isn't the stock market the same? There's this big impending cloud of doom creating an overcast in the global market, seemingly about to consume it all. I've read an article yesterday saying there we should liquidate all the stocks that we have and buy gold. I do not dispute that, but I think we ought to be careful not to over-react to both market extremes. In good times, be a little bearish and hold on to your purchases. In bad time, be a little bullish and buy a little at suitable levels. Most importantly, do not let the market determine your mood.

It was 2 hours later after I left that area. It didn't rain at all.

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An hour to eternity or an eternity in an hour?

I saw this panel from my favourite one-panel comic site : Wulffmorgenthaler. As always, it always inspired me to write certain things after reading it. One panel comic also makes me think a lot, despite its apparent simplicity. So this is one of the latest one from those comic genius:

We have a very short time to spend with people before we each go our own separate ways

I like this one because it reminds me that we have a short moment to spend time with each other before our paths diverge and we all go our own separate ways.

I think while it's important to delay our wants and settle our present needs first, so that we can save up for the future, we cannot forget to enjoy ourselves. While it is wise to save up for the future, it requires wisdom to decide when to live for the moment. In that sense, I need to work on the wisdom part. I mean that is the problem with savers - they tend to save too much, perhaps even accumulating money for security sake. While spenders had their own sort of problems, I guess spenders wouldn't regret their experiences at all.

I had a wonderful day with brothers and sisters just dining and chatting. I'm going to buy a kindle dx to reward myself for the insane months of hardwork and oversaving (Can you imagine that? Oversaving! Is there even such a term?). I'm going to have a planned relaxing week ahead.

I live for the moment now, at least for this week :)

I leave you with this beautiful poem by William Blake, Auguries of Innocence:

To see a World in a Grain of Sand
And a Heaven in a Wild Flower,
Hold Infinity in the palm of your hand
And Eternity in an hour.

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Fair value of noble after XA

When I saw noble, I suddenly remembered that they are going to go XA today. Haha, it just slipped my mind, if not I'll have calculated the fair value of noble before today.

BTW, I chose option 3. Seriously, I didn't really choose it. I can't sell it at the price I wanted, so no choice but to hold it then :)

They are going to give a dividend of 0.036 USD per share, payable on 6th July. I didn't read closely and I suppose that the dividend is only for shares held before XA and doesn't include the new rights shares.

Here's the information required:

Dividend: 0.036 USD per share
Forex: 1.38 (assumed)
Bonus exercise: 6 for 11
Last closing on 14th May: 2.98

The fair value, defined as the price of noble after XA NOW such that there is no change in one's profit/losses BEFORE XA but after distribution of dividend, can be calculated as such:

[2.98 - (1.38 x 0.036)] x (11/17) = 1.896 = 1.90

Currently, noble is having a buy/sell bid of 1.89/1.90 and it opens at 1.90. How would it close?

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What are your reasons for having kids?

** "BIAS" is a special feature in my blog where I get to say whatever I want with scant regards for your feelings. I'm not politically correct in this feature, so go ahead, judge me."


I was talking to a few people about the cost of rearing a kid in Singapore. It dawned on me that there are so much responsibilities and duties, not to mention the financial cost, associated with bringing up a kid. That makes it strange because when I (casually) ask people why they want a kid, the most common answer is that it's the most natural thing to do. It's almost like no second thought is needed. Just snap your fingers, let's have a kid.


Not that it's not a valid reason, of course. It's just that if my kid is suffering in the world and he asks me why did I bring him here to suffer, I better have a proper explanation for it. I can't just say that it's the natural thing to do after getting married. Having said that, I think some people better not have kids, despite whatever the government is trying to promote here. Have a kid so as to have some months of paid leave? Have a kid to reduce your taxes? C'mon, it's not as simple as just a money problem, even though it can form a big part of the stress faced by parents.

It's not always so romantically happy in having a kid

I think the biggest problem is time and effort. Some people just do not want to spend the necessary time and effort to raise a kid. They just throw money at them, perhaps to replace their guilt or simply their lack of interest in having a kid in the first place. I might even think they regret the whole thing. Hey, if you are going to screw up your own life, don't screw up an innocent life.


Is my generation the selfish lot?  The generation who only cares about self-interest and throw away all the goodness of family life? I do not think so. I do not speak for others, but at least for me, I think I couldn't be more self-less. If I cannot make sure I can do my best to bring up a kid that will make the world a better place than without, I would rather not have a kid. If you went through the system while growing up and suffers through it, would you want your kids to go through the same routine? I have my reservations on that.


Having said so much, do I like kids? Yes, I do. Would I want children? Yes, I do. But it is not a light decision to make, nor will I make it a hasty one. No amount of tax rebates nor months of paid leave can push me to have a kid. Do you really want parents who would have more kids to have such incentives? If you can make the environment and social institutions more friendly towards parents, then perhaps it can push me and others to have more kids. Until then, I'm sorry, I really do not think all the campaign will work well. The pull factors are just simply not attractive enough.

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As an afterthought, what about push factors? Pay triple the tax if there's no kid in the family? No buying of subsidized housing? When all the nice candies do not work, maybe the pushing and shoving just might. I hope I do not live long enough to see such acts here.

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Musing over my options for noble

For some strange unfathomable reasons, noble had decided to issue a bonus exercise of 6 bonus shares for every 11 shares held before ex date. Why 11 - a prime number? Wouldn't it round off nicer if the exercise is 6 for 10, or even 6 for 12? In order to round up nicely, investors must hold shares in multiples of the lowest common multiple of 11 and 1000 (who say maths is useless?). However, 11 is a prime number, so you must have 11 lots at the minimum in order not to end up with odd lots. If not, I think the trailing decimal places in the calculation of your bonus shares will be rounded down.


Each share is trading currently at around $3, so 11 lots will cost $33,000. Not a small sum of money at all for retail investors.


I am holding 2 lots of noble, so I'm trying to find ways to circumvent the problem of odd lots. I knew about the unit share market from poems trading platform. It's used to trade shares lesser than the board lot size of (usually) 1000 shares. I think somehow, I've got to use this feature in order not to end up with odd lots.


Here's a few ways that I can think of:


1. Buy 2 more shares from the unit share market, to arrive at a total of 2002 shares of noble before ex date. Since 2002 is a multiple of 11, I'll end up with 1092 bonus shares, giving me a total share after ex date of 3094 shares. Commission structure of unit share market is 0.28%, with a minimum of $10 charge.


Great...it's still odd...not a fantastic idea. I'll have to sell 94 shares or buy another 906 shares from the unit market to end up with nice board lot size.


2. Buy 9 more lots of noble to arrive at a total of 11 lots of noble before ex date. This will entitle me to 6 bonus lots, with a total of 17 lots of noble after ex date.


If not for the exorbitant extra 27k needed, this will be a good solution. I don't think I want to put so much into noble just so that I can skip the odd lots...bad idea.


3. Do nothing before ex date and get a bonus share of 1090 (rounded down), arriving at a total share of 3090 after ex date. Then go to the unit share market to sell off 90 shares of noble or top up with 910 shares to get 3 lots or 4 lots respectively.


The added advantage of topping up with 910 shares is that I would expect a selloff immediately after ex date as investors go to cash out their odd lots, so I might be able to buy at a much cheaper price to average down my overall purchase.


The estimated price after XA is $1.95. Assuming I want to buy 910 shares off the unit share market at 2.20 (I assume an even higher buy price at unit share market), it'll cost be $2002. Add in minimum commission of $10, it'll be roughly $2020.  The dividend of roughly $100 can be used to offset the cost of purchasing the odd shares too.


Might not be such a bad idea.


4. Sell off noble before ex date and buy it back a few days after ex date.


I like this idea a lot, so I've been queuing to sell for the last couple of days. If there really is a sell off after ex date, I'll be able to skip all the nonsense odd lots and even get a cheaper price for the shares. However, doing so, one will not be able to get the dividends. This should not be a big deal, considering how little the dividend is. I wouldn't be worried about this.


Do note that due to the low liquidity at the unit share market, the buy/sell spread can be quite big. You also have pay the minimum of 0.28% of transactions or $10, even if you buy/sell 1 share. Proportionally, the cost is higher. As such, I think no.1 is a very bad idea. I'm just wasting money doing it that way. No. 2 is out for me as I do not wish to be overexposed to noble, given my capital size.


So, it boils down to no.3 or no.4. Let's see which one the market throws at me.

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For whom is the whole life insurance meant for?

Just for whom is the whole life insurance meant for?


I've heard a number of people saying that they don't want to buy whole life because when they get older, their dependents would have grown up and thus there's no need to cover them anymore. The alternative is thus the term life plan because it's cheaper. This seems to suggest that the whole life plan is just for the coverage of their dependents in case the sole breadwinner (the person insured whose life is insured by the whole life policy) passed away.


My post here is to question that very assumption - that the whole life plan policy is to cover dependents in case you pass away prematurely, thus leaving them with a huge lump sum.


I do not use the whole life for such purpose. There are cheaper alternatives for such lump sum gift for those loved ones you leave behind to take care of financial matters. I propose that a whole life plan can be used to protect your own savings that had been built up thus far, from events that can erode it considerably. Events such as cancer, stroke, heart attacks and any other events that are debilitating yet not fatal immediately. In this sense, whole life policy will act like compulsory savings to force you to save up for such events.


Term plan can work the same, yes. But the catch is that term plan coverage only last around 60 yrs whereas whole life plan cover for an extended period till 100 yrs old.

So what happens between the years when your term plan coverage ceases? I think whole life can be used precisely for that purpose - to cover for the period when your term plan no longer covers you, until the day you pass on.


If something strikes you after 60 yrs old, and you do not have whole life coverage, someone will have to foot the bill. There are hospital and surgical fees to take care of, and there are other fees that had to be incurred that do not require hospital stay. Only the former are covered by H&S plans, so what about the latter? Things like non-standard drugs, stay home nurses and maid, overseas treatment....who is going to pay for them? The H&S plans do not cover things like that and I do not want to burden my spouse, relatives or dependents, so I have to depend on myself. But I do not trust myself that I can save up enough for such purposes, hence a whole life plan is critical for me to hedge against my own ability to prepare for such events.


I think of my own situation. I am sandwiched between two parties - the needs of my parents and the needs for myself. I've to buy insurance for my parents because they only have enough savings to take care of themselves if nothing extraordinary happens. If something is to happen, it will firstly wipe out all their retirement savings and secondly tap into my savings too.


They told me if something bad is to happen to them, I don't have to treat them because there's no point. I do not think I can do that. Can anybody do that? Not me. I only have limited amount of savings to handle my own affairs. If I have to help my parents, who would foot the bill for me if something is to happen to me? My dependents? Then this whole cycle will repeat again!!


I'm not a saviour nor a hero to rescue my future generations from this vicious cycle. I'm just a normal person struggling to make good on my dual duty as both a kid to my parent and a parent to my kids. It is only responsible for my kids to be born into this world without the excess baggage of the previous generation. I might not be able to do it, but hey, guess what, I'm doing my best.


It's also a bit too much to ask for a product to cover all of this stuff that I've talked about. It's not possible. I'll try to cover as many loopholes as I can foresee and do my best to steer my ship as danger free as I possibly can.

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Do note that I'm not a financial advisor. Of course I'm not. I'm just trying to make sense of all the debate here and there and reason out for myself on the actual purpose of certain insurance policies. I believe that no financial advisor can do that for you - you've got to think and reason it out for yourself. I do not presume to think for everyone, because my situation is uniquely mine. So do not follow me, because I'm not your leader. Do not walk ahead of me, because I might not be able to follow you. Do however, walk beside me as a friend, so that we can all share and discuss all our interesting life experiences together.

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The official reason why MBS screwed up

** "BIAS" is a special feature in my blog where I get to say whatever I want with scant regards for your feelings. I'm not politically correct in this feature, so go ahead, judge me."


I saw from my favourite one panel comic site, Wulffmorgenthaler, dated May 7th, regarding this picture shown below. I liberally changed the script and inserted my own as a dig at the latest Marina Bay Sands (MBS) saga over the kind of world crass standard they exhibit recently.

I mean, they are hosting lawyers. MBS sure knows how to pick their fight. They could have screwed up on a conference by the society of garang guni, or the hen pecked husbands club, but they had to pick their fight on lawyers. Bummer...

I thus present to you, my interpretation of the issue. No need to thank me, MBS, for giving you an idea on the official explanation for the screw ups. There's only one thing worse than lawyers...

The official reason why some of the rooms in MBS are not air-conditioned

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For the benefit of those who did not read up on the news, here's the article, reproduced from channel news asia site:

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How my world came tumbling down

After a few people smsed me and emailed me, I kind of realised that this post is a bit too much. Hence the disclaimer before the actual post itself. Do know that while reading this letter, it's supposed to bring out a certain point that is found only towards the end of the letter. SO, while reading it, the scenario painted out are NOT TRUE. While writing this disclaimer will spoil the "ah-ha" effect, I think making people unnecessarily worried about me isn't exactly the intended point either.

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Dear readers,


I had a very very bad week.


I fell down the stairs when I was going for my dinner last week. Dropped down a flight of stairs, sprained my left hand and broke my leg, leaving my leg in cast now. That was after I received a letter from the hospital after a full body check up the previous month. What can I say? The results are...not optimistic at all. It says that I've a growth in my right forearm, so more needs to be done before it can be ascertained whether it's malignant or not. As I was musing over the possibility of a cancerous growth, I must have lost my concentration and fell over the flight of stairs.


How can a spate of bad news hit me so relentlessly and furiously? Didn't my mum's high blood pressure got worse this month and had to be sent to the hospital? My pet cat's recent death already had me sleeping with my pillow wet and my eyes puffed up with all the crying. I don't think I've anything left to cry anymore. My gf had threatened to leave me after a very bad spate of arguments, so I can't seek consolation with her. Can I talk to my friends? They had 'left' me because while I was busy with my work, I didn't have time for anyone except to make more money. While they are physically there, our frequencies no longer resonate. It's just an empty feeling talking to them, because it reminds me of how things were in the past and how different they are now.


But all these did not happen at all. I did not fall off the stairs. I did not go for a medical checkup and neither did I receive any letter sentencing me to death. My leg is perfectly fine and my hands are still as dexterous as ever. My mum's blood pressure did not get worse and she did not go to the hospital at all. My cat is still very much alive and mewing for attention occasionally. My pillow and bed sheet are crisp and fresh as it had been changed just last week. I did had arguments and disagreements with my gf but she did not threaten to leave me. We are still very much in love. My friends are still there with me and though our frequencies no longer resonate perfectly, they are still in phase with each other. Conversations with them are no longer are as satisfying as I used to remember them, but we still know each other like a connoisseur to his favourite vintage wine.


So why did I tell you this? I just lost a few k in the stock market as the price spirals down and I want to let you see things in the proper perspective. Things are not as bad once you realised that you have a wonderfully blessed life right now, at this very moment. What is a few k of losses? Don't wait for the moment when you lose the things you have now to realise how fortunate you are.


Life is still very wonderful :)



Yours truly,

La Papillion

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Of fishes and men

You must have heard of this story, it goes like this:

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An American investment banker was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellow fin tuna. The American complimented the Mexican on the quality of his fish and asked how long it took to catch them.


The Mexican replied, "only a little while."


The American then asked why didn't he stay out longer and catch more fish?


The Mexican said he had enough to support his family's immediate needs.


The American then asked, "but what do you do with the rest of your time?"


The Mexican fisherman said, "I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life."


The American scoffed, "I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually NYC where you will run your expanding enterprise."

The Mexican fisherman asked, "But, how long will this all take?"


To which the American replied, "15-20 years."


"But what then?"


The American laughed and said that's the best part. "When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions."


"Millions.. Then what?"


The American said, "Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos."


The moral of the story… Know where you’re going in life — you may already be there.
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I disagree with the moral of the story. In my own twisted interpretation, the moral of the story, to me, is:

1. If the Mexican is already a millionaire and is thus living the life doing what he wants (i.e. fishing leisurely). then the moral must surely be that you must work hard to have a certain amount before you can do what you want in life. In other words, work hard now, so that you can enjoy your retirement doing what you like without worry for money.


2. If the Mexican is not a millionaire, then there is some difference between a millionaire-turned-fisherman and a fisherman, even though there are doing the same things now (which is fishing leisurely). I do not know if the Mexican's wife and family will argue with him everyday to bring in more money to feed the family or not. It's not stated in the story, but I would imagine so. There are responsibilities to fulfill, and so I would not seek to do what I really wanted before settling those responsibilities.


3. I remember what snr bro said the other day. Young men must spend more time and energy to earn money. Older men must spend their money to earn more money. Perhaps the Mexican is doing that, or had some other income stream so he do not have to be there physically to earn the money.


The fisherman's tale is not as romantic as first thought. Life is inherently harsher than a fairy tale.

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STI spooked by the PIGS

Who's afraid of the big bad PIGS? In the real world, the wolf should be afraid of the PIGS. One little pig knocked on the wolf's door and caused such a panic around the world. Now, the wolf is afraid that other little PIGS will come to knock on his door.

Let's take a look at STI weekly:

Weekly chart shows a bearish divergence on long term force index, but not on macd histogram yet. The degree of selldown isn't as much as that experienced in January earlier this year. Maybe not yet? haha! The previous selldown took 4 weeks (4 bars) before stabilising, so perhaps we'll see the same too? The selldown had brought STI to the value zone already, so the minimum target of the selldown had been reached. It will most likely over-react to the downside.

STI daily:

There's a gap support around the region of 2790 to 2820. Looks like that level also coincides with the mid term trendline established in Aug last year. Another 1.5% to 2.5% to go? I don't think now is the time to sell your cats and dogs to raise capital to buy up stocks. I finished my first wave of buying...will wait for clearer signs before putting in more money.

When there's nothing to do, do nothing.

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Solution to problem sum

Here I shall reveal the calculations that I had based on the problem posted in this earlier post. I sort of figured out that nobody will be so bothered enough to go and try calculating the theoretical price of ARA after XA, so I might as well show the answers now. Thanks HH for trying it! Haha :)


Since in the real world, there are no teachers to check for you and no answers behind the textbook to assure that you're right, we always have to try solving the problem using different methods. If all the methods arrive at the same conclusion, then chances are, you're right until someone proves you wrong.

First method:

I tried using numbers to have a feel of how it works:
Let's say I have 10 lots of ARA shares @ $1.00 average price. Since the dividend is declared at $0.025 per share, or $25 per lot, I'll have $250 dividend for my 10 shares. The closing price a day before XA was $1.15, so I can calculate what's my profits so far.

My inventory before XA: 10 lots of ARA shares bought at $1.00

Sell price : 1.15

Profit from shares : (1.15 - 1) x 10,000 =  $1,500
Dividend : $250

Total profit before XA: $1,750 (1500+250)

Now, what happens after XA? The price of ARA drops because there are more shares floating around due to the 1 for 5 bonus issue. This means that for every 5 lots of ARA shares you own, you will now have 1 lot of bonus ARA shares. The price drops accordingly to reflect the fact that the market value of ARA remains the same. Do note that only the ordinary shares are entitled to dividend; Bonus shares are not entitled to this round of dividend but they are eligible for future dividends.

Let y be the price of ARA after XA.

My Inventory after XA: 10 lots of ARA bought at $1.00 PLUS 2 lots of bonus shares

Sell price : y

Dividend : $250

Profit from the original 10 lots of shares : (y - 1.00) x 10,000
Profit from the bonus share : y x 2,000
Total profit : 10,000y + 2,000y -10,000+ 250 = 12,000y - 9,750

Since y should represent the theoretical price such that my profit/loss before and after XA is to be the same, I equate the two profits,

12,000y - 9,750 = 1,750
Solving,           y = 0.95833

Hence $0.958 is the price such that my profits before XA and after XA is the same.

Second calculation:

I noticed that several terms can be removed without changing the answer. First of all, dividends doesn't matter as both sides of the equation contain the $250 divy term. Next, even if I tried different no. of shares bought at different price, it doesn't change the answer. I changed all the variables to algebra, and confirmed that the calculation remains the same. Without bothering you with the details, here's the much simplified formula:

Price = 5 x (closing price before XA) / 6

Since the closing price is 1.15,

Price = 5 x 1.15/6 = $0.958

Third calculation:

Not really a calculation. It's more like to show you that chartnexus had worked out what I had worked out in the morning. The chart clearly shows that the price before XA, on 28th Apr, had a closing of $0.958 whereas it was 1.15 just the day before the software updated the changes.

The closing price a day before XA clearly shows $0.958 instead of $1.15

The theoretical price is definitely different from the closing price. I cannot predict how the price will close and I know that the theoretical price will only be there for a fleeting moment. So, isn't it a waste of time trying to calculate something that only exists for a moment?

Not to me. I take great pleasure in such intellectual masturbation. It's like an unreachable itch behind the back, irritating me until I can solve it :)

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Problem sum

This morning, I was trying to settle a problem related to the market. In real life, much of the challenge lies in defining the problem, rather than solving it. Once the problem is defined clearly, the solution can be found, or you can find people who can help you solve your problem. I shall spend some time defining the problem.


The problem is laid out here. I had bought shares of ARA on three separate occasions. They declared a dividend of $0.025 per share and thereafter a 1 for 5 bonus share issue (meaning that for every 5 shares held, you'll get 1 bonus share). The bonus shares are not entitled to the dividend because it comes after the dividend is declared. The last closing price of ARA yesterday before it went XA (ex-all) was $1.15. So, the question is, what should the theoretical price of ARA shares be, after it goes XA today? The theoretical price is the price of the new ARA shares after XA, such that the gain/loss before XA but after XD (ex-dividend) is the same as the gains/losses after XA. To put it more simply, what is the price of ARA today upon XA, such that my gain/loss is the same as my gain/loss yesterday, before XA?

A good problem will generate sparks in your neurons

I had worked out the answer, but I thought it'll be a nice exercise for those interested to solve this mathematical problem sum related to the stock market. I'll share the answers that I had worked out in a few days to give time for people interested to work it out :)

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Don't be the last fool standing

As I see more and more newbies coming in to the market, I thought it'll be only right to warn them that the market is not their mother to give them money, but to take it away from them. I must have repeated this countless times in previous post, but it seems I only see more clueless newbies coming in to participate in the market.

Some of the gripes I had with newbies are:

1. I'm in it for the long term

I cringed whenever I heard the word investing for the long term. It shows a few things - firstly, the person saying it believes that in the long term, every mother father stock in the market will rise. How long is long? From historical data, if you invest in STI, you won't lose any money after putting it there for 14 yrs. If you look at Joseph's theory in cycles, you also need around 12 yrs before we can say that we're peaking. All these are related to STI only, so if you're investing in individual companies, then you also assume the individual company's risk, which may not be correlated to STI at all.

So, the ultimate question is - are you prepared to hold it for the really long term - 10-15 yrs - all the time while your stock is bleeding, your capital locked up and seeing light only after that time period had passed? If you do not have the conviction, don't tell me you're buying for the long term.

2. While the attitude is to hold it for long term, there is no corresponding attitude to learn the market properly for the long term.

First deserve, then desire. If you do not wish to learn more about the market, yet wish to profit consistently in it, then you're like the weekend jogger who wants to compete with an Olympian athlete in a race. You might win him occasionally when he's not paying attention but when he does, you're dead. The odds are so against retail investors already, so why make it worse by not learning it properly?

Putting money in the market is like playing musical chairs. While the music is playing, everyone is happy. But when the music ends, do not be the last fool standing around mystified while everyone had found their seats. I repeat - do not be the last fool.

5 individuals but 1 chair - who's going to be the last fool standing?

3. The interest rate in banks is so low, so investing is good as it gives high returns

Yes, the interest rate is miserably pathetic at 0.125% per annum, but who ever heard of someone losing their principal sum by putting money in the bank, to the tune of 30-50%? That's how much you can lose by risking your money in the market. Don't just look at the returns, look at the possible losses! If you think you have a strong risk appetite (by filling those silly forms), ask yourself what you will do if you invest 30k but you are left with only 15k. Don't learn the lessons the hard way like me.

4. Greedy not to miss the run, yet no fear that the market will turn against you

Afraid to miss the market? Why so eager to lose money? If I know anything about the market, it's that it always give you second/third chances. There will always be opportunities, so why so eager to jump on in? Sincerely, without any malice, I wish that any newbies who put their money into the market loses their money when they first started. That will put them into the correct mindset. If anyone makes money, they start thinking that the market is like an ATM machine.

That's when the market starts clawing back the money given to you, often with a hefty interest put in.



Will people heed the advice? I bet most won't, there's why the market is as it always had been. Sounds harsh? Well, I know that money is hard earned, so don't waste it like that. Go smoke a cigar and have a good meal, at least you'll have some fun and entertainment.

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Of Dragons and Men

On Sunday, while waiting for my gf to appear, I was spending the time at the MPH browsing some books. I picked up T.Harv's Secret of the Millionaire Mind from the shelf and started reading some chapters of it. It was a wonderful recap of what I had gathered from the book, since the last reading maybe like 1-2 years ago.

A phrase caught my attention. It goes something like this, "Rich men grows bigger than their problems. Poor men tries to solve their problems".

I took my eyes off the page and reflected on that line. It struck me like a chord that resonates within me...how true! The line simply means that if we grow bigger than the scope of our problems, than the problems cannot even harm us significant. In fact, some of the problems might not even be problems anymore.

This message drives in deeply, especially after I've watched the 3D version of How to Train a Dragon (btw, a wonderful and touching story). I watched in glee as the Vikings throw their catapults at this giant dragon that just leaps out of the screen. The boulders just bounced off its thick hide whereas earlier on, the same catapult just knocked off some of the smaller dragons.

Problems are relative, it seems. If you're a big dragon, you're not bothered by the relatively small stones. But if you're a small dragon, you're especially bothered by the relatively big stones, but quite immune to the smaller ones. This idea of growing bigger than your problems focuses the attention not on the problems, but on the one thing you can control - yourself.

That's quite refreshing to me. Some examples of how this works:


1. In the past, I tried not to take cabs because I always think that it costs several bus/mrt trips and I could save that few dollars. As I grow out of this problem by earning more and valuing my time more, I no longer worry about taking cabs. I might just take it when I'm tired and had a hard day, or simply to save time.


2. I used to fret when students cancel my lessons and drop off the tuition classes. But as I get more and more students, the percentage of cancellation drops as I grew 'bigger'. It doesn't affect me much anymore. In fact, sometimes I would be very happy as I can get to rest or spend more time with people I value.


Maybe it's time for me to re-read that book again after so long. Might want to add it to the list of books that I must read every year :)

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The stress faced by a teacher

These few weeks I'm ultra busy. Normally, I'm just busy. The mid year examinations are coming, so that's bringing a lot of extra work to me. When you read this post, I'm probably out working already - I just scheduled this article to be posted at this time and date. Ah, the magic of technology.

In the past, during this period, I'll be quite stressful. This is because I've to push students to cramp a lot of things in their mind to prepare them for this major examination. I certainly don't like doing this because it's a mad rush of time. But can you imagine the students? It'll be worse because they are the ones taking the examinations and facing the consequences in the end.

Over the years of tutoring, I realised these truths:

1. Some students just do not want to get A. You might want them to get it, but if they do not desire it, they will just put in enough effort to get whatever grades they think is fair for them. I realised it's more of a motivational issue than a knowledge issue. I blogged about motivational methods in the past, and I employed every single trick that I talked about, to various outcomes. I can't do it consistently so I usually try to do everything and see if it hits something. If I managed to motivate them, they will do all that is necessary to get it done.

2. I fully understand the stress of teaching students. It should be (if it isn't already) the first thing they warn you about when getting your teaching degree. You say something important, students do not get it. You say it again, they got it, then after a while, they forgot about it. So you repeat and if they still do not get it, you get frustrated. This is because there's no reward in your actions. Action without reaction leads to frustration. But what happens if you give up? Then there's no hope anymore.

This is of course easier said than done. I had given up hope on students too (maybe less than 5 out of so many over 7 years) because I'm only human and can only take a certain amount of punishment before I give in. But remember, if you give up, there's no more hope.

3. It's possible to win a battle but lose the war in teaching. While stressing the importance of major examinations, you can actually create such bad vibes in learning that it might lead to bigger problems downstream when it comes to anything school related.

I remember teaching a JC student about maths. Though he didn't do very well in statistics when I taught him (he always get mediocre grades for his tests), he found the topic fascinating. I jumped on that curiosity and introduced him a few things that are not required in the examinations but can expand his views on the topic itself. So years had passed and sometimes when I met him on the street, he'll shout out to me and said that he remembered me teaching him statistics and had a fun time together. He even wanted to do a statistics course in university.

I pointed out the story to highlight the fact that it's sometimes easy to forget the perspective in things. Being zen-like and having the belief that things will work out well in the end will remove some of the stress in teaching students. I always say this: Things could get worse ...but it didn't.


So, for all the parents and tutors out there teaching their kids, I hope this article gives you something to think about over the weekend. Have a great weekend :)

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Changes in the education system

** "BIAS" is a special feature in my blog where I get to say whatever I want with scant regards for your feelings. I'm not politically correct in this feature, so go ahead, judge me."



I read with interest regarding the latest changes to our education system. Most of the time, the changes will relate to mother tongue - a misnomer for the second language we learn besides English. The bugbear had always been the teaching of chinese, which many found it extremely hard. Interestingly, scant little had been done for tamil and malay when compared to chinese, where many innovative and creative ways to teach are reported in the newspaper. I could be wrong, but if there's any changes, it is definitely not as 'reported' as those changes made in the chinese language. Maybe the advocates for changes in the malay and tamil languages are not as loud as those for the chinese language.

What's the problem with the current psle system? There are 4 subjects in the psle scoring system - english, 2nd language, maths and science - all of them had equal weighting in the final tally of the psle score. The new change is to correct the weighting of the 2nd language, so that it will count lower towards the final score.

I'm thinking aloud to myself :

1. From what I observed, most of the kids from the upper echelons of society speak English at home. I'm from the middle class, so of course I do not have the same opportunity to mix with those who are really in the top of the top. I would assume that, they too, will have kids who speak English at home, and not their mother tongue.

2. Again, from what I observed, those who do not speak the language naturally at home will not do very well in exams. If the kids do equally well, they must have spent a lot of effort and money to raise their proficiency in what must have been their 'weaker' language. Since effort and money is limited, the same amount could have been applied to their other subjects to achieve higher results.

3. I tend to teach the middle and lower classes more often that I do to the upper classes. Their main language at home is either their mother tongue or, for those from the chinese ethnic group, their individual dialects like teochew and hokkien. While I won't say that they will naturally do better in their second language, they certainly do not display the same agony when learning them. In fact, quite a few of the students I know actually rely on their second language to push up their grades in the exams. 

So, is it possible that the latest changes to the psle subject weightings can cause a change in the playing field among the different societal classes? Could the changes benefit some classes of society more than others?

If you throng the forums regarding the latest changes, you might have heard variation of conspiracy theories regarding some MPs with kids who are going to sit for the psle soon, and so they are pushing for the change. I couldn't help but nod understandably that such a situation might be true. Whether the rumors are unfounded or not, the fact they people are thinking like that suggest that more explanations and studies are needed to reassure Singaporeans that the changes are in fact for the benefit of the majority, not just for the powerful minority.

Do understand that while the upper echelons might suffer in their education because their weaker language is dragging their results down, at least they have an option to leave Singapore for better opportunities. The rest of us who do not have the means to leave Singapore are stuck with whatever changes and decisions that are made in the education system.

Life is never fair, it seems.

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I'm credible now

Sometime last year, I tried to apply for credit cards but failed miserably. I blogged about how frustrating it is to be bombarded by sales people egging me to get their free cards but when I filled up the long forms and submitted the required documents, they rejected me without any explanation.

After a few tries last year, I gave up. I tried a few things but didn't work. These include:

1. Showing them a fat bank account flushed with cash
2. Sending them 3 years of tax assessment notice
3. Paying 5 bucks for a CBS report to check my credit worthiness

It seems a funny thing right? Banks consider self employed as less credit worthy as someone who is employed. That's how the world works, I can do nothing much about it. But recently, just 2 weeks ago, my application for POSB everyday credit went through and I received the card through my mail.

Plastic plastic - life's fantastic

It was a joyous occasion to me, not because now I have a piece of plastic dangling in my wallet. It's because my concerns - about not being able to borrow money to finance my purchase of property - might not be a problem anymore. It's important to have a good credit history so that institutions can lend you money when you need it. This is definitely the unexpected disadvantage of being a full time tutor. Maybe I shouldn't generalise because it might just happen to me only.

I'm going to apply for a few more cards.

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Another way to beat inflation

I was looking at Adrain Khiat's column in the straits times this morning. Wow, he made it to the newspaper already, especially after he revamped his blog. I wouldn't say I'm a fan of his, but I do read his posting on and off. I stopped because there is just to much negativity in the comments. Might want to visit it again soon :)

Anyway, he mentioned something about child education and how inflation can cause the tuition fee for local universities to rise up to an astronomical sum, 20 yrs later. Somehow, I caught on to the idea of inflation after reading this.

I though that yes, inflation will cause the price of things to go up. But wouldn't inflation cause your salary to go up as well? Basically, the price of goods and services go up because the cost of producing these goods and services go up as well. Your salary will form part of the rising cost of these services. I think the bugbear here is not inflation per say, but rather the fact that while your salary increases, it might not rise as high as the cost of goods/services sold. If that happens, then it'll be a problem. You just have to look at the percentage rise in median salary vs the percentage rise in HDB flats over the last 20 yrs to see how HDB is still very 'affordable' to everyone.

Haha, the inflation monster is hiding in the closet!

When I started tutoring 7 years ago, I'm charging a rate of $22 per hour. Now I'm charging a rate of $40-60 per hour. Take $50 as the average rate per hour, this would mean an average inflation of 12.4% per yr. I think this would beat the average 3-4% inflation per year in Singapore.

Am I excessively worried about inflation? Not really. I just make sure that my salary can catch up with inflation. How? Ensuring that I do the best in my job so that I can command a premium rate. I have an advantage that employees do not have - I can determine my own hourly rate and float it accordingly to the times. While I realize that there is a cap to how much I can raise my rates for 1-1 tuition (since it would inevitably lower the demand), I can always aim for another model of business- the low rates, high volume kind, which is typical of group tuition.

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4 panels say it all

Sorry, I just couldn't resist it when I saw this picture :) This picture is taken from this hilarious site, but I had to censor some naughty bits before posting.

4 panels to tell a story that everyone who had dabbled in the market knows, haha! As I'm blogging, US is on a pretty major slide because of news of SEC's prosecution on one of the giants of Wall Street - Goldman Sachs.

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First deserve, then desire

It's been a long while since I returned to CNA forum (I linked it up in my blog, near the header). I used to go there everyday in the past just to read some of the entertaining banter that goes there. I stopped around 1-2 yrs ago because there isn't anybody there anymore. So, it's a surprise to see that the activity over at cna forum is getting quite hot.

I also realised that more people are jumping into the market. Just yesterday, I looked in fascination at someone trading using the IG platform with a netbook on a bus. I looked at the time - it's 2153 - so he must be trading the US market. The netbook was still opened when he alighted the bus. Watching the prices ticking, I suppose.

People are definitely returning to the market, though not yet in droves. But the signs are there. I've been noticing more and more activity, especially of newbies, entering the market. People whipping up IPOs, chasing after dual-listing candidates, more stocks breaking 52 weeks high....heck, even STI broke through the 3000 mark yesterday with ease and high volume.

I believe one must deserve before desiring to win in the market. If newbies are whacking the market and boasting how easy it is to make money from their pickings, something is very wrong. The market works in such a way to funnel the money from the masses to few professionals. If anyone without an iota of technical nor fundamental knowledge also starts making big money, I think the party is going to end soon. Not without the customary fireworks, of course -  the climatic grand finale so typical of bull runs.

"Are we there yet? Are we there yet?", the donkey in Shrek kept asking. I don't think so. I'm just waiting for the newspaper headlines to say that we've reached a new high or something. Bulls always climb higher up a wall of worry, I guess.

What's my action plan? I've cashed out quite a few positions that I've no intention to keep and getting ready for a near term correction to buy up some bargains if any. If there's no correction, so be it. I'm not going to let the market control my mood. Definitely no seller's remorse for me.

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Hedging

As the market marches on and ever upwards, we've to start thinking whether to cash out some profits or to ride it further. I've posted here that STI shows signs of weakening already, so it's always prudent to take some profits off and to have more cash in hand to snap up good bargains when the correction comes in. This is to hedge your opinion in case they are wrong.


1. If the market goes up, you'll still have some stocks in it to ride the uptrend.

2. If the market goes down, you'll have some cash in hand to seize the opportunities offered.


You'll notice that either the market goes up or down, there's always something to cheer for. I think that is the ultimate emotional state in the market - you don't really care if it goes up or down. You'll also notice that by hedging, we will not gain as much as we possibly could, neither would we lose as much as we possibly could. That's the point - we don't want extremes.




I think this advice applies to life as well. It's good to hedge your life in case it didn't turn out to be as planned. You know, we tend to think years ahead to plan for the future. We want to reach financial freedom by a certain age so that we don't have to work anymore and can enjoy our retirement. But what happens if that doesn't happen?

I think we have to take small 'profits' along the way in case the longevity of our lives are overestimated. While you are working towards that dream life of yours, do remember to live a life and enjoy the little things. We live once and it's regrettable if we didn't experience as much as we can.

I'm really just advising myself here, being such a workaholic.

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I'm grateful for...

The hot weather plus the frentic pace of work makes my temper volatile. I think it's good to think about the things that I should be grateful for. These are written as they come to my mind, so it's not in any particular order of importance.


1. I'm grateful for a hand to hold and a heart to understand, which all comes in a package as my gf - the source of my many troubles and many many more joys.

2. I'm grateful for the sisterhood and brotherhood formed in my blog. Hey, never in my wildest dream did I think that setting up a blog can have so many fringe benefits. They had spent their time with me generously, where instead they could have spent it on their own pursuits and for that I'm doubly grateful.

3. I'm grateful for a healthy body and an inquisitive mind. Without each, I would not be able to do what I can do with the energy and drive that I had.




4. I'm grateful for the bountiful food and drinks that I can eat and taste, made all the more sweeter and delicious by the wonderful company that I had.

5. I'm grateful for healthy and living parents. Despite all the misunderstandings, I know they still love me as a child and I to them as a parent.

6. I'm grateful for the cool quiet nights as I walked home from work. It feel very serene and I almost feel ashamed as my footsteps broke the silence of the night.

7. I'm grateful for the cats in the world. Without them, the world would not know the softest spot to sleep. None can rival the cat in the way they can provide a quiet companionship, sitting just beside you, contented to be just near your presence and asking for nothing more.


Upon reaching no.7, I feel much much better already, so there isn't a point to move on. What a wonderful exercise! I would do more next time when I'm feeling, to lack a better word, ungrateful.

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Dubai or not Dubai - that is the question

Seems like the IPO market is hotting up. I've seen a lot of people asking whether to subscribe to the IPO and how many lots to bid. Personally, I hate to bid for IPO. Why?


1. IPO stands for It's Probably Overpriced. Mw told me this before, I agree.

2. You do not know how many lots you are going to get, hence people will usually bid more lots than they really want. It's a catch-22 situation - if you get it, it means that people do not want it. If you don't get it, it means that the IPO is hot.

3. Money will get tied up for some time while the ballot is taking place. Unsuccessful bids will have your money refunded after another period of time. Of course, there will be a placement fee which is not refunded. I don't like getting my money tied up like this.

4. Based on experiences, the price will fall after the first day of trading. Hey, if you can think that you're going to make a profit by selling on the first day of its trading, so will others.


It's the last point that I'll be looking into with more details. I want to find out if my experiences is grounded in reality, or I'm just suffering from schadenfreude. Let's take a look at some of the IPOs listed in the last two years:



Do take note that there could be errors in my interpretation of what is considered bottom. The data is gathered with the best of what my tired eyes provided me.

Based on the simple assumptions, I proceed to make some daring but hasty conclusions. Here's what I found out:


1. Out of 29 IPO samples taken since last year, 26 of them had the highest price of its first trading day above its IPO price. Only 2 of them had their highest price below the IPO price on the first trading day, and 2 of them with the highest price being the same as IPO price.

It would seem that betting on IPO offers quite a good bet, regardless of fundamental. The probability of winning seems rather good (if you sell at the high). I'm thinking that even if you didn't sell at the high, you would have made a pretty good quick profit. That statement remains untested.


2. Of the 26 which had a high above IPO price, they have an average gain of 35% gain on its debut day. That is if you managed to sell at the highest point. Of the 2 that had their highest price below IPO price, the average loss was 2.5%.

Well, not only is there a high chance of a winning trade, the rewards of a winning trade is also much more than the loss of a losing trade.


3. Based on my subjective view of a bottom, only 9 out of 29 samples (I exclude TTJ because it's too young) had a closing price at the bottom being higher than the IPO price. 1 remained unchanged, so that leaves 19 samples with the closing price at the bottom being lower than the IPO price.

This means that if you're an investor looking to get a good yield on low price, you might as well wait instead of punting on the IPO. You have a good chance to get a lower price later.


4. Out of those 19 samples that had their closing price at the bottom being lower than the IPO price, the average drop in price is 15% below the IPO price. Out of those 9 samples, the closing price at the bottom rose 22%, on average, above the IPO price.

While it seems that a quickie is quite a good bet in the IPO market, it's not so good if you're planning to invest for a longer term. If you're looking to invest, I think it's better to wait for the price to drop below IPO price. There are times when your plan to get a lower price than the IPO price may fail...but I think you stand a good chance.


5. Out of those 19 samples that had their closing price at the bottom being lower than the IPO price, the average waiting time to wait for a bottom is 33 days.

However, do take note that this period of time suffers from a huge variation, possibly depending on market sentiment. From a visual glance, I noticed that in 2009, the wait for a bottom is longer. The few IPOs that we had this year...their wait is much shorter. Around 2-3 weeks only.


I think the key takeaway is this:

1. If you're looking to punt for a quickie, go ahead.

2. If you're looking to invest, wait a while for a lower price.

As for me, I don't think I have the luck to get a successful bid. Don't think I'll be going for any IPOs. This is not the kind of money I make and I understand that. Let others take the thrill.

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I just want a checking account

I wanted to open a joint account with checking facilities (meaning you can write cheques) with my gf. The main purpose of it is to allow each of us to contribute a part of our income to pay for joint expenses like mortgages, groceries, furnitures etc. Since I was at suntec yesterday and OCBC had their branch opened on Sunday, I popped by to enquire.

It seems that we intruded on their private small talk because the lady serving us seemed very annoyed and impatient. I asked her some simple questions but she didn't seem to know her stuff that well (she was reading it in front of us), so my gf asked her some stuffs about the practice of other banks and she replied that we have to check it out ourselves. Okay, I seriously must thank her for her good advice to check it out ourselves. Otherwise, I wouldn't have known that even a simple thing as opening a checking account can have such a wide differences between the major banks in Singapore.

You must hear it from me - OCBC offers the worst deal if you ever wanted to open a checking account in Singapore. Out of all the banks I compared, OCBC is the only one that requires a $2 fee per cheque written. Do check out this table for more details:


The above table is correct as of 5th April, 2010. You know how hard it can be to navigate and understand those statements and fine print, so I did my best. If there's any objections or mistakes, pls pls correct me.

That includes you, OCBC.

----------------------------------
After showering, I thought I was being unfair to OCBC. They do have an advantage over other local banks. It's the only bank that operates on Sunday. That is an extremely value added (costly, perhaps) service to busy people in Singapore.

If we compare local and foreign banks, you'll find that foreign banks generally offer more incentives to attract customers. It's the oh-so-valuable deposit money that is the lifeblood of banks. I suppose that the local banks already have high deposit ratios, hence they are not so eager to create new incentives to attract people to deposit. Just my hypothesis.

I'm not so excited over the 'high' interests in some checking accounts. A MMF fund easily beats it at around 1% per annum. Yes, it's a little tiny bit riskier and it's not guaranteed. Free cheque book is doesn't attract me much either, because I doubt I'll be using that often. It's one of those things that is good to have, in case you need it. I absolutely do not want to pay a fixed monthly fee, though a fall below fee is fine.

That being said, I think Citibank and Stanchart xtrasaver seems like a mightily good idea. Both are open on Sunday too, in case I need their services.

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Spend too much on savings

My gf coined that title, when I told her I saved this and that every month. It was a very interesting way to put it, as the contrast between spending and spending cannot be more stark when they are forced into one single statement like that. How can someone spend on savings?

The story goes like this.. Sometimes when I see something that I that interest me, my gf would tell me to just get it. But I told her that for this month, I do not have the budget for it.


"How can it be? You saved so much every month!"

"Aiya, the savings is used for other purpose, not to buy this mah."

"You must have spent too much on your savings lah"

"...."


Come to think of it, it's quite true isn't it? 1.5 years ago, I'm an incidental saver. It means that even though I save a portion of my monthly income, I do not have a goal and neither did I track my savings. I just spent what I had for the month (which is not much) and saved what is left. However, since I started tracking things a little more seriously, I realised this is not sufficient.

I began to treat 'savings' as an expense, something like how you would treat money spent on food and gadget and movies. Everything I have some income, I would squirrel a portion of it into another account so that I do not touch it nor see it. I would continue to do so for the rest of the month until I have met my savings target for the month. If I keep on track of my monthly savings target, I would hit my yearly savings target - a grand total of 50k (again).

This is essentially the same as 'paying yourself first'. I think it works tremendously. I particularly like the philosophy:


If you save 20% of your income, for every 5 years you worked, you can don't work for 1 year.

If you save 50% of your income, for every 2 years you worked, you can don't work for 1 year.


Well, not really. I didn't mean to say that you REALLY don't have to work for x years if you hit a certain percentage savings. I'm saying that if you don't pay yourself, you're really just working for others.

So far, I've stashed away 10k, so I'm quite on track. Another 40k more...

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