Up and coming IPOs

As market marches upwards, we'll see IPO in fashion again. What's scary is that my parents asked me about it too, as they mentioned that their money in the bank is idling, so they might as well make some use of it. If my non-investing parents are saying this, there must be others who are eager to do it too. Ignoring my tingling spidey sense for now, let's see if it's worth a shot at it. I'm not interested in the fundamentals of it, but as the IPO suggests, It's Probably Overpriced. It's definitely not for keeps too. Trading? That's not enough data to do anything from it, so let's analyse it from statistical point of view.



No companies worth its salt would want to do an IPO when times are bearish, because their shares would be sold at a lower valuation than in a more bullish environment. The fact that we're seeing the gahmen selling off their stake in the upcoming IPOs must be indicative of bullish times. Whether that party would end soon, I don't know, but since I'm already at the party, might as well take some calculated bet. I did a post on IPO before, it's found here. In it, I stated that the chances of doing a quickie (defined as selling on first day of trading) is quite high. Let's add three more data points:

As can be seen, the most recent IPO samples that we had did very well on their first trading day before crashing down. This can be seen on their charts. The 4th one on the lower right is TTJ, IPO price 0.200, trading on 1st April 2010.

Taking the first day data, I calculated the gains made by making an assumption - the selling price is made at the lowest price of the first trading day:


Leader Env - 7.1% gains
Consciencefood - 31.8% gains
Yamada green - 61.4% gains
TTJ - 5% loss


It seems like the chances of making a loss is quite slim.  However, since all the trading price of the IPOs mentioned are around the range of 20 cts, but the upcoming IPOs are not in the penny realm, perhaps the gains would more muted.



Not a lot of shares are out there for GLP, so I think it'll be a catch 22 situation. If you get it it's no good, if you don't get it, it's good. The IPO closes on 14th Oct, 2010 at 10am and begin trading on Monday 18th Oct. If you're interested, you can go to ATM to apply or better yet, do it at the comfort of your own home using internet banking. Just go to the DBS/POSB account, log in and look for investment services on the left column. Then go to electronic security application (ESA) and click yes on the questions at the bottom of the screen. Follow the rest of the instructions and you'll see GLP, priced at 1.96.


Good luck!

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Personal quick reference:

GLP : Deadline for IPO application 14th Oct 2010, listing date 18th Oct
MI :Deadline for IPO application 18th Oct 2010, listing date 21st Oct

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How to kick start your savings plan?

Quite a number of people asked me how I managed to save in such disciplined manner. The equation of saving never changes: Savings = Income - Expenses. You can either increase your income, decrease your expenses or do both at the same time. I prefer the first method of increasing your income, because seriously how much can you cut from your expenses? There will be a limit to the numbers of needs that you can convince yourself to change to a want, and the flow of life will just increase your expenses especially once you have a family. As mentioned in a previous post, I estimated that you need roughly $2,650 expenses to have a comfortable life. Let's say you don't intend to have such a comfortable life and cut it down to $1,500. If you're earning 2k per month, I'll still say it's hard to save a lot by cutting expenses. The better way is still to see how you can increase your income instead.



But the purpose of the post here is not to give ways on how you can increase your income. Everyone's talents and strengths (and chances) are different, so you got to be self-aware of what you can do. If you're good in sports, maybe can you teach swimming on weekends to earn some extra bit. If you have excellent skills in bakery, perhaps you can sell some to neighbors and take orders during festivals. The point is that there's always something you can do if you put your mind to it. The best way is to monetize things that you do habitually into an income stream. You think about it.



I believe that if you do not know where you stand now, it's hard to set a suitable goal forward. I feel very uneasy when I asked these few questions to myself:

1. How much do I spend on food per month?

2. Out of the food expenses, how much did I spend it on restaurants?

3. How much do I spend on transportation?

4. Out of the transportation expenses, how much did I use it on cabs?

And questions like that. It makes me uneasy because from the money that I earned, I have no idea where it went to. I lead a very blurry life between 2003 to 2007 because I have no idea where my income goes to. At the end of the month, it seems like the money I get 'disappears' and I looked forward to the next paycheck. When I do have a sum of money, I will feel rich and buy myself something expensive to reward myself for the work well done. This goes on for years and despite working hard, I've nothing to show for in my bank account.



I felt increasingly uneasy until I finally took action to remedy it. The very first thing I did is to sort out how much money and assets that I have right now. In other words, I need to find out my net worth - how much assets I have and how much debts I owe. Since I do not have any debts at that time, it's just a matter of adding up the amount that I have in all my bank accounts, money in the money market fund, net value of my stock investments, cash surrender values of my whole life plans and CPF. I put it in an excel spreadsheet to see the changes from month to month so that I know to a great amount of accuracy (it's not 100% for sure, there will be some 'losses' but that's okay) where my money is sitting at the end of every month.



After doing up my net worth, I proceeded on to the monumental task of constructing my cash flow statement. In my line of work, my booked earnings is divorced from the cash that I actually get per month. This means that on one spreadsheet, I've to record down how much work I did on that month and on another spreadsheet, I've to record the actual amount of cash that I received. I also started recording my expenses to have an idea of how much I spend. I'm detailed in my recordings, because I would put in the amount that I spend and the categorized item (e.g. food, transport, parents, insurance etc) with a short comment. So if I spent $50 at Tony Roma's restaurant alone, I would put it under 'Food' catergory, with the comment "Tony Roma - alone". This is to track my expenses so that I know how much I spend on what at the end of each month.

 
Now isn't that very similar to companies too, where they have their earned revenues and cash flow statements? I thought it's the very same thing and started thinking of myself as a company and I'm the CEO of myself. I started doing this networth, cashflow, income statements after reading intensively about financial accounting to jumpstart my interest on investing as opposed to trading. 



Once all my 3 personal statements are up, I really sat down and started analyzing what went wrong with this 'company'. Why is it that I can make an income every month but at the end of 4 years, I've nothing much to show in my bank accounts? Now here is where the expenses can come in very handily. I think by looking at the cold hard facts of your expenses per month, you can see where all the leakages are in all its glory details. Perhaps you've been spending too much on drinks, perhaps you've been buying too many clothes, perhaps you've been ebaying too much. This fact finding exercise will remove all traces of faulty mental accounting that we will do all the time. Oh, I got a bonus this month so it's okay if I spend it on this plasma tv. Oh, I got some trading profits, it's enough to offset some losses I had and the change can be used to buy a new gadget. Some mentioned that this detailed tracking is too much for them...well, I would say it depends on how much and how desperate you want to know. I did a very detailed account of close to 6 months before doing a less detailed one from now onwards because I already know my spending pattern. The interesting thing is that initially I wanted to do it for only 3 months to have an idea but eventually it became such a habit that I extended the 'trial' for almost 2 years now.



I think after the fact finding exercises to determine where you stand currently, a plan to remedy it should already be materializing in your mind now. If you have the discipline to write down your all your expenses for 3 months and above, carrying out the plan to change your spending pattern should be a walk in the park. I think most people would give up on the expenditure recording part.



I came to the realization that I am not spending a lot of money on myself, and most of my expenditures are actually on three things - food, transportation and parents. Hence to limit my expenditures would be foolhardy, because there is a limit to how much I can cut. The only way forward to improve the financial health of me as the company, is to increase my topline - my earnings. I also realised that I can afford the little things here and there to reward myself (as I've always suspected, I'm a very horrible slavedriver to myself). I can well afford it and I should do it so that I can stay longer in this game. Having a very concrete understanding of my financial circumstances, I also made a few plans to have a merger & acquisition exercise towards the end of this month, an acquisition on property towards middle of next year and perhaps spinoff a new company (or two) in about 2 years time. All these need huge capital expenses and being a private company, I can't sell shares to the public at all. So what do I have to do?



The plan is easy enough though the execution is not at all. Just bloody save 50k per year for 2-3 yrs. There you have it - the method (work and save), the motivation (preparation of life's milestones) and the killer (me).


To summarise this very lengthy post:

1. Have an idea on where you stand financially at this moment

- Do up your net worth and cash flow, including the expenditure statements

2. Analyze your statements

- See where the leaks are and how to remedy them

3. Set progressive goals 

- Set action plans on how to reach these goals

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The little things

In my job, I can get to see really wonderful scenes of nature unfolding as I walk along the streets. The world is my office and the flowers, the trees and the living things are my colleagues. Recently, I've been taking out my mp3 player in my bag and started listening to it while walking alone to work. Being alone and being lonely are really two different things. You can be alone but never feel lonely, or you can be surrounded by people yet lonely. I think loneliness is a state of mind.



Anyway, equipped with my multi purpose handphone, I get the urge occasionally to take some really breath taking sunsets. This particular one takes place while I was walking along to another workplace around evening time. You can always tell that you'll have a beautiful sunset by looking at the orangey glow (if it happens) around that time. If the cloud cover and the angle that that the last rays of the sun is just right, the whole sky will be flooded by an orange glow which is perfect for taking pictures. Here's a few that I took quite a while ago:

The cloud looks like the temple of ancient Greeks, with the three pillars supporting the roof. Hey, looks like MBS??

After a few minutes of walking, the great drama of the sky plays out further

Breath-taking isn't it?

The pictures are breath-taking enough even with my sucky handphone camera, so can you imagine the real scene unfolding in front of me? This is really one of the things that I liked about my job. My gf always say that I'm simple minded and is easily amused/contented by little things. I agree. If we strip away the nonsense that surrounds our life, the little things are all that matters isn't it?



Did I tell you about the activity that I will do after a rainy day, especially at night? I learned of this from my very kind hearted gf, who will pick up snails that happen to stray away from their grassy territory into the man-made pavements. There are many people walking on the pavements and occasionally you'll see a crushed snail whose life is snuffed out by a big giant foot. I wonder why nature made snails with shells that are so easily crushed...it doesn't serve them any better by sailing along so slowly either. Imagine you are walking along the streets, ambling gently perhaps window shopping, then a huge feet just came from nowhere and crushes you to death. Quick death no doubt, but such a wanton waste of life.... As such, I will do my part to pick up snails that happen to be in the pavements. Pluck them out of the pavements, and teleport them to their intended direction (I hope) towards a grassy patch. They will be all frightened and retreat into their backpacked home but at least they will be safe.



What's the purpose of this blog post? Nothing, haha :) In a rare rojak of events that happened, I am not working on a Sunday so I can afford some luxury thinking about the little things that happened in my life. If you see someone picking up snails after a rainy day at night, it could well be me.

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SIA bonds oversubscribed

Sfry, a regular at the cbox, put up a link on the enthusiastic subscription of the recently launched SIA bonds. The bond carries a coupon of 2.15% pa and matures over 5 yrs. To subscribe for it, you need to have a minimum of $10,000 though you can buy off the market (it starts trading on 1st Oct 2010) at around $1k, depending on the price.



I'm just wondering why there are so many subscribers to this. I think one of the main reason is that people are getting the super lousy returns from savings deposits of 0.125%, so this SIA bond of 2.15% seems like heaven sent. Retail investors must be very frustrated with the measly returns they get from the banks, given the low interest rate environment. Recently I was also shocked to learn that the fixed deposit rates for a particular bank gives the same returns for 5k to 1mil if you compare the same periods of lock-up. I thought that the more you put it the better the returns? Apparently not anymore.


I believe that there are so many equally stable alternatives to the rather undesirable SIA bond (to me, at least), but the difference lies in the liquidity of that particular alternative (or the lock up period, so to speak):

1. CPF

Bro8888 mentioned in one of his post that his colleagues asked him if this is a good idea to invest their monies in. He mentioned that by putting it in the risk free SA account, you can get 4% already, so what's the big deal right? The bad thing is that by putting extra money into the CPF, you can put in but you can't take it out, so careful planning have to be done. This is definitely not for people who needed to use the money in the short term because the only time you can withdraw the money is when you touched the withdrawal age, which is increasing all the time. CPF is also subjected to 'government risk', so changes in the policy regarding CPF will affect all CPF members.

2. Preference shares

If you take a look at just those preference shares alone in Singapore, there are quite a few gems that offer greater returns than the SIA bonds.

Disclaimer: Do read up more on the preference shares, their yield may not be what is displayed on the name

Again, with higher returns comes greater market volatility in terms of price. I remembered seeing the price of these preferred shares plummeting in the deepest of the crisis. Just take a look at the historical charts of these preference shares and you can see it. Personally I didn't see it as something bad, unless you happen to want to cash out during the deepest crisis. I see it as a chance to get more below the par value, so when they start redeeming your bonds at par value, you not only get the coupon payment throughout the holding period but also book a good capital gains. But do buy those from companies you can trust. The capital guarantee upon maturity is only as good as the standing status of the companies.



Take a look at the OCC 3.93% NCPS 10, trading at 94.60, it's quite a good one compared to SIA bond. First of all OCC stands for OCBC...Singapore banks, so I think it's as safe as SIA, if not safer. 3.93% yield is on the par value of 100, since the price now is 94.60, you'll actually get a yield of 4.15%. NCPS stands for non-convertible (or cumulative) preference shares, meaning that you can't exchange it for ordinary OCBC shares nor can the payments be accrued to the next payment date should they decide not to payout on this payment date. The payments are not guaranteed, unlike the bonds, but it's almost as good as a guarantee. You can read more about the details here. Do read more about it, because I know that some preference shares change their yield after a certain date, so it might not be the 3.93% coupon rate displayed on the name of the counter.



Most of the other preference shares are trading at 5-6% yield, even after taking into account their price which is trading at higher than par value. Can really take a look at these alternatives seriously.


These are the few alternatives that I can think of. Of course there are other investments that gives dividend yield much greater than the 2+% given by SIA bond, but those are different classes of assets with different risk altogether. I would gladly wait for more bonds to be traded on SGX to see if there are better investment ideas now that SIA started the ball rolling. Price matters a lot in all cases because buying even the most riskiest product at a super cheap price can turn out to be a profitable and not-so-risky experience. I would wait for SIA bond to go around 0.70+ to get a 3%+ yield before entering. Don't laugh at me, it just might happen within the next 5 years .

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How much do you need to have a family & live comfortably?

I was just wondering how much a typically Singaporean needs to earn in order to survive comfortably. The government is asking us not to be perfect and to have a family life (which includes 2 kids) as soon as possible. I am wondering how it is even possible to have all these without the necessary thought to the financial expenses involved. How much does a Singaporean need without kids?



Let's run through some of the expenses involved:


1. Housing - $750
2. Insurance - $500
3. Parents - $500
4. Food - $500
5. Transport - $200
6. Entertainment - $200


Total : $2,650

Riddle: How many kids do you see in the pic above?  Answer: two

 

That amount of money is based on a typical single with housing (4-5 rm resale), with no cars and no kids. Let's just round it up to $3,000. I've no idea how much you need to raise a kid, but my guess is that at different levels, different sums of money will be needed. Initially you'll need cans of milk powder and diapers, then you'll progress to toys, books, clothes and shoes, then it'll be tuition fees, school fees and enrichment fees and so on. I don't even know how to begin calculating.



But I think a safe guide will be at least twice the amount of money calculated i.e. $6k for household income. I think with $6k as a household income, it'll be a life where you can afford to spend a little now and then, but on big purchases, you'll still have to deliberate and think if your year end bonuses allow for it. The occasional trip overseas will be to nearby SEA countries (think thailand, M'sia, Indonesia) instead of lofty places like Europe, Australia or USA.



What about retirement? With 6k combined income, I think there's not much left for retirement in the CPF account. I think most would have to be spent on education for kids, as well as for the mortgage payment for housing loans. Is a car possible? Maybe...a small family car, nothing luxurious, nothing fanciful, but it'll be extra load to the family. Better make sure both are gainfully employed because if anyone got retrenched, then the hardship will be felt immediately. I doubt there'll be much savings that can be made based on a 6k household income.



Since both parents have to work, then a domestic helper is necessary. Supposedly there's no family support to help out on the caring part, then a maid have to come into the picture, which will add in an extra few hundreds to the expenses per month. No choice I guess, unless either the husband or wife is a high income earner who can earn more than the combined total of the household, perhaps like 8k or 10k, then one of them can stay at home to take care of the family. Then again, such arrangement will raise the risk of the family as a whole because when the economy downturns and jobs starts flying off, a retrenchment exercise is going to introduce a lot of stress to the family. At least for dual income family, one can still stand while the other retreats.



Is it a wonder then, that Singaporeans delay having kids, or don't even want to have kids? I think any responsible parent will think twice on their ability to shoulder the financial burdens of having 1-2 extra members to the family before heeding the calls of the government to drop the perfect conditions to have a kid. It's not just adding an extra pair of chopsticks to the dinning table...if only it's that easy.

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How do you know if you are addicted to the cbox?

** "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 noticed a significant increase in the number of people going to the cbox. It definitely shows that the market activity is picking up. At the most bullish times, my cbox volume indicator gives a good proxy to the general activity happening in the stock market.


Should be interesting to see if you need some treatment from being addicted to my infamous cbox, haha :)

1. Do you know the people who are using the cbox better than your face-to-face friends, even though you might never have met them before?

2. Do you have a compulsive desire to log on to the cbox during  free times in school or at work, just to see what the people there are talking about?

3. Do you have a separate cbox 'hidden' in the background of your workdesk of your computer so that you are kept in the know of what's happening in the cbox without letting people in your office know that you're doing that?

4. Do you have a desire to help out other people in the cbox or simply to share what knowledge you have or just some interesting things you're heard or read by providing links?

5. Be honest with yourself. Have you been spending more than 5 hours per day at the cbox, excluding sat and sun?

Looks like some of us here, haha!

If you answered YES to more than 3 of the above 5 questions, I think you're addicted to the cbox. Congrats, you are part of the growing community of bullythebear cbox users!

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I loved some of the comments so much that I decided to add in a few more checklist to see if you're addicted/ These are kindly contributed by those who commented on the cbox. Possibly addicts themselves, haha:

6. Did you change your phone or bought one just so you can access the cbox?

7. Did you try ways to bypass the company's internet control so you can access the cbox?

8. Did you come here to check your bids so as to get 1 or 2 cents lower than the folks here?

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STI component members

My broker sent me this very interesting chart with the STI 30 component stocks and their respective data. With STI reaching 3100, I thought it's a good idea to look at this. There are quite a few data associated with each component stocks, things like PE, Consensus target price, Divy yield and Recommendations by analyst.

This is what I've observed about the data:


1. Just a quick look at the recommendations offered by analyst for the 30 counters, we can see that there is a heavy bias towards a buy call. With the exception of SMRT (0 Buy, 8 Holds, 10 Sells), you can see that most of the calls made by analyst are Buy calls. Seems like many are optimistic about the next one year ahead, with upgrading of earnings and the economy recovered from the last crisis. For analyst to stake a sell call is a heavy bet on their analyst and their reputation, so SMRT might be interesting to look at. Why is there so many analyst calling for a hold/sell and nothing on buy?



2. If you look at the consensus target price for the various counters, you'll notice that some had been reached, some had been exceeded and there are some marching towards their target price. The difference between the target price and the current price is not very far. If one is so inclined, I suppose the consensus estimate for STI for the next 1 yr can be computed by finding out the respective weightings for each counter. I'll just take the banks as a guide, knowing that they will form a big part of the weightings. I think another 10-15% in STI is expected. This means we're looking at around 3400 to 3600 in a year's time.



3. Looking at the PE ratio, you can see that the 'land' counters are really high compared to historical PE. Most of the other component stocks have their PE ratio in line with historical PE. Banks seems to be underperforming, with their historical PE higher than current. I believed that if STI is to go up higher, banks will be the one to catch up to bring the whole index upwards. For property counters, the direction seems clear - sideway (best scenario) or down (likely scenario). I think STI also seems to be sustainable at this level because except for the 'land' counters, the PE is not exceeding high above its historical PE. In fact, it's pretty much in line with it.



4. I didn't know that with the exception of Genting (perhaps it's new) and NOL (years of losses), the rest of the components stocks pay dividend. It'll be great to hold the bluest of the blue chip with a good dividend, but how to do that? We must be courageous and buy them when everybody wants to dump them. That's what we're here for right? To encourage each other to buy when others are fleeing, and to have a community to provide each other with the social proof of being greedy and others are fearful.

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Support you we shall

** "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."



Yesterday I received news that momoeagle, one of the active cbox member here, decided to call it quits after adsense pulled a fast one on him. You can read about it here and the email that they sent to him. It's the very same email that I received from them when I was about to cash out my earnings from the advertisements. I blogged about that many moons ago here and I was still disgusted over it. Basically beyond appealing that's nothing much we can do here.



But I guess I never looked back since. I started to find other sources of ad-venue since adcents are not giving me much returns anyway, so who the hell needs them? Anyway, the point of me starting this is not to be famous or to even earn a living out of it. I reflected upon my blog's objective several times throughout its lifespan - it's always the same, I'm blogging because I wanted to record my journey and idiosyncrasies for my own record. If others find it enriching and amusing, and continue to support me my reading them, I'm very honoured. I think what makes me continue blogging is the immense support found online and offline amongst the superfriends. If not for this, I would never have met so many like-minded people, so diverse in their views and so willing to share. I'm even inviting a few people whom I've met many times online but never face-to-face for my wedding. That's the extent of the community built up over many nights of chats in my 'infamous' cbox.

I don't like white roses...it's like a red rose drained of passion, of spirit

What WILL make me sad is when my entire blog articles got removed, perhaps when the server for hosting the sites suddenly goes kaput. That will really ruin my day. It's not just the removal of a source advenue for me that makes me disappointed but rather the loss of my recorded memories. It's like someone came over and remove a few years of my life...ouch...I hope that never happens.



So, momo, if you're reading this, please continue to fight the good fight. I've learnt some valuable stuff over at your blog and will be hoping to read more of what you dish out.

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Timeline for AIMSAMPIReit rights exercise

Quite a number of aims shareholders are asking about the rights timeline. I thought I'll paste up the whole thing up here. This is taken from their presentation slides available in sgx website, under company announcement. I think the key dates are the rights acceptance period and the nil paid rights trading period.

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AIMSAMPIReit rights exercise

I've AIMSAMPIReit and it had gone XR today. The right issue is 7 shares issued at $0.155 for every 20 shares held upon XR. Since I had 30 lots of Aims bought at $0.220, I will be having some odd lots after the rights issue. For those who have no clues on how to subscribe for rights, my newbie's FAQ link here might help out. It's still useful to ME after having done it for so long, haha! Here's the calculations:

Right shares entitled: 30/20x7 = 10.5 lots

Amount to fork out for 10.5 lots = 10.5 x 0.155 x 1000 = $1,627.50

Total amount of aims after rights = 10.5 + 30 = 40.5 lots

Average price after rights for 40.5 lots = (0.22x20 + 0.155x7)/27 = 0.2031

I will most probably subscribe to excess lots over and above my entitled ones. Firstly, it's to top up my share holdings to avoid odd lots. The chances to apply for excess will be higher if your holdings have odd lots, so I hope to get at least 0.5 lots. Secondly, at 0.155 per right shares, it's a steal. It'll average down my overall holdings and get a very very decent yield. For more detailed information, look at AK's and Momo's links,  which I'm sure they will be happy to provide at the commentary of this post.



So the problem here is how much to subscribe? What are the chances of getting them in the first place? I think I can only control how much I want to subscribe, I'll leave the rest to fate. But it's not just suka suka subscribe, because you will have to pay them first and if it's unsuccessful (or partially successful), they will refund you back. In fact, you'll probably see the refund in your bank account before the shares are in your CDP, so that's the best way to see if your application for excess rights are successful or not.


I think I'll follow momo's suggestion to double up. How about 40.5 lots excess? In that case, I'll need:

40.5 lots excess at 0.155 each = 40.5 x 0.155 = $6,277.50

Entitled amt of 10.5 lots = $1,627.50

Total amt of capital to fork out =  $7,905

Total amt of lots if all successfully subscribed (I doubt so) = 81 lots

No point calculating how much my average price will be because I highly doubt I can get all the rights shares I want. If I really do, then I'll be afraid because what do all the rest see that I do not see? hahaaa, funny human beings...

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Preference shares Part II

I've written this article on preference shares a long time ago, suitably titled as Preference Shares Part I. I thought I should finish that article now, haha, after so long!



To have a quick recap, let's go through some of the terms. Nothing much had changed since the last definition, but today I'm not in the mood for fancy words, so let's just use plain Jane terms. There are a few terms in preference shares that need to be understood.



Non-cumulative : This means that if they did not give out a payment in the stated date, they will not accumulate that payment to pay more in the next payment date. In other words, the payment is not guaranteed, unlike a bond. However, all of the preference shares I saw state that if the ordinary shares are given a payment, they are also obliged to pay for the preference shares. Cumulative means that if the payment is somehow not given for this particular payment date, it will be accrued and paid on the next payment date. Non-cumulative is important because I just read from my older post that only non-cumulative ones are placed in Tier 1 capital for banks. Not sure if that's still in effect now, given the new basel III regulatory rules.



Non-convertible : This means that the preference shares cannot be converted into ordinary shares. Convertible of course means that it can be changed to ordinary shares.



Par value: Each preference share is issued at par value. Let's say the par value of this particular one is 100 upon issue. The preference share is traded in the open market, so it will be subjected to price volatility, meaning that it can go above or below the par value. During the crisis, most if not all the preference shares are traded way below the par value, but I think now most are trading above it. It's important to understand that if the issuer is to call back the preference shares, they will buy from you back at the par value. Hence, it's a good idea to buy yours at below par, so as secure a capital gains on top of any dividend payment. Unlike a bond where there is a maturity date (where the issuer will buy back the bond at par value), there isn't one for preference shares. There will, however, be a callable date, after which it may be liable for call back at par value.



This is not to say that buying above par value is a bad thing. If the preference shares pay you 5% pa and you buy above par value by 2%, it's still a good deal if it is called back after 1 yr because you'll still get 3% (5-2=3) returns. Of course, if you buy below par value, then there will be a margin of safety, so to speak. Price volatility is not a problem as long as you hold it till the issuer calls back the shares. In the worst case, if the issuer goes belly up, then too bad, you get almost nothing.



In the event of liquidation, where the assets of the company that issued the preference shares are to be sold, the creditors will get the first tranche of money. Creditors will be those that buy bonds. However, preference shares are ranked above ordinary shares.  Hence preference shares are junior to bonds but senior to ordinary shares in the event of liquidation. Let's hope nothing of that sort happens in the first place, so place your bets on companies that are safe. No point getting a preference shares of 15% pa on a very risky company. I believe when one is buying preference shares, you want to have the liquidity of share market to buy in or sell out yet at the same time have a sort of nonchalance to price movement. Getting preference shares is the surest thing to getting a almost guaranteed dividend income without worrying about price movement.



I had bought this non-cumulative, non-convertible 6.20% preference shares from hsbc, with par value of 25 USD. Callable date 16th Dec 2010 and anytime after that date. Dividend comes in quarterly tranches per year, on the 15th of March, June, Sept and Dec. I'll work out some calculations here for my own reference in the future.


Price bought: 24.1 USD
Yield : 6.2/24.1 x 25 : 6.43% pa
Price discount to par value : 1-24.1/25 = 3.6%


If they recall back on 16th Dec 2010, I'll get at least one quarter of the yearly dividends, or 1.61% (6.43/4). Since they will have to buy back from me at par, I'll get 5.2% (3.6+1.61) returns before commission and forex. If they recall one year later, I'll be looking at 3.6% + n (6.43)% returns, where n is the number of full years I'm holding. Sounds like a good deal to me.

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Berkshire business books bites the dust

Another one bites the dust. Berkshire business books gives me fond memories. They sell books that are much cheaper than those that are found in physical stores. But these days, with online bookstores aplenty, I think they are not getting the business they needed. I bought a few books from them, that's about it.

Goodbye!

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My top 5 list of possible career options

** "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 thinking what I would do as a career if I were to just follow my passions blindly, with no regards to the monetary rewards and social repercussions. Yes, social repercussions - there are some jobs that you can't bring yourself to tell others because people would look at you as if you're an alien who just landed on Earth. My job is almost like that actually, but I guess I've grown accustomed to it.


"So what do you do for a living?", he asks.

"I'm a private tutor"

"Oh...good hor, no need to pay tax"

"..... But I do."

"Oh okay...the weather very hot today hor?"


And the conversation shifts to something else. I guess without your social ranking (aka manager, executive etc.), people do not know where you stand in society, hence explaining the awkwardness in social occasions. Quite interesting to take note of people's reaction, actually.


Anyway, here's my list for career that I would do. They are not in any order of importance, just which one came to my mind the first:



1. Artist

Not the sing song type but the one who draws and paints. I'm also interested in such things but thought better of it to pursue as a career. Singapore? Arts? Somehow the two words do not equate together. I'm a practical soul, most unfortunately. Hence, I do not think I'm the arty farty people who can really do this kind of thing for a living.

2. Novelist

I always think that my penchant for words is better than my English grades show in my report books. There must be a conspiracy between all the English teachers because I always seem to get a low B or usually a C for my English results. I say they don't appreciate my kind of style. The next best thing to being a novelist is to be a blogger. I publish whatever crap and there are still people who reads them. Financially rewarding as a blogger? Okay lah, earn some kopi money. Satisfying? Definitely.

3. High flying executive

My job does not have a corporate ladder for me to climb, so I always wonder how it feels like to climb one. Will I be a dagger and cloak kind of people or will I be the underlings who gets tramped under? I think wearing a power suit with neck ties to work seems sexy to me when I don't have to actually do it, hahaha. Perhaps the perks and the social pecking rules are the incentives? I wonder what it'll be like to have subordinates report to me, or to have reports to deliver to customers and you know, the likes of rats doing the rat race.

4. Pianist

My utmost regret is not to be able to learn piano when I'm young. I always feel that I can do a good job (in fact, a very good job at it) but am not given a chance to do so. It frustrates me when I tried laying my hands on the keys of the piano but what I produced is just noise, but under a skilled hands, beautiful music emanates out from it. I play the guitar (suckily though, been self-taught) but piano is still....well, classier. All is not lost though, because if I have a kid, I would really want to learn the piano together. It'll be interesting to be the oldest student there amongst the tiny tots, haha

5. Educator

To encompass the whole spectrum of people who teach others to learn a skill and do coaching, I would loosely use the word 'educator'. I think my character is very suited for this type of work and I enjoy the interaction very much. Probably would do what I'm doing till I can't do anymore, but of course, without the intensity that I'm doing at now, which hardly leaves me with room to recuperate.

So there, presenting to you my top 5 career options. Interesting list to write down actually, and see what you could be doing in an alternate universe where everything is different and you're not restricted by monetary concerns and the generally uncomfortable and harsh realities of life. Would you share with me your top 5 list? haha :D

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

As I was finishing this post, I've a sudden urge to add in my 6th on the list. I feel that I'm not doing myself justice if I didn't add in. It's THAT important.


6. Computer programmer

I think I would have liked being a computer programmer. I've done a few modules on software programming (no biggies like C++ or java, mine is the engineering's very own ancient FORTRAN) and they interest me to no end. I like how I can construct algorithms and figure out different but progressively more efficient way to get to the end point. It's like solving a mathematical problem and you can get to do it creatively and still reach the same goals. Yes, I think maths is a very creative subject.

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The soundtrack of my life

I had this gigantic mp3 player - one of the first few generations of mp3 players, I proclaim proudly - from iriver. It is one gigantic piece of awesome, orgasm inducing music device, though it looks like a brick since it's essentially a harddisk. Not as sexy and slim as ipod...gosh, it does not even come with colours (it's only black fonts with blue background). I bought it for nearly 700 bucks for 10 Gb of storage and it's mine, so I loved it very much :)



Recently I brought it out of cold storage to listen to the songs I had inside. Usually I listen to songs by albums, put in the exact sequence as laid out in the album. If the artist and album producers decided that there is some magical rituals in putting the song listings in a particular way, who am I to say it's not? But yesterday, I put it to random shuffling, so instead of listening to albums one by one, I listened to my treasury troves, well, randomly.



I've always thought of producing an album known as my personal soundtrack. It's like the movie sound track of LP's life story. There are certain music that define my existence here on earth. When I was in primary school (the defunct Bedok View Primary school), I was quite into Chinese music. 特别的爱给特别的你 by Sky Wu, 蝴蝶飞呀 by Little Tigers and 红尘有你 by Wang Jie are very representative of what I listen to. I was humming my way into PSLE with these songs as the backdrop or playing hopscotch with these soundtrack. As it was my first foray into the vast universe of songs and pop culture, these songs are very very significant to me.



After that, I went into Maris Stella and had a musically unfruitful 2 years of my life. I was busy adjusting to the new pace of life and didn't have much joy to listen to music. It was the 90s and the beginning of funky hairdo, bold makeup and shoulder padded blouses. And Michael Jackson. I love to buy those big compilation cassette taps and CDs, titled suitably as Mega hit X (where X is a set of integers greater or equals to 1). I was trying to find my musical direction, so I sampled all sorts. There's the very lovely It must have been love by Roxette and (Everything I do) I do it for you by Bryan Adams. I love Bryan Adam's husky voice and his unique way of singing. I practically rushed home to listen to this song in certain periods of my secondary school live. I remembered 'ripping' (if you can call copying songs from cassettes to cassettes ripping) songs into my own personal compilation albums, songs like Paint my love by Michael learns to rock, the very long title by Meatloaf - I'd Do Anything For Love (But I Won't Do That), Soul asylum's Runaway Train and a little bit of Chinese songs. I'd changed my taste from chinese to english songs by secondary school but it'll be a sin to forget about Kit Chan's 喜欢你, 心痛 and 伤心. About the only local Chinese artist I like is Kit Chan. Much more than Stephanie or JJ anyway.

And people wonder why I've a melancholy nature. I supposed years of listening to love songs made me as such. There are 3 classes of love songs - the longing for love (She will be loved by Maroon 5), the joys of being in love (I want to hold your hand by Beatles) and the heartbreaking of love (I will survive by Cake). Each can be sub categorized into more subtle differences, but you get my point. Somehow, I always loved the type 3 class of love songs. So am I melancholy because of love songs, or I listen to love songs hence I became melancholy? I lean towards the latter.



I kept a lot a lot of cassette tapes depicting my secondary school life but sadly those didn't survive. A cruel woman in my home threw them away when I went to army. I remembered being devastated for a quite some time when I cope with the sudden loss of that important part of my life, my memories. How can someone throw other people's memories away? I forgive her but will never forget about it.



I went on to Temasek Junior College and was during the 2 short years, I have only 2 groups of artist that interests me most. Faye Wong and Cranberries. Especially cranberries. Most especially cranberries. I was practically listening to the CDs for most of my life in JC and it is definitely my soundtrack during the 2 years of my life there in TJC. It's my first 'heavy' music - Zombie. Ode to my family is very significant to me because I was humming that during my promos and A'lvls. It has that calming effect on me. Who can forget Linger and Dreams too? I loved this kind of enigmatic voices, so on hindsight, I think Faye Wong is the equivalent chinese verson of that obsession with this particular kind of sound. I bought the very expensive Faye Wong album in JC1 that costs me 30+ bucks at that time. I particularly loved the song 其子, which is the soundtrack of one of the TV movies made by SBC/TCS/Mediacorp (whatever name they call themselves these days, I can't keep track). Actually in the past she used the name Huang Jing Wen, as opposed to the more populist name Faye Wong now. I only bought two albums by her, one is the  天空 album and the other is a canto compilation.



There are little pleasant distractions like 愛相隨 by Emil Chau. It was not until very very much later that I discovered what I really like about music in general. As long as there's a guitar strumming, I would love it. I only knew that much much later in university around 2-3 yrs later. It's interesting to look back though, as I explored the wider universe of music. My classmates are all hot about Zhang Xin Zhe (Jeff Chang), though I'm not. I don't really like high octave male voices, haha :)



I think that marks the real end of my Chinese music era. No more Chinese music from there on...just the occasional songs here and there (I call it a one night stand with that artist). Just love and bye kind of thing.



Out of a philosophical thinking that my life cannot be suitably compressed into one blog post, I decided to blog about my soundtrack from army to the present time in another blog articles. If my soundtrack only lasts one post, it'll be a boring and short movie. Neither do I want it to become a long and draggy Lords of the Rings trilogy (seriously, who ever wants to watch the Return of the King twice? It's so draggggyyyyyy...). Yes, yes, 2 posts should be enough.

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Why I don't blog about the stock market anymore?

Someone mentioned in the cbox (the 'infamous' cbox as AK puts it) that how come I don't blog about stocks and shares these days. If you look at the recent posts, it's all about my ramblings and rantings. Whine whine whine...occasionally there'll be the personal finance or insurance topics that interests me greatly, but almost nothing about stocks or shares.


I don't know if this is a good thing or a bad thing for I suspect that it'll happen to all bloggers one day. Those who felt it but survived gone had gone on to greater heights. Those that felt it and did not survive, well, let's just say their blog's natural lifespan had been reached. I'm sure there are plenty of names in the blogosphere that had its day in the past, but had been gone by now. It's like there's an nuclear explosive - one day it's normal blogging as usual, then the next, only the site remains but there's no more updates. I suppose some blogs even had their infrastructure 'destroyed', meaning that the site can no longer be found and had been taken out with their contents erased.


So...you hear it from me first. I'm no longer as interested in stocks as I had once been in the past. 'No longer interested' is relative, of course. I'm still more interested in stocks then my gf ever will be (haha). Comparing myself in say 2 years ago and the present me, I think the present me is more disinterested and bo chup about the whole market thingy. I mean I still read about market news and read charts and all, but that's because I had to and not because I am inherently interested in it.


It's interesting to note my level of interest waning. It's partly due to my disillusionment about reading books. After you've read shelves of finance books in the library, you'll find that if you've read one, you've read all (figuratively, don't take it literally). The concepts are nearly all the same, so occasionally you'll find a gem that blows your mind, but those are rare and chances are you'll be more likely to find another book that sounds like the one you had read. Food gives nutrients to the body and books gives nutrients to your thoughts. I guess I'm weary about reading finance books now, so my thoughts are seldom about the market.

However, not being interested is different from not having to do it. I think I'll have to do it whether I'm interested or not, as opposed to say putting money in a bank. So while I am practically doing the same stuff with regards to the market as before (I think perhaps more stuff, since I do read charts everyday), I do so without the passion I felt when I first found out what is value investing, what is MA lines, macd histogram... These days, I'm more interested in freeing up my time to do what I like to do, be it playing games, reading or just watching youtube.


Another significant reason why I don't blog so much about the market is that there are people who are doing very much better than me. You can find all their blog links in my site on the top and on the right. Their articles are so much more insightful and more detailed than I can ever do, so I do not see the reason for repeating or trying to re-invent the wheel. I acknowledge that I'm not the best chartist/trader/investor - that much I know. Hence, there's no need to pretend to be good in it just so as to generate more viewership. I'll take a step backwards and try to facilitate traders and investors to meet up in the infamous cbox of mine and to exchange views. That I can do.

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Embracing our differences

I came upon this realisation that me and my gf have very different ways of doing things. It's not that I didn't know that after being together for so long, but rather during these few months of working together on a single project (i.e. our wedding), our differences are amplified and presented to us starkly. In the past, we settle our own projects and seldom have any interference from each other, so the inherent differences in our methods of doing things are thus hidden from view.



She's more of a feeling kind of person, meaning that she'll only do things when she feels like doing so. No amount of pep talk or well laid plans can persuade her to do otherwise. Me, on the other hand, prefers to come up with a plan and stick to it no matter what happens. So often times, when I'm hurried to do something as laid out by my plans, she'll amble along half-heartedly while waiting for her feeling to come, before she'll do it. It's been quite frustrating for me, but no longer.

Disciplined and structured - my way of doing things sounds like the military

Why? After some serious reflection, I thought that it's no point trying to force another person to adopt my way. She had her own successes doing things her own way, so do I, so why should she change to suit my need so that things go 'according to plan'? Besides, after nagging at her to do things for weeks, there's still no progress, so I might as well try another tack. I think it's because of this constant pressuring on my part that causes some arguments between us, and ultimately, I'm the one who feels even more stressed up.



I think if we shine the light of reflection upon ourselves, and stop seeing others as being the problematic one, it'll be the start of a new understanding and cooperation between the parties involved. This kind of concept is easy to read but hard to apply. Therefore, my epiphany that our differences are to be celebrated is both liberating and stress-relieving.



According to her, things that need to happen would happen, so there's no point rushing it. I would bear that in mind and perhaps adopt her free-style way of doing things. Seeing how she's so happy go lucky, perhaps I really should look into the advantages and disadvantages of my disciplined way of handling matters.

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Tuition nation no more?

There's recently a lot of forum letters on the subject of tuition in Singapore. Tuition is so pervasive here that it's a shadow education, as opposed to the more formal educational institutions. I think the phenomenon is quite common in asian countries, with taiwan, HK and korea being many more times more pervasive than here in Singapore. I heard that in Korea, where the kids are sitting for their entrance exams, even airplanes have to stop flying in the duration of exams to avoid disturbing the kids. You can imagine the booming tuition business there since they are so focused on exams.


My views are naturally biased, since I'm a part of this love-it-or-hate-it industry. Some students found great benefit in tuition, because it's a much more effective means of getting to master subjects. Of course you can explore yourself to reach the same mastery level but it'll take time, and tuition can help students reach this level in the shortest time possible. But some people complained why teachers cannot do the same thing in school? After all, the kids spend more time in formal lessons in school than in tuition, so shouldn't more learning be done in school than outside during tuition?

Tuition can break your piggybank in Singapore

I think there are a few reasons why school teaching is less effective:


1. There are many more students in school classroom than in a tuition class. If you join a tuition class with as many students as there are in school classroom, you should seriously consider finding an alternative. I think teacher-student ratio is the main reason why tuition centres are flourishing. It's quite impossible to learn when you have a teacher juggling with different learning capabilities of 40 odd students in class, within say 30 mins a lesson. It's possible to do it, but it's rare to encounter it.


2. There are many distractions in school. Kids behave differently in the company of their friends and when they are in the presence of 'adults'. Put 40 kids together in a room is bound to be a testing experience for any teachers. I believe a lot of time is wasted doing disciplinary actions and on administrative matters. What about tuition? You go in, you start a lesson, you end it, you go home.


3. This point boils down to the teacher-student ratio again. If the ratio is high, meaning there are more teachers than students, there is more attention. After so many years doing this, I find that the greatest advantage of tuition lies in 1-1 kind of setting. When someone experienced is there to observe the student's reaction to the things said in the textbook, the learning is made more effective because adjustments can be made on the fly. Basically I spend a lot of time observing how the student react to a question and when I impart content to them. From their observations, I will change my teaching on-the-fly and make decisions as to whether to elaborate more, or give more examples, or go back to the previous chapters to revise certain materials before moving on. It's different from asking the student to read the textbook himself because the teacher in the classroom cannot possibly help out the individual needs and concerns of every student. A small class size of maybe less than 5 in tuition can do the trick too.


As I was reading the letters, the first thought that came to my mind was that if my career is going to be jeopardized. If so, I will need a backup plan. As I talked with my gf and analysed the situation, I find that it's hard to do away with tuition, at least not in the next 5 yrs. Perhaps more regulation in the sense of asking tutors to register with an association might be in the pipeline. So what can I do in the event that the whole industry - my livelihood - is threatened?


No way I'll be an engineer. Most likely I'll join a formal institution to carry on what I've been doing all along.

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Random thoughts

Once a while, I gathered all the thoughts that I had in my mind - those that are worthy enough to blog but not long enough to write on a post by itself. For me, it's therapeutic to blog down these random thoughts. I love blogging, it converts formless thoughts in my head into concrete words. The act of converting them into forms that others can react to is itself a joy to me. Sometimes, when I write along, more thoughts will form to give framework and structure to my initial spark that prompted the blogging in the first place.


Random thoughts:


1. Why do I get the impression that FA guys are more critical of TA guys but not the other way? It seems like there is a universal disdain for the use of charts and indicators by those who walks the investing pathway. On the other hand, those who practice TA would think (in my impression, of course) that knowing the fundamentals of the stocks they are trading would definitely be of some value to their craft.



2. I think there are a lot of mindset differences between a self-employed and an employee. Speaking from my point of view of being self-employed for 7-8 yrs, I am always trying to initiate something. I've to look for work all the time, instead of letting it be arrowed to me. I've to handle my career image well and to constantly look out for ways to improve and get more work. I wonder how someone in the employee path will do. From what my friends told me, they seem to be avoiding work if and when possible. Innovation isn't that well regarded if your boss don't recognise it. Besides, if you initiate a project, you might not have any personal benefits at all.


I don't think I'm can be a model employee. I hate bureaucratic paper pushing and will never do well in such environment.

3. I don't think you have to ask someone how well they do in the market. If they make a profit, they would open their floodgates and tell you all about it, if you only allow it. The sense of joy and happiness when they win something cannot be contained easily. The same goes when they lose money in the market. A general sense of gloom will prevail and they are generally more quiet. The same cannot be said for those who had been in the market for a longer period of time. They generally have a calmer disposition and are immune to both the joys of winning and the pains of losing.


If I've the time, I would so wish to sit at the financial districts and watch whether people lose or gain money just by observing them. It'll make an interesting study.



4. I've saved accordingly to my target for the past 8 months. Another 2 more months of savings and I'll have finished my savings target of 50k. This would be the second time I'm doing this and I'm getting quite used to it. This system, though tough and demanding, does have it own advantages. The most obvious one is that I got to enforce a certain discipline to how much I can spend in a month. The not so obvious advantage (it even surprises me) is that I can know how much to work. Before I had this system, I was always trying to work a little more, save a little more without a fixed goal. Thus, being much a workaholic, I take work as it comes along. These days, once I reached my monthly saving goals, I tend to cancel lessons so as to take breaks to walk further. My journey ahead is long and winding, seemingly no end. Thus, I cannot afford to burn myself out prematurely. A break every now and then is crucial for my mental well-being.


I'm so looking forward to my end of the year trip to anywhere, to take my long deserved break from the bondage of work.

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Security

** "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 quite frustrated on last Sunday when I was out for work. As a result of this, I was particularly skeptical and thoughtful about things. In hokkien, this is called guai lan.


On that particular day, I was going to a condo. Actually there are two sorts of condos, one is with a laxer security and the other with more oxymoronic security. This particular one that I visited last Sunday was of the latter kind. By right, all the security guards have to ask any visitors to sign on the guest list, putting down details like:


1. NRIC and name
2. The unit to visit and the purpose of the visit
3. Time of entry
4. Signature


By principle, I do not see a point in giving these details. Firstly, I do not know what they are going to do with the book after it's finished. There are a lot of details that are personal and there is a risk that these private information can fall on wrong hands. The security guards watch the premises, then who watches the security guards? Secondly, there is no confirmation by the security guards that these details are even correct in the first place. If the purpose of writing these details is to catch those who are going to do suspicious things, then obviously it wouldn't work. Normal guests who fill in honestly will not do suspicious things, suspicious characters going in will not fill it up honestly.


As such, I always walk in as though I'm the resident of the condos. If they stop me, then I'll fill up, but in such a scribbled form that it satisfies their request but yet at the same time, does not yield any information. I think I'd even wrote an NRIC like S1234567 and it went through. If they are happy, I'm happy.


So on last Sunday, this security guard stopped me from going into the condo premises. He asked me rather rudely to sign in. I asked him why I should sign in. He was erm...ah... I think he had never been asked this question before. Then he replied that since I am an outsider, I must sign in. Then he waved vaguely behind him that there is a camera and it will track me.

Do you know why security wears black? They are trying to blend into the background to be non-intrusive

Do you know why there is rain? It's because there is water up in the sky so it drops down. It's a non-answer to a question.


If I had more time, I would request politely to meet up with the management concerning the security of the condos to ask them the questions that I had in mind with regards to filling in my details. You know what's the funny thing? I've been there for a least 2 years and had entered the condo at least 1-2 times a week. There is no excuse for not having seen me around. He is not doing his job well because the best form of security is based on a non-intrusive kind of scrutiny - you observe the people that comes in and recognise the familiar faces (either resident or not), sieving out the unfamiliar faces and observing them further.


I had been to condos in Orchard area and they are in familiar talking terms with me. Sometimes I'll just chit-chat with them and they tell me gossips about this and that. So I know that it can be done and it had been done in other places. It's just how individuals treat their job that distinguishes them. I've also know this particular MRT security lady (those that stand near the gates to check on luggage and bags). She never fails to strike up conversation with anyone whom she stops to check their belongings. My gf chatted with her for 30 mins before, so I know.


You know the saying, the best bodyguards do not use weapons? I think it can be applied to security too. The best kind of security is subtle and non-intrusive. It is based on a network of relationships so strong that if someone tries something funny, the people involved in the network will try their best to stop them simply because they view the other people as part of their own flesh and blood.


I could be idealistic, yes, but then again, I'm very guai lan that particular day, so I don't care.

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Old people don't need life insurance?

I was browsing through some of the blogs when I saw Mr Tan's post on insurance. It's his usual style to advice people to buy term and invest the rest. But that doesn't attract me - it's this line:


"There is no need for people to have life insurance when they are old."


By 'life insurance', I take it that he means the whole life variety - those plans that gives a lump sum pay out in the event of death and total permanent disability of the insured person from the inception of the policy till age 100.  This is very different from the very much cheaper term plan where a similar lump sum pay out will be paid out but it is usually up to age 65. However, life insurance these days come along with a critical illness (CI) rider that allows a lump sum payment when it strikes. Since this rider 'rides' onto the main plan of the whole life, which is up to age 100, the CI cover will also be up to age 100. I am under the impression that CI stand alone cover up to age 100 is either exorbitant in price or does not exist.


What do we need when we're old?


I think we need a comprehensive, as-charged hospitalization and surgery plans (H&S) that covers the expenses if you are hospitalized. The key word here is that you must be hospitalized locally, otherwise the H&S plans do not cover them. Some had mentioned that instead of using the CI cover that is usually attached to whole life plans these days (and covers up to age 100), we can use the H&S plans to replace CI cover from age 65 and beyond. While it's true that H&S plans cover treatment of CI, it's also relevant that H&S covers expenses ONLY if you're hospitalized in local hospitals. If you remember Charmaine's case, the little girl had to seek alternative cancer treatment overseas because the local hospitals do not have this particular drug (pardon me if I remember the details incorrectly). The cost turns out to be 350k USD and this huge sum definitely cannot be covered in the H&S plans unless you bought one of those special ones (not to forget, expensive ones) that covers overseas hospitalization bills as well. A lump sum payout by the CI rider will be very helpful in such cases. Even if it's not for overseas treatment, the lump sum is good for covering expenses related to the critical illness outside of hospitals, which is currently not covered under the H&S plans.


(Of course, you might not be able to claim your CI even if you have CI, particularly with regards to cancer. This is because of the very stupid clause where the cancer had to be in the ending stages. I ask, if it's in the ending stages, why seek treatment? If it's not the ending stage, how do I get the payout to seek treatment? Catch 22...)

I've no idea why the doc and the man is so happy with the latter throwing away his money

Do old people need death payout? It's perfectly correct to say that when we're old, there is no more dependents. If your life insurance is planned for your dependents, then obviously you do not need it when there are no more dependents. In that case, getting a term plan is perfect because unless you have a kid beyond age 40, by age 65 your dependents would already have become independent. This makes the life policy meaningless. What about the cash value of whole life plans? It's really nothing much to shout for, because if you invest in equities related instruments, you'll probably end up getting more (or losing very badly). If you need to invest, don't buy a whole life plan obviously.


It thus appears that the one redeeming feature of whole life policy is the CI cover up to age 100. I faintly remember someone mentioning that if you start savings now and invest it wisely, by the time you need it after age 65, you can self-insure the costs, especially if you bought yourself a good H&S plan. What if I can't save enough or what if my savings are all lost in the bear market? I would insure against that possibility with a few layers of defense:


1. A fully paid up whole life plan with sufficient (but not overly high) CI cover to protect my savings from age 65 to age 100. This is to reduce the premium so that I can sustain the costs of maintaining the policy, which is not going to be cheap compared to term plans.

2. A good amount of savings.

3. Be darn good to my children so that if I need them to take care of me and I have the financial means to fund it, filial piety can be quite a given. These days, one has to provide the conducive environment for children to be filial - by being a good natured senior citizen and a financially 'okay' senior citizen.


What about now to age 65? Get a term plan lah, it has depth of coverage but do not have the length of coverage. Who says you have to buy term and invest the rest only? You can buy term, buy whole, save up and invest!

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