Nationhood and What Singapore Means to Me

This has been a week where nationhood has shed new meaning and interpretation in Singapore's history. In one week, the value system of what it means to be a Singaporean has come to the fore.

From the 63 year old uncle looking fit and trim in in his Temasek Green National Service uniform, to the uncle and his stiff salute of respect and farewell, to the Singapore Armed Forces (SAF) Service Chiefs conducting vigil in full military regalia, to the businessmen who took the initiative to provide water and food, to the SAF quietly working through the night to set up tentages at Padang, to the long and patient queues from all walks, to the wonderful rendition of "Home" by our foreign friends from St John's College of Cambridge - these were the images. The outpouring of feelings were emotional and touching. Tears shed were a plenty, not once, not twice, but many times.

The remarks and comments from Statesmen past and present have poured in. From US, China, India, Australia, New Zealand and our ASEAN neighbours among the many. More significantly I felt were the remarks of those who have passed through Singapore some time in their lives, whether Singaporeans or not, who now lived overseas. The remarks were universal. All the spiel of political stiffness and supposed "oppression" espoused by many Western press were never supported by any of these views.

A friend quipped that this past week has done more good for National Education than 20 years' attempt at doing so. I so agree. It is not just the stories on national TV and press. It is also the many stories we hear from the veterans of that age, sharing their true feelings of living through that generation. Emotive, real. It is also the expressions on social media. Has any suggested that Singapore has been worse off? Few and far. It has been history coming alive for all of us.

Meritocracy, multi-racial harmony, democracy, equality and the rule of law. These are the make-ups of what forms Singapore. One that has benefited from a government that is prepared to think long term, making the necessary decisions and not the expedient, and that follows through on the commitments. Within this week alone, we have seen the exemplification of the level of efficiency and response of the government agencies. Would I want it otherwise?

SG50. Hurrah Lee Kuan Yew. This is the legacy you have left behind. The nation salutes you! My family and I, thank you.

SG50 - Celebrating the Year with the Nation II

[An update of a previous post]

It is the 50th year of Singapore's independence. That's half a century of nation building. It's quite an achievement to have come so far.

Bloomberg recently listed the Top 100 ideas of the century and "Singapore" was strangely listed as one of those ideas!

At #71, Bloomberg highlighted Singapore's growth of 1356% in GDP per capital over that 50 years while the world grew 146% and the US at 96%. World #1 in ease of doing business, #2 in shipping container traffic per capita, #2 in global competitiveness, #4 in financial centre, #3 in science scores, #2 in maths score and #3 in reading scores. Fascinating.

I guess there is much to be thankful for, even as we deal with new challenges moving forward, re-calibrating from a growth-at-all-cost model to one that seeks to find the right balance.

So let's celebrate SG50 with the nation. I came across a few offers for this year long celebrations. I thought I might start collecting the list of offers for reference. Here goes ...

Pan Pacific Hotel. Staycation package with breakfast and S$50 credits thrown in. Take in the night scenery and explore around Marina Bay?

Wildlife Reserves Singapore. For the price of one usual ticket, residents can sign up for Feather Friends Membership to visit Jurong Bird Park for a year unlimited. That's a lot of bird watching.

With the recent declaration by the President of the Friday before 9 Aug 15 as a public holiday, there are now many more offers for the National Day Long Weekend (post is by New Age Pregnancy blog). Check it out.

Seems like a lot more people exploring taking a short 4-day vacation over that week. Kind of miss the point. But to each his/her own. 爽就好。

Greatly welcome any information to add to the list.

You may also be interested in this:
Time for Businesses to Celebrate (Singapore Business Review)

Another One Bites the Dust - Olam B180129 6.75%

Olam B180129 was a bond that gave out 6.75% per year that was supposed to mature on 29 Jan 2018. Olam has done an early redemption.  There goes another good deal.  Sigh.

Looks like either Olam is in better financial shape or it is now able to secure a cheaper financial package to replace this bond.

Another Way to Avoid Paying More Tax - The Act of Giving

Previously, drawing upon the latest budget announcements (2015), I shared about One Way to Avoid Paying More Tax. There is yet another interesting way to avoid paying more tax come 2016, and this involves Giving from the Heart.

The tax deductible for donations to recognised charity organisations will be increased from 250% to 300% for donations in this Jubilee year. For subsequent years till the end of 2018, the deductible will revert to 250%.

Suppose I were to donate $1,000. The tax deductible at 300% would be $3,000. If my tax bracket is at 19.5%, that would be $585 of tax avoided. Looking at it from another angle, I would effectively be spending only a net amount of only $415 to give $1,000 to charitable causes.

Want to start giving now? Try SG Gives.

The nice thing is that these recognised charities automatically update IRAS. So there is no need to make specific declarations to claim these deductibles in our income tax submissions. It is so seamless. Effortless. Efficient.

Related:
One Way to Avoid Paying More Tax
Giving from the Heart
Giving Back to Society - SG Gives

One Way to Avoid Paying More Tax - SRS Adjustments from 1 Jan 2016

According to the latest budget announcements, the personal income tax will go up by as much as +2% for the higher income brackets. At the same time, the Supplementary Retirement Scheme (SRS) contribution limit would be raised from $12,750 to $15,300 for Singapore citizens and PR with effect from 1 Jan 2016. For foreigners, the corresponding SRS contribution limit would be raised from $29,750 to $35,700 (they do not have CPF contributions).

Supposing that with the new taxation levels, my tax bracket is at 19.5% (i.e. taxable income above $240,000). By maxing out my SRS contribution at $15,300, this amount would be deducted from my taxable income. As such, I would be making a tax avoidance of 19.5% x $15,300 = $2,983.50. That's enough for another short holiday!

Guess it's also one way to offset the increase of tax. I wonder if anybody is going to tell their bosses this year, "Boss, don't pay me more this year!"

Previously:
An Excursion on SRS, Deferred Taxation
Maximising Returns with Minimal Risks - for the ultra conservative investor
Start of 2015 - Time for Some Tax Avoidance

Lunar New Year - A Flurry of Ang Pows

It's the Lunar New Year, the time of the year when coffee shops are closed, fast food restaurants are crowded, as are all the fancy restaurants. Calories intake are up. And stocks are stable, only because the market is closed. For that matter, all the markets are closed too!

What does one eat during New Year? Maybe that one buffet orgy at wherever it is you're at. Steamboat, "lo hei", pastries a plenty. All it takes is one meal a day and I've consumed all the intake that I should be consuming.

But that's not what I wanted to talk about. What I wanted to talk about are the "Ang Pows". Every year, my wife and I faithfully give out Ang Pows, as is the tradition and practice from eons. In turn, my kids receive theirs from the married elders. Each year, what they receive add up to tidy sums. What does one do with all that money?

I guess there are three main options:

1.  The parents 'chiong gong' (confiscate) the sum received in exchange for what they've given out.

2.  The kids keep the money and squander it away. Samsung S5 or iPhone 6 perhaps?

3. The parents invest the sum for the kids' future.

I opt for the last. The only sum they keep and spend as they wish are the Ang Pows we gave them.

Happy New Year!

OCBC Capital 3.93% NCPS to be Redeemed

There goes another NCPS. OCBC's 3.93% NCPS is being redeemed at par value. Trading will stop on 27 Feb 2015, and proceeds would be paid on 20 Mar 2015.

Related:
Non-Convertible Preference Shares

MoolahSense Embarks on a New Fundraising Campaign

Looks like MoolahSense is getting its 2nd fund raising deal going. This was the headline in their e-mail to its members:

School Expanding into the Region.
Invest in their Growth!

Come on down to our closed-door info-session to find out more about the next campaign launching on MoolahSense. Don't miss your chance to “Meet The Boss” and get first-hand information about the business.
Time: 9 Feb, Monday | 7pm-9pm
Venue: 5 Teck Lim Rd, S088383


I would have a lot more confidence if this becomes a regulated line of business.

Previously:
Crowd Funding Comes to Singapore

A Great Retirement Offer from CPF

This is possibly one of the most important change in recent decade that will affect our retirement planning and definitely worth reading: Recommendations by the CPF Advisory Panel.

I view with much excitement the proposed option for the Enhanced Payout. With an Enhanced Retirement Sum of $241,500 giving a monthly payout of $1,750 to $1,900. For a couple that maxed this out, that would mean $3,500 to $3,800 of monthly income post-retirement at age 65. That's a hefty sum to meet retirement needs. The recommendations also suggested that this sum can be voluntarily topped up. I hope these can become tax-deductible as well.

I did a quick estimate, if I were to take the same sum of $241,500 (age 55) and achieve an annual rate of return of 6.5% for 10 years (age 65), and withdraw thereafter at 4% per year, I would only achieve $1,511 per month. Of course the difference in my model is one with a perpetual capital retention but with more market risks, whereas CPF's is comparatively risk-free and involves a draw down.

At the end of Chapter 2 of the report, there is a summary data from the household expenditure survey of retirees conducted in 2012/13 . Projected into the future, the per person expenditure works out to be $409.70, $669.70, $931.90, $1,364.90 and $3,170.10 for the respective quintile by 2026 (2% inflation assumed). Assuming at the top end, a retiree couple in 2026 would hence require $6,340. If $3,500 has been met via CPF retirement income, that leaves $2,840 to be met via other means. I figure that would mean an investment portfolio of $852,000 (i.e. $2,840 *12 months / 4%) generating 4% income per year.

Other options effectively retained the current Minimum Sum but renamed Full Retirement Sum at $161,000 with $1,200 to $1,300 monthly payout, and the Basic Retirement Sum at $80,500 (with property pledged) with $650 to $700 monthly payout. These provide options for those who are adverse to CPF holding the retirement savings and prefer to cash out.

CPF and the study team has done a great job in putting together the information packages that are reasonably easy to digest. It looks like MoM has accepted the recommendations. I look forward to the introduction of the Enhanced Retirement CPF package.

Related:
CPF - A Lifeline for Retirement

The Allure of Gold - Treachery of the Glitter

Gold is such an alluring product. It somehow carries this magical feeling of value. Perhaps it has to do with the Chinese and Indian cultures of collecting gold products as items of value, passing on from generation to generation.

Unfortunately in recent years, gold scams have been repeated, case after case. How does it work? Here's the general idea ...

The Scam

Company sets up shop in some flashy area, coupled with gold plated signages. It looks "rich", creates the illusion of grandness and brand. The Company sells the idea of VERY HIGH interest returns from buying gold, padded with the offer to buy back after a lock-in period at a lower percentage of the cost. Let's say 80%. So it comes across as principal guaranteed right? And coupled with the interests earned each year, it would seem like the full principal sum would be guaranteed. The holding period seems short. Perhaps three years. Would seem like the risk is gone after the three years? Certainly looks a lot shorter than waiting 20-30 years to see one's CPF money? So it starts to look damn attractive.

Then, couple this with a year or two of real track record - i.e. the pay out feels real. Now you build a base of investors who have become your spokesmen. They are then enticed into introducing their friends, people in their circle of trust. Unknowingly, the first generation of investors have become their sales agents. The pyramid now snowballs.

Is this whole business even real? This is actually viable for the company when the price of gold is on a continuous uptrend. Consider the early part of 2000s. That's how the price of gold looked like. The company is able to pay out the interest from the appreciation of the value of gold itself. Actually, the investor might have been better off buying a Gold Exchange Trade Fund (ETF) directly from the stock market and get the same outcome!

Post 2010, what has happened? The price of gold has been on a decline. Consequently, the company selling the scheme wouldn't be able to provide the high interest payout anymore. Or they could do so but suffer horrendous losses with no certainty of the trend moving forward.

So what do they do? They run! The investor is left holding the can, losing whatever cash they had invested. Capital guaranteed? Alas, not when the seller has run away with all your money. These schemes are not regulated by the Monetary Authority of Singapore (MAS). Best of luck!

In a country seen as upright (some say uptight) and trustworthy, it just seems unthinkable to the average man on the street that such large scale cheating can happen here in Singapore. There is too much in the psyche that the government is taking care of everything.

Then there is the problem of greed, and that absence of understanding on what realistic investment returns can be. When the risk-free rate of our CPF-SA is at 4% per annum, is it realistic to expect any real investment that can give out 4% per month!? That's 48% per year. Come on! If there is such easy money to be made, nobody needs to work anymore. The money tree must have become a reality. Ah, Utopia.

A Consequence

Most unfortunately, I came across an old friend who got himself caught up in this shady business. He was apparently the seller. I do believe he was quite an innocent partner thinking that he was offering a legitimate investment business. His partner ran away. He didn't. So he gets all the shtick. He got sued by a whole bunch of investors. You can imagine how his life has gone downhill. From living in a decent condo to driving a taxi trying to make ends meet. I hope he recovers from all this.

Morale of the Story

To repeat the cheesy line that has been so often said, "When it's too good to be true, it's most certainly too good to be true."

Related:
Gold and Fear

Crowd Funding Comes to Singapore - MoolahSense

In a previous post on Crowd Funding & Peer-to-Peer Loans, I had lamented that these services are only available in the US and UK. Singaporeans cannot take part in them as investors. But it looks like there is now a Singapore crowd-funding website providing Peer-to-Peer (P2P) lending service that has started operations - check out MoolahSense.

MoolahSense was featured in an article from The Edge recently. According to The Edge, the company had obtained clearance from the Monetary Authority of Singapore (MAS) and the Ministry of Law to proceed as a unique asset class after having engaged them for two and a half years. I imagine the complexity to get this going. On their website itself however, there is a disclaimer that this product/service is not regulated by MAS.

For the borrower, the minimum sum to be raised is $100,000.  The borrower needs to have at least one year of audited financial statements. MoolahSense would also conduct some level of background checks. For the investor, a minimum loan offered is $1,000. Only Singaporean residents are accepted as investors.

Essentially, the borrower starts a campaign to raise funds over a period of 30 days. Bids would be obtained from prospective borrowers and the lowest interest rates bid within the amount to be raised will be awarded.

There are of course no guarantees. Such loans from small-medium enterprise (SME) can fold up if the company go belly up, hence the high rate of interest offered. I view such loans as similar to junk bonds.

MoolahSense appears to have only started business not so long ago. There may have been only one campaign that has taken place and it may be facing difficulty getting more borrowers interested to come on board. Nonetheless, it has been extremely active in promoting their P2P platform at many events, and has even gone on to live TV such as CNBC.

Separately, SGX also appears to be working with a partner to develop the crowd funding market. Perhaps the scene will get livelier in time to come. Not sure if this option would be available to the retail investor though.

McDonalds - Trash in the food, is it still good?

Reputation is Everything

McDonalds has been experiencing a lot of bad publicity of late, especially in Japan. Publicity it certainly wished it didn't have. How about some dental material along with your burger? Maybe it came off the consumer's dental work and had nothing to do with McDonalds? But there was also the human tooth in fries, vinyl in chicken nuggets, and plastic in sundae. Not the kind of free gifts we want from our Macs for sure!

In any case, as a global company, it is hard for McDonalds to guarantee the quality and efficacy of its global supply chain. Making it even harder are the regional franchises with their own supply chains. It's a tough quality control problem. In an increasingly global market, ensuring the quality control of its entire supply chain can really be a bugbear. All it takes is a lapse or two, the loss of trust, and it's major damage to a company's reputation.

Healthy Lifestyle, Trendy Lifestyle

The trend towards healthy lifestyle and hence healthy food isn't helping McDonalds in its mature markets. Past attempts at healthy variations haven't turned out well. Their healthy variants just don't give the same kind of oomph.

In Australia, it is apparently carrying out some experiments at selective outlets with some trendy ideas. Seems Mac is very profitable in Australia. It's always good to experiment from a position of strength.

Trying Too Hard, More is Not Better

In the US, it seems their overly complex variety of menu options have created an execution problem, with stores taking too long to generate fast food. Can't call yourself a fast food joint if it doesn't come out fast enough right?

I recall with fondness the wonderful burgers from In-N-Out. Their menu is really the simplest I have ever seen. No complexities. Yet, the quality of the food is such that it makes you crave for more. Ever seen how they make their french fries? I saw them having a machine that peeled and sliced a potato, and the slices drop straight into the fryer. How fresh can it get?

Simplicity has its beauty.

It's All About Junior

Has the taste bud of its most important customer demographic changed? Their strongest proponents could well be the kids. Give your kids a choice of visiting a Mac, would they say no? They still like it right? So you have the very young who would drag their parents along. And then there're the price-sensitive teenagers. Price matters.

It boils down to children and teenagers. If these are the future of the human race, and they continue to like Mac, the future seems bright for the yellow arch?

Where Goes its Future?

It faces stiff competition from numerous fast food joints in its US market. Is this a passing fad or these are serious alternatives? Is it going downhill like Kodak and the sunset death throes of the wet film business, or is this just a blip in its long history?

Or will this moment in time turn out to be another wonderful opportunity to become an owner of McDonalds I wonder?

Here's a value proposition: If you're a frequent customer of McDonalds, instead of just paying them for your burgers and fries, how about owning their shares and collecting their dividends? Mac pays you instead!?

McDonalds remains a key midfielder in My US Team.

Disclaimer: Do your due diligence!

The Performance of Unit Trusts in 2014 and an Important Problem with Unit Trusts

The performance of Unit Trust Funds in 2014 offer some interesting insights.

The Best and the Worst

The Top 10 performing funds returned in the region of 49% to 67% (rounded). The Bottom 10 funds on the other hand returned -28% to -44%.

The Top 10 performing sectors returned 21% to 45%, while the Bottom 10 sectors returned -9% to -43%.

The risk-reward seems to be favourable for the investor, but clearly, the risks are also high.

BRIC

The infamous Brazil, Russia, India, China quartet was all the range a few years ago and gave rise to the acronym BRIC. So how did these infamous 4 performed in 2015?

Well, China and India appeared among the Top 10 best sectors. Russia and Brazil in the Bottom 10! The score was 2-2. Looks like a draw.

Diversification across markets and sectors seem like a smart thing to do to manage risks. We are after all not clairvoyant.

About Unit Trust and the Problem With It

Unit Trust was one of my first forays into investing. I am ignoring all those insurance related things that I got into much earlier of course. Its liquidity, to be able to buy and sell at anytime, remains attractive. ETF is another alternative.

One of the strategies that I adopted in the early days was to buy a fund in sectors that were going through major trauma. Being a contrarian, I was doing so to 'bottom-fish'. Unfortunately, there is a VERY VERY SERIOUS problem with Unit Trust funds when you try to do this.

What happens is that because market sentiments is so bad, everybody is exiting from the fund. It reaches a point where the fund size becomes very small. When that happens, the Expense Ratio of the fund becomes magnified and hence unattractive. The fund manager isn't going to be too incentivised to manage a small fund as his cut becomes small.

In addition, the market like it or not, tends to chase after funds that seem to be performing well rather than those in the red. So, it suffers from a sense of negativity and low take-up thereafter. Given the misalignment of interests, the fund manager is going to close such funds. When we look at the current list of funds, the picture is therefore actually rosier than reality because of survivorship.

Alas, as the investor, I am trying to bottom fish, but only to see the fund closing instead! Not only do I not get to ride its recovery, more salt is rubbed in the wound as I also suffered from expenses when buying the fund. The fund manager loses nothing, but I'm losing both ways. All the risks lie with the investor.

After a few episodes of this, I pretty much wised up to this fact. Nothing illegal on the part of the fund manager, but I view these companies as highly unethical bloodsuckers who only look after their self-interest. Stayed away from these companies thereafter. Shoo. Best to go with funds that have a long history. And by long, I mean 5, or better yet 10+ years of existence.

Caveat emptor (buyers beware) as they always say.

Bobbie Bear - A case of product exclusiveness

A Straits Times article recently talked about the Bobbie Bear produced at the Bridestowe Tasmania lavender farm. Seems a craze has started in China over owning the purple coloured bear produced exclusively by this farm.

More on this from Forbes:
How Did Tasmanian Lavender Bears Turn Into a Social Media Sensation in China

Purple seems to attract. Recall the purple dinosaur? I found that Purple One kind of irritating actually. My first encounter of it was at a US theme park when I innocently queued up and sat through a session of the Barney concert. I suppose if (and only if!) you have very very young kids, it would have been lovely. The American kids certainly did. Else, it was an hour of purple hell.

When I visited Bridestowe farm recently, the feeling was one of mind boggling awe; or was it envy? Lavendar plants in rows for miles and miles into the distance. Even on an island like Tasmania, land seems to be in abundance.

The farm had a cupboard full of these fellas on display. Their online store is selling them at AUD$29.95 a piece. I didn't realise then that they were such hot items. Should have gotten a few and eBay them! Darned.

If they were to flood the market with these in large numbers, the interest could well wear off rapidly. Worse, copycats will start producing similar ones, diluting their market. Given the scarcity and exclusiveness, this bear will probably remain a collector's item for some time to come and continue to command a premium.

It's an interesting case study in supply and demand. Especially, how to create a demand where there was none before, and how to create an artificial limited supply. Was it good marketing or just luck?

Contrast this against the many 'youngsters' who set up trinkets shops in mobile stands at malls. The items they sell are often common place items. There is really little to differentiate one from another. Hard to make sales like that isn't it?

In contrast, Bridestowe is actually telling potential customers that they can't even meet their demands, and wouldn't be entertaining any requests! Fascinating.

Is there a SGX stock that exhibits such a business model I wonder?

Non Convertible Preference Shares & Retail Bonds IV

[This is an update of a previous post.]

Traded on the SGX, NCPS are traded like shares (which means the bid-ask price fluctuates), but gives out dividend/coupon payments like bonds.  There aren't that many such NCPS, and they're mostly from the 3 big banks in Singapore. So long as the issuers don't call back their NCPS, they will continue to pay out the dividends at the stated rate.  However, some of these have 'maturity' dates where the coupon rate reverts to a floating rate thereafter.  Prior to the maturity date, the bank cannot call back the NCPS.

The risk of failure stems from the issuing company going down under (you lose your pants!), or when it fails to pay out any dividends for their standard shares resulting in no dividend payout for their NCPS as well. However, the likelihood of these negative events appear slim given the strong historical performance of these Singapore banks.  But then again, we've seen also big banks in the US going down under in recent history!

If one is not worried about the fluctuations of the "capital", and is happy with the dividend/coupon payout, NCPS may not be a bad option for building a "cashflow" stream.  So long as the issuer doesn't call back the NCPS, you will get the annual payout (usually half-yearly or quarterly) perpetually.  If they do call back the NCPS, you will get back the par value anyway.

Below are the respective NCPS.  Read as such:
[NCPS]
[Date of maturity] @ [Rate] ([Dividend/Coupon payout date])

Hyflux 6.0% - Cumulative NCPS

- 25 Apr 2018 @ 6% (25 Apr, 25 Oct)

- Thereafter @ 8% (25 Apr, 25 Oct)

DBS 4.7%
- 22 Nov 2020 @ 4.7% (22 May, 22 Nov)
- Thereafter @ 3-mth SOR + 2.28% (15 Feb, 15 May, 15 Aug, 15 Nov)

OCC 5.1%
- 20 Sep 2018 @ 5.1% (20 Mar, 20 Sep)
- Thereafter @ 3-mth SOR + 2.5% (20 Mar, 20 Jun, 20 Sep, 20 Dec)

OCC 3.93%
- 20 Mar 2015 @ 3.93% (20 Mar, 20 Sep)
- Thereafter @ 3-mth SOR + 1.85% (20 Mar, 20 Jun, 20 Sep, 20 Dec)

OCBC 4.2%
- 14 Jan 2013 @ 4.2% (20 Jun, 20 Dec) [re-callable anytime]

SOR refers to the Swap Offer Rate. This would be one case where as an investor, we actually be happy to see the SOR soaring.

For the latest, refer to SGX List of Preference Shares.

For an elaboration to understand about these preference shares, you may want to examine this talk on Comparing Bonds from an SIAS MyMoney investor education programme.

You may also be interested in SGX List of Retail Bonds.  As an example, "LTA n4.17% 160510" means that the bond issuer is LTA at a coupon rate of 4.17% per annum and matures on 10 May 2016.  See also My Name is Bond.

SG50 Offers - Celebrating the Year with the Nation

It is the 50th year of Singapore's independence. That's half a century of nation building. It's quite an achievement to have come so far.

Bloomberg recently listed the Top 100 ideas of the century and "Singapore" was strangely listed as one of those ideas!

At #71, Bloomberg highlighted Singapore's growth of 1356% in GDP per capital over that 50 years while the world grew 146% and the US at 96%. World #1 in ease of doing business, #2 in shipping container traffic per capita, #2 in global competitiveness, #4 in financial centre, #3 in science scores, #2 in maths score and #3 in reading scores. Fascinating.

I guess there is much to be thankful for, even as we deal with new challenges moving forward, re-calibrating from a growth-at-all-cost model to one that seeks to find the right balance.

So let's celebrate SG50 with the nation. I came across a few offers for this year long celebrations. I thought I might start collecting the list of offers for reference. Here goes ...

Pan Pacific Hotel. Staycation package with breakfast and S$50 credits thrown in.

Wildlife Reserves Singapore. For the price of 1 usual ticket, residents can sign up for Feather Friends Membership to visit Jurong Bird Park for a year unlimited.

Resort World Sentosa. Buy a $5 voucher and be entitled to buy a Day Pass to RWS at $50. Offer available till 18 Feb 2015 only (min 2 to go).
[For a cheesy tale: Weekend at Resort World Singapore (Nov 2010)]

I didn't include those niche offers that are only for newborn and pioneers. The list is kind of short for now. Will add as I find out more over time.

Greatly welcome any information to add to the list.

You may also be interested in this:
Time for Businesses to Celebrate (Singapore Business Review)

Staying Connected When Overseas - The Curse of the Internet Addiction

In this age of social media and networked connectivity, it is really hard to go overseas and to not be connected. It's a cold turkey treatment and I cringe all day, itching for the opportunity to be back on The Net. It's such an addiction.

Eventually upon reaching the hotel, relief finally presents itself when I discover that the hotel provides Wifi coverage; even if it means sitting in the hotel lobby like a goon to do so. End of cold turkey.

But while there may be hope that Internet access is available at the hotel, one is still disconnected and unplugged for the rest of the day. In the past, I used to use the Singtel Data Roam Savers plan which charge $15-30 a day for unlimited data, for the days when I get really itchy and need a dose of The Net!

During one holiday while on board the Mariner of the Seas cruise ship anchored off Phuket, Thailand, I discovered with glee that I was getting a pretty good signal strength from the local telco even though the ship was anchored offshore. Thai Telco rocks! So that was it. S$15 for unlimited data. I became a Wifi node for my whole family lazying away on-board, lounging comfortably at the top deck of the ship! Hah.

For longer trips however, it is probably cheaper to buy a local prepaid SIM card with a data plan.

In a recent trip to New Zealand, that was precisely what I did. I bought a prepaid SIM card with a 10 GB data plan at NZ$100 to last my family for two weeks. In the end, I only used up 6 GB. Wasted the rest.

In a more recent trip to Tasmania, Australia, I did the same thing. Searching through Internet reviews, it seemed like Singtel's Optus subsidiary wasn't the best choice. They are apparently good only in the major cities and towns, and has limited coverage otherwise. Seems in Tasmania, the best coverage is provided by Telstra. An A$30 prepaid SIM card gave me 3 GB of data for up to 30 days. That worked pretty well for my two-week holiday, complemented by the free Wifi at most hotels.

There are different ways to stay on The Net. It's only a question of how much of a fix is needed for the addiction.

The Severe Threat of Rising Interest Rates for Leveraged Property Owners

Interest rates have been unusually low in recent years. From a savings account point of view, this has meant pathetic interests for savings. But on the flip side, from a loaner's point of view, it has been a wonderful thing.

Housing loans in particular have been spectacularly low, enabling many to realise the dream of owning a property. With interest rates dropping, many switched over from a fixed rate to a floating rate loan. One form of this pegs the loan to the SIBOR, especially the 3-month SIBOR or 12-month SIBOR as this provided greater transparency. For instance, 1.75% + 12-month SIBOR rate.

However, interest rates have started climbing and have started to cause a bit of concerns, particularly for those with very high leverage. They may have problem with their personal cashflow if interest rates climb. 

Compounding this is the fact that property values have also started seeing a decline. The happy years of seeing property value increase year on year is possibly past. With negative equity looming, the banks could come calling, asking for a top up to make the difference.

The Rich Dad, Poor Dad notion of positive cash flow using property leverage is going to haunt those who never considered the downside. As property value slides, their equity value may well go negative. That positive cashflow could become negative very quickly!

I am reminded of a story I learnt from the late 90's: Cashflow - A Tale of Stable Income.  When bad news come, they come together.

History can shed useful insights to enable us to make decisions today that will affect the future. But we need to learn the rights lessons given that there can be many possible futures.

As for my own housing loan, my threshold will be 4% which I view as a risk-free rate. So long as my loan interest rate remains below 4%, I will continue to maintain the loan, and use the leverage to put my spare cash and CPF-OA into investment (shares and equity Unit Trust) as I believe I can do better than the 4%. There are risks of course.

Should the interest rate climb above 4% however, I will likely liquidate my investments that are using CPF-OA funds, and use that to pay down the loan. My loan principal has actually been whittled down to just 10% of the original loan. So I really have quite a bit of breathing room. Phew.

Hope your housing finances are in good shape. If not, it's time to re-evaluate the risks and check your margin of safety. Don't let it become your nightmare and cause of sleeplessness.

Fuel - Fluctuating with the Tide

It's strange. When the price of oil was in the century mark, everybody was feeling the pinch as the cost of business went up. The masses felt the pinch with the rapidly spiraling cost of petrol for car owners and the cost of electricity to power the home. It was all doom and gloom, with inflation eating into the bottom line for everyone.

This situation gave rise to higher cost means of recovering energy sources becoming viable. And so we then have shale gas, particularly in the US. It has grown so rapidly that it is shifting the US from a net importer of energy to becoming a net exporter. Suddenly, OPEC and Russia no longer hold the only big strings that pull the puppet.

And now we have an oversupply. The collapse in oil price has been rapid. Along with this, stocks in the oil and gas sector are dropping day by day. And yet, many of these companies are still generating growth in revenue.

Oil price go up, gloom! Oil price go down, doom! What a strange world.

The simple truth is that the demand for energy can't possibly get any less. The world continues to grow. As economies develop, surely the demand for energy can only grow? If the reverse is happening, we must be moving back to the stone ages.

With this, my hypothesis is that eventually a tipping point will be reached, and things can only return to the uptrend, be it the global economy or the cost of energy.

As a long term investor, such short term fluctuations are irrelevant. In fact, it is another opportunity knock. So are we accepting the knock or taking the knock and continue to watch?

I finally bought into ExxonMobil, after having bought Chevron a year back. Their prices continue to fall. But do we see the price of fuel at the pumps falling in lock step by the same proportion? Hmmm ...

Meantime, I should keep a closer lookout on flights for overseas holidays. It should be cheaper since aviation fuel is a big ticket cost item. Upgrade to Business Class anyone?

Disclaimer: Do your own due diligence! We all have different risk profiles and considerations.  

A Different Singapore for Financial Liberation without the Lure of Pension

Came across an article which talked about introducing some kind of pension system for the low income earners who have little in the way of CPF. It was suggested that this would only cost 1% of the government budget. I think this is a most slippery slope. 1% for pension is 1% less to spend elsewhere to build the nation. Would this truly help the low income or introduce the undesirable dysfunctional effect of social dependency we observe in some other countries? Personally, I am doubtful this is a good trajectory to take.

Start With the Young

Perhaps the journey has to move further back to the young. Can investment and financial awareness be introduced at an earlier age where it can be taught and introduced in a more compelling manner? Could it be weaved in into classroom Maths for instance?

Games could be another avenue. Are there any good ones to do so (see Wongamania)? The many popular ones are perhaps too cheesy or simplistic (Monopoly, Life). Robert Kiyosaki's Cashflow game is too tuned toward positive cash flow from property investment and perhaps too narrow. Not to mention expensive as heck! There are localised mobile apps like WhyMoolah. But I didn't find it particularly fun as it lacks a staying appeal.

As it is, it seems that more younger people are opening up trading accounts. A sign of greater interest and awareness? But chances are many may well be doing so to tikam tikam, looking for a quick "rush" and a quick buck. The likelihood that some will crash and burn is equally good. Hopefully, more will learn and shift towards a sustainable approach to stock investing.

Options for the Old: Housing and Tourism

Perhaps housing could also be structured a bit differently. If only our flats could be built with a lock-out unit that can be separately rented out? There were some attempts to do so but it doesn't seem to have proliferated. Every young family wants to buy their first home with the aim of expanding their humble home with children (and the provision for a maid?). But as the kids grow up, get married and move out, the home starts to get emptier and hollow. Instead of downgrading to a smaller home, wouldn't it be nice if a part of it could be locked off as a separate unit for rental, and hence provide a decent income stream for retirement to complement their CPF? It would also keep the older folks engaged. The possibility of social interaction with their guest is also a possibility.

The regulatory regime has to catch up to allow vacation rentals, a la AirBnB (see AirBnB - Sharing a Home for Rental Income). Legalise it so that the older folks can gain a rental income from vacationers. Would this have the dual effect of promoting affordable tourism in Singapore as well? Accommodation with a different touch, an option away from the sterile hotels. Of course, the concern is over the introduction of sleaze and crime if this is not managed well. Some form of inspection and regulatory requirements could well provide the mitigation.

Exchange Traded Funds - Navigating Through the Maze

The number of Exchange Traded Funds (ETF) that have been introduced on the SGX has been growing at an explosive pace.

ETFs that are index-tracking are touted as a better alternative to investing via Unit Trust given their lower fees. There is also the belief that being average (i.e. tracking the index) is better than being clever - i.e. beat the index. After all, if half the traders beat the index, the other half must surely have lost to the index. Reminds me of the phrase Hokkien phrase, "ai kiang, mai keh kiang" ("be smart, don't be overly smart!").

There are good introductory articles, such as those published by MoneySense to explain ETFs (see Introduction to ETF). SGX also publishes the list of ETFs and their current data at SGX ETF List. And there are more detailed information that were previously published at SGX as well - Detailed Information on ETF, dated Sep 2014. The list of fund managers listed at the end can be clicked on to navigate to the respective fund manager's website for more information on their ETF offerings. My observations are that some of those websites are not very friendly to the consumer though. They really need more work.

I have found it quite a lousy experience trying to figure out more information on the various ETF offerings. While each fund distributor has the details on their websites, what I want is to compare across the product offerings. I need something like Fundsupermart for Unit Trust.

Thus far, POEMS ETF Finder is probably the most useful avenue for this purpose. I'm typically looking for equivalent funds by sector/country, whether the ETF is a full replication or synthetic/swap type, whether it is a total return or dividend distributing type, etc.

There are confusing differences over what the fund is called by the fund manager versus what is encoded on trading portals. Takes quite a bit of decoding to figure out, else I could end up buying the wrong ETF! POEMS' use of symbols like "X" and "@" takes some figuring out. Turns out the "X" are ETFs which are synthetic type, while "@" are Specified Investment Products.

My believe is to diversify across regions and sectors as a risk management approach, something like this:

US
    SPDR S&P500 US$ - XD [Full replication]
    DBXT S&P500 US$ - Reinv [Synthetic]

Europe
    Lyxor Europe US$ - XD [Synthetic]
    DBXT MSEurope US$ - Reinv [Full replication]

Asia ex-Japan 
    Lyxor Asia US$ - XD [Synthetic]
    DBXT MSASPAC US$ - Reinv [Synthetic]

GEM 
    Lyxor EM Mkt US$ - Reinv [Synthetic]
    DBXT MSEmer US$ - Reinv [Synthetic]

ASEAN 
    CIMBASEAN S$ - XD [Physical replication - sample]

Japan
    DBXT MSJap US$ - Reinv [Full replication]
    Lyxor Japan US$ - XD [Synthetic]

Singapore 
    Nikko AM Singapore STI ETF - XD [Full replication]
    SPDR STI ETF 100 - XD [Full replication]

Commodity 
    Lyxor Cmdty US$ - XD [Synthetic]
    GLD US$ [Full replication]

* XD = dividends are distributed; Reinv = dividends are reinvested; US$ imply that ETF is traded in US$ currency.

There are more options from the wide basket of ETFs available. Above is hence only illustrative.

To keep costs low, the expense ratios of the various funds need to be considered. But in general, ETFs' expense ratios are usually much lower than Unit Trust funds.

There are more inherent risks with those "synthetic" type as they do not necessarily hold the basket of underlying shares in the index and are instead using swaps to achieve the index performance. Unfortunately, many of the ETFs are precisely of such synthetic type.

In some cases, there are non-synthetic alternatives that implement full or partial replication. In such cases, the ETFs will actually hold stocks from the benchmark index. Unfortunately, several of these ETFs do not distribute dividends and are therefore not attractive for investors who seek dividends as an income stream. Part of the reason for this is possibly the taxation regimes as dividends distributed would be subjected to tax, resulting in immediate dilution.

I have not considered Bond ETFs. There are several options available as well.

No perfect answers. The market likes to force us to make choices.

When Lots Reduce from 1,000 to 100 - 19 Jan 2015

19 Jan 2015 is a date to watch for on the Singapore Stock Exchange. Lot sizes for shares will be relaxed from 1,000 shares down to 100 shares. Those very high valued shares that had been pretty much out of reach for many retail investors will start to look attractive.

A share that cost $10 per share at 1,000 shares used to require $10,000 to gain share ownership. But at 100 shares, it will only require an outlay of $1,000.

The bank stocks (OCBC, UOB, DBS), and the Jardine family (JMH, JSH, Dairy Farm, Hong Kong Land, etc) will be within reach for a lot more people. Will a mad rush on 19 Jan drive up their prices in the initial scramble? Any short term adrenaline rush will however likely taper off back to "value" over time.

For the retail value investor, 2015 will be the year where these 'costly' shares start to appear in their portfolio. I hope.

Previously:
2 Great News from Changes to the SGX Stock Market

Rule of 72 Revisited - The Maths Behind

As we read about investment, we will eventually come across the "Rule of 72" (see previous post on this: Rule of 72 and Rue of 72). Kind of nifty as a rule of thumb to estimate the effect of compounding.

But what is the maths behind the Rule of 72? Business Insider explains in Why the Rule of 72 Works. This should really be used to bring maths alive in school (A-levels?)!

So in fact, we discover that it ought to have been the "Rule of 69". Hah!

Aside from the reason explained in the article for shifting to 72 (i.e. ease of divisibility by a greater range from 1-10%), I guess 69 isn't preferred either for its own reason!?

As an approximation, we could use 72 for dividing 2, 3, 4, 6, 8 or 9%; and 70 for 5, 7 or 10%.

Have fun!

Running Cafes as a Business Owner

Cafes. Ah, there is that fascinating sense of novelty and vision of sitting by and running a quaint little shop that offers an amazing cafe experience. After all, the road to financial independence tends to suggest that being a business owner offers higher opportunities than being an employee. So how about running a cafe?

But it looks like running such a business is tough. Straits Times published a piece recently about the challenges of running a cafe (Running Cafes No Piece of Cake). Kind of the dream for many people, young and old. Unfortunately, start up cafes are more likely fail than succeed. Sustainable success requires a lot more hard work.

A friend shared on her experience. When starting up, there is that tremendous urge to get the best. The best equipment, the best decor, the best furnishing. "Best" costs. When it came round to shutting down the business, selling off these stuff became a heart bleed.

And then there is the problem of staffing. It is difficult to find good help, especially in manpower strapped Singapore. When it came to closing time, her staff would readily disappear most quickly. And she found herself being the one cleaning up everything. It is an extremely tiring business.

At the end of the day, is it still profitable? Sales matter. Costs matter. Location matters. Publicity matters. Differentiation matters? Great tasting food? Presentation! There are so many factors that have to come together for that elusive success to click.

LadyIronChef has some insights to share in 10 Things You Should Know Before Opening a Cafe. Those are probably most helpful advice for the adventurous wannabes ready to take the next step.

Perhaps interning at an existing cafe could be a good starting point to learn the business? Gain the experience, gain the connection, understand what it takes. Better yet, if a well run cafe could hand hold new players to come into play? But perhaps there is little motivation to do so? Would a former employee be viewed with much disdain as a traitor who learned the trade and then became the competition? Maybe some kind of franchising system is needed?

In memory of the sad incident at Lindt Cafe, Martin Place, Sydney ... (Dec 2014)

A Review of My Investment in 2014

The culmination of 2014 marks my 8th year since the start of my investment journey, and the 6th year since investing directly in the stock markets. Ok, so I'm a late starter. But better late than never.

[I shall not count those early years of insurance linked policies since my National Service days. Those were just done in a blind and oblivious manner. Lost years!]

Despite the ups and downs (State of the Economy - 2014), the STI has achieved over 6% in 2014. With dividends included, the total return would be in the region of 8-9%. 

My stock investment has returned an IRR of 10.3% for 2014, inclusive dividends. This compares poorly compared to the previous years' returns of 21.6% (2013) and 39.0% (2012). 2014's performance has therefore dragged down my long term IRR from 20.6% (5 years) down to 17.3% (6 years). Still, it hasn't been too shabby, and it did outperform the benchmark STI, if only marginally.

Bought:
  Capitaland
  Hong Kong Land
  Japan Foods
  Kingsmen Creative
  Second Chance
  Tat Hong
  The Hour Glass
  Lyxor Europe 10 ETF

Rights Issues Subscribed:
  OCBC

Sold:
  Soup Restaurant

Dividend income was only $10,723 for 2014 from the stock portfolio. But it has been increasing at roughly $2,000 per year. It would have been higher, except that I took up a lot of script options instead of receiving cash dividends.

The initial $3,000 that started this journey from eons has morphed into a diversified six-figure portfolio that is well on the way to the eventual target to achieve financial independence. Time and discipline are key.

Hope you've also had as good a journey as we welcome 2015. May the year ahead continue to be a prosperous and healthy one for everyone!

Start of 2015 - Time for Some Tax Avoidance

Welcome to 2015! It's 1 Jan 2015. Time to be reminded to put that cheque of $12,750 into the Supplementary Retirement Scheme (SRS) account for the tax deductible benefits.

An Excursion on SRS, Deferred Taxation
Maximising Returns with Minimal Risks - for the ultra conservative investor

Each year, I put this sum into my Fundsupermart account under a money market fund. Then each month, I take $1,000 worth to buy into an equity fund to "rebalance" my diversified portfolio across the various market regions.

20 Years and $200,000, A Mother's Savings from a Son's Giving

My mother is at a ripe old age, and already a great grandmother. Older folks derive an immense sense of pride and joy in seeing the expansion of their family bloodline - children, grandchildren, and great grandchildren even.

For years since I started work, I've been making it a point to contribute 10% of my income to her. She hadn't found much of a need to spend. So she had been systematically saving the money into a bank savings account.

Recently, she showed me her passbook. Yes, she's still using a passbook! More than 20 years on, the savings had snowballed to well over $200,000. That's quite a tidy sum indeed.

She has some interesting intentions over how this would be used.

Firstly, should she run into any medical problem, this sum would be used to pay for medical contingencies. To ensure that someone else would have access to it, the savings account book was hence set up as a Joint Savings "or" account with me.

Secondly, if she passes on, her intention is that I should inherit the sum. As far as she is concerned, the money was from me and it's only fair that it should end up with me eventually (if any is left).

Personally, my thoughts were that the money I gave her was for her to use and to spend as she saw fit. I have no expectations for any sort of inheritance.

My mother is a most frugal person and remains very much a saver rather than a spender. In part, her sense of cost is very much anchored to her childhood. Hence, she really has difficulty contemplating paying for expensive meals, or even the taxi fare.

Several points I get from this:
- Frugality and savings can generate a tidy sum by retirement.
- Set aside a sum for medical emergencies; this risk increases with age.
- Have someone you trust to have access to the cash; not going to help you if you're in serious trouble and someone can't get access to it for you.

The only downside is that keeping the sum in a savings account hasn't exactly been ideal with the negligible interest rates that we've been experiencing. But it's not unreasonable either given that this hoard has to be kept fluid, and in low-risk form.

Seems like a reasonable plan? I thought it was quite prudent.

The side note that I had was over when my mother should have communicated this intention? It's fortunate that she is still in fairly good mental and physical health despite her age. Although, I can observe in recent years that she can get pretty confused. I think it is best to establish such an arrangement much earlier.

Fruits for thoughts.

Meanwhile, HELLO 2015!

SingPost - From Postal Service to eCommerce

Not too long ago, SingPost was viewed as an excellent dividend stock on SGX. Being the monopoly in postal services, it was viewed as a bedrock income stock. However, with the advent of the Internet and pervasive mobile device access, one wonders what dinosaur still need to send letters around? Numbers have been clearly dwindling in this regard.

So it is with some risk, and I feel with much strategic foresight, that SingPost brought in a new management team and started embarking on exploiting their strength, rapidly moving into eCommerce logistics by acquiring several companies. At the same time, exploiting technology to enhance and improve efficiency in their traditional postal services.

If it was once a dividend-value stock, it is now more like a growth company. Its future could yet be most exciting.

Interestingly, I read that the US Postal Services (USPS) has also started thinking along this line, recognising that its existing reach could well put it in a position to challenge UPS and FedEx. USPS has been suffering from losses and cutbacks in recent years. They're a bit slow aren't there?

Being small can sometimes a be a strength - by being nimble, complemented by foresight and the courage to take action to reshape its future. Being large has benefits in terms of critical mass, and therefore enjoying economy of scale. But a large machinery moves too slowly sometimes, grounded by its inertia.

See previous:
SingPost Joins Hand with Alibaba and the 40 Thieves

Boustead - a Hive Demerging

The headline of an article in The Edge screamed "Boustead Proposes a Break-up"! Sounded disastrous. Actually it is not. Essentially, Boustead is mooting to separate its property business into a REIT and to distribute the shares of this new company to its existing shareholders via a distribution in specie. It's like receiving dividends in the form of additional shares, except that these are for a separate company that is also listed on the stock exchange.

Sounds interesting rather than disastrous. However, some shareholders are not in favour as Boustead could lose some of its inherent diversity to withstand ups and downs with its respective business sectors if it hives off the property business.

Regardless, Boustead has maintained a pretty steady performance over the years. It is one of the stock in my team selection: My World Cup Team (of Dividend Value Stocks). I remain vested in this company.

Buyout interest in euNetworks (a GKGoh associate)

There is quite a bit of coverage in this week's The Edge on GKGoh, especially over the possibility of a buy out of euNetworks, an associate company.

Strange that there is so much interest in euNetworks considering that it has been loss making thus far. The potential probably lies in its role as an incumbent of fibre networks in major European cities. It is likely difficult for any new entrant to be able to lay new networks in such mature cities.

Meanwhile, GKGoh continues to trade at a discount to its book value (P/B is 0.72). So that remains attractive to me personally. I always find it strange when a company is valued below its book value when there is no apparent reason. Unrecognised value, or simply the norm for an investment holding company to suffer a discount?

I particularly like its holding of Boardroom, another stock on the SGX, and its Australian aged care holding. Boardroom has shown steady business and dividend payout. The Australian holding will likely provide a regular income stream as well.

I like that the founders/insiders have been buying their own stocks regularly in recent months.

A key risk lies in that the original founder is already 70 years of age and is looking at his succession. He has two sons in the company. Will the next generation be able to run the investment holding company as prudently and successfully?

See previous assessment:
G K Goh - who is this guy?