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Tuesday, 26 July 2016

Equities and Bonds can't be both right. Right?



If you are a panda or koala bear (single asset investor), it doesn't matter. Move along now, there's nothing to see here.

But for those of you who practice portfolio management with asset allocation; or have engaged financial advisors advocating the merits of diversification into different asset classes... How now?


In the "old normal" before 2009, one of the simplest asset allocation strategy was to have our assets in both equities and bonds. And we do periodic rebalancing between these 2 asset classes from time to time to seek risk-adjusted return in line with our temperament and risk profile.

Other variants would include the Permanent Portfolio where we split our assets into 4 or more asset classes - with or without rebalancing.


In this "new normal", both the US equities and bond market are both in near all time high bull market territory.

Both of these asset classes can't be right? 

Can they?





If both equities and bonds can go up together at the same time, does it mean both equities and bonds can go down together too!?

Those of you taking Business Finance currently, you may want to "ki chiu" and ask your lecturer on this anomaly?

And for those with financial advisors, maybe schedule a "lim kopi" meetup session to review your portfolio?

If you are approaching retirement or already in retirement, this is not a rhetorical or moot question.

Its not fun and games. The last thing you want is to do everything right so far only to fxxk-up the end game...


Not so passive now, are you?






108 comments:

  1. Knocking on people's heads again? I feel for those who are reading your post and waking up from their slumber only now. Interesting that you bring up Permanent Portfolio that is supposed to weather all storms. If equities and bonds (and gold) are at a high, then what does it leave us with? Biscuit tins of cash?

    Using index investing to prepare for retirement doesn’t mean I have to use it during retirement. Guess I'm lucky in the sense that I'm not at my end-game phase, and I'm the first to admit I don't have my end game totally figured out.

    For a start, maybe a variety of 'safer' instruments that are focused on income-replacement instead of portfolio growth – CPF Life, HDB Lease Buyback Scheme, SGS Bonds, Singapore Savings Bonds, fixed Deposits, Corporate Bonds, Fixed Income ETFs, high-yielding stocks & REITs etc. Oh, and kids.

    ReplyDelete
    Replies
    1. No Holy Grail investing method. All bluff people concept and theory?

      Delete
    2. Kevin,

      Where got knock people's head?

      I am asking that question to myself too ;)


      I improve by asking questions; my portfolio suffers when I think I have all the answers :(


      Well, the poster boy for Index Investing is not a koala bear after all ;) You're omnivores!

      LOL!

      Delete
    3. CW,

      Well, some have the answers... All we need is 5 minutes a day - whatever that means???

      Jokes aside, I hope someone can ask their Poly or Uni lecturers whether the traditional textbooks on Portfolio Management are still applicable - especially when Central Bankers are interfering with the price discovery process...

      Or are we now in unchartered waters?

      Meaning no one really knows!!!

      Delete
    4. This is why I keep up on different investment strategies. Just because I don't subscribe to them now doesn't mean they won't come into play later on when my circumstances have changed. The world changes too fast.

      People don't ask, then I don't say lor. I will become whatever-vore the world needs me to be, as long as I can put food on the table when I'm 70 and unemployed ...

      Delete
    5. Kevin,

      Careful now...

      You are sounding a bit like grasshopper with "crash got sound" philosophy ;)

      Beware of cantankerous ants!

      LOL!


      P.S. "The world changes too fast" - the force is strong in you. Instead of staring down at our plans while driving, I think its better to look out the windscreen ;)

      Delete
    6. Always changing & ever evolving! The day we stop is when we're five feet under. Even though all I want is just to hide in my turtle shell in a beach resort ;)

      I guess we look at our plans before driving, and look out the windscreen while driving yeah? Just like travelling overseas. Map the plans beforehand, but be ready to react to situations. Use Google Maps once in a while, but put down the damn phone and take in the sights, feel the hospitality, hear the conversation, smell the air and taste the food!

      Considering my retirement timeline is likely in 20-25 years time ( I cannot just nuah cuz I'm the type of person that needs some form of employment), all we need to do is to look back 25-30 years and marvel at how much the world has changed and of course, the investment options back in the 1980s or 1990s. Simi sai is index investing? Noawadays I cringe a little when folks 'koala bear' CPF top-ups into SA. Sounds good in theory now, but the world changes too fast, and we don't make the rules.

      Delete
    7. Kevin,

      "I guess we look at our plans before driving, and look out the windscreen while driving"

      I couldn't have said it better myself :)


      Oi!?

      Did someone just poked at the bleeding heart?

      LOL!


      Must look at context and perspective.

      Someone doing the SA thing in his 50s is different from someone doing it in his 20s...

      Also, after maxing out our voluntary SA contribution thingy, if we still have millions in liquidity to take advantage of opportunities is totally different from if you now have little to no bullets left...

      CPF as a portion of our income generating asset is good; as the only "koala bear" vehicle...

      If we have to go to Hong Lim Park to shout O$P$, life has not treated us well financially speaking :(

      Delete
    8. down there goes passive income and passive investing ideology!

      no such thing as passive income and successful passive investing!

      all along knew TI is a active passive indexer.

      http://singaporeanstocksinvestor.blogspot.sg/2016/07/a-lazy-and-fool-proof-way-to-investing.html?showComment=1469283685534#c7027651967462486135

      Delete
    9. the word 'passive' is just a marketing copy.

      i see it, i run for the hills.

      Delete
    10. SMK,

      Active passive indexer?

      Now that's a very interesting oxymoron ;)

      I like! It right there with my shades of grey...

      LOL!

      Delete
    11. SMK has a very sharp mind ;)

      I am a creature of circumstances. If I'm in the US and I have Vanguard next to me, I could possibly be a passive investor.

      Apart from my earliest days when I was still throwing the word "passive" around freely, I quickly learnt something very important. You'll find that I hardly call myself a passive investor. Ask me and I'll say I'm an index investor.

      Contrary to popular belief, even Bogleheads index investing to me isn’t that passive after all. Active rebalancing is key, no? I want volatility within each asset class.

      People just have a subconscious habit of associating index investing with passive investing as if they are equivalent :)

      Delete
  2. Maybe is the relative gap between equities and bonds returns that is still true. We always think all things must hover between positive and negative. It can be Positive and more Positive lah.

    ReplyDelete
    Replies
    1. Cory,

      Like that also can?

      If all assets go up at the same time, what's the purpose of portfolio asset allocation again?

      Might as well be a panda and stick with one asset class and be done with it ;)


      Lucky I trade currencies. When we long one currency, we are short another currency at the same time.

      Positive and more positive? It is happening now in the US bond market - that's why I am confused...

      With 30 year bonds yielding so low, in the days of old, short term treasuries will be yielding much higher to give an inverted yield curve.

      Now? Long term bond yield near all time low, short term bond yield even lower???

      I still can't get my head around negative interest rates... If I borrow money from bank, the bank pays me interest instead?

      Like that why do we need to save? Just borrow for passive income?

      Voodoo!

      Delete
    2. If you extend the idea, why need to work too.
      Just borrow as much as you can from the banks lol!
      And you can live on the interests.
      i only can say the World has turned inside out & upside down!
      It indeed is a MAD, MAD, World we are living in now.
      Want to QE some more?
      But what else can CBs do?
      MAD!

      Delete
    3. temperament,

      Yalor!

      We don't even need to invest the borrowed money. Just stuff it under our mattresses. Return to bank when the loan period ends with little to no risks... Just pray no fire or robbery!


      Meanwhile, collect the bank interests and be financially free by being a debtor instead of a saver?

      Let's see whether Japan got the guts to be the first country to experiment with "helicopter money" this week.


      We are indeed living in interesting times!

      Delete
    4. A negative interests rate only means bank cannot earn interests from storing money with the central bank. It doesn't mean bank will pay us to borrow. If you save with bank, we may reach a point where the bank may demands payment to protect your money if they have not much use of your cash. :)

      Delete
    5. Cory,

      The Japs are buying safes and keeping their cash at home - why would anyone pay the bank to store their cash?

      OK, unless you have hoards of cash and you pay the bank like renting security boxes...


      11 trillions of sovereign bonds globally are now in negative yield. Who owns these bonds?

      Well, somebody is paying governments for the privilege to lend money to them!?

      Insurance policy holders, bond and balanced funds investors, you may want to find out whether your money manager owns negative yield bonds ;)


      At lest the credit card companies are smart! Still charging 25$ interest per year.

      If I do peer-to-peer lending, I would not bite for interests less than 25% ;)

      Delete
  3. SMOL,

    Corelation between asset classes change all the time. During GFC, asset classes that have low co-relation become highly co-related. I think not all bonds are created equal.

    ReplyDelete
    Replies
    1. Yaruzi,

      Of course.

      Just like not all equities are created equal.

      Same for cash - what currencies to hold?

      Singaporean retail investors are lucky as they have one less problem to worry (for now).

      Somehow, I don't think investors in Malaysia and Indonesia would automatically default their cash to ringgit or rupiah...

      You think why rich mainland Chinese are bidding up properties in Canada, Australia, HK, and Singapore?



      As for correlation, the $64,000 question is whether the current positive correlation be the "new normal"; or will it revert to the old inverse one.

      And if equities and bonds inverse, which crowd is "wrong"?

      Somebody gonna get hurt...

      Delete
    2. I think the low yield/high bond price is a result of central bank engineering with QE. When they inject excess by buying bonds, they artificially press the yield lower. If central bank is buying, someone else must be selling and absorb the excess. The excess fund must find a place for better yield. I believe this is what inflate the other asset classes whether physical assets (gold, properties, etc) or riskier assets (equities, high yield, etc). Imagine the first glass is already full, but central bank continue to pour the water. It will just overflow to other glasses.

      Now, when the music stop and central bank start to drain the water back, which glasses will be emptied first and which glass will not be completely emptied?

      Delete
    3. Yaruzi,

      Your guess is as good as mine ;)

      We all have to muddle through and hope the decisions we made don't bite us in the ass!

      Delete
  4. Hi SMoL,,

    If I get the "author intention" right, a grasshopper has become a bleeding heart...

    :)

    ReplyDelete
    Replies
    1. Sillyinvestor,


      Just swinging my little hammer:

      If I had a hammer


      Delete
    2. Smol,

      Still catch no ball with "swinging hammer" after looking at the link. :(

      Delete
    3. Sillyinvestor,

      It's OK. Don't hurt yourself ;)

      Delete
  5. Hi Smol

    Can share the link to explain the various insects? Grasshopper, ant, .... haha

    ReplyDelete
    Replies
    1. Hello Frugal Daddy,

      Here's the link to my story telling days:

      The Grasshopper and the Ant


      I'm the antithesis to the study hard; work hard; must have goals in life; if you fail to plan... all those "wah kali gong" top down for your own good big daddy exhortations.


      I don't live life listening to campaign slogans ;)

      Delete
    2. So you are the grasshopper? Your earlier 40 yrs old study and working must be an ant with grasshopper heart.

      What is the insect that enjoy working to the max passionately?

      Can you consolidate and share here all your animals links so i can read 1 shot?

      Butterfly, caterpillar, panda, koala bear, and ?? I can compile and read to my child. Lol

      Delete
    3. Frugal Daddy,

      I not so organised as CW, but here goes:

      Specialist versus Generalist


      As for butterfly, fisherman, bleeding heart, and oily man, these are pet names I gave to interesting members of our blogging community ;)

      They call me SMOL - for I am tiny.

      Delete
    4. Interesting!

      I remembered reading a caterpillar turns butterfly post by you. Lol

      Delete
  6. Wa SMOL..

    Feel like such a fool after reading this post.

    Yea, earning moolah can never be passive. what a contradicting nick I have:(

    And this current situation we are in is certainly an anomaly isn't it?

    All these years, I've been told to hold both bonds and equities to take advantage when either asset class drops.

    But what am I suppose to do now when both are rising? Both are rising due to increase liquidity cause by QE right? Does this mean that the value of my cash holdings will fall due to inflation? In that case, am I suppose to buy some precious metal to protect the value? Or will it be better to get some ETF to ride on the liquidity wave? Wouldn't this QE bubble burst anytime? It's doesn't make sense to keep printing when it's not back by any assets except our confidence in the paper right?

    Why are there so much considerations? Not passive at all leh! 我被骗了😂

    ReplyDelete
    Replies
    1. PassivePeon,

      You where got fool?

      The fool will never admit he got 骗了 ;)


      I tell you, it cannot be fun to be money managers working for pension funds or insurance companies right now.

      How to secure the "promised" income for your pensioners and policy holders when 10 year US treasury is yielding below 2%???

      If you take on more risks to secure better yields, you risk cases like:

      1) Town councils losing money with their bond "investments";

      2) Conservative savers losing their capital when corporate bonds default (we have a few now in SGX);

      3) Small time newbie "ah longs" losing their money in peer-to-peer lending...

      4) REITs? Those who go full panda mode are definitely those who didn't go through the 2008/09 massacre where some REITs nearly went belly up.


      No, fools are those who think they know but don't :(

      Delete
    2. Hi SMOL,

      Money manager as in institutions or the person?

      If it's institutions then quite cham, can't worm their way out of the "promised guaranteed plus chop capital protected with variable bonus interest else my banking hall let you burn" investment that they have sold to their clients, without fearing that these investments will go up in smoke IF the party ends (honestly I think few really knows which direction the market will trend now right?).

      But if the money manager are referring to the snake-oil people instead, then still quite okay for them I guess. Their performance based on AUM anyway and so far performance shouldn't be that bad based on current market condition.

      If the party stops, these people can pang kang and take a break. When everything dies down, apply for the job again, indicating that they managed funds of $XXX AUM, which yielded positive yield from Feb'16 - Jul'16. Looks good eh!

      Hahah. Opps. Just my very naive thoughts of how their world functions. Poke me if I'm wrong okay! Gam xia!

      Delete
    3. PassivePeon,

      1. Hello, who said guaranteed and capital protected is full proof? If an insurance company or bank goes belly up, you sure we still get our money back?

      Bank deposits in Singapore is only "protected" up till 50K per bank per person.

      You should ask whether CPF Life is "capital protected" ;)



      2. Careful now. Those who manage other people's money professionally I respect. You know how difficult it is to be a professional money manager?

      Not only must be talented, must attend the right schools, and know the right people...

      No, they are not snake-oils. They are those who "made it".


      Those who can't make it have to settle for being snake-oils - teach others how to invest or trade ;)

      Bei kambings don't stop and think - if these snake-oils are so good, why can't they attract high net worth individuals or institutions to invest in them?

      Duh!

      Delete
  7. RELAX AND ENJOY!
    ELVIS

    https://www.youtube.com/watch?v=M9nzuv7AEug

    ReplyDelete
  8. Triple A theory!
    Anticipate, Adapt & Action!

    In the past, where need to invest. Just save put in the bank double digit interest compound. Where got all the rubbish of 5-6% return portfolio per year that we are all shouting now from our portfolio.

    Then come low interest and the need to invest due to inflation from fiat system. Everything rises in tandem!

    Then now negative interest which is the central bank preventing commercial bank to hold money but instead lend it all out. Bank will never charge consumer negative interest.

    By the way, which types of bonds?

    During GFC, both corporate bonds and equities already down in same direction!

    from an article:

    "Conventional investment advice says investors should have an allocation to both stocks and bonds, the latter to protect the portfolio in a downturn. But what happens if they both fall in a crash? By almost any measure bonds are in a bigger bubble than stocks, so the risk is high that they will not be able to offset losses in stocks. Don’t forget that bond prices crashed in late 2008, and many stopped paying dividends."

    ReplyDelete
    Replies
    1. Rolf,

      Those people with set in concrete goals, and plans based on yesterday's assumptions - how to anticipate?

      They are driving looking at the rear-view mirror.


      That's why those in leadership positions, entrepreneurs, investors, traders, etc; we need to see 2-3 steps ahead of the crowd - that's all!!!

      We were lucky.

      Lao Lee has this ability. And here we are today.

      Now?


      In investing, its all about positioning - before the event happens.

      If we wait till a financial blogger blogs about it, I think its already pretty much baked in the pie...

      Delete
  9. If corporations are down, definitely their bonds act in tandem.
    How about Singapore saving bonds?
    How about CPF's bonds?
    CPF is Singapore people's "MING KEN"

    ReplyDelete
    Replies
    1. temperament,

      That's why financial savviness goes hand-in-hand with political sensitivity ;)


      Those of us who worked in corporate and experienced a top management change would appreciate.

      Promises made by the previous management to you become words written on water :(


      Money in my pocket feels better. I like the CPF scheme; but no way am I going to add more money in voluntarily just because I greedy for that extra 1-2% returns.

      I'm active. I run my own nano hedge fund. I am a trader.

      Voluntary CPF contributions are for widows and orphans.

      Delete
    2. HA! HA!
      Can not beat an Ex Snake-Oil Sale-man,can you?
      And no wonder it's very hard to replace our Papys too.
      What!
      With so many the well to dos and most middle class will not want to rock the boat.
      Anyway, Singapore doesn't have Tsunami or Earthquake one.
      So our boat is always in calm weather leh.
      So far so good.

      Delete
    3. Agreed with SMOL. Just do what Law required for CPF. Do we need to eat water-melon to the Green even not in front water melon farm?

      Delete
    4. CW,

      You like that water melon analogy too?

      Good right?

      Can't remember where I read it from. I suspect its from one of those Dale Carnegie books.

      :)

      Delete
    5. temperament,

      Big daddy smart!

      The best move was to make sure most citizens have a stake in the country.

      Compared to rest of the world, we are the few where home ownership is a reality - not an impossible dream.

      Next, we have liberalised CPF for equities, bonds, gold investments, etc.

      Once a person owns assets, he'll vote differently from someone who has nothing to lose since he owns nothing.


      Hang on! Don't get too complacent.

      Religious, race, and armed conflicts still pose a real threat in our region.

      Just look at ASEAN - how many are run by the military in the background?

      So far so good? That's because we have a BIG STICK!

      It's not luck!

      Delete
    6. Join in the fun. $300k cash versus $400k cpf at age 55. Choose.

      Delete
    7. Frugal Daddy,

      If CPF is the minority part of our networth when we hit 55 - like less than 20% - then life has been good to us ;)


      But if CPF is more than 50% of our networth, I guess I can empathise with those that go to Hong Lim Park...


      Mind you, the goal is not to reduce CPF!

      Its to let other parts of our assets grow FASTER than CPF :)


      If not how?

      Asset rich as in property and the rest tied up in CPF Life...

      How to wine, women, and song like that?

      Delete
    8. Shh... Don't let the wife knows ;)

      Delete
  10. Jared,

    To make some adjustment in your phrase "big daddy smart!"

    "Big daddy of the past smart!"

    Today's big daddy can only consider smart if we are still doing well in the next few decades!

    Still remain to be seen if today's leaders can really adapt to the new normal ahead!

    ReplyDelete
    Replies
    1. Rolf,

      It's only been a year and more... So fast "new big daddy"???

      The present I'm OK since there are quite a few that's world class. What I can see and evaluate I not worried.

      Our political transition process is a lot smoother than some of our ASEAN neighbours. Thank goodness!

      The men in light blue are also doing well. That's good. Need some counterbalance.


      What's more unsettling is what you worried about - the youths that come after us. You don't want the scenario in Brexit to happen to us:

      Old vote one way; youth vote another way.


      Youth voting for concrete things like career opportunities, financial success; etc. (Price to pay is you let Belgium tell you what to do)

      Old vote for more intangible things like national pride, the ability to make their own laws and govern themselves, border control; etc. (My own house; my own rules)


      Our young history is somewhat similar - we rather be kicked-out than to follow other people's rule...



      Delete
    2. no lar, I am saying the Stewards within the same big daddy camp is changing.
      The voters will change generations after generations. Environments and targets changed.

      The LKY generation leaders are chasing for survivorship of all Singaporeans.

      This generation leaders are chasing for wealth and prestige on a global stage like we did in the last 10 ten years of economic growth. At the same time still need to maintain our previous wealth.

      It's essential for our survivor to be useful to this year. But Sometimes I was thinking did we grow too fast since the new leaders took over at the turn of the millennium.

      Grow too fast is never good... just look at Swiber!

      Delete
    3. Rolf,

      Be careful what we wished for...

      If I look at Taiwan and HK for the past 10 years; and Japan for the past 30 years...

      I am just grateful how life has turned out for me and my family.

      I am mindful of what may come in future; but I live in the present. Tomorrow may never come anyway...

      Today got wine today drunk!


      P.S. If Singapore does not grow and thrive, we may soon loose our sovereignty...

      Delete
    4. Aiyo... grow too fast never say stay stagnant and go backward leh.

      Grow also got several types!

      If you look at 1965-1995, the growth is all about improving our skills, knowledge and productivity, attract foreign investment, build factories, improve education, healthcare, housing etc etc....

      But if you look at from 2003 till 2014, the growth its real estate boom! Note hor...only price.... Banking sectors boom.. Note hor, more liquidity creates more borrowing, then more "Wealth"?

      Attract foreign talents is good due to our aging population, but then govt becoming too hype by the growth that they attracted too many ALL AT ONCE!

      So everything in moderation and within our means of growth. But you think our growth in the last ten years is in moderation or exceptional?

      :-)

      Delete
    5. Rolf,

      创业难,守业更难。


      I don't envy those who come after Lao Lee.

      I myself never liked "maintenance" kind of jobs. I much prefer pioneering or missionary kind of jobs.

      I focus on myself more :)

      Delete
  11. Yalor!

    "Dynasty" comes and goes.
    If there is a change of "Dynasty"
    Wonder how many Singaporeans remain?
    Are we already a Nation or a "many flocks of winter migrants"?

    Who can really see into another 50 or 100 years?
    (i think Big Daddy also think dynasty may change and not very sure how many Singaporeans remain.)

    Most rich and powerful may have the triple A(like Rolf said) set up already for their next generations.
    Ready to fly to "warmer climate".
    Or to stay and fight for survival?
    Until the day comes, Singaporeans have not been tested yet lol!
    You have not seen the real Singaporeans.
    Have you?

    ReplyDelete
    Replies
    1. temperament,

      I am mobile. I am citizen of the world.

      I am grateful for my ancestor who decided to venture forth into Nanyang instead of staying "stuck" in China.

      I got his genes in me. I'm the 5th generation descendent of a citizen of the world.

      Delete
  12. "If CPF is the minority part of our networth when we hit 55 - like less than 20% - then life has been good to us ;)


    But if CPF is more than 50% of our networth, I guess I can empathise with those that go to Hong Lim Park..."

    Sorry SMOL,
    i may disagree with what you said above.
    i think you have forgotten about CPFIS.
    Those 10 to 25 % who have made money, after 55 still park their money there.
    Caught you!
    You rarely slip.

    And Thank you for being candid.
    You want to be like the Vietnamese Boat People (of Chinese descents).
    i understand for you are single.
    All the HDBs & CPFs & Kin, MAY count for nothing for you.
    Just packed and go lol!
    Ha! Ha!

    ReplyDelete
    Replies
    1. temperament,

      The CPF income ceiling was $5K and only raised to $6K beginning of this year.

      That means for high income earners, CPF can't be a big part of their overall net worth ;)

      Of course they will be outlier CPF members who got 10 baggers with their CPFIS investments; but even so, with the new CPF Life scheme, we can take the excess CPF monies out after 55 just as long we can meet the Full Retirement Sum of $161K.

      The max we can park in CPF is $241.5K for the Enhanced Retirement Sum :(

      Which would you rather be after 55:

      1) CPF $241.5K is more than 50% of our net worth; or

      2) CPF $241.5K is less than 20% of our net worth?

      Must include property OK?


      Big daddy is definitely not trying to trap as much CPF from us. If yes, why are they shooing away money from high income and high net worth individuals?

      OK, that's to support and build up our fund management industry; but that's another story ;)


      It's OK to disagree with me. I'm wrong most of the time anyway :)

      Unlike bleeding hearts and "wah kali gong" bloggers, I just ask questions and share what I think.

      I don't proselytise ;)



      P.S. Freedom of movement is one of the most cherished rights of a free citizen ;)

      Delete
    2. i said you forget to take those 10 to 25 % of CPFIS investors who have made money and Still Park Their money in CPF after 55.
      That is after 55, they have not withdraw a cent.
      Of course i am talking about "my generation" who have the choice to opt out of CPF LIFE.
      Like CW8888 and me.
      And they may not be high wage earners.

      i think forget about it, we are both thinking and talking about different generations.
      You are talking about apples and i talking about oranges.

      Delete
    3. temperament,

      LOL!

      Having options is freedom.

      And yet that comes with personal responsibility.

      If you make the wrong choices, no one to blame but yourself!


      But for my generation no choice stuck with CPF Life, I'll bet some will take the opportunity to blame big daddy!

      Conveniently forgetting the fact if our CPF is a small portion of our net worth, its pretty much a non-event ;)



      P.S. Those who made money with CPIS and continue to park money in CPF and NOT WITHDRAW a single cent after 55, well, it proves they have more money OUTSIDE of CPF ;)

      Delete
    4. I just think that there is never a magic bullet that can solve everyone's problems. Somebody is caught between a rock and a really hard place.

      On one hand, need to force people to take care of themselves and promise them 2.5% and 4% guaranteed. Extra 1% for first $60k. Else how to win them over? Times are different now and going forward is not easy to make that kind of returns, maybe even harder for enormous amount of money. Just ask Buffett. Small fund easier to double or triple your money. Now? Just a small percentage of bullets used can buy entire companies, how to invest like that? Venture into private investments etc more exotic stuff, maybe? End up with higher risks. Don't even dare think about 20 years later. So yeah, nvr poke people lah. Just feel that maybe they never think things thoroughly before committing to an irreversible decision.

      On the other hand, shoo away wealthier folks who ironically, need it the least, and recognized that risk-free returns is such a good deal and they want to take full advantage of it.

      Delete
  13. Maybe and maybe not if you are talking about %.
    Can be 40% in CPF AND 60% OUTSIDE.
    Or even 50, 50 for people of my generation.
    Anyway, we are only guessing about my generation.
    Exclude the value of primary residence.

    ReplyDelete
    Replies
    1. temperament,

      Maybe we can sum up our bantering with one statement?


      "The richer we are, the more we want to park our money in CPF (but can't because of CPF limit); the poorer we are, the more we want to take it out (but can't because of minimum or basic retirement sum)."

      Delete
    2. Ha!Ha!
      i think what you say is "natural" or "perpetual"

      If i am under social welfare now, why are you (G) still keeping the very little amount of money i have.
      How can i have a little, just a very little of chocolate now?
      i can see the Rich have chocolate anytime they want.

      The rich may have just too much $$$, & seek every nooks and corners to try to make their money grows even more and faster please.

      Delete
    3. temperament,

      And that's the sad irony.


      That's why books like Rich Dad Poor Dad are so popular.

      It's all about mindset.


      You and I are not so well educated; but we don't have a mindset of lack ;)

      Delete
    4. One of my ex bosses who already had lots of money, in addition has 1 mil in Cpf which he told me it's so good. Where to find a place u can get so high risk free return, he said.

      And he said to me that he think government is losing lots of money in cpf!

      Delete
    5. Rolf,

      Funny how your ex-boss idea of CPF losing lots of money is quite DIFFERENT from those who shouts at Hong Lim Park...

      Delete
  14. that is the difference between the haves and the haves not!

    When it comes to money affecting the people, it is just so difficult for the government.

    ReplyDelete
    Replies
    1. Rolf,

      OK, who wants to join the government for the prestige and benefits of the job?

      Delete


  15. long duration fixed income investors moving to short term to lower their risk in recent times. you can't change the spots on leopards, fixed income investors will always prefer fixed income. and then there's the positioning by funds too. when even the old and new bond kings go bearish on longer duration bonds, you know there is just one last attempt to hit the highs.

    if you are confused by the above paragraph, I have posted some hastily written articles. or you can just google for the info.

    some nice stuff there smol.



    "With 30 year bonds yielding so low, in the days of old, short term treasuries will be yielding much higher to give an inverted yield curve."







    abe and kuroda playing pingpong. neither wants to be responsible.

    seriously, time is running out for these deflationary markets.

    time to bring on the fiscal spending bazooka.

    else it's not just changes in the monetary policy environments,

    it's the change in public political sentiments!



    "Let's see whether Japan got the guts to be the first country to experiment with "helicopter money" this week."







    half the bonds out there in the DM world are negative yielding.



    "11 trillions of sovereign bonds globally are now in negative yield. Who owns these bonds? "







    nice. correlations work.... until they don't. a nice example is the recent decoupling between oil and us equities.



    "Corelation between asset classes change all the time. During GFC, asset classes that have low co-relation become highly co-related. I think not all bonds are created equal."







    devaluation of renminbi. right now, it's businesses and asset plays, not just properties.



    "You think why rich mainland Chinese are bidding up properties in Canada, Australia, HK, and Singapore?"







    how soon? no idea. is there coordination between CBs? no idea.



    "Now, when the music stop and central bank start to drain the water back, which glasses will be emptied first and which glass will not be completely emptied?"







    haha. a standard idea sold to people who don't know what to do.



    "All these years, I've been told to hold both bonds and equities to take advantage when either asset class drops."




    ReplyDelete
    Replies
    1. SMK (Singapore Mancho King?)


      Ah! Its nice to have a global macro guy weigh in on our banterings ;)


      By the way, I would like to compliment you on your liberal use of spacing ;)

      I learnt this trick from the butterfly at Bully the Bear.

      To produce music, we need the spaces between the musical notes - now that's an elegant analogy :)

      While reading your comments, there's a natural rhythm and pace to it ;)


      I see you have learnt a trick or two from AK... First time I've seen someone repost comments at a blog as a blog post!

      LOL!

      Delete

  16. nope. SGD is extremely teng (tough to chew) at the moment still. but other currencies are dropping.



    "But what am I suppose to do now when both are rising? Both are rising due to increase liquidity cause by QE right? Does this mean that the value of my cash holdings will fall due to inflation?"







    is that a leading question? lol



    " In that case, am I suppose to buy some precious metal to protect the value?"







    what do you think of that, TI?



    " Or will it be better to get some ETF to ride on the liquidity wave? Wouldn't this QE bubble burst anytime? It's doesn't make sense to keep printing when it's not back by any assets except our confidence in the paper right?"







    that's your reaction? so funny lol and no, i am not making fun of you.



    "Why are there so much considerations? Not passive at all leh! 我被骗了"







    i imagine it is tough. the risk is so high.



    "I tell you, it cannot be fun to be money managers working for pension funds or insurance companies right now.

    How to secure the "promised" income for your pensioners and policy holders when 10 year US treasury is yielding below 2%???"







    somemore still got people recommending crowd funding leh. I see the 13.5% yield on Epicentre for $1m and I go huh? why the management of Epicentre do this? do they need it? what's their vested stake? somemore got so many promoters woh. what are they earning?



    "3) Small time newbie "ah longs" losing their money in peer-to-peer lending..."







    they go by tranches. the ones where yields are guaranteed means they already bought them. and if the prices go up, they sell to lock in the promised yields and get some float. It's really the mark to market ones that are scary.

    by my reckoning, some 'accredited investors' are going to get some real accreditations.



    "If it's institutions then quite cham, can't worm their way out of the "promised guaranteed plus chop capital protected with variable bonus interest else my banking hall let you burn" investment that they have sold to their clients, without fearing that these investments will go up in smoke IF the party ends (honestly I think few really knows which direction the market will trend now right?)."







    so long ago. such a dangerous time then.



    "In the past, where need to invest. Just save put in the bank double digit interest compound. Where got all the rubbish of 5-6% return portfolio per year that we are all shouting now from our portfolio. "







    they charge, bank run, lower reserve, unlawful. so they also forced to find yield. else unprofitable, bank selloff. see european banks. it's fun so far.



    "Then now negative interest which is the central bank preventing commercial bank to hold money but instead lend it all out. Bank will never charge consumer negative interest. "







    I always maintained bonds have the same risk as stocks.

    risk is defined as permanent loss of capital.

    the volatility is different, that's all.



    "" Don’t forget that bond prices crashed in late 2008, and many stopped paying dividends."







    lol are you positioned?



    "In investing, its all about positioning - before the event happens."




    ReplyDelete
    Replies
    1. SMK,

      That's why Singaporeans are "lucky". We are the Switzerland of the East mah ;)

      MAS may let SGD stay "teng" just as long exports and tourism not affected.

      MAS already surprised the market with a neutral bias for the SGD exchange rate - the last time they did that was during the depths of 2008/09. MAS knows something we don't???

      Let's hope they don't need to use the easing bias bazooka. Overseas holidays will cost more... Now that's a bummer :(

      LOL!



      Big daddy got foresight. Obviously they don't share Warren Buffett's view gold is a relic of the past ;)

      We allow CPFIS to invest in gold. Removed GST for trading of physical gold. Encourage storing of physical gold in Singapore for high net worth individuals with secured vault warehouses.

      If one can't read the writings on the wall, he/she must be a really "passive" person!



      Am I positioned?

      Ar ber then?

      It's just unlike most other bloggers, I keep my cards close to my chest.

      They make lousy poker players. LOL!


      Delete
    2. Whoops! I'm late to the party.

      Thanks Guys for contributing your insights and congrats SMOL for getting past the century mark without ur coconut friend😉

      Ouch! I'm trying to be a un-passive as I can already. Lol. Give chance leh.

      Much to learn ... Much to learn.

      That's why I'm showing all my cards. Hoping that my naivety will elicit some response such a poke in good faith? 👈🏻

      Ehh. I thought whatever we do is a position? Standing is a position and so is sitting down what? We'll only know how well our position is when we are on our deathbed right? Lol

      Delete
    3. PassivePeon,

      Don't mind us. You have fun exploring your way and discovering what you are made of ;)


      Standing on the sideline is a position; but its different from frozen and unable to squeeze the trigger.

      Just like scaling into a core position is not the same as averaging down.


      Have fun discovering the nuances on your own!

      Delete

  17. don't like that. lol

    they doing their best already.

    I don't know about their market knowledge of all these current batch.

    (LHL and tharman are really smart people though.)

    but they did put in their heart. even upped the CPF RA rates via a tiered system.

    I just hope they are not eating into reserves again. (I am a miser.)

    and not squeezing juice out of the GIC rock.

    forcing people an impossible target sometimes result in disasterous consequences.



    "Those of us who worked in corporate and experienced a top management change would appreciate.

    Promises made by the previous management to you become words written on water :("







    nice.



    "Just look at ASEAN - how many are run by the military in the background? 

    So far so good? That's because we have a BIG STICK!"







    gan en



    "If I look at Taiwan and HK for the past 10 years; and Japan for the past 30 years... 

    I am just grateful how life has turned out for me and my family."




    ReplyDelete
    Replies
    1. SMK,

      What did I say?

      Unlike our oily friend, I'm not worried about the current team.

      The dark dragon not only impress the pants off most erudite Singaporeans, he is well respected internationally too. Definitely United Nations/IMF/World Bank calibre.

      Our man in charge of the big stick is warrior class. Cuts a mighty imposing figure. I sleep well at night. I'll sweat bullets if we have a "scholarly" person hold that post...

      The Buddhist guy is a great problem solver. He's like the ghostbuster!

      The men in light blue will grow in strength as long they can continue to attract calibre persons. I like they are grooming the young instead of giving in to pressure to "entertain" the old cadres with their last chances for personal glory. Ying needs Yang; and Yang needs Ying.

      And we have that Teochew guy. Although he is now out like when Steve Jobs was kicked out of Apple, I'm certain if Singapore is in a crisis, and we ask him, he will return. When Lao Lee asked his ministers on the reasons why they want to stay in Singapore and not somewhere else, this Teochew guy's answer moved Lao Lee ;)

      I am not so pessimistic on Singapore (neither am I complacent).

      I'm still here aren't I?

      Delete
    2. Aiyo... Hey, I never say they confirm will not work. Having doubts when results not yet shown, why not?

      We should not justify that the current n next generation leaders (as a whole, not just Tharman) are capable yet because there are simply NOT YET sustainable results shown! We still need time before we can judge fully. So I prefer not to conclude first.

      As for LKY and his team, it's obvious that results is remarkable because that is why we are enjoying the fruits now.

      Ok har.. beware the harsh Rolf is coming hor... hehehe... U know me hor...

      I know grasshoppers live in present n dun have a bleeding heart for others! hahaha...

      But if we are truthful enough to ourselves, isn't our existence all about love for people around. Or just me, myself n I?

      The sentence "I m not a bleeding heart!" essentially is also a way to cover the truth by lips service lar. Our heart still bleed no matter how frozen it is in Singapore but it's our Lips that prefer not to bleed, bcos of "face"!


      Delete
    3. Rolf,

      It's OK. Take all the time you need to clarify your doubts. No one hurrying you. No stress.

      Some need more time; while some have an instinctive read on people ;)


      Yes, its just you.

      Happy now?

      LOL!

      Delete
    4. that's y I m here... hehehe! Not all place can dump true comments! Wait tio ban or comments will forever kena moderation!

      Hahhaha

      Delete
    5. Rolf,

      You guys are the best!

      We can really 笑傲江湖 here :)

      Delete
  18. Who is that teochew guy?

    Sama sama, it's "our generation" of leaders that have not proven the mettle.

    I used to think our 55 years old star really has the heart and capability to be the next,until his health ...

    Now, not sure who anymore....

    I am Not so impressed with the blue though...

    If u can't play politics at local level, and 四面楚歌,then... With our neigbours... I think I can't sleep...

    They are complacent too early. Just a small victory and ...

    ReplyDelete
    Replies
    1. Friend,

      How you prove your mettle when your principal still around? Wait till you become principal then reveal true colours mah!

      Show hand too early means you are not a "team player"; and you will never be made principal ;)

      Must read your 春秋战国。


      How many parties in the wilderness can win, and more importantly,continue to hold the 山头 they have won?

      Look, if I super talent in the white camp, just like investing, I also more interested in the global macro affairs and events.

      You think I interested in your feedback that no shelter from bus stop to your HDB flat? Or too many rats in your backyard? What? Your neighbour plays mahjong till 2am in the morning?

      Its the men in blue that forces the attention back to local local issues. Without the hammers, you think lighting will speak in dialects and singlish during elections?


      This is life.

      When I need your support, I talk to you at your level. Look! I'm using your lingo. I'm one of you.

      When I need you to do as I say, I talk down to you - must study hard, be productive, be more creative, be entrepreneur, grow a 2nd wing, work overseas, retrain, lifelong learning... And please speak in proper England.

      It's for your own good you know? And they say it in perfect ACS or RI England ;)


      Politics is always "played" at the local level. Just look at the coming US election and Brexit.


      Delete
    2. Friend,

      Look at how Heng deal with parents, and the Sabah incident and how his successor botch the sucide case?

      See how Khaw release hospital date and work magic ...

      It's written all over the wall without being "at the peak"

      Delete
    3. Sillyinvestor,


      1. Good to remove the stupid ranking of schools. It's like the singular focus on quarterly profits for listed companies - we loose track of what's the main purpose of education in the first place...


      2. Emphasis on talent; not grades. Focus on skills; not qualifications. How can I not smile? Especially people like me with limited paper qualifications and atrocious grades?


      3. I've left the school system a long time ago. So not much feeling. I guess teachers and parents are more vested. Investors and traders in our community knew this already - talent and skills matter more in the markets!

      Delete
  19. adding one wink here: what are the scenarios that benefit from strategic asset allocation (AA)?
    tactical AA?
    dynamic AA?

    :)

    ReplyDelete
    Replies
    1. SMK,

      Strategic is about getting the wife out of sight so you can have that rendezvous with your mistress.

      Tactical is cleaning up and making sure no lip stick marks on your collar.

      Dynamic is not getting caught!

      Delete
  20. Wah!
    SMOL,

    Teaching married men how to live like you.
    You the very bad lah!

    No wonder you may have many GFs but not married.

    Of course you can lead a cow to the stream but can't really force the cow's head down to drink.
    Or any horse for that matter.

    But who bring out the idea of eating the apple in the garden of Adam and Eve?

    ReplyDelete
    Replies
    1. temperament,

      Insinuating I'm a snake?

      I'm ex-snake oil salesman. Its stating the obvious ;)


      You read what I've said carefully. See if it makes sense for asset allocation. Wink.

      Delete
    2. there is also snake on medical symbol.

      The Greeks regarded snakes as sacred and used them in healing rituals to honor Asclepius, as snake venom was thought to be remedial and their skin-shedding was viewed as a symbol of rebirth and renewal. Which is a good thing to keep in mind the next time you spot a medical alert bracelet featuring the seemingly sinister serpents.

      So snake is good or bad? Confuse?

      Delete
    3. temperament,

      He talking to you?



      LOL! This is one of our favourite army jokes/pranks :)

      Delete
    4. i'm not sure whether i'm fortunate or unfortunate, i "escaped" being enlisted for National Service as the G started with the 1st batch born in 1949.
      So i escaped army's jokes or pranks too.

      But i am not surprised what our Human Mind is capable of(the good and the bad).

      And do you agree that "all we really need to know we learned it in Kindergarden"?

      Quote:-
      “I believe that imagination is stronger than knowledge. That myth is more potent than history. That dreams are more powerful than facts. That hope always triumphs over experience. That laughter is the only cure for grief. And I believe that love is stronger than death.”

      ― Robert Fulghum, All I Really Need to Know I Learned in Kindergarten.

      Delete
    5. temperament,

      I'm a slow developer academically speaking (thank goodness I escaped the Pri 8 scheme). So I can't say kindergarten was enough for me.


      For my experience, the 10 years of basic education (6 primary + 4 secondary) have equipped me with the tools to explore and learn to my heart's desire on my own outside the mainstream academia.


      But I can identify with Robert Fulghum's words. That's the realm of grasshoppers ;)

      Ants will quibble:

      1) How do you grade imagination? Can't have a KPI on something we can't grade!


      2) Myths are stories, not historical facts! Yet they know not that history is propaganda written by the victors...


      3) Dreams are so vague... Must be more precise like SMART goal settings. We can only manage things we can count... Who is the visionary? Who is the manager?


      4) Hope? That's superstition! I've tried and failed. If I can't do it, that means you can't do it. Give up your silly dream. Take a safe job. Be like everyone else. Serve the Queen Ant.


      5) Laughter is so flippant... Be serious! When someone is in grief, you should offer your expert opinion on why they should do as you say. What? Listen for a change?


      6) Love. Ah... I tell people I love what to do all the time. And I do the thinking for them too!

      Delete
    6. Ha! Ha!
      You can never hide that you were an Ex-Snake-Oil Sale Man.
      Can you?

      But i am always ever ready to be the rat who can smell one(snake).

      Talking about the snake and the rat in the same nest?

      How much different can they be?

      And i still think you are one of the "Best All Round Bloggers"

      Psst...
      My wife think so too.

      2 words only.

      My compliments.

      i like.

      Delete
    7. temperament,

      Thanks :)


      I myself is amazed by the range of topics we talk "male chicken" here!?

      LOL!


      My compliments to your wife too. She got a good catch! Rats are extremely energetic and frisky at night. Wink.

      Delete
    8. Ha! Ha!
      But i am really one you know.

      Delete
    9. temperament,

      Ah! You're the 49 Rat. The sneaky and clever one who tricked the cat out of his rightful place from time immemorial ;)

      Beware of cat lovers!


      I'm the 67 Goat.


      And just like that, we have hit a century in comments. Coconut the snooker player would approve ;)

      Delete
    10. No lah!

      Year 1948 is Rat

      1949 is the Gu.

      The first batch of National Service.

      Is this your record so far?

      The 100 century comments.

      Ah... coconut too busy nowadays to talk (male chicken) to anyone?

      Delete
    11. Opps!

      1949 is for the 1st batch of NS recruits. You lucky guy!

      I've had a few century comments. But that's with coconut commenting. And you know his style of comments ;)

      This is my first century without him.

      Delete
  21. Love how the comments trail evolved away from Jared's initial question...

    They are both right.

    The relationship between stocks and bonds is anything but static, like nearly everything else in the financial markets. That's why being in the markets is so much fun.

    I think statistics have shown that over a very long time period, these two assets classes have a correlation that's more or less equal to zero.

    Still the two are positive together most of the time, but that doesn't mean they move in lockstep with one another.

    The true diversification benefit of owning both stocks and bonds comes out only during the down years. They hardly ever finished down in the same calendar years.

    It's just that stock returns are much more variable in the short term and bond returns are actually more variable in the long term.

    Nothing works always and forever.

    Stocks outperform bonds most of the time. That's why I prefer that asset class.

    However actual returns in the markets over shorter time frames are usually far from the long-term averages.

    If markets were consistent, there would be no risk. And if there was no risk, there would be no risk premium earned over the time in the stock market.

    Zero-Risk Bias anyone??

    ReplyDelete
    Replies
    1. Andy,

      That's why we don't set goals or agendas for brain storming sessions.

      There's no such thing as off topic at this watering hole ;)


      Statistics... Very long time period...

      I'm standing here blinking my eyes at you.

      LOL!


      Let's see. During the Greek crisis, Greek equities bombed. Greek bonds cratered also.

      During 2008/09, Singapore equities got whacked. Singapore bonds were still bid as safe havens!?

      Hmm... See? It's still back to politics!


      Zero-risk bias? Suit those who love to set precision goals and make plans in concrete ;)

      What mountain cat?

      LOL!

      Delete
  22. Jared, you blinking your eyes at me? Don't make me nervous. LoL!
    Luckily I do know what you mean, I guess.

    For me financial market history (yeah, it often comes packed in statistics) can be useful in defining and managing risk. But of course it will never be able to tell me how to make the perfect move at the perfect time.

    Oh well, politics. We can never shut out politics from investing. That's why we have to not only diversify across asset classes (less bonds, please) but also across geographies. Wait, you say politicians are the same wherever you go? That's why I have to diversify across assets classes incl. real money like gold and silver.

    What mountain cat are you talking about? You lost me there.

    One thing is for sure, there are no more mountain cats left over here in Switzerland (besides the ones in the zoos).

    ReplyDelete
    Replies
    1. Andy,

      It's so wonderful not to spell everything out, and yet the message is understood :)


      Having just complimented you, you stumbled on the mountain cat???

      It's from your own Zero-bias blog post (shows I got actually read your blog).

      It encapsulates what you have just written:

      We can cross the rickety bridge with all the risk mitigating measures we can plan for.

      Yet there's no way to know in advance there's a hungry mountain cat waiting on the other side to pounce on us!


      So how?

      Ask the tall German to cross the bridge first ;)

      Delete
    2. Jared,

      There, you see what a few days of scenic driving around in the Swiss mountain-lion-free mountains can do to me? I don't even recognize the mountain cat as THE mountain lion.

      Your suggestions is not such a great idea. After all the tall German is also a skinny German and might not be able to provide enough meat to distract the mountain lion long enough for the other hikers to cross safely. I propose the group should select another hiker to cross first.

      And thanks, Jared, for reading my blog. Now the other two regular readers don't feel so lonely any more.

      Delete
    3. Andy,

      Ah! You were at the land of cheese and chocolate?


      Mature female readers will be bemused with 2 grown men being afraid of a little "cougar", "Don't be afraid boys. Come to mama! I'll take good care of you."

      LOL!

      Delete

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