Monday 27 June 2011

Bacon and eggs - difference between committed and involved

The pig and hen were good friends in a farm.

One lazy sunny afternoon, while shooting the breeze together under the shade of the old oak tree just outside the barn, the hen had an inspiration!

“Hey pig! Would you be interested to be a millionaire?” said the hen, fluttering her eye-lashes in a most alluring manner.

“What? What do you mean?” The pig awoken from his stupor…

“Wake up! Wake up! Pay attention!” the hen nudging the pig as she spoke. “If we work together, we can be millionaires!”

“How?” said the pig with a smile. The pig always had a soft spot for the hen.

“There’s a new casino opened just outside of town. We just have to place a million dollar bet on the roulette table – black or red.”

“But we don’t have a million dollars,” said the pig scratching his head. But he is hooked. The pig has always envied how some of other pigs managed to have all the money in the world; and they are always in the company of the most beautiful hens and chicks of the farm. Yes, the pig wants to be rich like them!

The hen snuggled up to the pig and gently tapped her feathered wing on the pig’s head. “Silly! We just need to borrow it from the bull from the farm across the street. I borrow; and you act as my guarantor.”   

“But what if we lose the bet?” quizzed the pig.

“We won’t!” said the hen confidently. I’ve been to this get rich quick seminar and I have the magic formula!” All we need to do is to wait for 10 straight outcome of reds, and we place all our money on the next 11th turn on black!” The hen was quite excited and was clapping her wings as she spoke. “What are the odds of red appearing again after 10 consecutive turns?”

The next day, both the pig and hen visited the bull from across the farm. The bull was the notorious money lender of the area. In his youth, he went overseas to Spain and has gorged to death quite a few bull fighters there. Now retired from bull fighting, the bull has diverted his attention to the lucrative business of “private finance”.

“I can lend you the money,” said the bull sucking and blowing his cigar. “But what collateral do you wish to pledge?” The bull was checking the hen out from claw to beak… The hen cuts a pretty face you can say!

“Well, we can pledge ourselves. If we don’t pay up, you can do with us whatever you want.” The hen put one wing behind her head and the other on her hips.

All this while, the pig just stood there frozen with fear of the size and overpowering presence of the bull, and did not pay attention to what the hen had pledged on his behalf. Blinded by lust and greed, and now fear!

I guessed you all knew the outcome of the story. The pig and hen lost their bet at the casino and was rounded up by the bull.

The bull made the hen his mistress; and the hen had to surrender all her eggs to the bull as payment. As for the poor pig, the bull sold him to the local diner together with the eggs from the hen.

There you have it - bacon and eggs!

Can you see the difference between being committed and involved?

The pig is committed, while the hen is involved.

Do you see parallels between the above story and you?

1)     Your relationship?  

2)     Your business partner?

3)     Your work place?

4)     Your investing/trading journey?

Friday 24 June 2011

It’s better to start young

Yes, it’s better to start young to me. (But not so young that its child labour!)

The Singapore business times have ran quite an interesting series of articles on young investors in Singapore.

I think it’s a good way to foster “entrepreneurship” and “self-reliant” amongst Singaporeans. Look beyond the usual trodden path of:

Study hard, get good grades, get a job in MNC or Govt, get married, have children, and work for life…

I started “late”. OK, I tell the truth! I am more a late developer (some call it slow. Hey! No labeling!) I started investing in stocks at 32 years young. Bought my first HDB property even younger at 35 ;)

Imagine if had started my investing journey at 25 years old. I now would have 20 years of real battle scars and experience. Not book theories and opinions!

I probably would have failed and lost all my investments at age 35. But so what? I can take (or continue with) a job and claw back by age 45. Now imagine peak earnings power coming together with street smarts? Alas, it’s not meant to be. Past is past. I must look forward.

Just take a simple test if you are in your mid 30s or 40s. Look for your cohorts that bought their first HDB in their 20s. They probably have got 2 bites of the HDB subsidized "cherry” before you bought your first HDB. Who is sleeping on bigger “paper gains” or see it in another way – bought at a cheaper price? (Missed the Singapore Great Sale?)  

Don’t get me wrong. I am not advocating risk-taking for the sake of risk-taking.

But imagine being ultra “conservative” all through life, and at age 55 or 65, when we have “big” money in our hands, we start to invest in “exotics” without full understanding of their true “risk and rewards”:

1) Bank’s structured products (Bank’s advice can’t be wrong!)

2) Synthetic swap-based ETFs (Guru say ETFs safe what?)

3) Land banking

4) Fine wine investing

5) Starting/investing in a new business (I’m on thin ice here)

6) And so on…

By themselves they are no different than any other investments. But imagine doing all the above at age 55 or 65 with the experience of a “newbie”? Won’t the odds of success be greater if we have 20 to 30 years of prior investing experience (both failures and successes)?

Ah! Starting young’s cost of failure is much smaller than later. Fall down from riding a bicycle at 25 or 35 is one thing (bruises and hurt ego the most!); but at 55 or 65… Hospital and Surgical plans anyone?

P.S.  For all the singles out there who can’t afford private housing, I know I know… Must wait till 35, buy resale, and cannot qualify for HDB concession loan… What to do? But life is not about all about money and what’s fair or not. Life is… (This you may have to figure out yourself)

Tuesday 21 June 2011

Roy Orbison - Oh Pretty Woman

I love this song! It's a Freudian reminder why I do what I do everyday. Cut the financial freedom bull-shit away!

Now your turn:

Everything I do, I do it for ..........  (you fill in the blanks)

Thursday 16 June 2011

My aim is to have my cake and eat it – a 3 room HDB flat for free!

I would like to follow up on my previous post on "Are HDB flats affordable?" and share my experience in using the max 30 years loan when I don’t have to.


1. Numbers have been rounded up for simplicity’s sake.
2. CPF ordinary interest = 2.5% per annum (ignore the extra 1%
    for the first SGD 20,000)
3. OCBC bank interest = 3.75% per annum (first 2 years’
    promotional interest below 2% we ignore)

In late 2003, I bought my beloved 3 room resale HDB flat in Queenstown. Even though I have SGD 100,000 in my CPF ordinary account, I still took out a 30 years OCBC bank loan for SGD 100,000.

Why pay bank interest of 3.75% per annum when I can pay in full and save on all the interest payments? 3.75% times 30 years is paying more than double the principal!

Scenario A (pay in full up front; no debt)

CPF = SGD 100,000           1 x HDB                      No debt

Scenario B (max out 30 years loan period)

CPF = SGD 100,000           1 x HDB                      Bank debt = SGD 100,000

I chose scenario B for the below reasons:

1)   By leaving my SGD 100,000 in CPF, it’s earning a risk-free return of 2.5% per annum. So the arrangement is like the interest offset loans by some banks. The reality interest I am paying OCBC is actually 1.25% (3.75% - 2.5%). It’s a small price to pay for the “flexibility” of having funds around when opportunity knocks!

2)   I maxed out the 30 years loan period so as to make my monthly payments as small as possible – SGD 500. This way, even if I am retrenched or met with some unfortunate accidents, it’s not a heavy burden to service (and cheaper than renting). If I have to service SGD 2,000 or 3,000 monthly bank loan payments per month (now that’s an anchor!), would I dare to “quit” at age 44 end of this year?

3)   I am confident to find CPF approved investments that can return higher than 3.75% per annum. It’s a sort of “carry trade”.

4)   In the event that the bank interest rate goes up, and/or I can’t find any suitable CPF approved investments that can exceed my hurdle rate of 3.75%, I can always make early full payment of the bank loan any time after the initial 2 years lock-in period. So it’s minimal risk. Best of all, I have the flexibility to decide (or I think I do)!

OK, that’s the plan and theory. Show me the money you say! Let’s see below for the current status 8 years later:

Scenario B - 8 years later in 2011 (max out 30 years loan period)

CPF = SGD 130,000           1 x HDB                      Bank debt = SGD 75,000
Note: The SGD 30,000 growth in CPF and reduction in bank debts were all paid out of realized capital gains from the original CPF SGD 100,000.

Nothing fantastic compared to those who doubled or tripled their investments during this time. But my plan is to repeat this “carry trade” till 30 years later when I reach 65 years young.

This way, I would have a fully paid-up 3 room HDB flat, and my CPF ordinary account will be like if I never bought a HDB flat at all – earning the full CPF interests.

I have my cake and eat it!

Putting things in perspective:

  • This is nothing new. It’s like those people who bought a 2nd rental property and using the rental to pay off the bank loan. X years later, you would have a “free” 2nd property too! (I monkey see, monkey do)

  • For those who own private property, you are luckier! You can pay in full or shorten the bank loan without fear of losing this “flexibility”. You can easily take out a home equity loan if an opportunity drops from the sky! HDB does not allow home equity loans. That’s why I have to “work harder” to by-pass the official rules… And avoid early bank repayment whenever possible!

  • My bank loan amount is chicken feet to many of you. It’s probably just an equivalent car loan…

  • I am just sharing my reality experience for those who may be interested to compare it with alternative journeys by others. I am not selling or promoting my way – which is nothing new at all. I am a believer of using OPM (other people’s money). And after 44, I will be tapping OPT (other people’s time) too.  Wink, wink.

Monday 13 June 2011

Sometimes it’s better to be “stupid” and “wrong”

I would like to share a “true” story that my grandmother used to tell me when she was alive.

My grandma had a widowed “jie-mei” (sister) friend who stayed at Punggol in the 1960s. This friend stayed in an attap (wooden) house like many Singaporeans who stayed outside the city then. (Singapore got city meh? Hey! My story or your story?)

This jie-mei auntie worked hard and managed to save SGD 2,000 in her late 40s. She was worried that putting this “fortune” under her pillow is not safe in her rickety attap house.

Being illiterate and not financially savvy, plus her strong distrust of banks, she decided that the safest way was to “invest” this SGD 2,000 by buying a plot of “swampy” land just outside her attap house in Punggol.

Her reasoning is simple – thieves can come and rob her, and fires may burn down her attap house, but that piece of “land” will never be lost!

Of course once the news of her buying that piece of “swampy” land spread to her neighbours, relatives, and friends – everyone was quick to offer their “well-intentioned” advice:

“That land can’t even grow vegetables, do you know?”

“Ah yeah! Better put the money in bank, can earn interest!”

“Why you so stupid? That land nobody want; you so silly to buy it!”

“Cannot build attap house on swampy land… If not you can at least earn some rental income. I feel sorry for you…”

And on and on… Everyone seems to be an “expert”. Somehow they did not notice that this jie-mei aunty never asked for their advice. All she did was to listen patiently and nod her head and laugh: “Really? Oh! I so stupid! Silly me!”

10 years passed. Lo and behold! Singapore in the 1970s was undergoing rapid redevelopment. And this development reached all the way to “ulu” (backward) Punggol too. A developer bought the land surrounding her attap house and village, and her “swampy and useless” plot of land was the last one in the way.

Guess how much the developed paid this jie-mei auntie for her swampy land?
SGD 100,000!!! Remember this amount is not a small amount in the 70s! I think enough to buy landed bungalow!

You do the math. A 50 bagger return over 10 years. Compound interest is equivalent to around 48% per annum (even better than Warren Buffet in % terms!)

And in money terms it’s the equivalent of getting a SGD 10,000 per year income for 10 years with an initial investment of SGD 2,000. Now how many of the gurus out there giving seminars and selling books have this kind of dividend/bond/rental yield? No leverage needed some more.

This jie-mei auntie gave her 3 sons most of this windfall money to start their own small businesses. And in her retirement, she was happily visiting Taiwan, Hong Kong, and Thailand. Not so bad for an illiterate not so savvy widow right?

That’s why my grandmother told me this story. In her voice, I can sense her envy and wonderment of the “luck” of her jie-mei friend.


This personal story of my youth was inspired by a chat on LP’s chat box last Friday afternoon.

There’s a gentleman let’s call him “nevetS”. He mused that in 4 years time, he hopes he can sell his HDB (public housing) flat for SGD 450,000 – at the same current market price today.

This remark attracted lots of “well-intentioned” advice (and mockery in disguise. Not so cool leh). And many were skeptical whether he can sell at the current price 4 years later. All of sudden, everyone is a bear on the Singapore property market?

All this new found insight just because our Housing Minister is trying to talk down the red-hot property market?

In Sept 2009, when I started to tip-toe back in the equities market, I was mentally prepared to let my money be tied in the equities market for the next 3-4 years. I thought this great recession will last that long! Little did I expect the STI (Straits Times Index) will double 1.5 years later? Not that I am complaining!

Now how many forecasted this quick turnaround of the STI during 2009? (For those who did, thumbs up to you!)

OK, now switch back to the property market. Can it not happen that in 2012-13 we have a correction, and in 2014-15 the property market recovers and property prices end up higher than in 2011?

Why so sure nevetS is “wrong” and you are “right”? You got attend fortune telling for financial freedom seminar? I am boldly predicting that forture tellers will soon join into the seminars fray if the market demand remains strong! Once upon a time Options and Multi-level marketing seminars were everywhere. Then they were replaced by Forex and Real Estate seminars. If history is anything to go by, we will soon find old wine in new bottles! Hey! Just got another one – invest in fine wine for financial freedom!

nevetS, you bought your HDB during BTO (Build-to-order) at SGD 200,000, while those that come after who bought during WIS (Walk-in-selection) paid SGD 300,000.

In the words of my Counter-Strike days: “Song bo (Happy)?”

I already know what nevetS will say J 

nevetS, whatever happens 4 years later is icing on the cake. nevetS, you go man! 

Friday 10 June 2011

Kenny Rogers - The Gambler (My trading modus operandi)

This song reflects my mindset when it comes to trading. It's inspired from a recent discussion at 5 cents 10 cents blog.

When I am at the "table", I focus on 2 things:

1) The cards on the table (fundamental analysis)

2) The faces and body language of the other players (technical analysis)

But one trading edge I have now after paying my school fees is this money mangement technique from the song:

a.  Know when to hold (Everyhand's a winner, and everyhand's a loser.)

b.  Know when to fold (Cut loss)

c.  Know when to walk away (Last Thursday, I sold a unit trust at a small profit to raise my cash position from 25 to 35%)

d.  Know when to run! (Get back to cash like no tomorrow? Hope that day never comes!)

If this makes me a gambler, so be it!

P.S.  Profit is not profit until it's safely in my pocket.

Wednesday 8 June 2011

Lies, damn lies, and statistics!

Recent IPO statistics on the yield:

FY 2011 = 5.30%

FY 2012 = 5.51%

Take at the look at the charts below.

Big growth for the 1st chart?

Since I prefer round numbers, the same statistics in my mind graph is as the 2nd chart.

The difference between 2011 and 2012 is only 0.21% lah!

Is this example similar in our daily lives? You bet!

In my work, I always remind my colleagues to round up our Key Performance Indicators (KPIs) to a big round number – don’t create the “illusion” of precision; where none is needed.

I am now working in supply chain, so one important KPI is total lead-time. I always hate it when I see lead-time written as 17.65 days!? What is that?

This “long” lead-time means it’s likely by ocean transport  mode. So in reality, we just need to know whether the vessel/container will arrive in 17 or 18 days will do.

Even if it’s airfreight, we just need to know the hours and minutes. Estimated time of arrival is at 22:30 hours. Do we need to put in the seconds? You mean airport so precise?

Those who like to “add feet to snake” are usually people who have been working in the air-con office for far too long, and may have lost touch with reality on the ground… (Poor thing. I must bring them out more often!)

Of course in some industry, precision is the difference between life and death – like working in the nuclear industry or when undergoing brain surgery. But in most other industries, we don’t really need precision. It’s all marketing hype!

Let’s take photography. We compare the sharpness of lenses by the number of eyelashes visible in professional magazines. Do we count eyelashes when looking at photos in real life?

Don’t get me started with pixels…. If the biggest print-out we ever print is A4 sized, can you see the difference between 6 and 12 mega-pixels?

And for gamers, the video cards are evaluated by frames per seconds. But can the human eye see the difference between 40 fps and 60 fps? For cartoons, we only need 24 fps to get the natural motion effect ;)

Yup, the same marketing trick is used in finance and trading. All we want as marketer (many moons ago I studied marketing…) is to get you to “up-size”. And McDonald does it best! “Would you like to up-size sir?”

Just be aware next time you look at statistics. You may want to take a look at my other post on percentages: "I dont want percentages I want money!"

I am very happy to see many finance bloggers put their portfolio performance monthly. I find it a great way to gauge the mood of the market – I am more interested to see the asset allocation (how much cash, how much equities, how much bonds, etc); or to see what stocks they are vested in (growth, defensive, cyclical, etc).

I don’t really care whether it’s positive or negative. Or increase by what %. Our portfolio sizes are different, strategies are difference, personalities are different – what’s there to compare?

But I am sure some readers will get a kick out of this “benchmarking”, and declaring I beat so and so by 0.21 percent! It’s the Singapore habit – we need to be number 1!

Hey! In the words of my hokkien army friends: “Whatever makes you happy!” or “Hua hee du ho!”

Monday 6 June 2011

两忘烟水里 – 天龙八部主题曲

This is my favorite 黃霑 song. Beautifully sung by 关正杰 and 关菊英.

It reminds me of the time when I was with my significant other at Hangzhou's west lake.

Loius Chia's sword fighting novels are in fact romantic novels in disguise - although feminists might think otherwise. But it's the ultimate male fantasy flick.... LOL!

I like this 80s TV version of Louis Chia novel. (Hey, don't laugh at the finger laser leh! At that time, it's state of the art effect!)

For those of you who are fans of this story, who are your favourite male and female characters? And why?

Thursday 2 June 2011

Dog in the manger

In old Macdonald’s farm, all the farm animals lived together peacefully in harmony.

But the peace was disrupted when farmer Macdonald adopted a new male dog one day.

The dog grew up in the city where he had to struggle and fight for his every meal. It’s a dog eat dog world of existence…

Now at the farm, the dog was lovingly cared for by old Macdonald; well fed and showered with love. What a difference from the dog’s previous life! No longer is the dog “branded” a stray. Now he is farmer Macdonald’s 2nd in command.

Instead of being contented with his new found good fortune, the dog grew dissatisfied more and more each day. What gives?

The dog noticed old Macdonald gave to the horses and cows hay every morning – but not to the dog. Old Macdonald is being partial! The dog mumbles…

This jealousy brews and stews in the dog until one morning it just erupted.

The dog rushed to the manger where the hay was kept and jumped on top of it. When the horses and cows tried to take their morning breakfast, the dog barked and chased them away.

The dog thought – if I can’t have it, then others should not have it too!

There’s a little of this “dog in the manger” in all of us (OK, only me!)

Instead of seeing how our lives have improved, we keep on comparing what others have that we do not have…

And if we can’t have it, we do our best to bring others down to our level. We have “beggar thy neighbour” attitude.

Or we cast innuendos and aspersions on how they got to be better than us.


Just look at how we the citizens behaved during the last election.

Roar of the heart from Jared Seah - 5th descendant of a Chinese immigrant and I have a sister

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