Monday 30 December 2013

Cultural Revolution and Benchmarking

Anyone remember the story of that taxi-driver who shared he earned $7,000 a month?

Then it was discovered the $7,000 were his best months; not the average per month... 

Hold this thought.

It never fails to tickle me pink when I read about self-professed long term "investors" are so enthused into comparing annual performance returns, benchmarking this, benchmarking that.

It can become like during the Cultural Revolution in China. 

"Next year my annual production will be 10% higher than last year!" village A chief shouts. 

"Our village will hit 20%!!!" exclaimed village B chief with an even louder voice.

Village chief C stands up in a superman pose, one arm on his hip and the other pumped up to the sky, "Our village will strive for 50% increase!!!"  (Is this or-yi-or Tarzan power or what?)

Everyone claps; everyone cheers!

Long term benchmarking for long term investors

I often poke this CW qian-bei whenever he writes about goal settings and KPIs. That's because it's a wonderful tool used by land owners and puppet masters on their minions. But why would free man use it on themselves? (That's another story for another day)

Long Term Benchmarking for Long Term Investors

But I have to give credit where credit is due. His kung fu deep or what?

Do you judge the performance of a marathon based on the timing of the first 2.5 km?

Annual performance results are merely milestones; not destination.
The minimum period for CAGR is about 10 years - around 2 Bull/Bear cycles. 

Huh? So long... No fun one! 

Well, if you want bragging rights that you beat Warren Buffett and Peter Lynch last year, don't let me stop you. Like they say, face is what others give you; shame is what you brought upon yourself. Cultural Revolution benchmarking! Who shouts the loudest wins (just don't ask about delivery...)

Far from being a party pooper, if you starting your journey, just have fun and make as many mistakes as you can during the early stages of your journey. Numbers per se don't mean as much as the learning along this journey of yours.

Whether your strategy today is dollar cost averaging, buying into low cost index funds, dividend stocks investing, DIY value or growth investing; it's mostly based on trust.  

A day will come when you will have your own mind-flip, epiphany, paradigm shift, "a-ha" moment or whatever you choose to call it.

That's when you can verify the actual results of your trust

Trust but verify.

This is the time you either exclaim "This shit really works!", or you go dejectedly "I have to make a change... This is not working as well as I thought...."

If anyone and everyone can do it, we would have to import more foreign talent as no Singaporeans would be working after 40. Or?

Short-term benchmarking for short term traders

Traders are more practical. Especially if trading full-time. You can't buy anything with percentages, so it's always about "show me the money!"

Day traders are more interested on improving themselves from an average $50 per day to $200 per day, to $1,000 per day trader. 

Something is not right if day traders ask for annual performance returns in percentages...

For swing traders, it would be like our tax-driver in the beginning - how much we make on average on a monthly basis..

Who uses annual performance returns in percentages?

If long term investors and short term traders don't use annual returns in percentages as their main KPI, who the freaking hell use it?

1) Professional money managers. Duh? Their annual performance bonus is based on it. Have you heard of year end "window-dressing"?

2) Salespersons and promoters. I'll let you figure this one out yourself.

Tuesday 24 December 2013

Saying Thanks for 2013 - Amazing Grace (Judy Collins with Boys' Choir of Harlem 1993)

This is the time of year many will be making new year resolutions and goals for the coming year.

Looking back, I've a lot to give thanks to.

1) Although mom has lost her peripheral vision due to glaucoma, I am thankful her normal vision is better than mine as she does not need glasses to read the eye charts. 

I am grateful to the good doctors and nurses of NUH eye centre for their care and attention to us during the past 2 years. I've seen interns becoming registrars; registrars becoming consultant doctors; and little girl nurses blossoming into young women. From the old Kent Ridge wing to the new towering NUH Medical Centre.

Progressing from 1 week several medical appointments, to weekly, monthly, quarterly, and now a followup review every 6 months. Phew! Mom and I can breathe easier now.

Tip: Readers who are above 50, and/or if you have family member history with glaucoma, do go for your annual eye examinations. There is no cure for glaucoma - we can only slow down or arrest it's effect upon early detection. 

2) Despite our fights and moments of separations; I am thankful the feelings of love and kinship have been strengthened - like aching and sore muscles after an exhaustive workout. 

I hate it when my elder sibling still treats me like a kid brother (I'm 46!), but do I treat my younger sibling similarly!? I tell mom my stomach is getting bigger, and the next moment she makes supper for me, like all moms do. Eat first! Don't go to sleep hungry... Who is taking care of who? I should be so lucky!

3) When everyday is Sunday, Sunday soon loses its appeal. I am grateful for my younger sibling for coming back during the weekends so I can take my "off-days" by working during the weekends.

Married women living with in-laws may understand this irony.

Thankful my new colleagues have accepted me into their team. Not the best of start when on my first day, people asked me: "We have enough staff oredi. Why you come here?"

I realised why after the first week. One month later, one of the full-time colleagues was fired. Grateful my street smart skill of reading people and business situations is still intact. Everything happens for a reason.

4) It's exactly 3 years today that I wrote my first blog post in Athens. Along the way, I've got the good fortune of getting to know some amazing people in cyberspace. Some of whom are complete opposites to me - be it education; work experience; spiritually; politically; and philosophically.

Wouldn't it be boring if everyone here is the same?

Like changing life stages, my blog posts have also evolved over the years. Thanks for the company readers!

5) Last but not least, I would like to share this Amazing Grace song to express my state of mind now.

Merry Christmas everyone! 

Friday 20 December 2013

Covered Short

Have you tried shorting stocks?

If you interested, do be aware that only amateurs will use SGX's securities borrowing and lendiing programme (SBL).

How I know?

I was that "sotong" (dumb) amateur. 

If your portfolio is big as in landed class, and you want to borrow shares to short, ask your prime broker. The rates are way much better than SGX's!

If your portfolio is more HDB like, do check out CFDs instead.

Trust but verify 

Since I learn better by doing, I've done both SBL and CFD. I encourage you to do the same so you can form your own opinions. Come to think of it, "trust but verify" is recommended for all things in life! OK, except for spirituality...

There is also this naked short and cover on the same day technique used by day traders. That's for the "professionals". Don't play play with naked shorting. If you didn't cover on the same day, SGX will "punish" you. Try it if you don't believe.

Covered Short

We often see terms and conditions and caveats way down at the bottom in fine print for promotional and advertorial articles. (Hello, this is not an advertorial OK?)

I'll put mine here before you read further:

1) You own some core equity holdings for 3 or more years.

2) You are familiar with how they react during different market sentiments.

Examples leh!

OK, look at your core holdings during May 2013. On the suggestion of "tapering", notice some of your holding drop quite a bit, some drop only slightly, and some hardly moved at all. That was your full-free rehearsal on how your core holdings react during a change in "market sentiment".

Look again for the past 2 weeks. That was our 2nd mini full-dress rehearsal. Did your core holdings react in a similar way? OK, drop wasn't as big as in May but notice the similarities when it comes to volatility of your core holdings?

Now let's say market sentiments recovered and STI went back up to 3200 or 3400.

In 2014, if you notice another shift in "market sentiment", you now know which core holdings can be a good candidates for doing a "covered short".

Short the stocks you already owned?

You only need to "borrow" stocks to short if you didn't already own them. 

No need SBL, no need CFD. No naked shorting.

Just sell (short) the shares you already owned!

Simple right?

Then buy back the same quantity of shares you have sold at a lower price (hopefully).

Warning: It can go horribly wrong. After you sell, the stock can go ballistic up up and away!

Hey! Don't look at me! Now you understand my 2 caveats above. You have to have an edge over other newbies by intimately knowing your own core holdings. If you don't understand your own core holdings, blame who?

Financial Engineering

I own a core holding bought at $1.00

I "covered short" (sell) it at $1.20

1) If I close my "covered short" by buying-in at $1.05, I would leave my original position at $1.00 as an open position. I'll book the "sell $1.20 and buy at $1.05" as completed transaction with booked profit of 15 cents.

2) If I close my "covered short" by buying-in at $0.90, I would book "sell $1.20 and bought at $1.00" (my original position) as completed transaction with booked profit of 20 cents. And record $0.90 as the "new" entry price for my core holding. 

This is optional. I just liked the idea of seeing "green" in my portfolio. Hate to see "red" losses... Also, it's motivating to be able to lower my entry prices without resorting to "averaging down".

Nothing new at all!

Some of you maybe screaming now - that's nothing new! Just old wine in new bottle!

You are absolutely right!!!

Don't be fooled by terminology or labels. Some call what I've described as Rounds 1,2,3,4. Some call it buy sell; buy sell. Some call it Trading around a core position, etc.

A rose by any other names is still a rose.

So why I call it covered short?

Men would understand. Even when we are with our wives or girlfriends, when a pretty babe walks by, what do we do?

Many times when I sold a core holding with the intention to buying it back at a later date (preferably at a lower price), I get distracted and bought another stock instead or completely forgot to buy the sold core holding back...  (What a cad I am!)

After several bouts of seller's remorse, I now treat those core holdings I temporarily sold as "covered shorts". 

When we short, we have to cover it back. Since it's a "short trade", plus my financial engineering "incentive", I am now more focused and motivated to find a good buy-in price to complete the transaction.  

Protecting profits

This technique is mainly to  protect my unrealised profit.

New readers may want to read more about protecting profits here:

The 3 Ms Part 2 - Money (episode 2 of 2)

Remember: If the reasons you bought a stock are no longer valid, then after you sell, don't buy it back!!!

This covered short technique is when you still have faith in your core holding. You are merely seeking a short separation to make the heart fonder (婚).

Monday 16 December 2013

How many more years do they have?

I came to know of a group of mainly retired teachers and ex-principals that gathers regularly at one of the food centres in Queenstown for coffee and chit-chat in the mornings.

Every alternate month or so, there will be organised "excursions" up north to Hap Chai, or down south to Batam. Wink, wink. 

Yes, they are all males.

Some on reading this may get their blood boil... How could these "educated" gentlemen, who should know better, do such things that may cause grief and shame to their families? At their age some more!

They should be role models or paragons to the young. Shackles of labels getting hurled out...


I once wrote that I no longer nag at my dad for smoking or drinking. I now even enable his habits by giving an allowance to do whatever he likes with it - there are no terms and conditions attached.

Despite taking medicine for high blood pressure, dad his outlived many of his friends and relatives who had healthier lifestyles than him - vegetarians, healthy living fanatics and all.

From him, I've learned life is not a straight line extrapolation. 

Morality, ethics, legality - many of these concepts I thought I knew have taken a new meaning once I put a human face on them. Something happened what I hit 40.

I begin to see things from the other side. Try walking in the shoes of others. And less seeing things from the "I am the centre of the universe" perspective. You can say I have discovered "religion"!?

Which is ironic since the acts I now "don't mind" from those retired gentlemen contravene with most mainstream religions' teachings.

How did I reconcile with myself? 

Just pause and think for a while before you hurl stones at these elderly gentlemen - how many more years do they have?

On another related topic, I've always wondered why people in their 80s still queue to buy Toto?

Now I get it.

It's no different from stories about retired people who had saved and worked hard all their lives, do all the proper "safe and secure" stuffs, no speculations. Safety first!

Guess what? 

When they get their hands on their retirement money, they start to "speculate" (of course they will call it investment) on risky stuffs with an all-in make or break mentality?

1) Overseas properties, land banking, etc.

2) Gold trading or other get rich quick "promotions". Ostrich farms anyone?

3) And of course after staying away from the STI for 30 odd years, they now fancy they can be profitable equities investors after reading a few books or taking up some seminars or courses. (Don't they realise the people taking the other side of their positions could have 20 or more years hands on investing experience over several stock market cycles than them?)

4) Or they suddenly discovered their "dormant" entrepreneur spirits and plonk down their entire nest eggs on new business "excursions". (It's never too late; but why now and all-in?)

It's called capitulation.

When you read the regrets of their stories for those who lost it all, one common thread appears:

These "safety first" retirees have had enough of seeing their classmates, colleagues, neighbours, and relatives getting richer than them by taking risks and speculating. At their advanced age, they see it as their last chance to "catch up". 

How many more years do they have?

Hidden behind those words, there's a needle in their hearts: 

"If others can get rich through XXX, why can't I?"

Saturday 14 December 2013

Man in Pink Tutu

Got this from my friend's Facebook.

This guy travelled the country in a pink tutu just to make his wife laugh during chemo... 

Girls, guys like him are keepers.

Let's do our bit to share more uplifting stories of joy, happiness, and love. 

And drink Chicken Soup!

Wednesday 11 December 2013

Gurkhas, Riots, and Emergency Funds

Mt Vernon crematorium is the resting place for my maternal grandma.

I visit her a few times a year; whenever I feel like saying hello. (I don't wait for Ching Ming; I listen to my heart. Visiting her is not an obligation)

This bond started way way back. 

I remember when grandma went back to China for visiting before I enrolled in primary school, the many days I've stood looking out the window crying for grandma to come back - especially after getting a beating from mom...

When I read stories of how children cry their hearts out when their maids have to return home, I understand that feeling.

Next to Mt Vernon is the camp for our Singapore Gurkha Contingent.

I often see these young warriors when I visit grandma.

After Sunday night's event, I am very glad and thankful we have the services of these professional warriors living amongst our midst.

Sometimes we forget the original purpose of an emergency fund, and through the passage of time, we may get too cute with it, without thinking through the consequences.

Imagine some smart aleck, doing a straight line extrapolation, may suggest this:

"Since there's no riots in Singapore for the past 40 years, why spend all these money in maintaining this Gurkha Contingent for an event that may or may not happen?"

An alternative example:

You own a car. 

You got bitten by the "passive income" flavour of the year bug.

So smart of you! 

Rent out your car to a car leasing company, while you switch to public transport. You earn the carry difference.

Now you go telling everyone how you turned a liability to an asset with positive free cash flow every month! 

Yes, enjoy that euphoric feeling while it lasts. Contrast it with the feeling of panic and frustrations when you need your car urgently back to ferry your sick child, injured wife, or aged parents during a medical emergency.

What is the purpose of an Emergency Fund?

We all have to answer that ourselves - depending on our personal situation and what we value more in life.  (Goals to reach financial success quicker versus people first?)

There will be whispers to our ears and well meaning advice on how much we can save by not having an emergency fund; or how much more we can earn by converting this emergency fund into an opportunity fund.  

You decide.


Monday 9 December 2013

3 sisters

Last night, while working as retail sales over the weekend, I saw a sight that reminded me of what's really important and beautiful.

3 adult sisters came into the showroom. Early to late 30s?

One was in a wheelchair. She looked the youngest. 

The eldest one was pushing the wheelchair and being the "legs" for her youngest sister.

The middle sister is the "scout"; walking in front and looking out for things of interest.

There were also 2 boisterous young girls of maybe 7-8 years old. Very pretty. Running around the showroom, touching, fidgeting, and playing around with the merchandise. 

I soon figured one of the young girls belonged to the adult middle sister, and the other child belonged to the youngest adult sister in the wheelchair. Ah! Cousins!

From the way the youngest adult sister was moving (or rather not moving) in the wheelchair, I am guessing it's a neck down paralysis kind of injury...

"Mommy, mommy! Look at at this!" 

"Just tell me," said the mother in the wheelchair. She can't turn her head...

I felt a thug in my heart.

"No mommy see!"

"Just tell me, dear."

Maybe the child is too young to understand; but I am happy they have a normal mother and child relationship. Hope the young child will grow up not changing just because her mom is "different".

I felt ashamed. 

I was perfectly happy and glad my mom came to visit me during canteen breaks during my primary school days. Looking back, this is such a blessing as nowadays, not many children can have such a relationship as there are fewer stay-at-home moms now. 

But in secondary school, I started to feel self conscious to be seen with my mom in public. Mom not wearing the "right" clothes. Not talking in the "right" accent; etc.

I changed. 

My attention now turned to the 3 adult sisters.

How often do we go out shopping with our adult siblings? Young is one thing. But when we have our own families and careers, how often do do stuffs together? 

I guess other than lunch or dinner gatherings in restaurants, it's a rarity.  
The 3 adult sisters were being themselves. 1 will like an item; 2 others don't like. 2 like; 1 disagree. There is no our poor little sister is handicapped, so we give in to her crap pretentions.

As usual, surrounded by 3 ladies, I chipped-in with my offbeat brand of banter and flirtations (Hey! Their hubbies not around).

I did a small sale; but more importantly, I think I've given all 3 adults sisters some fun in their Sunday afternoon shopping. 

I am mirroring what the other 2 healthy sisters were behaving towards their invalid sister.

The more we treat someone "special", the more were are in fact emphasizing their differences.

Please hor! It does not mean we don't give up our seats to seniors or pregnant women. That's common (can be most uncommon in some people) courtesy.

Hard to express in words. But I hate it when people patronize me... Which usually begins with "You people..."  (Hence the "I hate labelling" in my blog) 

And I hate myself even more when I fell into the "you people" thinking (for that split second) this morning reading the paper on the riots in Little India last night.

Tuesday 3 December 2013

Go stand outside the classroom!

I am not naughty as a child; just playful.

And forgetful. And mind drifter (sitting next to class window how not to wander off?).

So during my primary school days from primary 1 to 3 at Hua Yi Primary School (torn down for HDB BTO), it's a common sight to see me standing on chairs, tables, or outside the classroom as "penitence".

Forgot to bring textbook - stand on your chair!

Forgot to do homework - you go stand on the table!

Mind wander off while teacher talking - chalk got thrown to my head!

Draw cartoon during class - Jared! You again! You go stand outside the class!

The worst is when teacher you like (she cared about me as a real person) walked past.... 

"What now Jared?"

"I draw funny picture of Ms Ong (old maid in her 50s; like to slap people. I don't like her). Got caught..." 

"You har!"

And during the 70s, we have to brush teeth at the drains every Monday. Of course I would forget to bring my brush and mug once in a while. This time power!

Those who forget will get "invited" on the school's stage.

There I am, standing on top overlooking the whole school down below. Every school mate kneeling (squatting) by the drains with foams spewing from their mouths.

That's not a punishment! That's the closest I've come to feeling almighty and all powerful!

But strangely, after primary 3, I don't get into such punishments anymore...

I think that's when I discovered shame. LOL!

Or may be that's when I started noticing girls....

You know what?

When I got my first standing ovation after giving a speech to my hundred odd co-workers in Shanghai, my mind suddenly flashed back to my primary school days standing on the stage...

Steve Jobs is right.

It only made sense connecting the dots looking back.

Little did I knew then I was getting "practice" on overcoming stage fright, how to give presentations without the audience's mind wandering off, and how to read people (try drawing caricatures of people you love/hate, you be surprised what you see). 

Hey! I did learn something from school afterall!

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