True Story - Selling is Harder than Buying

Couple of weeks ago,  Lady, You Can Be Free blogged about her struggles with selling Starhub. LYCBF mentioned that she could have done better with the art of selling. That is something that i can empathize with because i have a similar story. It is definitely no where near her absolute amounts so that might have make my emotions a bit easier to handle.

Screen from Yahoo Finance. Annotations mine.

The Buying
Back in September 2013, i bought Singpost at $1.26. Main reason was for the stable dividends that their cash flow could sustain. The rest of the numbers look okay too, including net cash position, growing businesses and that bit of eCommerce exposure. 4 years ago, eCommerce was growing massively which i felt could counter the weak domestic mail segment.

At that time, i just started dipping my toes into the markets and that position was about 25% of the capital then with 0 cash position in the portfolio. Definitely the newbie mistake of I can do anything thought.

Everything was stable and expected for a couple of quarters until 2nd quarter of 2014. Suddenly, price took a steep climb. I recall back then thinking that it was just sentiments and i should lock some profits when i could. Few days into that spike, i sold half my stake at $1.495 only to see a trading halt a week later. That's when Jack Ma's Alibaba took a stake.

I remember i was full of myself thinking that i was in before Jack Ma. How dumb. Because, the share price went up to almost $2 in October. That is a 40% gain that half of my stake missed out on. I felt so much regret in making that sell decision and that is the greed devil whispering into my left ear. The right ear was trying to console myself that i still have a stake that is now $2.

Piling on to that eCommerce story, i was convinced that Singpost is no longer just a stable company. It actually has a growth story especially with Alibaba backing them up. The voice in the head became - let's just hold on to this permanently. Anyway, the dividends are still coming, my cost is low so i have ample time to disembark this ship with a profit regardless.

It seems like nothing could go wrong and share price marked a high of $2.16 in January 2015.

Then, the oil crisis kicked in and the share price corrected together with the market. It was only until early Nov 2015 with the quarterly results coming in that i first spotted red flags. The company was struggling to grow the revenue despite rapidly rising cost. The net cash buffer dropped big time and i remember looking at it a bit concerned. To be fair, it was still net cash at this point. But the market did not like it as much and sent it way down.

Dividends are still maintained so i held on but i felt really bad for all the profits that i "returned" to the market.

CEO Resigns
Out of the blue, the CEO quits citing new endeavors. After a series of acquisitions, it felt to me like this company is next to get the typical CEO treatment. Two weeks later, we get announcements about corporate governance issues. Putting two together, it seems the new endeavor of his includes escaping a sinking boat.

That pulled share price way down to $1.335. Looks like back to square one for me.

And then the results came in Feb 2016. Everything was growing as they say in the slides but BAM! Net debt. Obviously the cost of driving all those growth is getting to them which derived less performance than they saw.

However, the share price rose for the next quarter, probably in-line with a recovering market. It rose to $1.60 and on hindsight, this is probably my last chance to escape, especially with that damning report coming from the corporate governance scandal.

I waited another quarter for the next results and it came out bad. eCommerce segment underperformed and underlying net profit actually fell.

I finally sold in July 2016. At the same price i did in May 2014. $1.495. Grand total of 2 years wasted there.

Takeaways
I made 2 selling decisions in this trade. One was probably too early. The other was probably too late.

I probably should have waited a bit more on the first sell because the momentum is to the upside. If others buy on rumors and sell on news, i probably could wait until at least the real news comes out before making that decision. Also, at $2, it is definitely not a price i would buy Singpost even with the kind of growth story. If it is not a price i would consider buying, i should seriously consider selling.

On the other hand, on the break of the corporate governance news and especially with the CEO resignation. The flags are waving in my face. To have a cash company going to debt, with an ongoing scandal, with people questioning about overpaying for acquisitions in May 2016, i think it is clear as day to bail. I could have also sold at the low too assuming i sell on the news, but if it recovered with weak fundamentals, i ought to have considered dumping at a price maybe slightly upwards of $1.50 which i had ample opportunities to.

It is painful to watch an opportunity go by and not participating in it. But it is equally or more painful to give back all the profits that you could have gotten back to the market. I definitely could have done better here.

Have an exit strategy to protect your profits.

STI ETF is Diversification - Think Again

Everyone is touting how the equity markets is so good this here, even in sunny Singapore. The Straits Times Index (STI) is up about 17% year-to-date (YTD) and it's almost harder to lose money than to make money.

But hang on. Look at these headlines.

CNBC, Oct 11: GLOBAL MARKETS-Asia stocks near decade-high on global equity surge, dollar sags
MarketWatch, Oct 16: Nikkei continues to surge to two-decade high, leading Asian market gains
The Standard, Oct 16: Hang Seng climbs 0.8pc to near decade high

The list goes on.
Jakarta Index: 6050 (High Jan 2015, 5450)
Korean KOSPI: 2549 (High Apr 2011, 2142)

But poor old STI is at 3381 when the high set in Oct 2007 was 3805.

Sure the components had changed between that time and now. But since it is market capitalization weighted, why hasn't it recovered since then? I did not even talk about the US markets which is definitely going to set new highs even if a monkey was in administration. As much as the man claimed credit, i don't think it was majority his actions or planned actions or inaction whatsoever. I digress.

Does it mean the Singapore Exchange did not have bright sparks? Not exactly.

Let's take a look at the IT or electronics sector, especially the amazing Venture Corp results just published. The average returns for the top 10 capitalized stocks in that sector is a grand total of 100.3%.

Image taken from SGX Newsletter.

Yes, that's right. The average company there doubled their price. How is that for +17%?

Unfortunately, the damn STI does not even have a single electronics company out of that list of 10. I originally thought Venture, because of it's high share price at around SGD10 early this year, would be in. I was pointed out that Venture is not in, and it's probably because of the market cap not making the Top30 at the time of decision.

As of today, Venture will make the next review so if the prices, and for the bottom dude currently (poor Hutchinson Port), does not deviate from here much, it will be added in next. The corollary thought for some must be that Venture is going in, so the index will be forced to buy it soon and therefore there is some upside to it. By the time you see this post though, it might already be too late.

I will end this post with the Top 10 holdings of STI ETF which mirrors the actual index. You decide for yourself if you have proper diversification there.

Snips from SPDR STI ETF Factsheet (as of Sep 2017)

Next time somebody sells you STI ETF because 30 = diversification. Ask them about what's inside. Their heart and the fund, both.

Follow Up on Manulife REIT Rights Issue

Looks like it is pretty tough to get Excess Rights for Manulife REIT. I applied for 2000 excess, but only received a mere 200.

Anyway, here are the numbers. All prices in USD.

Price before annoucement: 96c
Average Price on Day after (4th Sep): 93c (approximate)
Buying 10000 shares on Day After: 10000 x 0.93 = 9300 USD
Rights Entitled: 4100
Excess Awarded: 200
Total New Units: 4100 + 200 = 4300
Cost per Unit: 69.5c USD
Rights Cost: 2988.50 (ATM fees excluded)
Cost Total: 9300 + 2988.50 = 12,288.50 USD

Average Price on First Day of Trading (26th Oct): 91c (approximate)
# of shares to sell back to 9300 cost: 2988.50 / 0.91 = 3285 ~ 3300 (rounded up to avoid odd lots)
Total Shares left:  10000 + 4300 - 3300 = 11000

Now, the dividend numbers are a little more complicated due to the distribution for the acquisition done in June. Regardless, i will use the previous distribution at face value.

Using latest Dividend numbers
Dividend per unit (DPU): 3.2c
Total Received on 10000 shares: 320 USD
Original yield (annualized): 320 x 2 / 9300 = 6.9%

Diluted Dividend (assuming no increase in income): 3.2 / 1.41 = 2.27c
Total with 11000 shares: 11000 * 2.27c = 249.65 USD
New yield (annualized): 249.65 x 2 / (12,288.50 - (3300 x 0.91)) = 5.4%

Obviously, the income in this case is going to rise as the rights issue was done to acquire another property. Rough calculations gave me a 0.80c contribution by the new property after rights issue.

Adding that in, and doing the last set of calculations.
(2.27 + 0.8) x 2 / (12,288.50 - (3300 x 0.91)) = 7.3%

I am honestly surprised by this result. I checked my 0.8c estimate a couple of times but the only portion that might be overstated is the Rent Free Reimbursements.

If this is the case, i might be trimming down some of my stake. Anyway, i have the yield that i need.

Did i make a mistake in the calculations somewhere?

Follow Up on Cache Rights Issue

2 posts ago, i set out to investigate if subscribing for excess rights, and subsequently, maintaining your cost, would result in a maintained or slightly lower yield.

So i had friends who participated and got around double the entitled rights. One had, 1062 entitled, applied 2000 in total, and got full 2000. The other had 1422 entitled applied 7000 in total, and got 2900. So i am assuming that getting 2000 shares in excess is common. This is very bad as data points but i work with what i have.

Here's the maths.

Price before annoucement: 88c
Average Price on Day after (5th Sep): 86.5c (High + Low, divide by 2)
Buying 10000 shares on Day After: 10000 x 0.865 = 8650 SGD
Rights Entitled: 1800
Excess Awarded: 2000
Total New Units: 1800 + 2000 = 3800
Cost per Unit: 63.2c
Rights Cost: 2401.60 (ATM fees excluded)
Cost Total: 8650 + 2401.60 = 11,051.60 SGD

Average Price on First Day of Trading (10th Oct): 84c (High + Low, divide by 2)
# of shares to sell back to 8650 cost: 2401.60 / 0.84 = 2859 ~ 2900 (rounded up to avoid odd lots)
Total Shares left:  10000 + 3800 - 2900 = 10900

Using latest 2Q Dividend numbers
Dividend per unit (DPU): 1.8c
Total Received on 10000 shares: 180 SGD
Original yield (annualized): 180 x 4 / 8650 = 8.3%

Diluted Dividend (assuming no increase in income): 1.8 / 1.18 = 1.525c
Total with 10900 shares: 10900 * 1.525c = 166.22 SGD
New yield (annualized): 166.22 x 4 / (11,051.60 - (2900 x 0.84)) = 7.7%

There you have it. At the same cost, there is a slight decrease in yield. Definitely better than the initial dilution.

Obviously i excluded the cost of the transactions which will impact the numbers a little bit.
Also, the whole price movement cannot be predicted. There are plenty of examples where the price did not recover like it did here between announcement date and trading date. This recovery is broad based because STI went up and even the FTSE ST REIT Index went up.

That aside, you could have gotten Cache at a cheaper price from the 2nd day after the announcement was made. So you might luck out a bit more there as well. Again, this cannot be predicted. And most importantly, the amount of excess cannot be predicted. You may not get much excess for you to make it even worthwhile to consider this move.

Final point, you may see a slightly higher DPU in the coming quarters than the one i calculated as there would be cost savings due to the paying down of debt and that might go in favor of maintaining the yield.

Like all good scientific, data-based studies, here's a conclusion. Maintaining or slightly lower yield is possible. But my personal take is this, there are far too many factors that can screw with you to even make this viable.

All You Need is a Nudge

One month on from the previous post.

This time my excuse is that shift work has begun for me and it threw my personal schedule a little out of whack. News came out today that Richard Thaler was awarded the Nobel Prize in Economics for his work on Behavioural Economics. I don't think i have read his books but i certainly have read a couple on Behavioural Finance.

http://www.channelnewsasia.com/news/business/commentary-nobel-prize-winner-richard-thaler-changed-economics-9295828

Thaler in his works, argued that people should not be forced to do things with bans or laws. Instead, small interventions, or nudges, that make the right choice easier are the best way to go.

I think this theme is rather similar to the notions delivered in Malcolm Gladwell's Tipping Point. My memory is vague but i recall a story within Tipping Point that talks about how adding a map on to a pamphlet resulted in marked increase in attendees for an event. Here, Thaler thinks that making automatic enrollment into retirement should be the default choice rather than opt-ins and that without help, most people would never retire. This auto-enrollment is also used in our HOTA act.

https://www.bloomberg.com/news/articles/2017-10-10/thank-richard-thaler-for-your-retirement-savings

I fully agree with him on this point. Our version of 401(k) would be CPF. Due to our mental accounting, if we didn't have compulsory contribution in CPF, many people will struggle with retirement.

The rest of that bloomberg article has a couple more gems including auto-escalation - a notion to gradually increase a nudge rather than a forceful change.  Another that stood out for me was investing too much into your company's stock is risky. It might come across as confirmation bias where i read only those points that agree with me. But i do appreciate that there could be people who worked for Apple, Amazon or Google. I guess, if you think the company you are working for will become half as big as those 3, you could invest in your company as much as you want.

This is not a post to idol-worship him. In the CNA article, they list 3 areas of work that Thaler did and i am going to throw some suggestions out here to nudge some readers to overcome these behaviours.

Limited Rationality
Nudge yourself to not think in buckets. See money as a tool and where it came from does not matter. A windfall is the same as a salary. Where to use the tool depends on where in your life needs it most.
This tool can be used now or in the future, can be used to buy experiences for immediate pleasure, or pay off debts to ease stress, or even saved for delayed gratification. This might be tough for people who are used to envelope budgeting to do. But budgeting should just be a guide for you to watch your spending and not overdo it. I don't practice envelope budgeting myself, but i do have separate accounts for savings and spending.

Social Preferences
Nudge yourself to not inflate lifestyle when you get a pay raise. You just got a pay raise, and you feel like you could afford to go luxury just a bit more. Not denying a one-off treat here, but who you are is not determined by the kind of lifestyle you lead. You may now be mingling with people who only dine at posh restaurants because they can afford to, but you don't have to forsake the kopitiam just because now you are part of the clique and have a fatter pay check. My expenses has hardly increased since the day i started working. What changed was that my savings rate increased.

Self-Control
This is a tough one. Yet, it says self. Nudge yourself to say no to just one bad temptation or bad choice for a start. Don't pay for that self-control. Exercise what is within you for self-control. It takes a lot of willpower and if you believe that willpower is finite, it's good that you also know that it can be strengthened. I don't believe willpower is finite but going with that train of thought, cut desserts on weekdays and only allow yourself to have a cake on weekends might be a way to strengthen self-control. You don't have to cut it out completely unless you are hugely motivated to lose extra weight.

There you go. Start nudging yourself to make slightly better decisions than you did yesterday. Now, i am off to nudge myself to pen down more of my thoughts on this blog.

Emotions and Vulnerability in Trading

Every time i end up on TED Talks consciously or subconsciously, i am reminded of this one TED talk that i watched many years ago.

Youtube: The power of vulnerability | Brené Brown

TED Talk Link - Link

The topic resonated with me so much that i went to buy one of her books on Vulnerability after that.

Image from Amazon

Daring Greatly: How the Courage to Be Vulnerable Transforms the Way We Live, Love, Parent, and Lead (Goodreads Link)

Everyone must have their own stories of feeling unworthy, of feeling shame, of feeling vulnerability. 

Should i confess to her my feelings? Is this the right time to do it?

The company did not call back after the interview. Did i do something wrong?

Should i speak to the sweet looking girl at the end of the bar?

And recently, i saw the similarities of that with trading.

Every time you initiate a new position, you are completely at the mercy of the markets. You have rescinded the control over to some thing else other than yourself. No matter what you do, there is no way to direct the action of the markets.

That is Uncertainty.

It is extremely difficult to embrace that. Some people do it well, perhaps, translating their ability to handle vulnerability from other parts of their lives. Some of us don't deal with it so well. We shun it, we don't like uncertainty. We don't like to feel vulnerable.

But that is exactly how it works.

I did attempt to change myself and try to embrace vulnerability in my life. That was way before i started dabbling with the markets. I liked to think that i made progress but i think i am not quite there yet. Clearly in terms of trading, i am nowhere close.

Fears still grip me and then i see the counter i identified ran. 

Greed still has a hold on me and i chase after a breakout and get stuck.

The next time it happens again, i am going to read this post again.

I'm going to leave you with two quotes from the video.

On what traits the people who embraced vulnerability had.

"willingness to do something where there is no guarantee"

On how and why we numb ourselves to vulnerability.

"we make everything that is uncertain certain"

Keep Learning

Rights Issue - Are they Right for You?

I honestly have been extremely lazy to write any post but work has been a bit hectic recently so that's my lousy excuse. A storm is brewing outside and i am cooped up here so why not pen something down?

There has been a series of Rights issuance this year for Singapore REITs versus 2016. Off the top of my head, i can recall Sabana having one earlier this year; Cache and Manulife just announced almost back-to-back, and of course, we have Ascott who does it almost like celebrating birthdays.

Other more established blogs will cover the whole basics of rights issue. No point talking about it here. But something pertinent popped up in conversations with my peers. Some people think that REITs are useful vehicles to use during retirement.

I disagree and i bold the highlight why i think they're not.

Against my disagreement, dividend from REITs are somewhat predictable, extremely regular and acts as a good inward cashflow for retirees. This much i agree.

Now, what do retirees have to deal with if said REIT does a rights issue like now?

You have to cough up large amount of important cash flow to subscribe if you do not wish to be diluted. Are you going to eat bread and drink plain water for 3 weeks because the money you needed for a lifestyle is now forced to be entered into an equity position?

Don't subscribe.

Fine. But then your dividend per unit drops aka you take back less dividend which then negatively affects your cash flow. How now brown cow? Of course, if this reduced dividend is still sufficient for you to get by, this would not affect you.

There are a multitude of ways to prevent this occurrence for sure. My point is, REITs are not as useful as people think they are. The same people often blindly chase after the high yields they offer. There is a reason why bonds are recommended and used for this purpose.

Not to detract from the good instrument of REITs, if you're in the wealth building stage, they make fantastic cash flow vehicles. I personally have 30odd% of my portfolio in REITs.

Throw in a spanner into the works. What if the rights issue is like the one Manulife is doing? For growth and not like what Cache is doing to improve balance sheets?

There is a possibility that even with the increased number of units, the dividend may be maintained or even grow. This is definitely good and even with the dilution, the cash flow for the retiree may maintain. Even better if you managed to subscribe and maintain the yield payout.

So, obviously i did not like the Cache rights issue. They are doing it now because the unit price is very favourable. When you have high unit price, you could raise more funds even with a steep discount for the exercise price. This is why hardly any REIT did rights issue when prices were low in Feb 2016. Sabana did it at a low probably out of a little bit of desperation.

Essentially, rights issue is just a means of fund raising. It is always cheaper to finance through a bank, ie, take on debt vs asking from the public open market. I am not based in the finance industry so people in the know can correct me on that statement.

Cache Results Presentation Slide. (link)

But for Cache, this is no longer that feasible. MAS has a ruling that REITs can only leverage up to 45%.  At 43.6% there is hardly any room to take on more debt. Plus, should the properties drop in valuations, which is very likely in this climate, the ratio might rise to hit the limit soon. Should that happen, a rights issue at that point in time might be extremely damaging to the value of the REIT.

I see this exercise a preemptive move to prevent that from happening. There might be some form of savings in terms of interest to be paid, but DPU will almost definitely fall on top of the negative rental reversions the sector is already facing.

It's just bad for almost everybody until they can grow again.

As a side note, none of the 3 acquisition that Sabana did the rights issue for went through. The management can say anything they want to market the rights issue so that people throw their cash in to fund the company, but end of the day, deals may still be broken.

So, to finish off this post. I am going to start an experiment. This might have been tested before and if any one could point me towards it, it would be great.

The idea came from a friend who asked if you could subscribe for excess rights, and then later sell out the excess shares you have to lock in the gain so that your position is back to the same value as before. Would that be better than not subscribing?

For example.
Pre-rights. Your cost was 50c.
Rights at 40c and you got a bit of excess rights.
Assuming it is a 50% dilution and 1000 excess is granted.
Original position was $5000. New total cost is $9400.
New cost per unit is 44.8c
If you sold back $4400 worth to return to your original exposure value, you actually have a lowered cost and a little bit of extra shares to sort of maintain your yield.

There's a lot of assumptions about price movements in that example so i shall record the findings using Cache and Manulife and see what we get at the end of both the rights exercise.

Cache
18 for 100
Original Price: 88c
Rights Price: 63.2c
TERP: 84.2c

Manulife
41 for 100
Original Price: 96.5c
Rights Price: 69.5c
TERP: 88.6c

Information above obtained directly from announcements made to SGX

I am vested in Manulife REIT and i have friends in Cache who (i'm hoping) can report back on the status of the excess allotments.

Keep Learning.

Perfect Example Why an Emergency Fund is Recommended

I was a little slow in reading this piece of news.

SIA introduces voluntary no-pay leave for cabin crew

(Image and Article from Today Online)

The economy is not exactly in a recession. It was probably even gloomier in 2015 while oil prices crashed. Sure, i appreciate that our friends in the marine industry will paint a way different story. My heart goes out to them.

Put yourself in these cabin crew shoes or kebaya. We may all celebrate initially that you can take a long stress free vacation to the next best resort without much considerations. But what happens if you needed your income to pay for simple bills like phone, internet or utilities? Last i heard, these don't come with a no-need-to-pay for 3-months option.

It is voluntary but there are more crew than needed for flights so where are you going to work if there are simply too many? I don't think the company will be that kind to simply add an extra member for the sake of it. They're clearly cutting cost because it is necessary.

It is not even clear if they have an option to moonlight. Uber/Grab driving, HonestBee, Redmart delivery perhaps. Part-time elsewhere, probably not. 

So, if you live paycheck to paycheck, you might want to imagine this happening to you. You did not get fired but still your income ended.

Whatever name you want to call it, make sure you stockpile money along the way so you do not put yourself in hardship when unexpected events beyond your control impacts you.

Grounded.

Responsibility

The internet, full of its trolls, memes, too much self-hate, too much self-love, throws up a gem once in a while.

This is a story about four people named Everybody, Somebody, Anybody and Nobody. There was an important job to be done and Everybody was sure that Somebody would do it. Anybody could have done it, but Nobody did it. Somebody got angry about that, because it was Everybody's job. Everybody thought Anybody could do it, but Nobody realized that Everybody wouldn't do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have done.
- That's Not My Job

Came across this from a forum post. No reason to credit the poster since he or she did not credit the originator, nor was it original.
Dug around a little and found that it's a condensed version of a poem written by Charles Osgood (Wiki). Sharing and remembering to tell myself this.

“The Responsibility Poem”

There was a most important job that needed to be done,
And no reason not to do it, there was absolutely none.
But in vital matters such as this, the thing you have to ask
Is who exactly will it be who’ll carry out the task?

Anybody could have told you that Everybody knew
That this was something Somebody would surely have to do.
Nobody was unwilling; Anybody had the ability.
But Nobody believed that it was their responsibility.

It seemed to be a job that Anybody could have done,
If Anybody thought he was supposed to be the one.
But since Everybody recognized that Anybody could,
Everybody took for granted that Somebody would.

But Nobody told Anybody that we are aware of,
That he would be in charge of seeing it was taken care of.
And Nobody took it on himself to follow through,
And do what Everybody thought that Somebody would do.

When what Everybody needed so did not get done at all,
Everybody was complaining that Somebody dropped the ball.
Anybody then could see it was an awful crying shame,
And Everybody looked around for Somebody to blame.

Somebody should have done the job
And Everybody should have,
But in the end Nobody did
What Anybody could have.

The M1 Disconnect

Back in October 2016, i watch this stock fall together with the sector in what was a fairly lackluster year for equities. I thought to myself, it's pretty significant off the highs, i am going to take a pessimistic estimate of its earnings, and then find an entry that will make me feel comfortable.

That entry came and i took up a position in M1. News of fourth Telco were fairly widespread then and coupled with some political uncertainties around the world, were some of the reasons thrown out for its decline.

It was a few days before they announced their results so i did some calculations on whatever latest results they had and took my own estimations of the fall in Earnings and therefore yield. Telcos have had a good run since 2010 together with the population boom and has became a fairly stable and good yielding defensive stock.

Stable in the sense that the price doesn't fluctuate much and the yields are fairly high. Considering that their revenue are pretty steady due to many of us being tied to contracts, it is not unreasonable to call it defensive and describe it that way.

Having said that, i entered expecting that the next 12 months dividend should come up to around 12c.
Now that their 2nd quarter results are out, and i have held it almost to full 12 months, i am pretty disappointed to see that even my estimates were too optimistic. Actual dividend comes up to only 11.1c and you can kind of extrapolate that the rest of the figures are not healthy.

The price has since fell big time after this recent earnings announcement. While i strongly advocate proper money management of cut loss, i am still holding it. I hate to admit it but i think i do still suffer from loss aversion. There are some positive stories that i am still hoping to play out so that is keeping me in.

Maybe not so much a disconnect per se, but more like a lag in bandwidth.

As of this post, the price has not fell enough for me to consider adding more stakes. I did not take a big position (relative to full portfolio) so i have some room to add. Management has since warned that Full Year net profit will be lower than last year and i am going to estimate that the next half year will see a poorer showing in percentage wise than the first half.

Lessons learn here are that i need to consider more factors in my estimation. Clearly the fourth telco is known, and the threat should probably worth more than i gave it credit for.

The Salted Fishes in My Freezer

I won't have noticed how fast time passed if not for the fact that the last post was already a month ago. I really need to pen more content than i am currently doing.

Since this is the new month, new half of the year, I want to start talking about my portfolio which till now hasn't been revealed. Fun Fact: There's more days from July to December than Jan to June so its actually closer to half today than on the last day of June.

But before going to the portfolio, i just like to share about this two salted fishes that are sitting in my financial freezer. I define them as the duds that i have failed to cut loss on,, which i really should. They are unlikely to make it back to the price i entered but hey, i'm like you, i'm still there waiting for one day when it happens. The returns will be shit of course but whatever, 咸鱼翻身 (google translate) you know. 

Image from: Retail News Asia

Salted Fish #1

Construction counter. Entered in its heyday when there were good news about a potential exciting overseas venture. I was still new to the market and the knowledge of the market pricing in all the "maybe" information has not dawned upon me yet. Then, a string of bad news happened to the firm. Talk about when it rains, it pours. Cut loss was a theoretical know-how at that time as well. So nope, did not cut when i could. At one point, i was at 80% loss. 

Salted fish is still in the freezer and it always reminds me of the mistakes i made in the past. Looking on the bright side, it taught me cut-loss, efficient market pricing and even a share consolidation exercise. I might have also made another further mistake by averaging down not so long ago during a rights issue. Though it hasn't fall much lower than that price ever since. 

There's still a tinge of hope (which is bad). But honestly, that is the end of adding to this salted fish.

Salted Fish #2

When i entered, it was a shell investment holding company. Hyped by the stakes taken by a very prominent broker in Singapore taking it on an RTO exercise, it was marketed to be a play on the future of the real estate it then owns just across the straits to the north. As i watched it move, the classic FOMO (Fear of Missing Out) stirred within me. Of course, being human and also extremely new, i succumbed to it. Guess what, i succumbed on the very last retrace which turned out to be the exact downfall. Talk about fear of missing out on catching falling knives. Two lessons in one go, how lucky was I.

This was a good story because the very next day after i entered, a brokerage even called for a trading curb on this counter. Guess what, it was the sole brokerage that i was using. This might have exacerbated the fall for all i know. But there was I, panicking due to the fall and having no means to dump it other than calling my broker. Couldn't contact him and had to be put through to a colleague to give instructions to dump it. 

So why is it still in the freezer? 

I did not dump all the shares i had purchased. I left the last one lot (at that time) so that i could remember this event. That is stupid because i doubt i would have forget given the kind of emotions i was feeling at that time. Anyway, there were warrants that were given for free and i got myself into some kind of unwarranted mess (pun). 

Got forced to learn what warrants were and how it worked. There were occasions where i thought about selling the free warrants which i really should but they have since lapsed and expired. There is no point in exercising because the mother share was cheaper than the exercise price. 

By now, it should be fairly obvious what counter this is. Including the contra loss, i am at 90% loss. And it is so cheap now that it might not even pay for brokerage if i sold. There is really zero hope in this guy recovering to break even but i am including it in my portfolio returns because this is what it is. 

Summary

I made mistakes before, and they cost me quite a sum of money at that time. This two counters took out about 5% in my XIRR over 3 years because a lot of it was committed in the early years. I have obviously paid my school fees and learned my lessons as the new counters are doing much better.

They are still in the freezer as unfortunate reminders. What are some of your salted fish?

Mum's Advice that Works For Investing Too

There are some wisdom and advice that your parents told you when you were a kid.

Don't trust strangers easily
Don't receive candy from people you don't know
Don't open the door or you'll be snatched

They served us well when we were young. There's one that will continue to be valuable advice even in the world of investing.


SGX My Gateway

People often wonder where to get news; where to get more information and do this so-called homework or due diligence.

One place that i can recommend is here.

SGX My Gateway

I don't work for them, nor do they need my miserable marketing but it has some value.

Subscribing to them gives an Economic Calendar of major data releases expected in the coming week. This mailer typically comes on a Friday with a look ahead on Earnings report by SGX listed companies and also some major government or financial institutions upcoming reports.

Now, they also give a weekly investment update on various topics including market and sector reports and highlights. Most are good to know data and some of the updates do teach important investing concepts to newbies.

On 30th May, they released an update on the performance of STI 3 Year Dollar Cost Average Returns. If you're interested, you can look it up.

It seems like a very good returns percentage to report. Especially when STI isn't exactly high at the moment. It even shares about using IRR (Internal Rate of Return) vs ROI (Return on Investment) and their differences. This is good because it teaches about measuring investment performances.

But there is something wrong about the way some numbers were presented. Some numbers that probably need not be part of the article and is slightly flawed in thinking.

What is the problem? 

In the last paragraph, it compared the returns of the Top 5 performing STI constituent stocks with the Bottom 5. While i don't doubt that the numbers are correct, and i haven't bother to verify, i am pretty certain they forgot that SATS was not even in STI 3 years ago.

STI components are reviewed twice a year. So in that 3 years, at least 6 reviews have taken place which may or may not lead to a change. And typically, each change involves up to 3 component stocks. They are reviewed according to a set of criteria. Clearly, the comparison of top 5 vs bottom 5 is meaningless because bottom 5 often gets replaced with better performing components.

Now, the maths will still likely give you the return they declared since it is based on month end closing price of STI ETF. But doing that analysis into component level does no good to the article and exposes them on this systemic flaw of their analysis.

Your mom told you not to trust strangers. I think it's good you verify everything even if they're from trusted source. Including your favourite financial bloggers or your investing buddy next to you.

Bitcoin Bubble Blitz

If you had Bitcoins starting 1st Jan 2017, you would have almost tripled the worth of your Bitcoins as of today.

This should be the best performing asset so far, coming from around 1000 USD per Bitcoin to a intraday high of 2780 USD per Bitcoin last week. Having read through some of the asset bubbles in history, this blitzy rise seems like a bubble in the making. Now that it is appearing in the news so much, i went to read up a bit more about it.

The technology is Blockchain and the currency is Bitcoin. Blockchain is a decentralized database, which in this case is like a ledger. Similar to traditional accounting, transactions go into the ledger (blockchain) as blocks which needs to be verified by nodes. Miners are special nodes that works on a kind of mathematical problem which sets the transactions into a block that becomes part of the chain. They then get some Bitcoins for their Proof of Work.

I may have gotten some details wrong, but that's pretty close to what Bitcoin really is.

There are also alternative cryptocurrency and platforms available which adopts blockchain technology such as Ether and Litecoin. All of them have seen impressive rise together with Bitcoin. And the rise could be explained by several regulatory reasons in Japan and China.

But when you have assets that increases in valuation in this manner, there are bound to be herhistory have shown how it is likely to end. Now, Bitcoin might see more positive regulation and structural changes to become more mainstream. So is this still early in the bubble? 

Sit around with me and watch this drama unfold.

Check this Investopedia page out for quick highlights of historical asset bubbles.

Motivations Behind Long Position

I am back writing. Well, this interval was due to a resettlement going on in my life. All very exciting stuff.

So as promised, the previous post shared about a counter that i bought or in more industry lingo, went long. Long is simply buying and conversely short is selling.

Hardworking and observant readers will know the counter is Starhill Global REIT.

It is an office/retail REIT that mostly deals with such real estate in Singapore and Australia. I am not new to this counter. I bought it with cash when i first started investing and that position will likely never see profits already. So because of legacy i do keep track of it's developments since 2013.

So the motivations behind the CPFIS decision.

#1. It was sufficiently cheap back when i made the purchase

#2. The counter is thankfully able to generate enough dividend to cover the additional holding cost that the agent bank charges.

#3. Like mentioned in the previous post, the yield (or yearly dividends divide by cost) needs to beat the minimum that CPF OA offers. It was going at upwards of 6.5%. So netting away the opportunity costs of 2.5%, i'll make around 4%.

Of course, there are other counters out there that can satisfy the above three motivations too. So there are actually more homework done to decide firstly, what is cheap and secondly, are the dividends sustainable.

But i'll save that for another day.

For now, it looks like the market agrees with me and have now pushed it up to 77c as at time of writing.

I'll try to generate more content but no guarantees. There's a lot to see in this part of the world.

Vigin Trade on CPFIS

So this happened since i last posted.

Now, i only just realized it is difficult to maintain a blog when it is not really a priority. I think i have to try to make it a point to create content on a more regular basis. In any case, for the few readers, you could subscribe to get notified of a post.

So this CPFIS account of mine have been created years ago when i first dip my baby toes in the market. But i had never bothered to utilize it because of several reasons.

1) I don't have that much in my CPF OA anyway.
2) The initial amounts in CPF earns higher interest (+1% based on some criteria)
3) The costs involve in using CPFIS account.

For those who are not so savvy, you could utilize your CPF monies to invest in multiple instruments. One of which is in shares listed on SGX. The caveat is that only CPF approved shares can be bought/sold. For a full list, do visit the CPF board website (Here).

You can head down to any of the three big local banks and approach them to open an account. This CPFIS account can be linked to any of the local brokerages. Trading is carried out the same way except that the order placement needs to indicate (usually a tick in a checkbox) that you are using CPF to settle this trade.

This is by no means encouraging readers to use CPF monies to invest. It is but a tool to be deployed when necessary.

So for point 1. You'll only able to invest up to 35% of your investible savings in shares. CPF Board has kindly provided an illustration of this 35% on the same link above.

On point 2. The monies you withdraw from your CPF stops earning that interest that CPF promises. It could be 2.5% or 3.5% depending on your balances. This becomes your pseudo risk free rate. If your investments perform worse than this, you essentially lost money.

On point 3. Each agent bank levies a set of charges for using them to administer your CPFIS account. This ranges from the commission taken per trade, as well as a quarterly service charge. Google "[bank name] CPFIS charges" and you should find information on these. So you lost money even before your investments made money.

Clearly, there is a lot more to consider than simply using cash to invest.

Do your home work, make the right decisions. After all, it is your hard earned money even though it's stuck in CPF for a long time.

So what did i buy using this?

Image Credit: Website of the Counter I Bought

Not difficult to guess.

Will reveal the motivations behind this counter in the next post.

Tools do not Define the Craft

You are a craftsman. Your tool supplier just updated their tools.

image from OCBC website

Everyone who needs to know, knows about this already. If you like to know the details, go search. What i like to do here is to point out some stuff. Some could be obvious, others not so.

1) Good times don't last. No surprises they revised it again.

2) It is just another tool available for use. If a tool is now blunt, the master carpenter switches his tool.

3) They must have seen how inelastic their customers are to have shorten the revision periods. I am guilty too.

4) Can't be bothered to study in-depth, but possibly other areas of their business are struggling for them to want to reduce their expenses this much.

5) Plugged a few loop holes to make us monkeys jump higher through the hoops.

6) Notice how it started so simple and grew more complicated. Complexity does not equate to good.

And the most important point.

7) Monkeys don't mind jumping through hoops to make this bit of interest but complains that investing take up a lot of time.

Investing takes effort and time. Yes, but investing not need be time-consuming or difficult. You just didn't know the other tools available out there.

Find the right tool for the right craft.

I can help.

Paying School Fees

Last post narrated a story that i went through where i wasn't the lead character. It happened after i gained some form of knowledge in finance to be able to help in the way i did.

Today's post will cover the one story that started it all. The one that made me realize there are wolves out there. And if you're not the predator, you'll become the prey.

It all started when i entered the workforce. I was finally earning my own keep.  Like others, i'm no longer bounded by the allowances I receive, not bounded by the little income I can get teaching tuition or working part-time after school. A sense of freedom enveloped me which i later realized was the ability to meet my own needs.

I was now in a situation which was sustainable. My expenses were lower than my income; exactly the meaning of living within my means. And that just means i could save that difference of income minus expense.

Now with this spare cash, you could do countless other things. The one thing i knew back then was that the banks were giving me miserable interest. I had to do more in order to make better use of my accumulating savings. I had the misconception that because i was not a finance person, investing was beyond me and i best outsource this scary and complex task to some one else.

In came, this very kind FA by the name of Z.

Z was a young skinny lad, probably not much older than i was. The only clue i had about him was that he was already working during my days in National Service as that was when he first contacted me. Till today, i believe an acquaintance of mine left my contact with him. Z knew my profile and didn't bug me too much about buying a product with him for a good 3 or so years when i was in school. However, he continued to stay in touch, slowly leaving an impression in me. 

When Z contacted me this time round, my profile has changed. I was now well-fed as a prey rather than a malnourished young cub which won't satisfy much of his satiety. Z was smart and patient to have stalked this young prey till now. Honestly, young FAs out there could take a leaf out of this book. I thought he was sincere enough to have followed me for so many years so i agreed to a meet-up.

With an income, some savings, complete ignorance in finance, i make the perfect candidate to sell some toxic products. "I want to invest some of my spare cash because the interest rates are very low." This was what i told Z on our first meeting. Oh how foolish was I. I thought i was so smart to know the little bit about low interest rates. Z must have peed a little in his pants at this point. He must have been a very good actor as well because I don't recall him being terribly excited at that point. I did get fantastic efficiency in processing my paperwork and that coffee was on him.

And so, i started paying for an ILP and perhaps also, a bit of Z's car loan. Looking back, i should have bought from a sweet, young thing in tight skirt instead of Z. At least i could have a more pleasant meeting and a good feast for the eyes. But i digress.

After several months, i logged in to the platform the insurer provided. I was shocked to see that 90% of my savings went to costs and only 10% was actually buying some funds. I took out the policy documents and indeed, this was already presented to me. I guess their sales tactic worked as it successfully managed to divert my attention to the good stuff and forgot about the bad ones. Obviously now, the coffees we had during that fateful meeting was borne by me.

I quickly terminated the policy at a loss and got back a mere fraction of what i spent. It could have been much worse like the folks who have paid for years. With a street-trained mahjong background, i took this as necessary school fees. I then embarked on educating myself on finance and has never looked back ever since. I don't fully blame Z for selling me that product because i asked for it. But he could have done a better job in explaining to me the full intricacies of the product. It was clearly not suitable for me. 

Now that i have a few years managing my own finances under my belt, still novice in the world, i can proudly say that investing is not THAT scary or complex a creature. With a good dose of discipline and self-control, it can be made simple.

Onwards, the posts will become a bit more random covering values, concepts and examples as and when i find good lesson material in my day-to-day life.

Leopard Origins

Let me narrate a story.

One day, my aunt came to me, asking for help with her insurance policies. I thought it was strange that she knew i had some proficiency in this. So I probed a little and found out she was facing problems with her finances which led to the deterioration of her health. I agreed to help her out, careful not to over promise for i had neither experience nor qualifications.

So i went to my Aunt's house one morning. It surprised me to see another lady there. Somebody closer to my age than my aunt. This lady was well dressed and professional in her short white dress. She introduced herself as S who was an agent who managed some of my Aunt's policies. While my Aunt was gathering her documents, i spoke to S trying hard not to be smitten by her powdered and beautified face. You can't blame me for they were good in the art of making-up - both cosmetics and stories.

S handled the situation first and reviewed many of the documents that my Aunt brought out. She sounded perplexed and upset at the situation my Aunt found herself in. Way too many policies, way too many unnecessary insurance with premiums way too high for her income. Now, this sort of situation came as no surprise. I've read and even witnessed many such cases but to hit so close to home is another matter altogether. Not all products were sold to my Aunt from S and she only recently took over my Aunt as a client.

I was wary about S because she's an agent and she's pretty. As S was going through all the products, it was clear she was not the one responsible for the most toxic products sold to my Aunt. Her products while not ideal was actually providing some decent coverage. I can't speak the same for the rest. S's heart is as good as she looks.

Below i list the products that my Aunt had.

- A hospitalization plan
- 15year endowment plan (started in 2014)
- Single premium ILP
- Limited Whole Life (started before 2012)
- 5+5 Endowment plan (started in 2012)
- 5+5 Endowment plan (started in 2013)
- Annuity Plan with 8 years premium, to be paid out from Age 70

All the above for my Aunt who turned 55 in 2012 with take home income less than that of a diploma graduate. Her health is not that good and she has no dependents.

At this point, S and i were frantically trying to locate the receipts and passbook details for the accounts to gather the full picture. Observant readers will note that 55 is the age of the withdrawal of CPF funds. It was clearly the case where extra money was suddenly available and you became the fattest prey to these unscrupulous wolves. My Aunt merely wanted to place money into rolling Fixed Deposits.

As we went through all the fact-finding, it was clear what happened to the monies and we managed to piece together the timeline in which all of the above happened. S finally took her leave after doing the paperwork her client requested for. I stayed on and planned for my Aunt her best course of action.

The 2 5+5 Endowment plans were sold to my Aunt by a bank sales staff named I. Initially, i was angry at I. She was probably only focused on hitting her own KPI when selling products to my Aunt. These two plans had annual premiums 10 times the amount my Aunt brings back home monthly. Just what is left for my Aunt's day to day sustenance is beyond my comprehension. She even had to withdraw more money from her CPF to fork out for these premiums. To make matters worse, my Aunt downgraded her hospitalization plan so that her overall cost is lower. Thinking in the shoes of my Aunt, she probably felt silly for making mistakes like this. Me getting angry will only make her feel worse.

Still, I won't wish I well though. I's LinkedIn profile has her looking worse than S and most probably her heart too. It's no wonder some people will never look good no matter what they do.

I thought of approaching the bank for a resolution. If that does not work, to go on to FIDREC. After more thoughts, this seems to me to be at the cost of the victim's well-being. Long story short, justice cannot always be served and if it does, it comes with a cost that cannot be compensated by dollars and cents. I eventually took over most of the outstanding premiums so that my Aunt can focus on getting well.

It has been 6 months since that fateful day i helped review the policies. We did eventually raise an issue with the bank but we didn't get the outcome we wanted. My Aunt seems to prefer not to push through with her case. The only consolation for her now is that she knows she isn't alone in this.

All i can do now is to hope she doesn't need her money until the plans mature.

Birth of a Blog

Hello visitors.

This post is written to commemorate the birth of this blog.

After much thought over 2016, i have decided to embark on a mini project on writing to educate on financial literacy for non-financial readers.

While i may not have the qualifications in Finance, what i bring is a keen interest to translate difficult financial concepts into simpler ideas for the lay-person on the streets to understand about growing wealth.

The objective is simple: Education.

And the values that i will stick to is Simple, Relatable and Short.

This also serves as a place for me to revisit the theories that i might have forgotten along my own journey.

In the days, to come i will publish more about myself and the one incident that finally pushed me to start this blog.

Stay tuned.