Me On Money Matters

Day trader

The STI started at 2,247.86, then rised throughout the day, ending at 2,358.91.

I didn't expect STI to go up so soon.

The window of opportunity was less than 15 minutes today. I noticed this was rather like the last few dips. It takes a day trader to pounce on these opportunities.

While it may look easy to earn free money, I also notice that not all stocks go up. Some remain stuck near their opening prices.

I suspect that "someone" is propping up the index counters by buying the ones with the least resistance (easiest to go up due to low selling volume).

Bailout rejected!

The House of Representatives rejected the 700 billion bailout plan. Dow plunged 777.68 points (to 10,365.34), S&P dropped 106.59 points to 1,106.39 and Nasdaq dropped 199.61 points to 1,983.73.

Interestingly, most of the Republicans voted against it. Looks like they can still do the right thing even though it may be painful.

Ladies and gentlemen, we are now in unchartered waters. Please grab your lifevests. It's every man for himself!

One forumer speculated that the next trouble bank could be Citigroup. It now has to absorb the 45 billion debt by Wachovia after the takeover.

(There will be a bear rally after the plunge, so the daring should buy in during these two days. Your timing must be good, though.)


In the ongoing Minibonds saga, we hear of risk-averse investors who put a substantial portion — or even all — of their savings into the Minibonds.

Bad move.

This is a reminder to myself not to make this mistake. This is easier said than done, though.

My largest single investment turns out to be my company shares, at 7.2% of my net worth. There are already many examples where long time employees lost their retirement fund when their company folds — because they were overly reliant on their company's stock and did not diversify. I do not wish to have this experience.

Perhaps a thumb of rule would be 10% for a single investment. My current plan is to keep my company shares at 5% to 7.5% of my net worth.

(Rules can be broken, of course. But there must be a good reason for it.)

My company shares can be traded in arbitrary units, so it's easy to adjust. This cannot be done for most other investments. Singapore stocks require you to trade in units of 1000 (usually), and most funds require $1k to $10k minimum.

Why I didn't buy the Minibonds

I was interested in one of the Minibonds. I was looking for a safe investment that gives decent fixed returns.

Why I didn't invest in the end:

  • Nothing to do with bonds (despite its name)
  • No capital guarantee/protection
  • No secondary market
  • Credit events, while improbable, are not impossible

Looks like I'm much more conservative than the Minibonds' investors. Low risk doesn't mean no risk.

Claiming ignorance now

Many Minibond investors are asking the Central bank to look into their plight and to force the distributors to refund their deposits in full.

When everything is well, you happily collect 5% p.a. Now things go wrong, you claim ignorance?

Did you read the prospectus? If yes, you have no grounds to complain. If no, it's your fault as you didn't put in your due diligence.

It is my opinion that there is grounds for appeal because most people who bought these products are the risk-averse ones; they are really looking for fixed-deposits. They may not know there's a thick book of terms and conditions to read through first.

Be prepared for banks to make a loss. :-)

Another cracker peddler

I encountered another cracker peddler again. I saw her moving from unit to unit just as I returned home with my ta-bao'ed dinner. As I promised myself the last time, I would buy something as a form of charity.

"How much is one packet?", I asked.

"One for $3.50, three for $10", she replied.

Wow, that's expensive! I believe I can get the same packet outside for $1.50 to $2! Nevertheless, I bought one packet.

The crackers looked edible, so I opened the packet and ate them. So far so good. Previously I told myself I wouldn't eat it due to the unknown hygenie. To risk it over $3.50? I'm such a cheapo.

This episode just re-enforced my view that these cracker peddlers are not genuine sellers. $3.50 per packet? Who in the right mind would pay such outrageous premiums? Selling at night? Whoever eats crackers at night?

More old recommendations

Christopher Ng highlighted these stocks in his second book, Harvesting The Fruits of Prosperity:

  • M1
  • SingPost
  • Starhub
  • Jurong Tech
  • ComfortDelgro
  • SingTel
  • Parkway
  • SGX
  • UOB
  • DBS
  • OCBC
  • SIA

The book was published in June 2007.

Note that Christopher Ng merely highlighted these stocks, he did not recommend them outright. It is up to the reader to do more analysis to find out what is suitable for him.

Charting more data

Looking at some stocks that I'm interested in...

Date STI Cosco DBS SGX SingTel SPC
7/03 1,588.67 0.160 12.00 1.49 1.59 1.22
1/04 1,829.98 0.328 15.30 1.79 1.91 1.39
7/04 1,867.56 0.430 15.40 1.67 2.26 2.86
1/05 2,087.12 0.620 15.80 1.92 2.46 3.92
7/05 2,250.29 1.015 14.70 2.09 2.69 4.88
1/06 2,401.20 1.140 16.50 3.02 2.57 5.40
7/06 2,320.20 1.270 16.90 3.26 2.42 4.88
1/07 3,035.58 2.810 22.10 5.85 3.44 4.14
7/07 3,653.23 4.860 23.90 9.95 3.52 6.00
1/08 3,050.09 4.980 18.82 10.00 3.97 7.02
7/08 2,830.75 3.100 18.38 6.61 3.46 7.10
9/08 2,559.07 1.820 17.12 6.71 3.57 4.64

Closing prices taken around 15 January and 15 July (+/- 2 days).

STI touched 2,307.79 on 18 September before rebounding sharply, perhaps due to intervention by the central bank. STI was around this level from July to December 2005.

Although the stocks seemed to be doing okay, they all went pretty low at some point:

  • Cosco touched 1.35 on 16 Sep
  • DBS touched 15.46 on 18 Sep
  • SGX touched 5.70 on 16 Sep
  • SingTel touched 3.16 on 19 Sep
  • SPC touched 4.20 on 16 Sep

Charting historical data

Date CDelgro SingPost SPH SpRe STEng
7/03 0.815 0.675 3.88 0.255 2.00
1/04 0.970 0.670 3.96 0.255 2.07
7/04 1.220 0.800 4.36 0.255 2.06
1/05 1.530 0.895 4.56 0.255 2.39
7/05 1.560 0.945 4.48 0.280 2.49
1/06 1.600 1.150 4.30 0.315 2.94
7/06 1.480 1.040 3.90 0.265 2.69
1/07 1.730 1.110 4.50 0.300 3.18
7/07 2.180 1.240 4.56 0.360 3.68
1/08 1.620 1.080 4.48 0.340 3.52
7/08 1.460 1.040 4.08 0.280 2.49
9/08 1.490 0.945 3.85 0.240 2.74

Closing prices taken around 15 January and 15 July (+/- 2 days).

Looking at some old recommendations

Christopher Ng recommended these stocks in his first book, Growing Your Tree of Prosperity:

  • ComfortDelgro — $1.57, now $1.49
  • REITS — not interested as they are tied to the property market; not good outlook
  • Robinsons — privatized
  • SingPost — less than a dollar (I suppose $0.950 to $0.995), now $0.945
  • SPH — $4.58, now $3.85
  • SpRe — $0.28, now $0.24
  • STEng — $2.63, now $2.74

The book was published in 2005. Note that you have to read the book to understand why he recommended these stocks.

When I read this book at the end of last year, I was wondering when I would ever see these prices. The market retreated faster than I expected. Sad to say, I'm already vested.

I got two feedback after I mentioned this to my colleagues:

  • The situation has changed (2005 is so long ago)
  • You would have lost money if you follow his advice in 2005

It is up to the individual to think for himself.

What's next?

The US Federal Reserve has managed to borrow a little bit of time, but what will happen in two weeks time?

People are not talking about the next bank failure anymore. They are talking about the collapse of the US currency now.

Debts don't magically disappear or become safer after you sweep them under the carpet.

(Unless you offload them to some foreign sovereign funds with long-term investment horizon, ha ha!)

More on Minibonds

News: Should Minibond Series 3 have taken the retail route?

Date: 19 September 2008. Source: BT.

IF YOU want a front-row lesson in first-class financial obfuscation for structured products, then look no further than the way the recently collapsed Minibond Series 3 notes was packaged and marketed.

Lehman structured a synthetic derivative product to hedge its exposure to various instruments and linked it to the default likelihood of six major banks.

It's water under the bridge now.

Two lessons we learn here:

  • Do your homework. Read the prospectus, for goodness sake!
  • Never put all your eggs in one basket, no matter how good/safe it seems

AIA policies vs Minibonds

News: AIA policies a different animal from Lehman's Minibonds

Date: 17 September 2008. Source: BT.

FROM reading the news pages which are replete with financial disasters, it may seem that individuals here who have put their savings into AIA and Lehman instruments face dire outcomes.

Losses are a foregone conclusion for those who have invested in a derivative product called Minibond where Lehman was the issuer. But that certainly is not so for AIA, one of Singapore's largest and most conservative insurers.

Good explanation on how the Minibonds work.

DBS High Notes 5 vs Minibonds

Now I understand the difference between DBS High Notes 5 and Lehman Brothers' Minibonds a little better.

Lehman Brothers was one of the reference entity for DBS High Notes 5. The structured product was probably some sort of insurance against the reference entities. Lehman Brothers busted, so it means the issuer has to pay out the insurance. As such, we can expect there to be nothing left.

From what I read, the Jubilee Series 3 was also affected.

Lehman Brothers' Minibonds are different. Lehman Brothers is just the issuer/arranger. Now that it busted, the underlying securities would be sold at market value and the capital returned to the investors. The problem is, these securities will not have much value, as they are probably some sort of high-risk insurance coverage too.

First wave of impact

News: DBS High Notes investors at risk

Date: 18 September 2008. Source: ST.

Bank warns they may lose entire stake in Lehman-linked product

SOME local investors of a product linked to bankrupt investment giant Lehman Brothers have received late-night phone calls from DBS Bank warning them that their entire stake may be wiped out. The investors have their cash in a product called DBS High Notes 5 that the bank offered wealthier clients last year. It came with a promised annual return of about 5 per cent.

But Lehman's collapse on Monday means the product will be unwound and investors may only get a portion of their investment back - or none at all.

It must come as a shock to these (high net worth) investors. I wonder if DBS would compensate them out of goodwill. This is because this is a product offered by DBS. If DBS is just a seller/agent, then it is easier for DBS to say, "it's none of my business".

Anyway, I doubt the investors will lose their entire capital. DBS only says that "investors in High Notes 5 may - 'in the worst-case scenario' - not get back their entire principal amount invested". That's hardly 0%. Could be 50%.

The investors of the Lehman Brothers' Minibond series, for example, are expected to get back 30% to 50% of their capital.

I wonder when the situation would escalate to a bank run.

A worldwide bank run?

News: Is Your Money Market Fund the Next Subprime Mortgage Debacle?

Date: 17 September 2008. Source: Yahoo.

The financial meltdown surpassed another dismal milestone today as the bankruptcy of Lehman Brothers forced one of the world's premiere money market funds to record a loss -- the first for such a fund in 14 years.

If you're scared that you, too, are going to get slammed, put your money in an FDIC-insured savings account and/or invest it in a money-market fund at a major firm that will be publicly humiliated if its funds drop. This is no guarantee, of course (the fund that lost money today is a big one), but it's better than investing in little money-market funds no one has ever heard of.

Will there be a worldwide bank run?

Tough times ahead

News: Fallout in Singapore

Date: 17 September 2008. Source: ST.

SINGAPORE and the region will not escape the financial tsunami sweeping through Wall Street, according to local economists.

They told The Straits Times yesterday that the man on the street will feel the fallout from the credit crisis in the form of a tighter jobs market, sinking asset prices and shrinking corporate bottom lines.

Tough times ahead. Be prepared to be frugal!

I learnt one new word: maelstrom means whirlpool. I thought it was misspelled initially.

AIG in hindsight

News: How did it come to this?

Date: 17 September 2008. Source: ST.

HOW did it come to this for American International Group (AIG)?

By some measures, AIG was the biggest financial services firm in the world with US$110 billion (S$158 billion) in revenues last year and US$1 trillion in assets. Now it teeters on the brink of destruction.

It's easy to see why AIG fails, in hindsight, of course.

To bail or not to bail, that's the question

News: After AIG rescue, Fed may find more at its door

Date: 17 September 2008. Source: Reuters.

In one $85 billion fell swoop, the U.S. Federal Reserve may have wiped out what credibility it won resisting Lehman Brothers' rescue plea and opened its door to countless other companies to come calling for cash.

By providing a massive loan to American International Group on Tuesday, just two days after refusing to use public funds to save Lehman Brothers from bankruptcy, the central bank also invited tough questions on how exactly it determined whether a company was too big to fail.

The Federal Reserve has its hand tied. Both are not pleasant outcomes.

I agree with the article that Federal Reserve's pattern of punishing shareholders and protecting the creditors/bondholders is disturbing.

This is just asking for a one-way bet for failing companies.

Will AIA survive?

News: Mayhem at S'pore AIA

Date: 17 September 2008. Source: ST.

Worried policyholders thronged the customers service centre despite US government bailout of parent company AIG.

THE mayhem continued at AIA Singapore on Wednesday with hundreds of anxious policyholders descending at its customer service centre at Finlayson Green.

This was despite an unprecedented move by the US government to bail out AIA's parent company AIG with a US$85 billion loan.

Can AIA survive the "bank run"? I wonder how long will it go on?

I have lost all details on my AIA investment product — I don't even know its name! I wanted to go to AIA's office to find out, but now it looks like I got to wait another week or so.

The inevitable bank run!

News: MAS urges AIA policyholders not to terminate policies hastily

Date: 16 September 2008. Source: CNA.

The Monetary Authority of Singapore (MAS) has urged AIA policyholders not to act hastily to terminate their insurance policies, as queues formed outside AIA's offices on Tuesday, with some clients seeking to end their policies.

AIA is a subsidiary of New York-based American International Group (AIG) - one of the world's largest insurers - which has been hit by the financial meltdown.

I wanted to laugh at them, since it's well known AIA is separate from AIG. Then, I remembered I also have an investment product with AIA and I felt like joining them!

Taking steps to protect myself

The Singapore Deposit Insurance Corporation (SDIC) guarantees the first $20,000 for each depositor on a per-bank basis.

$20,000 is very little. It is widely believed that MAS (Monetary Authority of Singapore) will guarantee the entire deposit, but this cannot be taken for granted.

There are two ways to look at it.

It is said that $20,000 covers 80% of all deposits, so MAS does not have an incentive to step in. MAS can say that if you have over $20,000, you should be savvy enough to take care of yourself.

However, if MAS does not guarantee the entire deposit, it may create a bank run even for sound banks. As such, MAS has to come out and say it guarantees the entire deposit.

Anyway, given the current financial turmoil, I decided to lower my exposure in this area.

The bulk of my cash is in Maybank. I will shift part of it to Standard Chartered and part of it to UOB to lower the risk of losing my capital.

Standard Chartered has very slightly lower interest rate than Maybank, that's why I didn't put my capital there. The difference is negligible, though.

UOB has much lower interest rate than Maybank. However, it's better to lose a bit of interest than the capital.

I will open another savings account to hold even more cash. The Fairprice Plus savings account looks good. It is like the e$savers account — it offers 1% interest p.a. from the get-go and is covered by SDIC.

Now, I must say that the scenario of a bank folding in Singapore is extremely remote. However, if it costs very little or nothing, why not take a simple step to protect yourself?

Big or small impact?

News: Bank's staff in Singapore face uncertain future

Date: 16 September 2008. Source: ST.

TWO groups of people in Singapore have been left fretting over the demise of investment bank Lehman Brothers. First, its staff of about 270 based at Suntec City who, industry sources say, should learn of their future today once it had been communicated from the bank's US headquarters overnight.

The second are investors who bought Lehman products and will now be wondering if they can get their money back.

Looks like Wall Street problems will hit Singapore pretty soon.

Lehman Brothers staff get affected: small impact (just 270 people).

Investers get affected: medium impact (get 30% of their capital back). I suspect people who bought this are the risk-averse ones especially if it were marketed as being risk-free.

It'll get uglier when AIG folds.

Stay clear of bank products

News: She wants higher interest but loses $20,000 instead

Date: 15 September 2008. Source: The Electric New Paper.

Granny claims she didn't know $50,000 savings invested in high-risk unit trust

SHE wanted to put her $50,000 in a fixed deposit account to earn more interest.

But the 62-year-old grandmother, who wanted to be known only as Mrs Ong, ended up putting all the money in a unit trust fund because she ignorantly listened to a bank employee, who allegedly told her it would earn her a higher interest.

So she did, not realising that it was high risk, unlike a fixed deposit which is risk free.

But as the global market tumbled, so did her investment in the fund.

Sad to say, my father bought one structured product too. He believed the salesman's sales pitch that both the capital and interests were guaranteed.

We argued for a few minutes before he told me that he invested only $10k (or $20k, I can't remember). I then stopped and told him time would show him the truth. And it did.

It's all too easy to market such products to the elderly; they like fixed deposits and they miss the old days where interest rates were 5% to 7%.

(Note: I know Mrs Ong bought a unit trust, not a structured product.)

History in the making

Ladies and gentlemen, we are witnessing history right before us. Lehman Brothers has filed for bankruptcy, Merrill Lynch is being sold to Bank of America and AIG is asking for US$40 billion in bridging loans.

What a difference a weekend makes. We live in interesting times!

Who's next?

Now that the dust has settled on the bailout of Fannie Mae and Freddie Mac, it's time to ask, who's next?

Lehman Brothers is already making news. It is the next casuality. The real question is, who is next after Lehman Brothers?

Merrill Lynch, UBS and CitiCorp are likely candidates. UBS and CitiCorp may be "saved" by selling off their assets, but they will never be the same again.

This sub-prime issue is really taking its own sweet time to unravel. We are clearly not out of the woods yet, so any talk about bottoming is premature.

Investing for yield

It is a common advice to prefer growth over yield for stocks. However, some companies operate in a quasi-monopolistic manner in Singapore, thus allowing them to enjoy profits year after year. However, they don't have much room for growth, Singapore being such a small market.

I feel it is perfectly fine to invest in such companies for the yield. It would be a bonus if the share price goes up. (This is the reverse of growth stocks.)

I believe that many people put their money in such stocks to get 4% to 6% yield, instead of the 1% to 1.5% FD rate.

Investment objectives

My investment objectives in 2008, and very likely for 2009, are

  • to get passive income
  • to grow net worth

For the first, I will buy steady stocks that give regular dividends.

For the second, I will either buy sound companies that enjoy good growth, or highly speculative ones in anticipation of future earnings. I prefer not to buy and sell as I do not want to monitor the market all the time.

The first objective is more important than the second, as I'm trying to create a secondary income stream. For a start, I will try to achieve a FIR of 0.25. Of course, I must not lose the capital!

(FIR [Financial Independence Ratio] = annual passive income / annual expenses)

My investment strategy has been described as an "old man's" strategy. That's pretty unfair to all the old men out there because I'm even more conservative than them! For what it's worth, my father takes on even more risk than me!

I subscribe to Christopher Ng's (author of Growing Your Tree Of Prosperity) thinking that it is more important to preserve the first $100,000 than to grow it.

Success, for now?

News: "I want to make enough money to retire by 26"

Date: 12 September 2008. Source: TNP.

He was jobless, broke and demoralised. To make things worse, he faced endless criticism from friends and relatives about his unemployed status.

It came to a point when Mr Choo Koon Lip decided that he had had enough.

In September last year, he boldly declared in his blog that he would make enough money to retire in a year's time, by the time he was 26.

From what I see, Mr Choo is still far from retirement.

It's good that Mr Choo can generate income without a regular 9-to-5 job, but he has also taken very high risks to do so.

Also, Mr Choo seems to be pretty well-funded, although he has a poor background. I wonder how?

The myth of dollar cost averaging

Let me say it upfront, I do not believe in dollar cost averaging (DCA).

The reason is that the market moves in cycles. If you DCA, you won't have much capital to enter the market when it is down.

Another use of DCA is to average down your loss. What I can say is, it doesn't work. But this is not the fault of DCA. What happens is that people DCA too quickly. Stocks can drop 50% from their peak easily. If you DCA every 5%, it's easier for you to run out of cash than the market to run out of depth. (Not to mention the stock may never go back to its peak.)

I'm wiser now. I'll only consider DCA every 3 months or when the price drops by 20%. Then, I'll make a decision whether to DCA, to cut loss, or not do anything at all.

Note that exceptional situations still call for exceptional handling. This is just my thumb of rule.

Stock performance and outlook

I didn't intend to update the stock performance so quickly, but the market dropped so drastically in just a few days.

I show the current performance to help explain my outlook and strategy.

Stock Wt 2/9 11/9 6/2005
A 5.3% 76.7% 72.1% 52.1% (6/2006)
B 33.8% 80.4% 77.3% 24.6%
C 25.6% 77.9% 70.3% 63.4%
D 29.7% 97.5% 90.0% 82.5%
E 5.7% 89.7% 88.8% 81.8%
Total 100.1% 84.4% 73.3%

The columns show how much the stocks are worth compared to their purchase price. The 6/2005 column uses the prices on 1 June 2005.

A is a speculative stock. This stock hit my bear market estimate a few days ago. I believe it would drop even more, but I am going to leave it alone as it is just a small portion of my portfolio.

B is also a speculative stock. I sold it today. This stock is highly dependent on the STI. As I believe the STI will continue its downtrend, I decided to sell and buy back later.

C is a commodity related stock. It's very close to my bear market estimate and it's too late to sell it. On the other hand, I am likely to buy more. The only problem is deciding on the price to buy.

D is an engineering stock. I intend to sell it off on a rebound to minimize my loss because I believe it will continue to slide. If I can't, I'll just hold onto it, but it limits my options — I don't want to buy more as I don't want a single stock to dominate my portfolio.

E is a defensive service stock. I may buy more, but I'm in no hurry as I believe the price will still go down.

A painful day

I sold off one of my stocks today at a loss of 23%. I was more relieved than anything else. I thought I could stomach the up's and down's of this roller coaster stock, but apparently I had over-estimated my tolerance. I should be able to sleep more soundly at night now.

Interestingly, I told my father the stocks that I'm holding and he had no comments. I thought he would scold me for disregarding his advice to wait out the "storm".

Net worth update

Category 3/2008 9/2008
Company shares 6.8% 7.2%
Equities 13.8% 18.6%
Funds 7.6% 6.5%
Insurance 3.7% 1.2%
Material asset 13.1% 12.8%
Near cash 52.1% 51.1%
Working cash 3.0% 2.6%
Total 100.1% 100.0%

Figures may not add up to 100% due to rounding errors.

Other indicators:

Ratio 3/2008 9/2008
Bear ratio 0.899 0.896
FFR 6.26 6.40
FIR 0.05 0.08

Bear ratio = ratio of net worth in a bear market to the current situation.

FFR (Financial Freedom Ratio): liquid net worth / annual expenses. I counted the entire net worth, so that means selling everything at the end.

FIR (Financial Independence Ratio): annual passive income / annual expenses. This is an estimate currently.


News: Matchmaking meet

Date: 8 September 2008. Source: ST.

They share CVs to find mates for their children at first such event here

WITH a picture of her son in her handbag, housewife Wang Lianzhi mingled with some 150 parents at the Speakers' Corner yesterday for a mass matchmaking session.

'My son's 30. He's never had a girlfriend. He's working on his computer all the time and seldom goes out,' explained Mrs Wang, 67.

Time to update my resume! :-)

First impressions count

News: When guys first see you, they don't care about your character

Date: 8 September 2008. Source: TNP.

IT seems the obsession with beauty is alive and well among Singaporeans.

Ms Charmaine Choo, 21, for example, feels that her external appearance is crucial to her life.

As a personal assistant, she feels that first impressions count.

Interestingly, Ms Choo judges others in the same way.

Stock performance

As of 2 September 2008.

Stock Org Wt Wt %age
A 5.8% 5.3% -23.3%
B 34.5% 32.8% -19.6%
C 28.7% 26.5% -22.1%
D 26.0% 30.1% -2.5%
E 5.0% 5.4% -10.3%
Total 100.0% 100.1% -15.6%

Org Wt (original weightage) is the weightage using the original purchase price.

Wt (weightage) is the weightage at the current price.

%age is the percentage gain (loss) compared to the original purchase price.

Figures may not add up to 100% due to rounding errors.

A is a speculative stock.

B is also a speculative stock.

C is a commodity related stock.

D is an engineering stock.

E is a defensive service stock.

The cracker peddler

I was watching a Chinese serial when a Malay man stopped in front of my door, put down two huge bags, and greeted me.

"Selling crackers", he began.

"I'm sorry, I'm not interested", I replied.

"Just one packet?", he asked again.

"No", I replied.

He then took his bags and moved on.

I then began to justify to myself why I didn't buy:

  • The quality/hygenie is suspect
  • He may come back

Then I thought I could make a small purchase for, say $2, and throw the stuff away. It would be like charity!

Perhaps it was the rain that made me feel extra sympathetic, because I decided to go and look for the peddler. I walked down the stairs and looked on every floor, but he had disappeared.

Expenses for August 2008

Category Jan Feb Mar Apr May Jun
Basic 902.71 936.18 2,294.03 817.89 883.92 780.06
Cash 182.72 194.95 212.00 304.00 194.45 233.50
Credit Card 103.10 44.00 194.50 0.00 0.00 17.00
Vehicle 282.32 830.80 196.07 893.33 262.66 770.06
Others 304.15 200.00 326.10 239.95 105.89 22.72
Total 1,775.00 2,205.93 3,222.70 2,255.17 1,446.92 1,823.34
Category Jul Aug
Basic 2,153.47 881.76
Cash 207.60 223.50
Credit Card 76.03 21.13
Vehicle 2,502.69 498.65
Others 20.33 178.87
Total 4,960.12 1,803.91

No notable big expenses, just a bunch of small ones that add up very quickly.

Poor or irresponsible?

News: More unable to pay electricity bills

Date: 29 August 2008. Source: ST.

35% of families with power bill woes stay in larger 4- or 5-room flats

MORE families here are having trouble paying their electricity bills. And in what social workers described as 'surprising', a significant number - about 35 per cent - are those who live in larger four- and five-room flats.

As of June this year, about 13,700 households have been put on a pre-paid metering scheme after they had their power supply cut off or were in danger of having the supply disconnected.

I realize that people just do not know how to conserve electricity. And then they wonder why their electrical bill is so high.

Times are bad

News: Citi tells staff to cut costs

Date: 28 August 2008. Source: ST.

Employees worldwide allowed fewer colour photocopies or new BlackBerrys; layoffs likely too

UNITED States-based financial giant Citigroup is well-known for its massive staff bonuses in boom times but now, hit by big losses, it is scrimping to cut costs.

The embattled group is clamping down on colour photocopying by staff and the purchase of new BlackBerrys, the popular portable e-mailing gizmo.

Other drastic measures detailed in a memo sent to staff worldwide include a ban on employees holding off-site meetings, apparently to cut down on the cost of refreshments bought outside.

That's how you know bad times are coming. All these cost cutting are very bad for staff morale. I know because I've been through it twice.

Need for financial education

News: Living it up - but at what cost?

Date: 25 Aug 2008. Source: ST.

Most youth today are inept when it comes to managing their finances

BEING financially free for the first time is a delirious experience.

As young adults in our 20s and fresh out of school, the taste of a first full month's salary feels not unlike the freedom to do anything.

So, we start eating out at expensive restaurants, buying brand-name items, maybe even a small car.

Build a nest egg? That thought never crops up - not at least for one group which has been making the news.

Going by a recent report in The Straits Times about under-30s today being the fastest growing group of debtors, it seems this set has gone a bit silly with their spending.

The 20s is a financial minefield.

Late to the party

News: UOB 'to sell preference shares'

Date: 19 August 2008. Source: ST.

UNITED Overseas Bank (UOB) is said to be the latest local bank to raise funds from investors by selling preference shares - a generally popular investment option in uncertain times.

Retail investors are likely to get a bite of the offering which pays annual interest of 5.05 per cent, a whisker below OCBC Bank's 5.1 per cent preference shares offered earlier this month, sources said.

I am interested. UOB is more sound than OCBC.

Reits will fall next

News: Still 'one safe haven' for investors - Reits

Date: 17 August 2008. Source: ST.

Funds turning in 'decent results' and should see better earnings in near term

Home prices are peaking, sales are sliding, and property counters are among the stock market's worst performers.

What's a property investor to do?

Fortunately, there is still one safe haven, according to a recent report by Credit Suisse. It tips real estate investment trusts, or Reits, as a good bet for investors.

What is recommended in the main stream media is usually too late.

Poor market sentiments

News: Market woes hit unit trusts

Date: 16 August 2008. Source: ST.

Amount invested in second quarter plummets by $1 billion from first quarter

POOR market sentiment has taken a huge toll on unit trusts with a $1 billion fall in the amount invested in the second quarter, compared with the first three months of the year.

Only a net $287.9 million was put into the sector in the three months ended June 30, in sharp contrast to the $1.29 billion in investments in the first quarter.

Tough times for everyone.

While I would like to invest more into unit trusts, the high commissions put me off. I will look for a fund with low commissions.

Tough times

I thought my stocks performed poorly last month. They were even worse this month. Instead of narrowing, my losses widened from 7% to 14%! One of my stocks has even hit my bear market estimate. This is bad.

Well, I'm not going to average down for now. I don't have much capital to enter the market often, so I need to time my purchases properly.

More trouble for UBS

News: UBS settles US$18.6 b auction-rate securities case

Date: 9 August 2008. Source: ST.

SWISS banking giant UBS AG agreed on Friday to buy back nearly US$20 billion (S$28.12 billion) in auction-rate securities from investors, a day after Citigroup reached a similar settlement with regulators for US$7 billion as part of a wide-ranging investigation into the collapse of the market for the bond-like investments.

Will UBS and Citigroup even survive?

Feng Shui? hmm...

News: Feng Shui turns this wheel

Date: 8 August 2008. Source: ST.

Frankie Chee explains why the Singapore Flyer had to turn the other way.

THERE is no scientific explanation to Feng Shui, but the ancient Chinese art of seeking fortune and wealth through astronomy and geography was powerful enough to make a $240-million wheel turn the other way, literally.

I believe in being in harmony with nature, but Feng Shui sometimes go too far.

One step ahead for Merrill Lynch

News: Merrill deal leaves other banks' debt in doubt

Date: 30 July 2008. Source: NYTimes.

Somehow, $4.4 billion just evaporated at Merrill Lynch.

Less than two weeks ago, Merrill Lynch valued the toxic mortgage investments on its books at $11.1 billion. Now, it is selling those investments for $6.7 billion - and financing most of the purchase to boot.

The fire sale raises a troubling question for the battered U.S. financial industry: Have other banks with similar investments overestimated their values?

That question reverberated across Wall Street on Tuesday as analysts began assessing the implications of Merrill's move to cleanse its tainted balance sheet.

Selling $11.1 billion worth of investments (already marked down from $30.6 billion) at $6.7 billion and providing 75% financing for the buyer?


Food and transport

Food and transport are essential expenses, or are they?

It is common to have meals outside of home. If you have lunch and dinner outside, it'll most likely cost you $195.30 per month ($4.50 x 2 x 21.7) for the weekdays.

Transport seems inevitable as well. Even a short ride will cost you $1.00, so it will cost you at least $43.40 per month ($1 x 2 x 21.7).

Are these inevitable?

Not if you are willing to change your mindset. For example, be willing to cook at home and be willing to look at alternative transports, such as walking, cycling or changing your routine so that you can take the shuttle bus.

Expenses for July 2008

Category Jan Feb Mar Apr May Jun
Basic 902.71 936.18 2,294.03 817.89 883.92 780.06
Cash 182.72 194.95 212.00 304.00 194.45 233.50
Credit Card 103.10 44.00 194.50 0.00 0.00 17.00
Vehicle 282.32 830.80 196.07 893.33 262.66 770.06
Others 304.15 200.00 326.10 239.95 105.89 22.72
Total 1,775.00 2,205.93 3,222.70 2,255.17 1,446.92 1,823.34
Category Jul
Basic 2,153.47
Cash 207.60
Credit Card 76.03
Vehicle 2,502.69
Others 20.33
Total 4,960.12

Basic expenses are high due to personal income tax. Good thing there's 20% rebate. Parents' allowance is slightly lower this month because my father refused to take the balance after I helped pay for some plane fares.

Cash expenses are in the ballpark even though I ate a lot of junk food in the last week.

Credit card expenses are due to treating two colleagues in one go last month! One colleague left and I owed another colleague a meal since last year.

Vehicle expenses are high due to renewing the MX-5's insurance ($1,134.12) and renewing the CB400F's COE ($1,125). I paid the car's insurance last month by credit card, that's why it only shows up now.

Penny shares can be a bottomless pit

News: Beware of penny stocks

Date: 27 July 2008. Source: ST.

My dreams of high returns turned to ashes as I succumbed to the temptation of riding on cheap counters

When I was growing up, the stock market was this mysterious concept that my parents would talk about with their peers as I listened, wide-eyed with innocent curiosity. They would either be gleefully discussing how they made a tidy profit by selling off some shares or lamenting how they suffered big losses by getting rid of some poor-performing stock.

A decade later, with A-level economics, two unrelated degrees and a business journalism course under my belt, the stock market was demystified. I was no longer in awe of how it worked. In fact, I longed to conquer it.

To tell the truth, I was tempted too. But penny shares are more like gambling than investment.

On the other hand, my father has still not learnt his lesson. He claimed he would buy only blue chips in the next downturn, but recently he told me he planned to buy penny shares instead for 2x to 3x gain — due to advice from a friend of his.

A leopard never change its spots.

Rumour spreads fast

News: Temasek sold '5m Merrill shares', not half its stake

Date: 26 July 2008. Source: ST.

Filing error made it look as if investor incurred a huge loss on the disposal

DID Temasek Holdings really sell half its stake in troubled financial giant Merrill Lynch at a disastrous loss?

This was the talk of town yesterday, as speculation and e-mail messages flew across Singapore, citing a report claiming the Singapore investment company had sold about 87 million Merrill shares.

Stunned market watchers quickly calculated that, if the report were true, Temasek would have suffered tens of millions of dollars in losses based on Merrill's current market prices.

It's an undeniable huge paper loss, though.

An old companion calls it a day

My Acer TravelMate 611TXV finally called it a day yesterday.

The notebook was unable to read from the hard disk. This is not a hard disk failure; it works fine on another notebook.

I called up Acer. They do not repair m/b, they only change them wholesale. However, they do not have it anymore. Even if they do, it would cost $595 (before GST).

Hopefully, the failure is due to some components on the m/b that can be replaced easily, but I'm not optimistic.

I bought the notebook on 16 July 2001 for $3,800, including 3% GST. (Found the invoice!)

Over the years, I have repaired and upgraded it several times. I estimate I have spent $1,000, so the total cost is $4,800.

The cost of the notebook works out to be $57.14/month.

Economics of drinking

Since last year, I seldom buy a drink with my food. It saves me about $1 to $1.50 per meal. This is pretty substantial in the long term.

What if you need a drink? A can of coke costs $1 to $1.50, depending on the location. If you can tahan until the end of the meal, you can buy one at $0.70 at a convenience store. Or, you can buy a 1.5L coke for $1.70 to $2.

In the past, the drink stall was a sure-win proposition. With increasing costs, many people have opted not to drink, just like me. The drink stalls' response was to increase the price, thus causing more people to avoid drinking.

How to tell if your bank is in trouble

News: SEC moves to curb illegal stock plays

Date: 17 July 2008. Source: ST.

Emergency rule introduced to limit short selling in shares of 19 firms

THE United States' stock market regulator has stepped up its war against what it believes is manipulation of share prices by 'short sellers' - traders who bet on falling share prices.

The 19 stocks are,

  • Fannie Mae
  • Freddie Mac
  • Allianz
  • BNP Paribas Securities
  • Bank of America
  • Barclays
  • Citigroup
  • Credit Suisse
  • Daiwa Securities
  • Deutsche Bank
  • Goldman Sachs
  • HSBC
  • JP Morgan Chase
  • Lehman Brothers
  • Merrill Lynch
  • Mizuho Financial
  • Morgan Stanley
  • Royal Bank of Scotland
  • UBS

A bank is not as safe as you think

News: US federal regulators seize control of IndyMac Bank

Date: 12 July 2008. Source: CNA.

Federal regulators said they had taken control of the troubled California-based IndyMac Bank on Friday in one of the biggest bank closures in US history.

The FDIC guarantees the first US$100,000 per account. All accounts owned by the same person at the same insured bank are added together and the total is insured up to $100,000.

In Singapore, the MAS only guarantees the first S$20,000.

Time for a great quote

Warren Buffet once said, "Only when the tide goes out do you discover who's been swimming naked."

I was reminded of this when I read someone's online post where he advocated taking on 0% installment plans instead of paying cash and then using the money to invest.

We have all sorts of experts giving all sorts of sure-win advice in a bull market. Now that the bull is behind us, let's see who is swimming naked and who is not.

Lost in cyberspace

I transferred $12,000 out of my Maybank account and would only get it back in the account one week later. I would lose $2.49 in interests.

Funds transfer is not free.

Wage Report by MOM

MOM released their Report on Wages in Singapore 2007 last month. This time, they included the 25th and 75th percentile too. Well done!

The reports are scattered in several PDFs and the data in numerous Excel spreadsheets. MOM should consolidate them in a zip file for easy downloading.

The report that I'm most interested in is 4.6 Mean, Median and Quartiles of Monthly Gross Wage of Selected Occupations in Information and Communications.

I listed some occupations that I am particularly interested in.


Occupation Mean 25% 50% 75%
Business Development Manager 8,083 5,305 7,050 9,934
Engineering Manager 7,513 5,560 8,253 8,922
Technical Manager 7,862 6,185 7,100 8,979


Occupation Mean 25% 50% 75%
Application Programmer 3,247 2,665 3,100 3,805
Business Analyst 4,642 3,668 4,410 5,480
CIS Manager 7,935 5,700 7,225 9,540
Computer Engineer 3,244 2,834 3,101 3,635
Computer Operations and Network Manager 8,279 5,915 8,000 10,165
Database Administrator 4,267 3,478 4,040 4,714
IT QA Specialist 2,641 1,800 1,955 2,647
IT Security Specialist 4,311 3,000 3,644 5,737
Network and Computer Systems Administrator 3,250 2,300 3,000 4,000
Network Systems and Data Communication Analyst 3,893 3,079 3,785 4,545
Software Engineer 3,619 2,746 3,000 4,045
Systems Designer and Analyst 3,864 3,019 3,700 4,365
Systems Programmer 4,506 2,300 4,100 6,456

It's pretty easy to earn over $6,000 if you have the word "Manager" in your title. On the other hand, it is difficult for a programmer (whether he is called an engineer or analyst) to earn over this amount.

I wish MOM would include the 10th and 90th percentile in the future. :-)

CPF members by wage in 2007

< $400 58,726 3.8%
< $800 146,542 13.3%
< $1,000 71,432 17.9%
< $1,500 180,959 29.6%
< $2,000 189,476 41.9%
< $3,000 316,855 62.4%
< $4,500 266,493 79.6%
>= $4,500 314,384 100.0%
Unspecified 87
Total 1,544,954

The Singapore Government is right on target: it targeted $4,500 as the 80th wage percentile for the year 2007 in 2005.

The median income is $2,330.

I went to look for these statistics because I am very curious how many people earn above $4,500 per month.

I got the statistics from MOM's website, and they got it from CPF. However, CPF's website do not have these statistics.

15% off from peak

News: $120b wiped off listed firms' market cap in first half

Date: 1 July 2008. Source: ST.

Slower earnings growth and poor sentiment take their toll on bourse

A TOTAL of $120 billion has been slashed from the combined market value of companies listed in Singapore since the start of the year.

That is a 15 per cent slide, the biggest first-half fall in market capitalisation since a 30 per cent dive during the Asian financial crisis between January and June 1998.

Still have another 15 percent to go.

Expenses for June 2008

Category Jan Feb Mar Apr May Jun
Basic 902.71 936.18 2,294.03 817.89 883.92 780.06
Cash 182.72 194.95 212.00 304.00 194.45 233.50
Credit Card 103.10 44.00 194.50 0.00 0.00 17.00
Vehicle 282.32 830.80 196.07 893.33 262.66 770.06
Others 304.15 200.00 326.10 239.95 105.89 22.72
Total 1,775.00 2,205.93 3,222.70 2,255.17 1,446.92 1,823.34

Basic expenses are lower because the phone/Internet bills are not deducted (they were deducted last month).

Cash (withdrawal) is on the high side because of several fast food meals. Perhaps fast food meals exceeding $10 should be classified under Others. I expect cash withdrawals to be around this figure in the next few months.

The Vehicle expenses are lower than expected because I paid my car's insurance by credit card. That effectively postponed the payment by a month. (The expenses for next month will be astronomical!)

The bulk of Vehicle expenses is the road tax ($557).

June is a surprisingly lean month.