Singapore's coming election must be held latest by 2017 January. Singapore will be celebrating SG50 for 50 years of Singapore's independence in 2015. Many people are expecting "goodies" from the National Budget speech in 2015 (think sometime in April/May period).
Given all the above providing feel good factors, I would hazard a guess that the coming Singapore General Election should be held sometime in 2016 H1. More likely March/April 2016, either after 2016 National Budget Speech if 2016 National Budget Speech still giving "goodies" to Singaporeans, or before the 2016 National Budget Speech if there is no more "goodies" to Singaporeans.
Wednesday, December 24, 2014
Sunday, December 21, 2014
Yellen says poor Americans live in ‘sobering’ conditions
An interesting piece of news from this URL...
Yellen says poor Americans live in ‘sobering’ conditions
By Greg Robb
Published: Sept 18, 2014 10:02 a.m. ET
Reuters
WASHINGTON (MarketWatch) — The condition of lower-income families in America is “sobering” even as the economy recovers, Federal Reserve Chairwoman Janet Yellen said Thursday.
“We have come far from the worst moments of the crisis and the economy continues to improve, but the effects of the recession are still being felt by many families, particularly those that had very little in savings and other assets beforehand,“ Yellen said in a speech she prepared for delivery at a conference sponsored by the Corporation for Enterprise Development.
The Fed must continue its efforts to help Americans build assets, she said.
The financial crisis showed that many American families are economically vulnerable, with few assets to fall back on in times of distress, Yellen said.
Families with assets are able to deal with unexpected expenses as bumps in the road but “families without these assets can end up, very suddenly, off the road,” Yellen said.
Coming one day after the Fed’s latest policy meeting, Yellen did not discuss interest rates or the economic outlook, instead focusing on the effects of the recession on lower-income families.
The Fed chairwoman cited the Fed’s 2013 Survey of Consumer Finances, published earlier this month, which showed that the bottom half of families by income held only 8% of all financial assets.
The median net worth reported by the bottom fifth of households by income, about 25 million Americans, was only $6,400 in 2013, the Fed survey found.
The next fifth of households by income had median income net worth of just $27,900. These numbers are down from the prior survey in 2010 because income has continued to fall for these families, Yellen said.
Another Fed survey found that the majority of American households would be in jeopardy after an unexpected expense of only $400, she added.
“The Fed’s mission is to promote a healthy economy and strong financial system, and that is why we have prompted and will continue to promote asset building,” Yellen said.
Yellen says poor Americans live in ‘sobering’ conditions
By Greg Robb
Published: Sept 18, 2014 10:02 a.m. ET
Reuters
WASHINGTON (MarketWatch) — The condition of lower-income families in America is “sobering” even as the economy recovers, Federal Reserve Chairwoman Janet Yellen said Thursday.
“We have come far from the worst moments of the crisis and the economy continues to improve, but the effects of the recession are still being felt by many families, particularly those that had very little in savings and other assets beforehand,“ Yellen said in a speech she prepared for delivery at a conference sponsored by the Corporation for Enterprise Development.
The Fed must continue its efforts to help Americans build assets, she said.
The financial crisis showed that many American families are economically vulnerable, with few assets to fall back on in times of distress, Yellen said.
Families with assets are able to deal with unexpected expenses as bumps in the road but “families without these assets can end up, very suddenly, off the road,” Yellen said.
Coming one day after the Fed’s latest policy meeting, Yellen did not discuss interest rates or the economic outlook, instead focusing on the effects of the recession on lower-income families.
The Fed chairwoman cited the Fed’s 2013 Survey of Consumer Finances, published earlier this month, which showed that the bottom half of families by income held only 8% of all financial assets.
The median net worth reported by the bottom fifth of households by income, about 25 million Americans, was only $6,400 in 2013, the Fed survey found.
The next fifth of households by income had median income net worth of just $27,900. These numbers are down from the prior survey in 2010 because income has continued to fall for these families, Yellen said.
Another Fed survey found that the majority of American households would be in jeopardy after an unexpected expense of only $400, she added.
“The Fed’s mission is to promote a healthy economy and strong financial system, and that is why we have prompted and will continue to promote asset building,” Yellen said.
Thursday, December 18, 2014
Singapore OCR private property market likely crash in 2016-2018
Singapore private property market is weakening significantly...
You can read the news at this URL...
You can also read the news that I had attached below.
Apparently, Singapore's CCR (Core Central Region) property price has dropped by a lot and the CCR market is very soft now because CCR has traditionally been a foreigners' playing ground. The introduction of Singapore's property cooling measure called "ABSD" (additional buyer's stamp duty) has basically killed it!
However, Singapore's OCR (Outside Core Region) property market is a different story. Singapore's OCR property market is now slowly being killed by Singapore's property cooling measure called "TDSR" (total debt servicing ratio) (Note that I had covered the absurdity of TDSR in my previous post and I will not repeat here again).
Recently, it has been reported that mortgagee sales (i.e. bank forced sales of mortgaged properties) have been on the rise, and even those so-called "mickey-mouse" units (i.e. very small size units of <500 sqft) are under mortgagee sale! Many of these "mickey-mouse" units are in the OCR region, which is very surprising because these units market value are very low and yet the owners still faced mortgagee sale after being unable to pay the small amount of property loan instalment and probably also due to being unable to refinance at cheaper rate and longer loan tenure due to imposition of TDSR!
It seems that while Singapore CCR private property prices has already crashed, and now Singapore's OCR property market is suffering a slow death and the price would likely have crashed by 2016-2018 if no removal of any property cooling measure has been made by then...
--------------------------------------------------
6 months to sell a condo, 3 to offload a flat
Friday, Nov 21, 2014
Rennie Whang
The Straits Times
Private condominium sellers are taking nearly six months to secure a sale, the longest wait in over two years, new data shows.
It also takes far longer now to find a buyer for a Housing Board flat - with a three-month wait on average.
Data compiled by the Singapore Real Estate Exchange (SRX) shows that private non-landed units spent a median of 120 days on the market in the first quarter, rising to 137 days in the second quarter and 154 days in the third.
Last month, they spent 172 days - almost six months - on the market before being sold. It is a far cry from 88.5 days, or less than three months, a year back.
The median wait to sell HDB units has grown as well, from more than 60 days per quarter in 2012 and last year to 91 days in the third quarter this year.
These long waits reflect weakened demand, consultants say. Upcoming increases in total residential stock will further pressure owners to sell, said Century 21 chief executive Ku Swee Yong.
In the HDB market, resale demand has suffered owing to factors such as the large number of new Build-To-Order flats, giving first- and second-time buyers a more affordable option, said PropNex CEO Mohd Ismail.
There has also been growing supply in the HDB resale market from people collecting keys to second homes, leading to sliding prices in the past five quarters.
For private homes, the total debt servicing ratio and additional buyer's stamp duty have discouraged buyers.
New private home sales are not expected to exceed 9,000 this year, far lower than last year's 17,590 annual sales figure.
The median price spread - the difference between asking and transaction prices - has also risen in both public and private residential markets, SRX found.
In the HDB market, the median price spread rose from 4.7 per cent in the first quarter to 4.9 per cent in the second and 5.9 per cent in the third. It was 3.8 per cent in the third quarter last year and 2.1 per cent a year earlier.
For private non-landed properties, the spread went from 6.3 per cent in the first quarter to 7.3 per cent in the second and 8.2 per cent in the third. It was 4.9 per cent in the third quarter last year and 4.1 per cent a year earlier.
While median days on market is expected to rise, price spreads may keep edging up though they are likely to stabilise soon, said OrangeTee research manager Wong Xian Yang. Valuations could be adjusted and sellers are likely to lower asking prices.
Private condo owners tend to have more holding power, but weak leasing demand for newly completed mass market condos may pressure some owners to sell, said R'ST Research director Ong Kah Seng.
The longer waits and growing price spread do not necessarily mean prices will soften further, said Savills Singapore research head Alan Cheong.
"Usually, (this could be the case) for more liquid markets like equities... Fortunately, real estate is not a homogeneous product with factors including location and unit size... all having an effect on pricing. Still, with a negative economic indicator such as increased days on market, creditors may feel compelled to quickly act against delinquent loans."
You can read the news at this URL...
You can also read the news that I had attached below.
Apparently, Singapore's CCR (Core Central Region) property price has dropped by a lot and the CCR market is very soft now because CCR has traditionally been a foreigners' playing ground. The introduction of Singapore's property cooling measure called "ABSD" (additional buyer's stamp duty) has basically killed it!
However, Singapore's OCR (Outside Core Region) property market is a different story. Singapore's OCR property market is now slowly being killed by Singapore's property cooling measure called "TDSR" (total debt servicing ratio) (Note that I had covered the absurdity of TDSR in my previous post and I will not repeat here again).
Recently, it has been reported that mortgagee sales (i.e. bank forced sales of mortgaged properties) have been on the rise, and even those so-called "mickey-mouse" units (i.e. very small size units of <500 sqft) are under mortgagee sale! Many of these "mickey-mouse" units are in the OCR region, which is very surprising because these units market value are very low and yet the owners still faced mortgagee sale after being unable to pay the small amount of property loan instalment and probably also due to being unable to refinance at cheaper rate and longer loan tenure due to imposition of TDSR!
It seems that while Singapore CCR private property prices has already crashed, and now Singapore's OCR property market is suffering a slow death and the price would likely have crashed by 2016-2018 if no removal of any property cooling measure has been made by then...
--------------------------------------------------
6 months to sell a condo, 3 to offload a flat
Friday, Nov 21, 2014
Rennie Whang
The Straits Times
Private condominium sellers are taking nearly six months to secure a sale, the longest wait in over two years, new data shows.
It also takes far longer now to find a buyer for a Housing Board flat - with a three-month wait on average.
Data compiled by the Singapore Real Estate Exchange (SRX) shows that private non-landed units spent a median of 120 days on the market in the first quarter, rising to 137 days in the second quarter and 154 days in the third.
Last month, they spent 172 days - almost six months - on the market before being sold. It is a far cry from 88.5 days, or less than three months, a year back.
The median wait to sell HDB units has grown as well, from more than 60 days per quarter in 2012 and last year to 91 days in the third quarter this year.
These long waits reflect weakened demand, consultants say. Upcoming increases in total residential stock will further pressure owners to sell, said Century 21 chief executive Ku Swee Yong.
In the HDB market, resale demand has suffered owing to factors such as the large number of new Build-To-Order flats, giving first- and second-time buyers a more affordable option, said PropNex CEO Mohd Ismail.
There has also been growing supply in the HDB resale market from people collecting keys to second homes, leading to sliding prices in the past five quarters.
For private homes, the total debt servicing ratio and additional buyer's stamp duty have discouraged buyers.
New private home sales are not expected to exceed 9,000 this year, far lower than last year's 17,590 annual sales figure.
The median price spread - the difference between asking and transaction prices - has also risen in both public and private residential markets, SRX found.
In the HDB market, the median price spread rose from 4.7 per cent in the first quarter to 4.9 per cent in the second and 5.9 per cent in the third. It was 3.8 per cent in the third quarter last year and 2.1 per cent a year earlier.
For private non-landed properties, the spread went from 6.3 per cent in the first quarter to 7.3 per cent in the second and 8.2 per cent in the third. It was 4.9 per cent in the third quarter last year and 4.1 per cent a year earlier.
While median days on market is expected to rise, price spreads may keep edging up though they are likely to stabilise soon, said OrangeTee research manager Wong Xian Yang. Valuations could be adjusted and sellers are likely to lower asking prices.
Private condo owners tend to have more holding power, but weak leasing demand for newly completed mass market condos may pressure some owners to sell, said R'ST Research director Ong Kah Seng.
The longer waits and growing price spread do not necessarily mean prices will soften further, said Savills Singapore research head Alan Cheong.
"Usually, (this could be the case) for more liquid markets like equities... Fortunately, real estate is not a homogeneous product with factors including location and unit size... all having an effect on pricing. Still, with a negative economic indicator such as increased days on market, creditors may feel compelled to quickly act against delinquent loans."
How to be a successful investor
The other day, I had a gathering with a group of friends. Inevitably, the discussion will shift to investments. The topic most hotly talked about is "How to be a successful investor"!
We have some friends who have worked so hard in their career that although they are reasonably well-off and comfortable in life, they also have medical problems, mostly high blood pressure and high cholesterol. Some even have kidney, liver, and heart problems. One of them had gone for heart by-pass. So, at the end of the day, to be successful in life, you need to have a healthy body, and hence you need to have a healthy life style to stay healthy!
To be a successful investor, you need to read widely, and have sharp analytical skills on what you read (Yes! - Read NEWS with EYES wide open, brain functioning!!!), regardless of the source (always assume what you read is only presented as "half-true"!)!
To have sharp analytical capability, you need to be healthy.
To stay healthy, you need to do the following:
1) Have enough good sleep everyday.
2) Lead a healthy life style (no smoking, no heavy drinking etc), and do not subject yourself to too much stress.
3) Eat healthily - More different variety of fruits and vegetables, and less high cholesterol food.
4) Keep active and have moderate exercise everyday (if possible).
Research has shown that if you don't have enough good sleep for prolonged period of time, you are bound to develop health problems, particularly prone to mental problems. Other than mental problems, you can also easily develop other health problems, like liver problems.
Also, people should live a healthy life style that do not subject themselves to much stress. Research have found that stress is the main cause of mutations in the human gene known as p53 gene. It was found that about 11 Million people living with cancer have specific mutations in the p53 gene leading to the production of a faulty p53 protein, and this is half the cases of human cancer. As such, stress seems seem to be the cause of more than 50% of cancer cases.
It is also important to eat healthily, reducing intake of high cholesterol food and deep fried food (where oil has been recycled too many times) to a minimum.
Last but not least, moderate exercise everyday is good for everyone. Remember, I would like to stress the word "moderate", not "extreme" exercise. Moderate exercise helps you to relax, while "extreme" exertion increases stress.
Only when you have healthy body and a healthy mind can you then become a successful investor!
We have some friends who have worked so hard in their career that although they are reasonably well-off and comfortable in life, they also have medical problems, mostly high blood pressure and high cholesterol. Some even have kidney, liver, and heart problems. One of them had gone for heart by-pass. So, at the end of the day, to be successful in life, you need to have a healthy body, and hence you need to have a healthy life style to stay healthy!
To be a successful investor, you need to read widely, and have sharp analytical skills on what you read (Yes! - Read NEWS with EYES wide open, brain functioning!!!), regardless of the source (always assume what you read is only presented as "half-true"!)!
To have sharp analytical capability, you need to be healthy.
To stay healthy, you need to do the following:
1) Have enough good sleep everyday.
2) Lead a healthy life style (no smoking, no heavy drinking etc), and do not subject yourself to too much stress.
3) Eat healthily - More different variety of fruits and vegetables, and less high cholesterol food.
4) Keep active and have moderate exercise everyday (if possible).
Research has shown that if you don't have enough good sleep for prolonged period of time, you are bound to develop health problems, particularly prone to mental problems. Other than mental problems, you can also easily develop other health problems, like liver problems.
Also, people should live a healthy life style that do not subject themselves to much stress. Research have found that stress is the main cause of mutations in the human gene known as p53 gene. It was found that about 11 Million people living with cancer have specific mutations in the p53 gene leading to the production of a faulty p53 protein, and this is half the cases of human cancer. As such, stress seems seem to be the cause of more than 50% of cancer cases.
It is also important to eat healthily, reducing intake of high cholesterol food and deep fried food (where oil has been recycled too many times) to a minimum.
Last but not least, moderate exercise everyday is good for everyone. Remember, I would like to stress the word "moderate", not "extreme" exercise. Moderate exercise helps you to relax, while "extreme" exertion increases stress.
Only when you have healthy body and a healthy mind can you then become a successful investor!
Tuesday, December 16, 2014
Coach (NYSE: COH): Value-stock or Value-trap?
Recently, I read a blog that wrote the below opinion piece on Coach:
-----------------------------------------
Coach, Inc. (NYSE:COH): Another big-name retailer, this handbag and luxury goods specialist's shares have struggled in 2014. But it still has an economic moat because of its "brand history and the extensive, directly operated, and wholesale distribution network", according to Morningstar. And again, the numbers back it up. Coach's three-year average net profit margins are nearly 20%, for example. It gets some interest from my Buffett-based model, in part because it has averaged a return on equity of more than 38% over the past decade. And it gets strong interest from the Greenblatt-based model, in part because of its stellar 39% return on capital.
-----------------------------------------
So, is Coach a value-stock now a Value-trap?
What is your take?
My gut instinct (without doing a lot of research and background study yet) is that "Coach is a value-trap"!
I have been receiving some emails from Coach marketing their products. I don't buy Coach products, and have never bought anything from Coach before, nor do I intend to any time now or in future. The fact that I am receiving such "spam" emails from Coach does give me an impression that business for Coach must have been really bad now that they need to resort to "spamming" our mailbox!
Having said that, it would only be fair to do a detail research and background study before I put the nail on the coffin for Coach. Ok, let's wait I have the time to do one. I would be more interested to do for some other stocks I am eyeing now..... Will keep you updated soon............
-----------------------------------------
Coach, Inc. (NYSE:COH): Another big-name retailer, this handbag and luxury goods specialist's shares have struggled in 2014. But it still has an economic moat because of its "brand history and the extensive, directly operated, and wholesale distribution network", according to Morningstar. And again, the numbers back it up. Coach's three-year average net profit margins are nearly 20%, for example. It gets some interest from my Buffett-based model, in part because it has averaged a return on equity of more than 38% over the past decade. And it gets strong interest from the Greenblatt-based model, in part because of its stellar 39% return on capital.
-----------------------------------------
So, is Coach a value-stock now a Value-trap?
What is your take?
My gut instinct (without doing a lot of research and background study yet) is that "Coach is a value-trap"!
I have been receiving some emails from Coach marketing their products. I don't buy Coach products, and have never bought anything from Coach before, nor do I intend to any time now or in future. The fact that I am receiving such "spam" emails from Coach does give me an impression that business for Coach must have been really bad now that they need to resort to "spamming" our mailbox!
Having said that, it would only be fair to do a detail research and background study before I put the nail on the coffin for Coach. Ok, let's wait I have the time to do one. I would be more interested to do for some other stocks I am eyeing now..... Will keep you updated soon............
Friday, December 12, 2014
Avoid SOR-pegged property loan!
I may have written this a bit late but better late than never!
I am writing to warn people about SOR-pegged housing loan, because SOR has been increasing very rapidly for the past 1 month! For example, the 3-Month SOR has rose from about 0.2% to 0.516 now, while 3-Month has barely increased at about 0.445%.
SOR is expected to increase much more from now onwards, so beware! Meanwhile, SIBOR is expected to be much more tame...............
I am writing to warn people about SOR-pegged housing loan, because SOR has been increasing very rapidly for the past 1 month! For example, the 3-Month SOR has rose from about 0.2% to 0.516 now, while 3-Month has barely increased at about 0.445%.
SOR is expected to increase much more from now onwards, so beware! Meanwhile, SIBOR is expected to be much more tame...............
Tuesday, December 9, 2014
Read NEWS with EYES wide open, brain functioning-3
Today, I read an interesting article (quoting a research paper), titled "CPF returns attractive versus risk: Institute of Policy Studies", which you can read at this URL...
The part which is believe is "interesting" BUT doesn't quite make sense in the paper cited by the news article is pertaining the claimed return of CPF, where it says:
"The CPF has similar returns, over 20 years, when compared to a typical balanced portfolio of 60 per cent equities and 40 per cent bonds, the paper said. But these returns of 5.7 per cent a year come with a standard deviation of just 1.4 per cent due to various guarantees in the system. By contrast, the standard deviation for the 60:40 portfolio is 12.3 per cent, with expected returns a tad higher at 5.9 per cent."
I don't know how the authors obtain 5.7% a year return for our CPF money locked in CPF, because as we know, CPF money has been paid 2.5% per annum (p.a.) for very long time, and the first $60,000 will get 4% p.a. The CPF has a minimum sum of $161,000 for retirement fund and another about $50,000 for Medisave account, making a total of $211,000 locked inside CPF for every Singaporean. If only $60k receives interest of 4% p.a. and the other $151k receives interest of 2.5% only, how the hell the authors of the paper arrive at 5.7% p.a. return? May be the 5.7% p.a. is the AVERAGE return (total return over 20 years divided by 20 years) and NOT ANNUALIZED return? But hey, ANNUALIZED return is usually used in the financial sector and presenting the return as 5.7% AVERAGE return and then comparing to say about 5.7% ANNUALIZED return from stocks and bonds are like comparing APPLE to ORANGE!
For people who are not sure about the difference between AVERAGE return and ANNUALIZED return, let me explain it in a simple way:
1) Say you have AVERAGE return of 5.7% over 20 years, then your total return over 20 years = (5.7%)x20 = 114%.
2) Say you have ANNUALIZED return of 5.7% over 20 years, then your total return over 20 years = (1.057) to the power of 20 = 303.04%.
Hey, the difference between (2) and (1) above over 20 years = 189% !!!
I leave it to all of you to figure out the details or call for more clarifications from the authors of that paper.
The part which is believe is "interesting" BUT doesn't quite make sense in the paper cited by the news article is pertaining the claimed return of CPF, where it says:
"The CPF has similar returns, over 20 years, when compared to a typical balanced portfolio of 60 per cent equities and 40 per cent bonds, the paper said. But these returns of 5.7 per cent a year come with a standard deviation of just 1.4 per cent due to various guarantees in the system. By contrast, the standard deviation for the 60:40 portfolio is 12.3 per cent, with expected returns a tad higher at 5.9 per cent."
I don't know how the authors obtain 5.7% a year return for our CPF money locked in CPF, because as we know, CPF money has been paid 2.5% per annum (p.a.) for very long time, and the first $60,000 will get 4% p.a. The CPF has a minimum sum of $161,000 for retirement fund and another about $50,000 for Medisave account, making a total of $211,000 locked inside CPF for every Singaporean. If only $60k receives interest of 4% p.a. and the other $151k receives interest of 2.5% only, how the hell the authors of the paper arrive at 5.7% p.a. return? May be the 5.7% p.a. is the AVERAGE return (total return over 20 years divided by 20 years) and NOT ANNUALIZED return? But hey, ANNUALIZED return is usually used in the financial sector and presenting the return as 5.7% AVERAGE return and then comparing to say about 5.7% ANNUALIZED return from stocks and bonds are like comparing APPLE to ORANGE!
For people who are not sure about the difference between AVERAGE return and ANNUALIZED return, let me explain it in a simple way:
1) Say you have AVERAGE return of 5.7% over 20 years, then your total return over 20 years = (5.7%)x20 = 114%.
2) Say you have ANNUALIZED return of 5.7% over 20 years, then your total return over 20 years = (1.057) to the power of 20 = 303.04%.
Hey, the difference between (2) and (1) above over 20 years = 189% !!!
I leave it to all of you to figure out the details or call for more clarifications from the authors of that paper.
Sunday, December 7, 2014
Avoid Gold! Warren Buffett also said so!
Why avoid Gold, you may ask?
Well, it is a bad investment!
Who says so?
Me!
But you are a nobody, how do we know whether to trust your words?
Ok ok, at least Warren Buffett, the world's most famous investor supported my view! You can read the post on why Warren Buffett hates gold at this URL...
The post give the detail reasons but I found it to be overtly complicated.
There are simpler way to explain why we should avoid "investing" in gold, and that is by comparison to other investment instruments. I can summarise for you as follow:
1) While stocks and bonds pay "dividends" or "coupons", and property earns you rental, investment in gold pays you nothing, but instead you incur storage costs!
2) If you own property, you can live in it if you can't rent out. If you own gold, you can't sleep in it!
3) Property price is known to rise against inflation and currency depreciation, gold does not always follow so.
For your convenience, I have attached the post as below:
--------------------------------------
Why Warren Buffett hates gold
Matt DiLallo, The Motley Fool 8:18 a.m. EDT September 21, 2014
Warren Buffett didn't become one of the greatest investors of our generation by investing in gold. In fact, he pretty much hates the shiny metal. Just take a look at part of a speech Buffett gave at Harvard in 1998 when he said of gold:
"(It) gets dug out of the ground in Africa or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."
Buffett just doesn't get what all the fuss is about when it comes to gold. The way he sees it, the value of gold is nothing more than our stubborn willingness to protect its value.
However, that's not the worst part of gold in Buffett's view. His biggest issue is the fact that gold is just so worthless. Not in the value someone is willing to pay for an ounce of it, but in its ability to create wealth. In Buffett's opinion, gold is lazy and has no place in an investor's portfolio.
Lazy, good-for-nothing ...
Buffett hammered on gold in his 2011 shareholder letter calling it an "unproductive asset." He said that assets like gold "will never produce anything, but are purchased in the buyer's hope that someone else will pay more for them in the future." He went on to say that the owners of assets like gold "are not inspired by what the asset itself can produce -- it will remain lifeless forever -- but by the belief that others will desire it even more avidly in the future."
The problem with gold is that it has two major insurmountable shortcomings. It is "neither of much use nor procreative" according to Buffett. While he does allow for the caveat that gold has some small industrial and decorative use, the demand for either purpose is insufficient to use up all of the gold we are digging out of the ground just to hide it away again is a bank vault. However, his bigger issue with gold is that it can't be used to produce anything of value. Its value rises and falls based on what someone else is willing to pay for it, not based on its ability to generate income for its owner.
Productivity builds wealth, not gold
Buffett ends his diatribe on gold in that letter by contrasting it to the productive assets he prefers:
Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,127 per ounce, its value would be about $9.6 trillion. Call this cube pile A.
Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 ExxonMobil's (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
And yet, investors still do choose gold over these productive assets all the time. Assets that will be producing corn and cotton and oil and gas for longer than any of our lifespans. Meanwhile, the gold will be unmoved and still incapable of producing anything. To wit Buffett said, "You can fondle the cube, but it will not respond."
Don't be fooled by gold
There's a real good reason why Warren Buffett hates gold. One who buys gold is hoping for the greater fool to buy it from them for a higher price at some future date. But that's not investing -- it's gambling.
Instead, Buffett seeks to surround himself with assets that are constantly producing value. Income that flows through the business is reinvested in new lines of business that go on to produce more income. It's a never-ending cycle where new wealth is created each and every year. It takes advantage of the wonders of compounding income and leaves behind the folly of being allured by a lazy, good-for-nothing, shiny object.
Well, it is a bad investment!
Who says so?
Me!
But you are a nobody, how do we know whether to trust your words?
Ok ok, at least Warren Buffett, the world's most famous investor supported my view! You can read the post on why Warren Buffett hates gold at this URL...
The post give the detail reasons but I found it to be overtly complicated.
There are simpler way to explain why we should avoid "investing" in gold, and that is by comparison to other investment instruments. I can summarise for you as follow:
1) While stocks and bonds pay "dividends" or "coupons", and property earns you rental, investment in gold pays you nothing, but instead you incur storage costs!
2) If you own property, you can live in it if you can't rent out. If you own gold, you can't sleep in it!
3) Property price is known to rise against inflation and currency depreciation, gold does not always follow so.
For your convenience, I have attached the post as below:
--------------------------------------
Why Warren Buffett hates gold
Matt DiLallo, The Motley Fool 8:18 a.m. EDT September 21, 2014
Warren Buffett didn't become one of the greatest investors of our generation by investing in gold. In fact, he pretty much hates the shiny metal. Just take a look at part of a speech Buffett gave at Harvard in 1998 when he said of gold:
"(It) gets dug out of the ground in Africa or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."
Buffett just doesn't get what all the fuss is about when it comes to gold. The way he sees it, the value of gold is nothing more than our stubborn willingness to protect its value.
However, that's not the worst part of gold in Buffett's view. His biggest issue is the fact that gold is just so worthless. Not in the value someone is willing to pay for an ounce of it, but in its ability to create wealth. In Buffett's opinion, gold is lazy and has no place in an investor's portfolio.
Lazy, good-for-nothing ...
Buffett hammered on gold in his 2011 shareholder letter calling it an "unproductive asset." He said that assets like gold "will never produce anything, but are purchased in the buyer's hope that someone else will pay more for them in the future." He went on to say that the owners of assets like gold "are not inspired by what the asset itself can produce -- it will remain lifeless forever -- but by the belief that others will desire it even more avidly in the future."
The problem with gold is that it has two major insurmountable shortcomings. It is "neither of much use nor procreative" according to Buffett. While he does allow for the caveat that gold has some small industrial and decorative use, the demand for either purpose is insufficient to use up all of the gold we are digging out of the ground just to hide it away again is a bank vault. However, his bigger issue with gold is that it can't be used to produce anything of value. Its value rises and falls based on what someone else is willing to pay for it, not based on its ability to generate income for its owner.
Productivity builds wealth, not gold
Buffett ends his diatribe on gold in that letter by contrasting it to the productive assets he prefers:
Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,127 per ounce, its value would be about $9.6 trillion. Call this cube pile A.
Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 ExxonMobil's (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
And yet, investors still do choose gold over these productive assets all the time. Assets that will be producing corn and cotton and oil and gas for longer than any of our lifespans. Meanwhile, the gold will be unmoved and still incapable of producing anything. To wit Buffett said, "You can fondle the cube, but it will not respond."
Don't be fooled by gold
There's a real good reason why Warren Buffett hates gold. One who buys gold is hoping for the greater fool to buy it from them for a higher price at some future date. But that's not investing -- it's gambling.
Instead, Buffett seeks to surround himself with assets that are constantly producing value. Income that flows through the business is reinvested in new lines of business that go on to produce more income. It's a never-ending cycle where new wealth is created each and every year. It takes advantage of the wonders of compounding income and leaves behind the folly of being allured by a lazy, good-for-nothing, shiny object.
Saturday, December 6, 2014
Oil prices falling, what is the consequences to your investment?
The biggest business news in these 2 weeks have been that crude oil prices have been falling from a peak of US$120+ per barrel to US$60+ per barrel ever since news of oil over-supply got circulated around and then OPEC decided to maintain their oil production. This is further escalated by other oil producing countries to maintain their production volumes, thus resulting in over-supply and expected fall in oil prices!
To add oil to fire, Saudi Arabia has just started to cut the prices of oil they sell, effectively starting a "price war". To this end, only the lowest cost oil producers, like Saudi, will survive if oil prices fall to US$30+ per barrel. US$30 per barrel level is believed to be the lowest threshold that Saudi is willing to go in a price war and is already more than enough to kill off most of its competitors whose cost of producing oil are generally between US$30-70 per barrel.
Who will be the casualties then? Who are the highest cost oil producers? It seems that Russia, Brazil, Valenzuela, and even Norway are higher cost oil producing countries because it cost more to extract oil from deep seas and deeper ground.
Even oil from oil sand in Canada, and shale from US will not be spared because of their higher costs.
A figure of about US$60 per barrel has been floated around as the cost of oil extraction from oil sand and shale, below which these companies will make losses and cannot survive for long.
Note that the low oil price is expected to stay for quite a while (may be for another 2-3 years) and time is need to wipe out the higher cost oil producers because most of these producers are probably hedged for 1 year on the high oil price and they will only feel the pain of low oil price after 1 year of sustained low oil price.
However, falling oil prices to rock bottom price is good for huge oil consumption countries (as exposed to oil production countries), such as US, China, India, Singapore, Thailand etc. Meanwhile, both Malaysia and Indonesia's oil and oil-related industries will be affected to a certain extent. Note that Malaysia derive about 1/3 of their revenue from oil and oil-related industries. Even UK will also be affected due to their huge revenue from North-Sea oil production.
With falling oil prices, US will benefit from lower living cost inflation, thus US stock market and hence S&P500 index is expected to have further fuel to continue the bull run (even after QE has been removed and even if interest rate raise only moderately).
Singapore will benefit from lower living cost inflation as well.
However, beware of oil-related stocks like Keppel Corp (BN4), Sembcorp Marine (S51), Sembcorp Industries (U96), Ezion Holdings (5ME), Nam Cheong, Swiber, Ezra, Swissco, etc!
However, this will also means that soon S$ will depreciate against its other trading currencies, particularly US$. Beware!
In summary:
1) Avoid investment in oil and oil-related industries!
2) Beware of falling S$ vs US$.
To add oil to fire, Saudi Arabia has just started to cut the prices of oil they sell, effectively starting a "price war". To this end, only the lowest cost oil producers, like Saudi, will survive if oil prices fall to US$30+ per barrel. US$30 per barrel level is believed to be the lowest threshold that Saudi is willing to go in a price war and is already more than enough to kill off most of its competitors whose cost of producing oil are generally between US$30-70 per barrel.
Who will be the casualties then? Who are the highest cost oil producers? It seems that Russia, Brazil, Valenzuela, and even Norway are higher cost oil producing countries because it cost more to extract oil from deep seas and deeper ground.
Even oil from oil sand in Canada, and shale from US will not be spared because of their higher costs.
A figure of about US$60 per barrel has been floated around as the cost of oil extraction from oil sand and shale, below which these companies will make losses and cannot survive for long.
Note that the low oil price is expected to stay for quite a while (may be for another 2-3 years) and time is need to wipe out the higher cost oil producers because most of these producers are probably hedged for 1 year on the high oil price and they will only feel the pain of low oil price after 1 year of sustained low oil price.
However, falling oil prices to rock bottom price is good for huge oil consumption countries (as exposed to oil production countries), such as US, China, India, Singapore, Thailand etc. Meanwhile, both Malaysia and Indonesia's oil and oil-related industries will be affected to a certain extent. Note that Malaysia derive about 1/3 of their revenue from oil and oil-related industries. Even UK will also be affected due to their huge revenue from North-Sea oil production.
With falling oil prices, US will benefit from lower living cost inflation, thus US stock market and hence S&P500 index is expected to have further fuel to continue the bull run (even after QE has been removed and even if interest rate raise only moderately).
Singapore will benefit from lower living cost inflation as well.
However, beware of oil-related stocks like Keppel Corp (BN4), Sembcorp Marine (S51), Sembcorp Industries (U96), Ezion Holdings (5ME), Nam Cheong, Swiber, Ezra, Swissco, etc!
However, this will also means that soon S$ will depreciate against its other trading currencies, particularly US$. Beware!
In summary:
1) Avoid investment in oil and oil-related industries!
2) Beware of falling S$ vs US$.
Friday, December 5, 2014
CSOP FTSE China A50 ETF index fund (2822.HK) update...
In a post on 11 Aug 2014, I mentioned that for exposure to China, you can try CSOP FTSE China A50 ETF index fund (2822.HK).
Since then, the price of this fund seems to be on steroid and has gone up by >30% to the current HK$11.92.
Since then, the price of this fund seems to be on steroid and has gone up by >30% to the current HK$11.92.
S&P500 index and US$ update...
This is an update on S&P500 index and US$ since my last update on 14 Nov 2014 when S&P500 was 2039 and US$:S$ = 1.2991.
Now, S&P500 index is 2076 (+1.81%), and US$:S$ = 1.3230 (+1.84%).
I am expecting further gains in S&P500 index and US$ (vs S$).
Now, S&P500 index is 2076 (+1.81%), and US$:S$ = 1.3230 (+1.84%).
I am expecting further gains in S&P500 index and US$ (vs S$).
How much do you need to accumulate to retire at 65 years old and have $3,500 to spend a month for 20 years
Came across a most recent article dated 5 Dec 2014 on "Majority unprepared for retirement: Survey" which says that (my summary):
- THE majority of Singaporeans do not have a financial plan for retirement, are afraid of planning ahead and need more than they estimate to retire, a new survey has found.
- Many respondents hope to retire comfortably but only a minority are actually taking tangible steps to meet that goal.
- Singapore government estimates show that the number of residents aged 65 and above is expected to triple to 900,000 by 2030.
- Many Singaporeans do not even know where or how to start planning.
- 23% feel that they do not have enough funds to start investing.
- Workers and retirees agreed that Singaporeans do not know enough about building up a nest egg.
- The survey also found that people are underestimating the funds they need for old age.
- About 85 per cent of respondents said they hoped to have about $3,500 to spend a month for 15 to 20 years after retiring at the age of 65. They believe that it would be sufficient to set aside about $480,000 to $700,000.
- calculations by DBS financial experts showed that for monthly payouts of $3,500, Singaporeans will need a $900,000 fund.
You can read the original article at this URL...
So, how much really should you need to accumulate at 65 years old to retire with $3,500 to spend a month for 20 years? Obviously, the actual figure will depend on the assumptions that the estimator made, such as:
1) living cost inflation in next 20 years
2) The return from the capital you have at age 65 for the next 20 years.
Without these 2 assumptions being clearly made known, people are just groping the elephant while being blind-folded!
So what are reasonable assumptions for living cost inflation and return on capital? - These have a lot to do with government policies, and Singapore and the world's economic situations, and also cost of oil and Singapore's currency exchange rate (strong S$ or weak S$).
In general:
1) A stronger S$ will usually mean lower living cost inflation (since most of the items needed are imported).
2) Lower oil price will usually mean lower living cost inflation (since oil is used to produce electricity and run almost all transport and used by almost all businesses).
2) A stronger and appreciating property price will mean more comfortable retirement for most Singaporeans (since >90% of Singaporeans own their homes and they can downgrade to extract cash value out of their homes for more comfortable retirement).
Let's just assume that living cost inflation is 3% and return from capital is 4% (CPF retirement fund payout rate), then in order to have enough to spend $3,500 per month for the next 20 years, a person will need to accumulate:
$925,000
based on my calculation.
However, really, do you really need $3,500 per month to live in Singapore?
I don't think so!
Actually, I believe $2000 per month is sufficient to live in Singapore, assuming that you have your house already fully paid up and the full sum of $2000 is just for month expenses!
Ok, let do a scenario study assuming 3% inflation and 4% return, how much do a person need to accumulate to retire for 20 years for these estimated living expenses per month?
Living expenses per month Amount needed at 65 years old
$1000 $265,000
$2000 $530,000
$3000 $795,000
$4000 $1,160,000
Note: My above calculation assumes that the expenses drawn down increases with inflation and not a flat figure for next 20 years since I assume that expenses will increase as inflation increases.
- THE majority of Singaporeans do not have a financial plan for retirement, are afraid of planning ahead and need more than they estimate to retire, a new survey has found.
- Many respondents hope to retire comfortably but only a minority are actually taking tangible steps to meet that goal.
- Singapore government estimates show that the number of residents aged 65 and above is expected to triple to 900,000 by 2030.
- Many Singaporeans do not even know where or how to start planning.
- 23% feel that they do not have enough funds to start investing.
- Workers and retirees agreed that Singaporeans do not know enough about building up a nest egg.
- The survey also found that people are underestimating the funds they need for old age.
- About 85 per cent of respondents said they hoped to have about $3,500 to spend a month for 15 to 20 years after retiring at the age of 65. They believe that it would be sufficient to set aside about $480,000 to $700,000.
- calculations by DBS financial experts showed that for monthly payouts of $3,500, Singaporeans will need a $900,000 fund.
You can read the original article at this URL...
So, how much really should you need to accumulate at 65 years old to retire with $3,500 to spend a month for 20 years? Obviously, the actual figure will depend on the assumptions that the estimator made, such as:
1) living cost inflation in next 20 years
2) The return from the capital you have at age 65 for the next 20 years.
Without these 2 assumptions being clearly made known, people are just groping the elephant while being blind-folded!
So what are reasonable assumptions for living cost inflation and return on capital? - These have a lot to do with government policies, and Singapore and the world's economic situations, and also cost of oil and Singapore's currency exchange rate (strong S$ or weak S$).
In general:
1) A stronger S$ will usually mean lower living cost inflation (since most of the items needed are imported).
2) Lower oil price will usually mean lower living cost inflation (since oil is used to produce electricity and run almost all transport and used by almost all businesses).
2) A stronger and appreciating property price will mean more comfortable retirement for most Singaporeans (since >90% of Singaporeans own their homes and they can downgrade to extract cash value out of their homes for more comfortable retirement).
Let's just assume that living cost inflation is 3% and return from capital is 4% (CPF retirement fund payout rate), then in order to have enough to spend $3,500 per month for the next 20 years, a person will need to accumulate:
$925,000
based on my calculation.
However, really, do you really need $3,500 per month to live in Singapore?
I don't think so!
Actually, I believe $2000 per month is sufficient to live in Singapore, assuming that you have your house already fully paid up and the full sum of $2000 is just for month expenses!
Ok, let do a scenario study assuming 3% inflation and 4% return, how much do a person need to accumulate to retire for 20 years for these estimated living expenses per month?
Living expenses per month Amount needed at 65 years old
$1000 $265,000
$2000 $530,000
$3000 $795,000
$4000 $1,160,000
Note: My above calculation assumes that the expenses drawn down increases with inflation and not a flat figure for next 20 years since I assume that expenses will increase as inflation increases.
Thursday, December 4, 2014
A word of caution on REIT
REIT stands for "Real Estate Investment Trusts".
It has been very popular in Singapore!
However, I would caution people not to put too much money into REIT, for below few reasons:
1) Most people in Singapore are already invested in property / real estate (through owning their own residential property), so there is no reason to own more property assets.
2) Buying more REIT on top of self-owned property is like putting more egg into same basket. It is better to buy stocks in other business sectors to diversify the investment risks.
3) If you want to invest in more property / real estate investments, it is better to buy the property on your own than to own it through REIT. This is similar to buying stocks directly ourselves than buying unit trusts! By going through a middleman, most of your profits would have been "eaten" up by the middleman and ultimately what you get back will be mediocre!
It has been very popular in Singapore!
However, I would caution people not to put too much money into REIT, for below few reasons:
1) Most people in Singapore are already invested in property / real estate (through owning their own residential property), so there is no reason to own more property assets.
2) Buying more REIT on top of self-owned property is like putting more egg into same basket. It is better to buy stocks in other business sectors to diversify the investment risks.
3) If you want to invest in more property / real estate investments, it is better to buy the property on your own than to own it through REIT. This is similar to buying stocks directly ourselves than buying unit trusts! By going through a middleman, most of your profits would have been "eaten" up by the middleman and ultimately what you get back will be mediocre!
Friday, November 28, 2014
How to quickly obsolete your job before your job obsoletes you!
As a follow up to my previous post titled "Better quickly obsoletes your job before your job obsoletes you!", I would like to briefly summarize the tactics to "How to quickly obsolete your job before your job obsoletes you", as follow:
1) When started working, save much more than you spend!
2) During the day, work you "work". During the evening, work on your "investment"!
Above are the 2 keys to being able to help you to be able to quickly obsoletes your job before your job obsoletes you!
The above is also the Solution to "Why you work so hard but you are still poor?"
You may ask: How much should you save from your salary?
Well, there is no hard core number or percentage, but the more the merrier!
To give you an example, when I started working, I saved 50% of what I earned.
5 years later, despite increase in my income, I kept my expenditure constant, and I increased the amount I saved to >70%!
When I have more money in my bank for rainy days, I started to spend more again and the amount I can save dropped to less than 50% (despite further increase in income).
I feel that average of about 50% is about the right figure because with 50%, for every year you had worked, you can afford to retire for 1 year! So theoretically, if you start working at 25 years old, and assume you can live to 85 years old, you would probably work for 30 years and by saving about 50% of your income, you can afford to retire at 55 years old and enjoy your retirement with no monetary worry for >30 years (assuming your return from your pot of fund is equal to inflation).
1) When started working, save much more than you spend!
2) During the day, work you "work". During the evening, work on your "investment"!
Above are the 2 keys to being able to help you to be able to quickly obsoletes your job before your job obsoletes you!
The above is also the Solution to "Why you work so hard but you are still poor?"
You may ask: How much should you save from your salary?
Well, there is no hard core number or percentage, but the more the merrier!
To give you an example, when I started working, I saved 50% of what I earned.
5 years later, despite increase in my income, I kept my expenditure constant, and I increased the amount I saved to >70%!
When I have more money in my bank for rainy days, I started to spend more again and the amount I can save dropped to less than 50% (despite further increase in income).
I feel that average of about 50% is about the right figure because with 50%, for every year you had worked, you can afford to retire for 1 year! So theoretically, if you start working at 25 years old, and assume you can live to 85 years old, you would probably work for 30 years and by saving about 50% of your income, you can afford to retire at 55 years old and enjoy your retirement with no monetary worry for >30 years (assuming your return from your pot of fund is equal to inflation).
Tuesday, November 25, 2014
Better quickly obsoletes your job before your job obsoletes you!
The other day, I had a good discussion with my friend. He made a very good point indeed that I would like to share with the rest of you, that is:
"Better quickly obsoletes your job before your job obsoletes you!"
He was lamenting that while Singaporeans can now live longer and older, our job actually "obsolete" us sooner and earlier! What he meant by "our job obsolete us" is that we are more likely to get retrenched at an earlier age, and then subsequently unable to find a job that pays as much and is able to make use of our knowledge and expertise.
On the other hand, he said you would be pretty safe if you can "obsolete your job" by about 45 years old, which he means to say that you no longer need the income from your job to live and support your family.
He cited an example of a friend working in the hard-disk drive industry, and after getting retrenched at the age of about 45 years old, has not been able to get a full-time job that pays as much and able to make full use of his prior knowledge and expertise. He sent out several hundreds of resumes until he gave up because either he was judged as "over-qualified" or "too old" for the job or his experience is not relevant to the job, or the pay is so poor given the nature of the job that he give it a pass as it can't even cover his family living expenses (and taking up those job will jeopardize chance of him landing a good job in future). What did he end up as? Taxi driver! But the story does not end there - He was complaining that the taxi driver is being exploited and squeezed by the taxi operators with ever increasing high taxi rental charges while their taxi fare charges have been fixed!
According to my friend, many people in the middle-income families with no "connections" are finding themselves out of jobs at about 45 years old or thereafter, and having to resort to very large cut in pay when they take up another jobs.
However, those with "connections" are having a good time, with some apparently not doing much (if any) and getting paid several hundred thousands to millions of dollars a year!
So, his conclusion and advise to all of you out there is that "Better quickly obsoletes your job before your job obsoletes you!".
If you can't, then make sure you have the right "connection" so that people will give you jobs to pat your back! However, sad to say, having the right connection may have more to do with your family background / circle of friends and contacts and luck then the person's ability!
So, how can you "quickly obsoletes your job before your job obsoletes you"?
"Better quickly obsoletes your job before your job obsoletes you!"
He was lamenting that while Singaporeans can now live longer and older, our job actually "obsolete" us sooner and earlier! What he meant by "our job obsolete us" is that we are more likely to get retrenched at an earlier age, and then subsequently unable to find a job that pays as much and is able to make use of our knowledge and expertise.
On the other hand, he said you would be pretty safe if you can "obsolete your job" by about 45 years old, which he means to say that you no longer need the income from your job to live and support your family.
He cited an example of a friend working in the hard-disk drive industry, and after getting retrenched at the age of about 45 years old, has not been able to get a full-time job that pays as much and able to make full use of his prior knowledge and expertise. He sent out several hundreds of resumes until he gave up because either he was judged as "over-qualified" or "too old" for the job or his experience is not relevant to the job, or the pay is so poor given the nature of the job that he give it a pass as it can't even cover his family living expenses (and taking up those job will jeopardize chance of him landing a good job in future). What did he end up as? Taxi driver! But the story does not end there - He was complaining that the taxi driver is being exploited and squeezed by the taxi operators with ever increasing high taxi rental charges while their taxi fare charges have been fixed!
According to my friend, many people in the middle-income families with no "connections" are finding themselves out of jobs at about 45 years old or thereafter, and having to resort to very large cut in pay when they take up another jobs.
However, those with "connections" are having a good time, with some apparently not doing much (if any) and getting paid several hundred thousands to millions of dollars a year!
So, his conclusion and advise to all of you out there is that "Better quickly obsoletes your job before your job obsoletes you!".
If you can't, then make sure you have the right "connection" so that people will give you jobs to pat your back! However, sad to say, having the right connection may have more to do with your family background / circle of friends and contacts and luck then the person's ability!
So, how can you "quickly obsoletes your job before your job obsoletes you"?
What life-style you can afford with $1M to retire for 30 years?
Now, if you have S$1M now and would like to retire for 30 years, what life-style can you afford? How much money can you afford to spend per month as living expenses to last 30 years?
Well, based on my calculation, with S$1M now, you would be able to afford to spend S$3250 per month for 30 years (with 2% p.a. increase in allowance built-in)!
$3250 per month for a couple NOW (with 2% p.a. increase in allowance built-in) is really a comfortable living already.............
Assumptions I made are:
a) Average Investment return of 3% p.a.
b) Average Inflation of 2% p.a.
Above are realistic assumptions and hence totally achievable.
Given that average age of Singaporeans is 83 years old for men and 85 years old for women, if you have enough to retire for 30 years means that you can retire at 53 and 55 years old respectively if you are a woman/man !
Well, based on my calculation, with S$1M now, you would be able to afford to spend S$3250 per month for 30 years (with 2% p.a. increase in allowance built-in)!
$3250 per month for a couple NOW (with 2% p.a. increase in allowance built-in) is really a comfortable living already.............
Assumptions I made are:
a) Average Investment return of 3% p.a.
b) Average Inflation of 2% p.a.
Above are realistic assumptions and hence totally achievable.
Given that average age of Singaporeans is 83 years old for men and 85 years old for women, if you have enough to retire for 30 years means that you can retire at 53 and 55 years old respectively if you are a woman/man !
Monday, November 24, 2014
How much savings do you need NOW to retire with basic living in Singapore?
In my previous post, I estimated that the basic no frail cost of living in Singapore as of now for an old couple = S$1348 per month.
So, how much does a couple need to retire for 30 years from now if they just need S$1348 per month for living expenses and assuming investment return of 3% per year/annum (p.a.) on their capital and inflation of 2% per year? Note that my assumption has 2% p.a. increase in expenses built-in year after year (and not a flat S$1348 pm).
According to my calculation, the couple just requires a lump sum of S$420,000 to be able to retire now for 30 years!
Question 1: Is average investment return of 3% p.a. realistic?
A: Yes, 3% is already considered low. Don't forget Singapore Government gives 4% for your CPF Special Account and Medisave.
Question 2: Is average inflation 2% p.a. realistic?
A: This will depends on global economic situation and more importantly government's economic and monetary policy, especially when Singapore uses exchange as a tool to control inflation. Also, Singapore government has great control over medical costs via their economy of scale in operating all gov hospitals and polyclinics.
So, how much does a couple need to retire for 30 years from now if they just need S$1348 per month for living expenses and assuming investment return of 3% per year/annum (p.a.) on their capital and inflation of 2% per year? Note that my assumption has 2% p.a. increase in expenses built-in year after year (and not a flat S$1348 pm).
According to my calculation, the couple just requires a lump sum of S$420,000 to be able to retire now for 30 years!
Question 1: Is average investment return of 3% p.a. realistic?
A: Yes, 3% is already considered low. Don't forget Singapore Government gives 4% for your CPF Special Account and Medisave.
Question 2: Is average inflation 2% p.a. realistic?
A: This will depends on global economic situation and more importantly government's economic and monetary policy, especially when Singapore uses exchange as a tool to control inflation. Also, Singapore government has great control over medical costs via their economy of scale in operating all gov hospitals and polyclinics.
Comments on Goods and Service Tax (GST) and Wealth Tax
In my previous post titled "Why you work so hard but you are still poor?", I mentioned that:
"When taxes have been tweaked and/or new taxes implemented by the Government, we are seeing more and more of such taxes in the form of Goods and Services Tax (GST) or other form of "wealth tax". For example, recently Malaysia just introduced GST. On the surface, we were told that these are "wealth tax" that only taxes the people who are "rich", but really what you are seeing is that such taxes, instead of taxing the genuinely rich (the top 1% income earners and rich businessmen), these "wealth taxes" are targeted at the majority of the population and middle-income families so that they do not tax the genuinely rich so much."
In this post, I would like to give further comments on such Goods and Service Tax (GST) and Wealth Tax.
Give you an example to illustrate these so-called "wealth tax" or consumption tax: If the government wishes to rise $1 Billion in taxes from a population of 1 Million, they could choose to:
a) Raise the income tax of the top say 1% genuinely rich (top 1% income earners and big businesses) by collecting $1 Billion from the top 1% or 10,000 people, thus each of the rich paying $100,000; OR:
b) Raise the tax from the majority of the 90% of the population or 900,000 people, thus each of them paying about $1,111.
We are seeing more and more that government preferring method (b) in raising additional taxes!
On the surface, doing (b) seems fair, until we diagnosed the incomes of the various groups:
(i) Top 1% people earn at least $500,000 a year!
(ii) The rest of the people do not even earn $200,000 a year!
For the past 20 years, the top 1% people's income increases exponentially compared to bottom 80% of the people! This also seems to be the case in Singapore!
Example, the lowest income earners earn about $500 per month 20 years ago and now they only earn $1000 per month (after the introduction of minimum wages in Singapore!). Ops, sorry, should be "Progressive wages" as some hard-core PAP supporters would like us to call it. To these people, "minimum wages" like those in US and the West are bad, while Singapore's "progressive" wages are good! Really? We can investigate left and right and up-side down and the Singapore's "progressive wages" include "minimum wages" as a core component, so isn't this a form of "minimum wages"???
On the other hand, the top salary people have their salary increased from about $500,000 per year to a few Millions $ a year!
What about the general people, like the fresh graduates pay? Well, 20 years ago, a fresh graduate from engineering course can get a salary of about $2,200 per month. Fast forward now, the same fresh graduate can only get a salary of about $3,000 per month or an increase of about 36%.
And oh, I should not forget to mention that cost of basic living is like having gone up by >200% over the past 20 years!
After knowing these above facts, would you still think that raising taxes via method (b) above is more fair than method (a)? After all, for past 20 years, the top-income earners have benefited the most and obtained several hundred % increase in salaries from Singapore's GDP progress (including the top civil servants and Ministers) vs the bottom 80% or so, so isn't it fair to ask them to bear more? Instead, they received an incentive of their income tax being slashed from 33% to 20% as a result of introducing GST!
Is it fair to make the bottom rang income people pay more taxes when they are already making ends meet with ever increasing living cost inflation as a result of their Govt's own policy?
Singapore's GST is a very good example isn't it?
Before 1994, there is no GST in Singapore, and the highest income earners pay 33% income tax and businesses pay 30% corporate tax. The income tax is progressive, and about bottom 40% people pay no taxes.
Since introduction of GST in 1994, GST has been raised to 7% while highest income earners' income tax has been slashed from 33% to 20% while businesses now only pay 17% corporate tax (vs 30% before 1994). This has resulted in significant tax reduction collected from highest income earners and businesses, and this short-fall in taxes have been made up significantly from GST collection which collects taxes from 100% population in Singapore!
Note that Singapore's GST has no tax exemption for basic necessities (unlike those in other countries, e.g. UK, Europe etc), hence hitting the poor and the lower middle-income very hard!
For a comparison, for example in UK, basic living necessities (e.g. water, gas, and electricity), food necessities, medicine, children needs are all exempted from GST (in UK they called it Value-Added-Tax or VAT).
"When taxes have been tweaked and/or new taxes implemented by the Government, we are seeing more and more of such taxes in the form of Goods and Services Tax (GST) or other form of "wealth tax". For example, recently Malaysia just introduced GST. On the surface, we were told that these are "wealth tax" that only taxes the people who are "rich", but really what you are seeing is that such taxes, instead of taxing the genuinely rich (the top 1% income earners and rich businessmen), these "wealth taxes" are targeted at the majority of the population and middle-income families so that they do not tax the genuinely rich so much."
In this post, I would like to give further comments on such Goods and Service Tax (GST) and Wealth Tax.
Give you an example to illustrate these so-called "wealth tax" or consumption tax: If the government wishes to rise $1 Billion in taxes from a population of 1 Million, they could choose to:
a) Raise the income tax of the top say 1% genuinely rich (top 1% income earners and big businesses) by collecting $1 Billion from the top 1% or 10,000 people, thus each of the rich paying $100,000; OR:
b) Raise the tax from the majority of the 90% of the population or 900,000 people, thus each of them paying about $1,111.
We are seeing more and more that government preferring method (b) in raising additional taxes!
On the surface, doing (b) seems fair, until we diagnosed the incomes of the various groups:
(i) Top 1% people earn at least $500,000 a year!
(ii) The rest of the people do not even earn $200,000 a year!
For the past 20 years, the top 1% people's income increases exponentially compared to bottom 80% of the people! This also seems to be the case in Singapore!
Example, the lowest income earners earn about $500 per month 20 years ago and now they only earn $1000 per month (after the introduction of minimum wages in Singapore!). Ops, sorry, should be "Progressive wages" as some hard-core PAP supporters would like us to call it. To these people, "minimum wages" like those in US and the West are bad, while Singapore's "progressive" wages are good! Really? We can investigate left and right and up-side down and the Singapore's "progressive wages" include "minimum wages" as a core component, so isn't this a form of "minimum wages"???
On the other hand, the top salary people have their salary increased from about $500,000 per year to a few Millions $ a year!
What about the general people, like the fresh graduates pay? Well, 20 years ago, a fresh graduate from engineering course can get a salary of about $2,200 per month. Fast forward now, the same fresh graduate can only get a salary of about $3,000 per month or an increase of about 36%.
And oh, I should not forget to mention that cost of basic living is like having gone up by >200% over the past 20 years!
After knowing these above facts, would you still think that raising taxes via method (b) above is more fair than method (a)? After all, for past 20 years, the top-income earners have benefited the most and obtained several hundred % increase in salaries from Singapore's GDP progress (including the top civil servants and Ministers) vs the bottom 80% or so, so isn't it fair to ask them to bear more? Instead, they received an incentive of their income tax being slashed from 33% to 20% as a result of introducing GST!
Is it fair to make the bottom rang income people pay more taxes when they are already making ends meet with ever increasing living cost inflation as a result of their Govt's own policy?
Singapore's GST is a very good example isn't it?
Before 1994, there is no GST in Singapore, and the highest income earners pay 33% income tax and businesses pay 30% corporate tax. The income tax is progressive, and about bottom 40% people pay no taxes.
Since introduction of GST in 1994, GST has been raised to 7% while highest income earners' income tax has been slashed from 33% to 20% while businesses now only pay 17% corporate tax (vs 30% before 1994). This has resulted in significant tax reduction collected from highest income earners and businesses, and this short-fall in taxes have been made up significantly from GST collection which collects taxes from 100% population in Singapore!
Note that Singapore's GST has no tax exemption for basic necessities (unlike those in other countries, e.g. UK, Europe etc), hence hitting the poor and the lower middle-income very hard!
For a comparison, for example in UK, basic living necessities (e.g. water, gas, and electricity), food necessities, medicine, children needs are all exempted from GST (in UK they called it Value-Added-Tax or VAT).
Saturday, November 22, 2014
Why you work so hard but you are still poor?
When I was young, I have seen really hard working people, some even doing 2 jobs and working through week-end! We would want to think such hard working people would be rich sooner or later, but the facts tell us otherwise. In real life, many of such people are working hard to make ends meet, and they are still rather poor at the end of the day, having to work until they die to survive in Singapore! Why is this so?
I have come to the conclusion that hard-working is no longer the solution to getting rich because of the following global political and economic trend:
1) When a country's economy is in recession, their Central Bank now have a tendency to PRINT MONEY.
2) When money is printed, currency deflation/depreciation occurs. That is, your paper money CASH is worth much less than they normally are.
3) When currency deflation occurs, living cost inflation happened. The person can afford less and less or have to pay more and more for a living.
4) Currency deflation also suppresses interest rate, and your paper money CASH do not get much return in terms of interest earned (negligible compared to living cost inflation).
5) People who resort to working hard (and not smart) tend to be doing jobs that do not get much salary appreciation in this new world knowledge-based economy (not even fresh graduates in Singapore!). Their wage increase cannot catch up with living cost inflation.
6) People are living a longer life, and yet without being able to make much more and save much more for comfortable retirement (vs the escalating cost of living)!
7) When taxes have been tweaked and/or new taxes implemented by the Government, we are seeing more and more of such taxes in the form of Goods and Services Tax (GST) or other form of "wealth tax". For example, recently Malaysia just introduced GST. On the surface, we were told that these are "wealth tax" that only taxes the people who are "rich", but really what you are seeing is that such taxes, instead of taxing the genuinely rich (the top 1% income earners and rich businessmen), these "wealth taxes" are targeted at the majority of the population and middle-income families so that they do not tax the genuinely rich so much.
8) The above vicious cycle continues!
I have come to the conclusion that hard-working is no longer the solution to getting rich because of the following global political and economic trend:
1) When a country's economy is in recession, their Central Bank now have a tendency to PRINT MONEY.
2) When money is printed, currency deflation/depreciation occurs. That is, your paper money CASH is worth much less than they normally are.
3) When currency deflation occurs, living cost inflation happened. The person can afford less and less or have to pay more and more for a living.
4) Currency deflation also suppresses interest rate, and your paper money CASH do not get much return in terms of interest earned (negligible compared to living cost inflation).
5) People who resort to working hard (and not smart) tend to be doing jobs that do not get much salary appreciation in this new world knowledge-based economy (not even fresh graduates in Singapore!). Their wage increase cannot catch up with living cost inflation.
6) People are living a longer life, and yet without being able to make much more and save much more for comfortable retirement (vs the escalating cost of living)!
7) When taxes have been tweaked and/or new taxes implemented by the Government, we are seeing more and more of such taxes in the form of Goods and Services Tax (GST) or other form of "wealth tax". For example, recently Malaysia just introduced GST. On the surface, we were told that these are "wealth tax" that only taxes the people who are "rich", but really what you are seeing is that such taxes, instead of taxing the genuinely rich (the top 1% income earners and rich businessmen), these "wealth taxes" are targeted at the majority of the population and middle-income families so that they do not tax the genuinely rich so much.
8) The above vicious cycle continues!
4 pillars of Global Economy, 3 splattering
The 4 pillars of Global Economy I reckoned are: US, Europe, China, and Japan.
However, while US is still recovering from recession, and China is slowing down, Europe is in dormant and Japan is now in recession!
However, we don't need all 4 pillars to be flying to make money from investment, we just need to identify the one with back-burner and invest our money and bet on it!
So, most of my money now I now bet on US stocks and US$.
I have set aside some money for investing into European stocks and China stocks.
Japan? Forget about it! Chance of it recovering over the long-term is slim indeed!
However, while US is still recovering from recession, and China is slowing down, Europe is in dormant and Japan is now in recession!
However, we don't need all 4 pillars to be flying to make money from investment, we just need to identify the one with back-burner and invest our money and bet on it!
So, most of my money now I now bet on US stocks and US$.
I have set aside some money for investing into European stocks and China stocks.
Japan? Forget about it! Chance of it recovering over the long-term is slim indeed!
Friday, November 21, 2014
Abenomics could not save Japan from structural deterioration
Much has been touted about Abenomics, the aggressive monetary stimulus and flexible fiscal support and structural reform introduced by Japan's Prime Minister Shinzo Abe. However, I do not think highly of Abenomics, and Abenomics could not save Japan from structural deterioration, for 2 main reasons:
1) Aggressive monetary stimulus will not save Japan:
How much a country can print money without significant monetary depreciation and significant capital outflow to safer heaven is premise on how confident people are in the country.
If US print money, there is unlikely to be significant capital outflow because US is still the world's strongest super power, and the US$ is the world's internationally traded currency.
However, the same cannot be said for Japan.
2) Structural reforms is difficult for Japan:
Japan is facing very serious aging problem, with a higher and higher percentage of its population being too old and unable to work as time goes by. This will result in significant taxing and burden on the younger working population, and it will come a time when thing just snapped. I don't think Sales tax will save Japan because while it raises additional revenue for Japanese government, it will lead to more hoarding of money and repercussions.
The long-term future for Japan is grim indeed. I will not want to be holding Japanese assets, be it Japanese Yen or Japanese stocks.....................
-----------------------------
PUBLISHED OCTOBER 06, 2014
Abenomics: Roadmap to corporate reform
Abenomics reforms could bring significant corporate improvements that rekindle interest in Japanese equities. By Hiroki Sampei
LAST year was a great year for Japanese equities. Investors returned to the world's third-largest economy on a wave of euphoria surrounding Prime Minister Shinzo Abe's bold ambition to drag Japan out of a deflationary stagnation that dates back to 1990.
The first two arrows of Abenomics - aggressive monetary stimulus and flexible fiscal support - were highly successful in building initial enthusiasm around Japan's economic outlook, triggering a sharp rally in the Japanese stock market.
However, enthusiasm has given way to scepticism in 2014, and investor unease was exacerbated by a worse-than-expected fall in quarterly gross domestic product (GDP) after the increase in consumption tax in April 2014.
Japan's stock market has been a relative laggard year-to-date amid mounting concerns over whether Abe can deliver on his all-important third arrow of structural reform.
-----------------------------
1) Aggressive monetary stimulus will not save Japan:
How much a country can print money without significant monetary depreciation and significant capital outflow to safer heaven is premise on how confident people are in the country.
If US print money, there is unlikely to be significant capital outflow because US is still the world's strongest super power, and the US$ is the world's internationally traded currency.
However, the same cannot be said for Japan.
2) Structural reforms is difficult for Japan:
Japan is facing very serious aging problem, with a higher and higher percentage of its population being too old and unable to work as time goes by. This will result in significant taxing and burden on the younger working population, and it will come a time when thing just snapped. I don't think Sales tax will save Japan because while it raises additional revenue for Japanese government, it will lead to more hoarding of money and repercussions.
The long-term future for Japan is grim indeed. I will not want to be holding Japanese assets, be it Japanese Yen or Japanese stocks.....................
-----------------------------
PUBLISHED OCTOBER 06, 2014
Abenomics: Roadmap to corporate reform
Abenomics reforms could bring significant corporate improvements that rekindle interest in Japanese equities. By Hiroki Sampei
LAST year was a great year for Japanese equities. Investors returned to the world's third-largest economy on a wave of euphoria surrounding Prime Minister Shinzo Abe's bold ambition to drag Japan out of a deflationary stagnation that dates back to 1990.
The first two arrows of Abenomics - aggressive monetary stimulus and flexible fiscal support - were highly successful in building initial enthusiasm around Japan's economic outlook, triggering a sharp rally in the Japanese stock market.
However, enthusiasm has given way to scepticism in 2014, and investor unease was exacerbated by a worse-than-expected fall in quarterly gross domestic product (GDP) after the increase in consumption tax in April 2014.
Japan's stock market has been a relative laggard year-to-date amid mounting concerns over whether Abe can deliver on his all-important third arrow of structural reform.
-----------------------------
Japan has fallen into recession (yet again)!
I read the news 2 days ago that Japan has fallen into recession (yet again)!
There has been much talk and hooray about Japan Prime Minister's Abenomics and his 3 arrows. But for all of those, Japan is now in recession once again!
I have been quite negative about Japan PM's Abenomics because it does not solve the fundamental structural problems facing Japan.
There has been much talk and hooray about Japan Prime Minister's Abenomics and his 3 arrows. But for all of those, Japan is now in recession once again!
I have been quite negative about Japan PM's Abenomics because it does not solve the fundamental structural problems facing Japan.
Thursday, November 20, 2014
Estimated cost of basic living in Singapore for a retiree
Below is my estimated cost of basic living per month for a retired couple (no frails) as of now:
* Food (cook at home, with occasional eat out) = $400.00
* Transport (bus and trains only, should be much less for retirees) = $150.00
* Utilities (electricity, water, gas, sewage) = $100.00
Communications (mobile phones subscriptions & internet) = $98.00
* Clothings and footwear = $200.00
* Medical insurance & expenses (assume the rest covered by insurance) = $400.00
* Some frails and luxury = $0.00
* Rental costs = $0.00
Total per month per couple = $1,348.00
Or: $674 per person.
Note: Rental costs is $0 because I assume the couple has a fully paid property.
So, it seems that the basic cost of living in Singapore for an old retired couple is indeed very close to the CPF Life payout of just 1 single individual (as of now)!
* Food (cook at home, with occasional eat out) = $400.00
* Transport (bus and trains only, should be much less for retirees) = $150.00
* Utilities (electricity, water, gas, sewage) = $100.00
Communications (mobile phones subscriptions & internet) = $98.00
* Clothings and footwear = $200.00
* Medical insurance & expenses (assume the rest covered by insurance) = $400.00
* Some frails and luxury = $0.00
* Rental costs = $0.00
Total per month per couple = $1,348.00
Or: $674 per person.
Note: Rental costs is $0 because I assume the couple has a fully paid property.
So, it seems that the basic cost of living in Singapore for an old retired couple is indeed very close to the CPF Life payout of just 1 single individual (as of now)!
Tuesday, November 18, 2014
Carl Icahn loses $40 million on Hertz’s stock in one day
Should you follow famed investors to buy and sell stocks?
Think about it again, after reading below news.............
Carl Icahn loses $40 million on Hertz’s stock in one day
By Tomi Kilgore
Published: Nov 14, 2014 5:02 p.m. ET
Bloomberg
Being right doesn’t mean making money.
Carl Icahn was right, that Hertz Global Holdings Inc. needed to do something about accounting issues and shareholder value. But being right cost Icahn about $40 million on Friday, and it was almost a lot worse.
Hertz’s stock HTZ, -4.58% slumped $1.04, or 4.6%, on Friday, after the car rental company said it would have to restate its 2012 and 2013 results, after previously announcing it would only restate 2011 results, as it continues its investigation into accounting issues. The stock bounced sharply in the final three hours of trading, to pare losses of as much as 14% at its intraday low of $19.55.
Icahn Associates, the car rental company’s biggest shareholder, owns 38,800,000 shares, or an 8.48% stake in Hertz.
In a regulatory filing over the summer, Icahn indicated he bought the stock because he thought the company was “undervalued.” But he also said he wanted to speak to Hertz’s board of directors about a host of concerns, including shareholder value, accounting issues, operational failures and a lack of confidence in management.
Hertz’s announcement Friday may vindicate Icahn’s concerns, but at a price. He lost $40.4 million in market value on Hertz’s stock Friday, if his holdings remained the same. At the intraday low, he was down as much as $123 million.
Since Aug. 20, when Icahn’s holding were disclosed, the of Icahn’s holdings have been slashed by $335 million.
Keep in mind that Hertz announced on Sept. 8 that its chairman and chief executive at the time, Mark Frissora, was stepping down “for personal reasons,” and said on Sept. 11 that it would add three Icahn representatives to its board of directors.
But Icahn isn’t the only one that believes Hertz will be able to turn things around. Analyst Christopher Agnew at MKM Partners said Friday that after a meeting with management, he was impressed with their understanding of the Hertz’s issues and with their roadmap on how to deal with them.
He reiterated his buy rating on Hertz’s stock. His $33 price 12-month target implies a 52% gain from current levels.
Think about it again, after reading below news.............
Carl Icahn loses $40 million on Hertz’s stock in one day
By Tomi Kilgore
Published: Nov 14, 2014 5:02 p.m. ET
Bloomberg
Being right doesn’t mean making money.
Carl Icahn was right, that Hertz Global Holdings Inc. needed to do something about accounting issues and shareholder value. But being right cost Icahn about $40 million on Friday, and it was almost a lot worse.
Hertz’s stock HTZ, -4.58% slumped $1.04, or 4.6%, on Friday, after the car rental company said it would have to restate its 2012 and 2013 results, after previously announcing it would only restate 2011 results, as it continues its investigation into accounting issues. The stock bounced sharply in the final three hours of trading, to pare losses of as much as 14% at its intraday low of $19.55.
Icahn Associates, the car rental company’s biggest shareholder, owns 38,800,000 shares, or an 8.48% stake in Hertz.
In a regulatory filing over the summer, Icahn indicated he bought the stock because he thought the company was “undervalued.” But he also said he wanted to speak to Hertz’s board of directors about a host of concerns, including shareholder value, accounting issues, operational failures and a lack of confidence in management.
Hertz’s announcement Friday may vindicate Icahn’s concerns, but at a price. He lost $40.4 million in market value on Hertz’s stock Friday, if his holdings remained the same. At the intraday low, he was down as much as $123 million.
Since Aug. 20, when Icahn’s holding were disclosed, the of Icahn’s holdings have been slashed by $335 million.
Keep in mind that Hertz announced on Sept. 8 that its chairman and chief executive at the time, Mark Frissora, was stepping down “for personal reasons,” and said on Sept. 11 that it would add three Icahn representatives to its board of directors.
But Icahn isn’t the only one that believes Hertz will be able to turn things around. Analyst Christopher Agnew at MKM Partners said Friday that after a meeting with management, he was impressed with their understanding of the Hertz’s issues and with their roadmap on how to deal with them.
He reiterated his buy rating on Hertz’s stock. His $33 price 12-month target implies a 52% gain from current levels.
Monday, November 17, 2014
Should you follow famed investors to buy and sell stocks?
Following my previous post, now I bring to your attention about a 'huge mistake' on an investment made by Warren Buffett - Tesco PLC, the UK's largest supermarket chain.
You can read the news on Tesco at this URL...
However, it is even more surprising to know that Buffett is selling Tesco after its share price has fallen by more than 50% this year to GBP1.90. Is Buffett expecting the stock to fall further? Should you sell (if you own Tesco stock) or should you buy instead (acting in opposition position to Buffett)?
What is my experience and take?
No, I don't follow famed investors to buy and sell stocks.
Usually by the time you see the news, it usually means you are too late! You will be buying near the high end or selling near the low end (before buying or selling dries up and the rebound comes)!
You can read the news on Tesco at this URL...
However, it is even more surprising to know that Buffett is selling Tesco after its share price has fallen by more than 50% this year to GBP1.90. Is Buffett expecting the stock to fall further? Should you sell (if you own Tesco stock) or should you buy instead (acting in opposition position to Buffett)?
What is my experience and take?
No, I don't follow famed investors to buy and sell stocks.
Usually by the time you see the news, it usually means you are too late! You will be buying near the high end or selling near the low end (before buying or selling dries up and the rebound comes)!
Sunday, November 16, 2014
Hedge fund titan Dan Loeb reports Alibaba stake, dumps AIG
Below is the news I recently read recently:
"Hedge fund titan Dan Loeb's Third Point LLC picked up 7.2 million shares of Chinese e-commerce giant Alibaba BABA in the third quarter, a stake worth $639.7 million as of Sept. 30, according to a regulatory filing on Friday. Funds are required to disclose long positions in 13F filings with the Securities and Exchange Commission 45 days after the end of each quarter. Alibaba marked Loeb's largest new stake, equal to 7.3% of his portfolio, according to Whalewisdom.com. Dow Chemical DOW remained Loeb's largest position at 22 milion shares, with a Sept. 30 market value of $1.154 billion. Loeb also acquired 4.5 million shares of Ebay EBAY worth $254.8 million, while unloading his entire 6 million share stake in American International Group AIG as well as entire stakes in Hertz HTZ and T-mobile."
So, question: Should you follow famed investors to buy and sell stocks?
"Hedge fund titan Dan Loeb's Third Point LLC picked up 7.2 million shares of Chinese e-commerce giant Alibaba BABA in the third quarter, a stake worth $639.7 million as of Sept. 30, according to a regulatory filing on Friday. Funds are required to disclose long positions in 13F filings with the Securities and Exchange Commission 45 days after the end of each quarter. Alibaba marked Loeb's largest new stake, equal to 7.3% of his portfolio, according to Whalewisdom.com. Dow Chemical DOW remained Loeb's largest position at 22 milion shares, with a Sept. 30 market value of $1.154 billion. Loeb also acquired 4.5 million shares of Ebay EBAY worth $254.8 million, while unloading his entire 6 million share stake in American International Group AIG as well as entire stakes in Hertz HTZ and T-mobile."
So, question: Should you follow famed investors to buy and sell stocks?
Saturday, November 15, 2014
Transparency needed for CPF Life - What is the actual payout and how is it computed?
After playing with the CPF LIFE Payout Estimator at this URL for a while, I am still none the wiser as to what is the actual CPF Life payout for each individual and how that payout figure is calculated.
I was told that the actual CPF Life payout amount is at the low end of the range given by the CPF Life Payout Estimator Calculator. If so, could we also assume that the bequest amount is likely to be at the low end of the range as well?
Until CPF Board becomes transparent with the actual CPF Life payout and how the payout figure is calculated, we can only rely on the figure told to us by our friends and relatives, which leads us to the conclusion that CPF Life payout sucks!
I was told that the actual CPF Life payout amount is at the low end of the range given by the CPF Life Payout Estimator Calculator. If so, could we also assume that the bequest amount is likely to be at the low end of the range as well?
Until CPF Board becomes transparent with the actual CPF Life payout and how the payout figure is calculated, we can only rely on the figure told to us by our friends and relatives, which leads us to the conclusion that CPF Life payout sucks!
Moderation and thrift count in retirement
Another interesting article on typical Singapore's retirees expenditures can be read at this URL...
To summarize, some interesting facts are:
* Retirees spend a few thousand dollars at the most each month; more typically, the amount is a moderate $1,000. Perhaps, needs are simpler when one is older. The statistics debunk a fashionable assertion that "even $1 million is not enough to retire on" or that you must target to have retirement income which is 70 per cent of your last drawn income.
* Even for the wealthiest who spend $2,000 a month, they do not need millions in the money pot - just a $600,000 blue-chip and bond portfolio giving a 4 per cent yield, for example.
* Whether future retirees can spend as little as the current batch is a question mark.
* In absolute terms, the typical retired person spends little, but is buffeted by considerable inflation.
* According to the report, individuals in typical retiree households spending $720 a month experienced a 5.3 per cent inflation rate in the last 10 years.
* CPF Life, assuming a full 2015 Minimum Sum of $161,000, provides a monthly income of about $1,300 a month for life from age 65. But at a 5.3 per cent inflation rate, a typical retiree's spending will balloon beyond $1,300 a month after just 12 years.
* The inflation rate of 5.3 per cent is also more than what most conventional insurance instruments can match, or even what the CPF itself provides.
* On average, retiree households in four-room flats spend $1,500 a month, but get $1,230. Those in five-room flats spend $2,000 a month, but get $1,800. Those in three-room flats, condominiums and landed properties spend less than what they get.
* Another interesting tidbit is that retirees living in three-, four- and five-room flats are earning about $200-300 a month in investment income.
* Thus, for the current batch of Singaporean retirees, the picture does not look grim by any means. They are likely to have some resources, in the form of their flat or investments. They are thrifty and do not spend much.
* Still, a large proportion of retiree households' support comes from relatives and friends not living with them, presumably their children; the social fabric is still strong. Contributions from relatives and friends not living in the same household amount to $300-700 a month for most retiree households.
To summarize, some interesting facts are:
* Retirees spend a few thousand dollars at the most each month; more typically, the amount is a moderate $1,000. Perhaps, needs are simpler when one is older. The statistics debunk a fashionable assertion that "even $1 million is not enough to retire on" or that you must target to have retirement income which is 70 per cent of your last drawn income.
* Even for the wealthiest who spend $2,000 a month, they do not need millions in the money pot - just a $600,000 blue-chip and bond portfolio giving a 4 per cent yield, for example.
* Whether future retirees can spend as little as the current batch is a question mark.
* In absolute terms, the typical retired person spends little, but is buffeted by considerable inflation.
* According to the report, individuals in typical retiree households spending $720 a month experienced a 5.3 per cent inflation rate in the last 10 years.
* CPF Life, assuming a full 2015 Minimum Sum of $161,000, provides a monthly income of about $1,300 a month for life from age 65. But at a 5.3 per cent inflation rate, a typical retiree's spending will balloon beyond $1,300 a month after just 12 years.
* The inflation rate of 5.3 per cent is also more than what most conventional insurance instruments can match, or even what the CPF itself provides.
* On average, retiree households in four-room flats spend $1,500 a month, but get $1,230. Those in five-room flats spend $2,000 a month, but get $1,800. Those in three-room flats, condominiums and landed properties spend less than what they get.
* Another interesting tidbit is that retirees living in three-, four- and five-room flats are earning about $200-300 a month in investment income.
* Thus, for the current batch of Singaporean retirees, the picture does not look grim by any means. They are likely to have some resources, in the form of their flat or investments. They are thrifty and do not spend much.
* Still, a large proportion of retiree households' support comes from relatives and friends not living with them, presumably their children; the social fabric is still strong. Contributions from relatives and friends not living in the same household amount to $300-700 a month for most retiree households.
Friday, November 14, 2014
S&P500 index and US$ climbing up...
As mentioned some time ago, I am quite bullish on S&P500 index and US$ (vs S$). I am glad to be proven right with the S&P500 index now 2039 and US$:S$ = 1.2991. This is very important because I am putting my money where my mouth is.......
Thursday, November 13, 2014
Fed rate: Fed's long-run equilibrium rate is now 3.75%
It is interesting to read that 3.75% is now Fed's new norm or new long-term equilibrium rate as follow:
"The new Fed forecasts suggest that at the end of 2016 the U.S. economy will be at full employment, with inflation slightly below 2%. Despite that robust outlook, the Fed's projected median fed funds rate for the end of 2016 is just 2.85%, nearly 1% below its stated long-run equilibrium rate of 3.75%. Fed Chair Janet Yellen attributed this to the "lingering effects" of the global financial crisis."
My understanding is that Fed's long-run equilibrium rate used to be about 5.5%...............
If Singapore's SIBOR rate follows the same trend as Fed rate, and Singapore's SIBOR rate previously was about 2.5% average over long-term, then Singapore's new norm or new long-term equilibrium SIBOR rate should be about 3.75/5.5 * 2.5 = 1.70% !!!!!!!!!!!!!!!
"The new Fed forecasts suggest that at the end of 2016 the U.S. economy will be at full employment, with inflation slightly below 2%. Despite that robust outlook, the Fed's projected median fed funds rate for the end of 2016 is just 2.85%, nearly 1% below its stated long-run equilibrium rate of 3.75%. Fed Chair Janet Yellen attributed this to the "lingering effects" of the global financial crisis."
My understanding is that Fed's long-run equilibrium rate used to be about 5.5%...............
If Singapore's SIBOR rate follows the same trend as Fed rate, and Singapore's SIBOR rate previously was about 2.5% average over long-term, then Singapore's new norm or new long-term equilibrium SIBOR rate should be about 3.75/5.5 * 2.5 = 1.70% !!!!!!!!!!!!!!!
Tuesday, November 4, 2014
US$ shows convincing sign of uptrend vs S$
The last time I mentioned that US$ is likely to rally against S$, the exchange of US$ to S$ is about 1.26. Now, the exchange is 1.291, or an increase of about 2.46%.
This trend is expect to continue................................
This trend is expect to continue................................
Sunday, November 2, 2014
Corning (NYSE:GLW) Q3 sales and earnings beat estimates
In October 2014, Corning (NYSE stock symbol: GLW) announced its results for the third quarter of 2014. It reported third-quarter revenue of $2.54 billion, an increase of 22.9 percent from the year-ago quarter. Also, core EPS grows 21%; and sales and earnings exceed expectations.
Third-Quarter Highlights
GLW earnings announcement for shareholders contain the following statements:
1) "We continue to work on a major initiative for our Life Sciences business, which we believe could become a large opportunity for us.".
2) "Gorilla Glass is receiving interest from the automotive industry for solutions that may reduce overall vehicle weight, improve gas mileage, and provide additional safety benefits. These new technologies may serve as the foundation for Corning's next growth surge".
3) "And with the anticipated conclusion of the current repurchase program this quarter, the board of directors has agreed to accelerate its evaluation of future share repurchases and dividend increases."
It had also recently been announced that Apple did not use Sapphire glass (from GTAT) for Apple iPhone 6. GTAT's Sapphire glass is a direct competitor for Corning's flagship product, Gorilla Glass.
Traditionally, iPhones have shipped with Corning’s Gorilla Glass as its protective cover glass. However, because of Apple‘s deal with GT Advanced Technologies, a manufacturer of sapphire crystal products and manufacturing equipment, there were rumors that the iPhone 6 would have a sapphire cover instead of Gorilla Glass.
While Apple has not explicitly mentioned the use of Corning’s Gorilla Glass on iPhone 6 or the iPhone 6 Plus, there have been indications that the iPhone 6 might have Gorilla Glass protecting its display.
The Likelihood Of Gorilla Glass On iPhone 6 Bodes Well For Corning. The fact that Saphhire glass is unable to replace Gorilla Glass is great news for Corning and their shareholders.
Third-Quarter Highlights
- Core sales were $2.6 billion, a 26% increase on a year-over-year basis. Net sales (GAAP) were $2.5 billion, a 23% increase on a year-over-year basis.
- Core earnings per share were $0.40*, a 21% improvement over a year ago. This marked the eighth consecutive quarter of year-over-year core EPS growth. GAAP earnings per share were $0.72.
- Corning’s LCD glass volume was up by high single digits sequentially, driven by retail sales of TVs and supply chain preparations for the upcoming holiday season.
- Year-over-year core sales in Corning Environmental Technologies grew significantly at 25%, and core sales in the Optical Communications segment remained robust, growing 7%.
GLW earnings announcement for shareholders contain the following statements:
1) "We continue to work on a major initiative for our Life Sciences business, which we believe could become a large opportunity for us.".
2) "Gorilla Glass is receiving interest from the automotive industry for solutions that may reduce overall vehicle weight, improve gas mileage, and provide additional safety benefits. These new technologies may serve as the foundation for Corning's next growth surge".
3) "And with the anticipated conclusion of the current repurchase program this quarter, the board of directors has agreed to accelerate its evaluation of future share repurchases and dividend increases."
It had also recently been announced that Apple did not use Sapphire glass (from GTAT) for Apple iPhone 6. GTAT's Sapphire glass is a direct competitor for Corning's flagship product, Gorilla Glass.
Traditionally, iPhones have shipped with Corning’s Gorilla Glass as its protective cover glass. However, because of Apple‘s deal with GT Advanced Technologies, a manufacturer of sapphire crystal products and manufacturing equipment, there were rumors that the iPhone 6 would have a sapphire cover instead of Gorilla Glass.
While Apple has not explicitly mentioned the use of Corning’s Gorilla Glass on iPhone 6 or the iPhone 6 Plus, there have been indications that the iPhone 6 might have Gorilla Glass protecting its display.
The Likelihood Of Gorilla Glass On iPhone 6 Bodes Well For Corning. The fact that Saphhire glass is unable to replace Gorilla Glass is great news for Corning and their shareholders.
Saturday, October 25, 2014
Turbulence in the stock market
The past 3 weeks have been a very turbulence time for stocks. What should you do then?
Well, I am not sure what you will do, but I for sure am looking for investment opportunities, despite my portfolio being hit.
As Benjamin Graham says:
"The stock owner should not be too concerned with erratic fluctuations in stock prices, since in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine" (i.e. its true value will in the long run be reflected in its stock price).
It does look like the drop in stock market as a whole has stabilized (as long as Ebola will not spread out of control).
Well, I am not sure what you will do, but I for sure am looking for investment opportunities, despite my portfolio being hit.
As Benjamin Graham says:
"The stock owner should not be too concerned with erratic fluctuations in stock prices, since in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine" (i.e. its true value will in the long run be reflected in its stock price).
It does look like the drop in stock market as a whole has stabilized (as long as Ebola will not spread out of control).
Monday, October 13, 2014
What are the scams that we know so far?
Ok, I am writing this from memory, so pardon the inaccuracy but it should be roughly there...
The scams that happened so far that I can remember includes get rich quick investment schemes promising super high returns in:
- land-banking (in foreign countries of course!)
- gold
- ostrich farms
- olive farms
- membership MLMs
- exploration (gold, mining, oil exploration etc)
- foreign properties (newly launched properties to be constructed - of course!)
- secret trading strategy worth MILLIONS $
- You won 1st / strike lottery / selected to receive MILLIONS $, need your cooperation to transfer these money to your account... - The catch: Need you to transfer some facilitation fee to facilitate the transfer!
- (what else???)
The scams that happened so far that I can remember includes get rich quick investment schemes promising super high returns in:
- land-banking (in foreign countries of course!)
- gold
- ostrich farms
- olive farms
- membership MLMs
- exploration (gold, mining, oil exploration etc)
- foreign properties (newly launched properties to be constructed - of course!)
- secret trading strategy worth MILLIONS $
- You won 1st / strike lottery / selected to receive MILLIONS $, need your cooperation to transfer these money to your account... - The catch: Need you to transfer some facilitation fee to facilitate the transfer!
- (what else???)
Thursday, October 9, 2014
New survey gives snapshot of typical retiree households
An interesting article I read recently on "New survey gives snapshot of typical retiree households" which you read at this URL...
shed interesting new facts and information retiree households in Singapore.
To summarize, some interesting facts are:
* A typical retired household here draws a monthly income of $1,735, half of which comes from investments and contributions from family members or friends.
* A retiree household living in a three-room flat spends an average of $1,000 every month, of which a third goes to food and another third to housing, utilities and health expenses.
* Retiree households are also spending more every month. They shelled out an average of $1,700 last year, compared to $1,300 five years ago. However, the bottom fifth of these households spent only $480 a month, compared to $4,120 for the top 20 per cent.
shed interesting new facts and information retiree households in Singapore.
To summarize, some interesting facts are:
* A typical retired household here draws a monthly income of $1,735, half of which comes from investments and contributions from family members or friends.
* A retiree household living in a three-room flat spends an average of $1,000 every month, of which a third goes to food and another third to housing, utilities and health expenses.
* Retiree households are also spending more every month. They shelled out an average of $1,700 last year, compared to $1,300 five years ago. However, the bottom fifth of these households spent only $480 a month, compared to $4,120 for the top 20 per cent.
Monday, October 6, 2014
Flood of junk bond issues worries investors
I am surprised to read the below news in Business Times, while at the same time getting news from my Relationship Manager that the bonds, perpetual bonds, and debt notes issued by Singapore companies are getting snapped up within a day of issue and always at the low end of the guided coupon rate.......... Are the Singaporean investors not savy enough? Caveat Emptor!
---------------------
PUBLISHED OCTOBER 06, 2014
Flood of junk bond issues worries investors
Emerging market supplies set to hit a record as corporates from China and Asian countries tap low interest rates
BYNEIL BEHRMANN
GLOBAL investors are beginning to become wary of low yielding emerging and European lower grade corporate "junk" bonds following a flood of new supplies on the market.
The result has been a decline in prices and a rise in average yields since the market peaked in the second quarter of this year, traders and analysts say.
In the first three quarters of 2014, US$397 billion of emerging market bonds were issued, according to data from BondRadar, which monitors the primary new issue international bond market.
---------------------
---------------------
PUBLISHED OCTOBER 06, 2014
Flood of junk bond issues worries investors
Emerging market supplies set to hit a record as corporates from China and Asian countries tap low interest rates
BYNEIL BEHRMANN
GLOBAL investors are beginning to become wary of low yielding emerging and European lower grade corporate "junk" bonds following a flood of new supplies on the market.
The result has been a decline in prices and a rise in average yields since the market peaked in the second quarter of this year, traders and analysts say.
In the first three quarters of 2014, US$397 billion of emerging market bonds were issued, according to data from BondRadar, which monitors the primary new issue international bond market.
---------------------
Friday, October 3, 2014
Trend of US$ moving up against S$ has been established
Another reminder that US$ is moving up against S$ and the trend seems to have been established and it is not too late to catch the bandwagon if you want to........................
Think this trend should continue for next few years - Of course, it would not be in a straight line, but you can bet that US$ will be higher than S$ 1 year later, and that it will still be higher 2 years later vs 1 year later..............................
As of now, US$1 is S$1.272...........
On 16 Sep 2014 when I mentioned about the trend of US$ moving up against S$, US$1 was S$1.260.
Think this trend should continue for next few years - Of course, it would not be in a straight line, but you can bet that US$ will be higher than S$ 1 year later, and that it will still be higher 2 years later vs 1 year later..............................
As of now, US$1 is S$1.272...........
On 16 Sep 2014 when I mentioned about the trend of US$ moving up against S$, US$1 was S$1.260.
How much will it cost to raise your child?
You can read an article that I refer to below for how much it will cost to raise your child........
You can find interesting cost of raising child calculator at this URL...
------------------------------------
Average cost of raising a child hits $245,000
By Melanie Hicken @melhicken August 18, 2014: 3:32 PM ET
Kids are cute...but expensive
NEW YORK (CNNMoney)
New parents be warned: It could cost nearly a quarter of a million dollars to raise your child -- and that's not even including the cost of college.
To raise a child born in 2013 to the age of 18, it will cost a middle-income couple just over $245,000, according to newly released estimates from the U.S. Department of Agriculture. That's up $4,260, or almost 2%, from the year before.
Estimates can vary widely depending on where you live and how much you earn.
High-income families who live in the urban Northeast, for example, are projected to spend nearly $455,000 to raise their child to the age of 18, while low-income rural families will spend much less, an estimated $145,500, according to the report.
The figures are based on the cost of housing, food, transportation, clothing, health care, education, child care and miscellaneous expenses, like haircuts and cell phones. But the estimates don't include the cost of college -- a big-ticket expense that keeps rising.
The good news: overall costs have grown more slowly in recent years thanks to low inflation, said economist Mark Lino, who has written the annual report for the USDA since 1987.
But many families are still having to do more with less. The country's median income remains more than 8% below where it was before the recession, while child care and health care costs continue to grow faster than inflation.
Child care, in particular, is a huge burden -- often costing as much as the family home.
In 2012, center-based care for one infant was greater than median rent payments in nearly half of the states, according to Child Care Aware of America's most recent report.
In Seattle, Britta Gidican and her boyfriend spend $1,380 each month on daycare for their 17-month-old son, just $20 less than they spend on their mortgage each month.
"When I was pregnant I knew daycare would be expensive," said Gidican, a public relations manager. "But I didn't expect to pay two mortgages."
Rising transportation and food costs are also eating up a big chunk of family budgets. Gas prices have nearly doubled since 2004, according to the AAA. Meanwhile, food prices have increased more than 13% since 2008, according to the USDA, and make up the third biggest child-rearing expense in the agency's estimate.
Kim Blackham, a mother of four and part-time marriage and family therapist, says she has seen her grocery bill climb dramatically in the past decade. Today, she and her husband spend around $1,000 each month, in part because of her son's food allergies and her efforts to cook healthier meals for her family.
"I used to coupon shop, but the problem with coupons is that they are all for processed items," she said. "You seldom see a coupon for fresh fruit or meat."
For families trying to get by, here are some ways to ease the sting:
Use your community: From fancy strollers to bike seats, Boulder, Colo. mother-of-two Kate Lacroix said she has found a large community of people willing to share their hand-me-downs.
"There is a real economy of scale when you use the village," she said.
Take advantage of tax credits: Many employers offer tax-advantaged accounts that let parents pay for health and child care expenses with before-tax dollars.
Taking advantage of these accounts, and other child-related tax credits, can help you save thousands of dollars come tax time, said Bob Gavlak, a wealth advisor with Strategic Wealth Partners in Independence, Ohio.
Plan (and save) ahead: When possible, expectant parents should prepare for the added costs ahead of time, said Matt Becker, a financial planner who specializes in working with new parents.
First, estimate your child-related expenses and then try to save that amount each month. By the time your child is born, you'll be used to living without that money and also have a sizable savings built up.
"Having a baby is a huge life change. You are going to have unexpected things come up," said Becker, founder of planning firm Mom and Dad Money. "Having that extra savings can help a lot."
------------------------------------
More on costs of raising child at this URL...
You can find interesting cost of raising child calculator at this URL...
------------------------------------
Average cost of raising a child hits $245,000
By Melanie Hicken @melhicken August 18, 2014: 3:32 PM ET
Kids are cute...but expensive
NEW YORK (CNNMoney)
New parents be warned: It could cost nearly a quarter of a million dollars to raise your child -- and that's not even including the cost of college.
To raise a child born in 2013 to the age of 18, it will cost a middle-income couple just over $245,000, according to newly released estimates from the U.S. Department of Agriculture. That's up $4,260, or almost 2%, from the year before.
Estimates can vary widely depending on where you live and how much you earn.
High-income families who live in the urban Northeast, for example, are projected to spend nearly $455,000 to raise their child to the age of 18, while low-income rural families will spend much less, an estimated $145,500, according to the report.
The figures are based on the cost of housing, food, transportation, clothing, health care, education, child care and miscellaneous expenses, like haircuts and cell phones. But the estimates don't include the cost of college -- a big-ticket expense that keeps rising.
The good news: overall costs have grown more slowly in recent years thanks to low inflation, said economist Mark Lino, who has written the annual report for the USDA since 1987.
But many families are still having to do more with less. The country's median income remains more than 8% below where it was before the recession, while child care and health care costs continue to grow faster than inflation.
Child care, in particular, is a huge burden -- often costing as much as the family home.
In 2012, center-based care for one infant was greater than median rent payments in nearly half of the states, according to Child Care Aware of America's most recent report.
In Seattle, Britta Gidican and her boyfriend spend $1,380 each month on daycare for their 17-month-old son, just $20 less than they spend on their mortgage each month.
"When I was pregnant I knew daycare would be expensive," said Gidican, a public relations manager. "But I didn't expect to pay two mortgages."
Rising transportation and food costs are also eating up a big chunk of family budgets. Gas prices have nearly doubled since 2004, according to the AAA. Meanwhile, food prices have increased more than 13% since 2008, according to the USDA, and make up the third biggest child-rearing expense in the agency's estimate.
Kim Blackham, a mother of four and part-time marriage and family therapist, says she has seen her grocery bill climb dramatically in the past decade. Today, she and her husband spend around $1,000 each month, in part because of her son's food allergies and her efforts to cook healthier meals for her family.
"I used to coupon shop, but the problem with coupons is that they are all for processed items," she said. "You seldom see a coupon for fresh fruit or meat."
For families trying to get by, here are some ways to ease the sting:
Use your community: From fancy strollers to bike seats, Boulder, Colo. mother-of-two Kate Lacroix said she has found a large community of people willing to share their hand-me-downs.
"There is a real economy of scale when you use the village," she said.
Take advantage of tax credits: Many employers offer tax-advantaged accounts that let parents pay for health and child care expenses with before-tax dollars.
Taking advantage of these accounts, and other child-related tax credits, can help you save thousands of dollars come tax time, said Bob Gavlak, a wealth advisor with Strategic Wealth Partners in Independence, Ohio.
Plan (and save) ahead: When possible, expectant parents should prepare for the added costs ahead of time, said Matt Becker, a financial planner who specializes in working with new parents.
First, estimate your child-related expenses and then try to save that amount each month. By the time your child is born, you'll be used to living without that money and also have a sizable savings built up.
"Having a baby is a huge life change. You are going to have unexpected things come up," said Becker, founder of planning firm Mom and Dad Money. "Having that extra savings can help a lot."
------------------------------------
More on costs of raising child at this URL...
Thursday, October 2, 2014
The coming era of unlimited — and free — clean energy
Below is an interesting and thought-provocative read. So, how can we benefit from this knowledge? Which are the companies which are in solar-related businesses that will benefit most from the solar energy trend?
----------------------------
By Vivek Wadhwa September 19, 2014
Solar energy is ready for primetime. (Nicky Loh/Bloomberg)
In the 1980s, leading consultants were skeptical about cellular phones. McKinsey & Company noted that the handsets were heavy, batteries didn’t last long, coverage was patchy, and the cost per minute was exorbitant. It predicted that in 20 years the total market size would be about 900,000 units, and advised AT&T to pull out. McKinsey was wrong, of course. There were more than 100 million cellular phones in use 2000; there are billions now. Costs have fallen so far that even the poor — all over world — can afford a cellular phone.
The experts are saying the same about solar energy now. They note that after decades of development, solar power hardly supplies 1 percent of the world’s energy needs. They say that solar is inefficient, too expensive to install, and unreliable, and will fail without government subsidies. They too are wrong. Solar will be as ubiquitous as cellular phones are.
Futurist Ray Kurzweil notes that solar power has been doubling every two years for the past 30 years — as costs have been dropping. He says solar energy is only six doublings — or less than 14 years — away from meeting 100 percent of today’s energy needs. Energy usage will keep increasing, so this is a moving target. But, by Kurzweil’s estimates, inexpensive renewable sources will provide more energy than the world needs in less than 20 years. Even then, we will be using only one part in 10,000 of the sunlight that falls on the Earth.
In places such as Germany, Spain, Portugal, Australia, and the Southwest United States, residential-scale solar production has already reached “grid parity” with average residential electricity prices. In other words, it costs no more in the long term to install solar panels than to buy electricity from utility companies. The prices of solar panels have fallen 75 percent in the past five years alone and will fall much further as the technologies to create them improve and scale of production increases. By 2020, solar energy will be price-competitive with energy generated from fossil fuels on an unsubsidized basis in most parts of the world. Within the next decade, it will cost a fraction of what fossil fuel-based alternatives do.
It isn’t just solar production that is advancing at a rapid rate; there are also technologies to harness the power of wind, biomass, thermal, tidal, and waste-breakdown energy, and research projects all over the world are working on improving their efficiency and effectiveness. Wind power, for example, has also come down sharply in price and is now competitive with the cost of new coal-burning power plants in the United States. It will, without doubt, give solar energy a run for its money. There will be breakthroughs in many different technologies, and these will accelerate overall progress.
Despite the skepticism of experts and criticism by naysayers, there is little doubt that we are heading into an era of unlimited and almost free clean energy. This has profound implications.
First, there will be disruption of the entire fossil-fuel industry, starting with utility companies — which will face declining demand and then bankruptcy. Several of them see the writing on the wall. The smart ones are embracing solar and wind power. Others are lobbying to stop the progress of solar power — at all costs. Witness how groups in Oklahoma persuaded lawmakers to approve a surcharge on solar installations; the limited victory that groups backed by the Koch brothers won in Arizona to impose a $5 per month surcharge; and the battles being waged in other states. They are fighting a losing battle, however, because the advances aren’t confined to the United States. Countries such as Germany, China, and Japan are leading the charge in the adoption of clean energies. Solar installations still depend on other power sources to supply energy when the sun isn’t shining, but battery-storage technologies will improve so much over the next two decades that homes won’t be dependent on the utility companies. We will go from debating incentives for installing clean energies to debating subsidies for utility companies to keep their operations going.
The environment will surely benefit from the elimination of fossil fuels, which will also boost most sectors of the economy. Electric cars will become cheaper to operate than fossil-fuel-burning ones, for example. We will be able to create unlimited clean water — by boiling ocean water and condensing it. With inexpensive energy, our farmers can also grow hydroponic fruits and vegetables in vertical farms located near consumers. Imagine skyscrapers located in cities that grow food in glass buildings without the need for pesticides, and that recycle nutrients and materials to ensure there is no ecological impact. We will have the energy needed to 3D-print our everyday goods and to heat our homes.
We are surely heading into the era of abundance that Peter Diamandis has written about — the era when the basic needs of humanity are met through advancing technologies. The challenge for mankind will be to share this abundance, ensuring that these technologies make the world a better place.
Vivek Wadhwa is a fellow at Rock Center for Corporate Governance at Stanford University, director of research at Center for Entrepreneurship and Research Commercialization at Duke, and distinguished fellow at Singularity University. His past appointments include Harvard Law School, University of California Berkeley, and Emory University.
----------------------------
----------------------------
By Vivek Wadhwa September 19, 2014
Solar energy is ready for primetime. (Nicky Loh/Bloomberg)
In the 1980s, leading consultants were skeptical about cellular phones. McKinsey & Company noted that the handsets were heavy, batteries didn’t last long, coverage was patchy, and the cost per minute was exorbitant. It predicted that in 20 years the total market size would be about 900,000 units, and advised AT&T to pull out. McKinsey was wrong, of course. There were more than 100 million cellular phones in use 2000; there are billions now. Costs have fallen so far that even the poor — all over world — can afford a cellular phone.
The experts are saying the same about solar energy now. They note that after decades of development, solar power hardly supplies 1 percent of the world’s energy needs. They say that solar is inefficient, too expensive to install, and unreliable, and will fail without government subsidies. They too are wrong. Solar will be as ubiquitous as cellular phones are.
Futurist Ray Kurzweil notes that solar power has been doubling every two years for the past 30 years — as costs have been dropping. He says solar energy is only six doublings — or less than 14 years — away from meeting 100 percent of today’s energy needs. Energy usage will keep increasing, so this is a moving target. But, by Kurzweil’s estimates, inexpensive renewable sources will provide more energy than the world needs in less than 20 years. Even then, we will be using only one part in 10,000 of the sunlight that falls on the Earth.
In places such as Germany, Spain, Portugal, Australia, and the Southwest United States, residential-scale solar production has already reached “grid parity” with average residential electricity prices. In other words, it costs no more in the long term to install solar panels than to buy electricity from utility companies. The prices of solar panels have fallen 75 percent in the past five years alone and will fall much further as the technologies to create them improve and scale of production increases. By 2020, solar energy will be price-competitive with energy generated from fossil fuels on an unsubsidized basis in most parts of the world. Within the next decade, it will cost a fraction of what fossil fuel-based alternatives do.
It isn’t just solar production that is advancing at a rapid rate; there are also technologies to harness the power of wind, biomass, thermal, tidal, and waste-breakdown energy, and research projects all over the world are working on improving their efficiency and effectiveness. Wind power, for example, has also come down sharply in price and is now competitive with the cost of new coal-burning power plants in the United States. It will, without doubt, give solar energy a run for its money. There will be breakthroughs in many different technologies, and these will accelerate overall progress.
Despite the skepticism of experts and criticism by naysayers, there is little doubt that we are heading into an era of unlimited and almost free clean energy. This has profound implications.
First, there will be disruption of the entire fossil-fuel industry, starting with utility companies — which will face declining demand and then bankruptcy. Several of them see the writing on the wall. The smart ones are embracing solar and wind power. Others are lobbying to stop the progress of solar power — at all costs. Witness how groups in Oklahoma persuaded lawmakers to approve a surcharge on solar installations; the limited victory that groups backed by the Koch brothers won in Arizona to impose a $5 per month surcharge; and the battles being waged in other states. They are fighting a losing battle, however, because the advances aren’t confined to the United States. Countries such as Germany, China, and Japan are leading the charge in the adoption of clean energies. Solar installations still depend on other power sources to supply energy when the sun isn’t shining, but battery-storage technologies will improve so much over the next two decades that homes won’t be dependent on the utility companies. We will go from debating incentives for installing clean energies to debating subsidies for utility companies to keep their operations going.
The environment will surely benefit from the elimination of fossil fuels, which will also boost most sectors of the economy. Electric cars will become cheaper to operate than fossil-fuel-burning ones, for example. We will be able to create unlimited clean water — by boiling ocean water and condensing it. With inexpensive energy, our farmers can also grow hydroponic fruits and vegetables in vertical farms located near consumers. Imagine skyscrapers located in cities that grow food in glass buildings without the need for pesticides, and that recycle nutrients and materials to ensure there is no ecological impact. We will have the energy needed to 3D-print our everyday goods and to heat our homes.
We are surely heading into the era of abundance that Peter Diamandis has written about — the era when the basic needs of humanity are met through advancing technologies. The challenge for mankind will be to share this abundance, ensuring that these technologies make the world a better place.
Vivek Wadhwa is a fellow at Rock Center for Corporate Governance at Stanford University, director of research at Center for Entrepreneurship and Research Commercialization at Duke, and distinguished fellow at Singularity University. His past appointments include Harvard Law School, University of California Berkeley, and Emory University.
----------------------------
Tuesday, September 30, 2014
If you want to be an executive, billionaire, or US president, it’s a good idea to graduate from Harvard Business School!
You can read more about this on "The 25 Most Successful Harvard Business School Graduates" at this URL...
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The 25 Most Successful Harvard Business School Graduates
Business Insider By Richard Feloni
If you want to be an executive, billionaire, or US president, it’s a good idea to graduate from Harvard Business School.
Founded in 1908, HBS was the first institution in the world to grant a Masters in Business Administration.
The Harvard MBA has since been a hallmark of the elite, with George W. Bush, Mitt Romney, and Michael Bloomberg all earning the degree.
We sifted through HBS’s sterling history to find the most powerful, prominent, and financially successful grads that came out of Cambridge.
Walter Haas, Jr., Class of 1939, succeeded his father as the CEO of Levi Strauss & Co. He grew Levi’s from a regional California brand to one of the world’s biggest apparel companies.
1939 MBA Robert S. McNamara served as the US Secretary of Defense during the Vietnam War.
After nabbing his MBA in 1942, Philip Caldwell took over as the first non-Ford to run Ford Motor Company, where he led one of the biggest turnarounds in American business history.
Stephen R. Covey, Class of 1957, become tremendously influential after publishing his bestselling book ‘The Seven Habits of Highly Effective People.’
Robert Kraft, MBA graduate of 1965, is the chairman and CEO of the Kraft Group, which most notably owns the New England Patriots. He’s worth an estimated $4 billion.
Michael Bloomberg finished his MBA in 1966 and went on to found financial data company Bloomberg in 1981 and serve three terms as New York Mayor. He is worth an estimated $34 billion.
George Kaiser graduated from HBS in 1966 and is the chairman of BOK Financial Corporation. He’s worth an estimated $10 billion and his foundation donates over $40 million a year, mostly to early childhood education.
Henry Paulson finished his MBA in 1970, and joined Goldman Sachs in 1974, working his way up to CEO. In 2006, he left the bank to become the US Treasury Secretary.
Stephen Schwarzman, Class of 1972, is the chairman and CEO of the Blackstone Group. He’s worth an estimated $10.6 billion.
Ray Dalio got his MBA in 1973 and is the highly influential founder and co-chief investment officer of Bridgewater Associates. He’s worth an estimated $15.2 billion.
After finishing his MBA in 1974, Mitt Romney had a long career with Bain Consulting. He was elected Massachusetts governor in 2002 and has since been a never-say-die presidential candidate.
George W. Bush graduated from HBS in 1975 before working in the oil business, owning the Texas Rangers, becoming governor of Texas, and then serving as US president from 2000 to 2008.
Jim Koch, Class of 1978, left management consulting to start the Boston Beer Company, which makes Samuel Adams. He’s now a billionaire.
Anne Moore earned her MBA in 1978 and went on to the top of publishing, becoming the first female CEO of Time, Inc., in 2002.
Meg Whitman, MBA graduate of 1979, is the chairman, president, and CEO of Hewlett-Packard. She’s worth an estimated $2 billion.
John Paulson got his MBA in 1980 and went on to found the investment management firm Paulson & Co. He’s worth an estimated $13.7 billion.
After finishing his MBA in 1981, Chase Carey started an influential media career. He helped launch FoxNews and FoxSports, was CEO of DirecTV, and is now the president of News Corp.
Jamie Dimon graduated from HBS in 1982. He’s the chairman, president, and CEO of JPMorgan Chase and No. 22 on Forbes’ list of the world’s most powerful people.
Jeffrey Immelt, Class of 1982, is the chairman and CEO of General Electric. He was selected as Jack Welch’s successor in 2000.
Michael Lynton, MBA graduate of 1987, is the CEO of Sony Entertainment and the chairman and CEO of Sony Pictures. He also sits on Snapchat’s board.
Abigail Johnson got her MBA in 1988 and is today the chair of Fidelity Worldwide Investment. She ranks among the richest women in the world, with an estimated net worth of $13.2 billion.
Bill Ackman has taken over Wall Street since his ’92 MBA and turned Pershing Square into a $12 billion hedge fund.
Mark Pincus, MBA graduate of 1993, is the cofounder of social media gaming company Zynga. Today he’s worth around a billion dollars.
Sheryl Sandberg is largely credited with making Facebook profitable. The 1995 HBS alum initiated a global conversation about women and work with her bestselling book ‘Lean In.’
Sal Khan, Class of 2003, is the founder of the increasingly popular online learning site Khan Academy, which has received funding from the Gates Foundation and Google.
-------------------------------
You can read more about this on "The 25 Most Successful Harvard Business School Graduates" at this URL...
-------------------------------
The 25 Most Successful Harvard Business School Graduates
Business Insider By Richard Feloni
If you want to be an executive, billionaire, or US president, it’s a good idea to graduate from Harvard Business School.
Founded in 1908, HBS was the first institution in the world to grant a Masters in Business Administration.
The Harvard MBA has since been a hallmark of the elite, with George W. Bush, Mitt Romney, and Michael Bloomberg all earning the degree.
We sifted through HBS’s sterling history to find the most powerful, prominent, and financially successful grads that came out of Cambridge.
Walter Haas, Jr., Class of 1939, succeeded his father as the CEO of Levi Strauss & Co. He grew Levi’s from a regional California brand to one of the world’s biggest apparel companies.
1939 MBA Robert S. McNamara served as the US Secretary of Defense during the Vietnam War.
After nabbing his MBA in 1942, Philip Caldwell took over as the first non-Ford to run Ford Motor Company, where he led one of the biggest turnarounds in American business history.
Stephen R. Covey, Class of 1957, become tremendously influential after publishing his bestselling book ‘The Seven Habits of Highly Effective People.’
Robert Kraft, MBA graduate of 1965, is the chairman and CEO of the Kraft Group, which most notably owns the New England Patriots. He’s worth an estimated $4 billion.
Michael Bloomberg finished his MBA in 1966 and went on to found financial data company Bloomberg in 1981 and serve three terms as New York Mayor. He is worth an estimated $34 billion.
George Kaiser graduated from HBS in 1966 and is the chairman of BOK Financial Corporation. He’s worth an estimated $10 billion and his foundation donates over $40 million a year, mostly to early childhood education.
Henry Paulson finished his MBA in 1970, and joined Goldman Sachs in 1974, working his way up to CEO. In 2006, he left the bank to become the US Treasury Secretary.
Stephen Schwarzman, Class of 1972, is the chairman and CEO of the Blackstone Group. He’s worth an estimated $10.6 billion.
Ray Dalio got his MBA in 1973 and is the highly influential founder and co-chief investment officer of Bridgewater Associates. He’s worth an estimated $15.2 billion.
After finishing his MBA in 1974, Mitt Romney had a long career with Bain Consulting. He was elected Massachusetts governor in 2002 and has since been a never-say-die presidential candidate.
George W. Bush graduated from HBS in 1975 before working in the oil business, owning the Texas Rangers, becoming governor of Texas, and then serving as US president from 2000 to 2008.
Jim Koch, Class of 1978, left management consulting to start the Boston Beer Company, which makes Samuel Adams. He’s now a billionaire.
Anne Moore earned her MBA in 1978 and went on to the top of publishing, becoming the first female CEO of Time, Inc., in 2002.
Meg Whitman, MBA graduate of 1979, is the chairman, president, and CEO of Hewlett-Packard. She’s worth an estimated $2 billion.
John Paulson got his MBA in 1980 and went on to found the investment management firm Paulson & Co. He’s worth an estimated $13.7 billion.
After finishing his MBA in 1981, Chase Carey started an influential media career. He helped launch FoxNews and FoxSports, was CEO of DirecTV, and is now the president of News Corp.
Jamie Dimon graduated from HBS in 1982. He’s the chairman, president, and CEO of JPMorgan Chase and No. 22 on Forbes’ list of the world’s most powerful people.
Jeffrey Immelt, Class of 1982, is the chairman and CEO of General Electric. He was selected as Jack Welch’s successor in 2000.
Michael Lynton, MBA graduate of 1987, is the CEO of Sony Entertainment and the chairman and CEO of Sony Pictures. He also sits on Snapchat’s board.
Abigail Johnson got her MBA in 1988 and is today the chair of Fidelity Worldwide Investment. She ranks among the richest women in the world, with an estimated net worth of $13.2 billion.
Bill Ackman has taken over Wall Street since his ’92 MBA and turned Pershing Square into a $12 billion hedge fund.
Mark Pincus, MBA graduate of 1993, is the cofounder of social media gaming company Zynga. Today he’s worth around a billion dollars.
Sheryl Sandberg is largely credited with making Facebook profitable. The 1995 HBS alum initiated a global conversation about women and work with her bestselling book ‘Lean In.’
Sal Khan, Class of 2003, is the founder of the increasingly popular online learning site Khan Academy, which has received funding from the Gates Foundation and Google.
-------------------------------
Sunday, September 28, 2014
Why rate hikes are good news for stocks!
A friend had liquidated all stocks, citing Fed going to hike rates which is bad for stocks.
I held the contradictory view, in that I believe the rate hike is a sign that US economy is on a very firm footing, and hence several more very GOOD years to come for stock prices!
If only below news article come out earlier and my friend has read it.............
-------------------------------------------------
Why rate hikes are good news for stocks
History shows higher interest rates don't always upend stocks
Associated Press By Steve Rothwell, AP Markets Writer
FILE - In this Thursday, July 3, 2014, file photo, specialist Jay Woods is reflected in a screen at his post that shows five years of the Dow Jones industrial average, on the floor of the New York Stock Exchange. History shows higher interest rates don’t always upend stocks. The Fed is set to end its bond purchases in October and most economists expect the first short-term rate hike by mid-2015. These early increases, analysts say, are unlikely to derail the current bull market for stocks, because the Fed is raising rates in response to a growing economy. (AP Photo/Richard Drew, File)
The Fed's unprecedented economic stimulus has in large part driven a surge in stock prices since 2009. The central bank has bought trillions of dollars of bonds and kept short-term interest rates close to zero. That's allowed businesses and consumers to refinance their debt at lower rates, freeing up cash to spend.
But if history is a guide, investors have nothing to fear.
In the nine instances since 1955 that the Fed has started raising rates after a recession, the Standard & Poor's 500 index has risen by an average of 58 percent between the first hike and the peak of the market, according to LPL Financial, an independent broker-dealer based in Boston.
The Fed is set to end its bond purchases in October and most economists expect the first short-term rate hike by mid-2015.
These early increases, analysts say, are unlikely to derail the current bull market for stocks, because the Fed would be raising rates in response to a growing economy. Manufacturing expanded in August at the strongest pace in more than three years. Hiring is also picking up, along with consumer confidence.
"Rising interest rates are usually a symptom of the success of the economy, and companies are benefiting from it," says Seth Masters, chief investment officer for Bernstein Global Wealth Management. "Generally, that's pretty good if you're a stock investor."
RISING RATES, RISING STOCKS
Research from Burt White and Jason Nicastro at LPL shows that after an initial bout of volatility, stocks typically rise along with rates.
The last time the Fed raised rates was 2004. The market flinched at first, with the S&P 500 dropping 3.4 percent in July after rates rose from 1 percent to 1.25 percent. The index then climbed for another three years, gaining 37 percent between the first rate increase and the market's peak in October 2007.
Stocks rise when the Fed lifts rates enough to contain inflation, but not by so much that the hikes suffocate borrowing and lending. If the economy continues to expand, the benefits of stronger growth outweigh any headwind from higher borrowing costs.
A healthier economy also means stronger corporate earnings, which drive stock prices, says Jim McDonald, chief investment strategist at Northern Trust Asset Management.
Upcoming hikes are expected to be small and gradual, so they don't choke off growth, says Brad Sorensen, a director of market and sector research at Charles Schwab.
The median short-term rate supported by Fed policymakers at the end of next year is 1.38 percent, up from a range of zero to 0.25 percent currently.
RISKS
Of course, the Fed won't always read the economy right, and that's what makes stock investors nervous.
Four of the five previous bull markets since 1970 ended as investors got spooked by a recession, or the anticipation of one, and sold stocks. And what causes recessions? In three of the past five, it was the Fed hiking interest rates to slow inflation.
Typically, though, the problems for the economy and stock market don't come until after the Fed has hiked rates a number of times, not early in the process. Eventually, higher rates put a brake on the economy and crimp earnings, prompting investors to sell stocks.
The last cycle of rate hikes topped out at 5.25 percent, with the final increase coming in June 2006. Stocks peaked in October of the following year.
Still, some investors worry that the next hikes will defy historical patterns because of the Fed's unprecedented stimulus.
Once the central bank ends its third round of quantitative easing after its next meeting that starts Oct. 28, its balance sheet will stand at close to $4.5 trillion, about five times its size from before the financial crisis.
"A pessimist could say 'well, it's going to be different this time because the market's going to be inflated by all the stimulus from the Fed,'" Northern Trust's McDonald says.
Like Sorenson, though, he thinks the most likely scenario is that the Fed will raise rates gradually, the economy will continue expanding, and stocks will keep rising.
Some parts of the market are more vulnerable to rising rates:
— Dividend-rich shares of utilities, phone and consumer staples companies could get hurt, says James Liu, Global Market Strategist for J.P. Morgan Funds. Investors typically buy these safe-and-steady stocks when they are worried about a slowing economy. This year, they have been buying them for income because interest rates are low. Utilities have gained 9.3 percent, compared with 6.8 percent for the S&P 500.
— High-yield bonds, one of the riskiest parts of the debt market, are another worry for Liu. This debt is issued by companies that are more likely to default. If rates rise, the probability of companies defaulting also increases.
Investors will listen for more clues to the Fed's rate strategy at its next policy meeting in late October. Until more is known, investors may be in for a bumpy ride.
"We're going to be right back where we started in six weeks," says Liu, "So, it's not over yet."
-------------------------------------------------
I held the contradictory view, in that I believe the rate hike is a sign that US economy is on a very firm footing, and hence several more very GOOD years to come for stock prices!
If only below news article come out earlier and my friend has read it.............
-------------------------------------------------
Why rate hikes are good news for stocks
History shows higher interest rates don't always upend stocks
Associated Press By Steve Rothwell, AP Markets Writer
FILE - In this Thursday, July 3, 2014, file photo, specialist Jay Woods is reflected in a screen at his post that shows five years of the Dow Jones industrial average, on the floor of the New York Stock Exchange. History shows higher interest rates don’t always upend stocks. The Fed is set to end its bond purchases in October and most economists expect the first short-term rate hike by mid-2015. These early increases, analysts say, are unlikely to derail the current bull market for stocks, because the Fed is raising rates in response to a growing economy. (AP Photo/Richard Drew, File)
The Fed's unprecedented economic stimulus has in large part driven a surge in stock prices since 2009. The central bank has bought trillions of dollars of bonds and kept short-term interest rates close to zero. That's allowed businesses and consumers to refinance their debt at lower rates, freeing up cash to spend.
But if history is a guide, investors have nothing to fear.
In the nine instances since 1955 that the Fed has started raising rates after a recession, the Standard & Poor's 500 index has risen by an average of 58 percent between the first hike and the peak of the market, according to LPL Financial, an independent broker-dealer based in Boston.
The Fed is set to end its bond purchases in October and most economists expect the first short-term rate hike by mid-2015.
These early increases, analysts say, are unlikely to derail the current bull market for stocks, because the Fed would be raising rates in response to a growing economy. Manufacturing expanded in August at the strongest pace in more than three years. Hiring is also picking up, along with consumer confidence.
"Rising interest rates are usually a symptom of the success of the economy, and companies are benefiting from it," says Seth Masters, chief investment officer for Bernstein Global Wealth Management. "Generally, that's pretty good if you're a stock investor."
RISING RATES, RISING STOCKS
Research from Burt White and Jason Nicastro at LPL shows that after an initial bout of volatility, stocks typically rise along with rates.
The last time the Fed raised rates was 2004. The market flinched at first, with the S&P 500 dropping 3.4 percent in July after rates rose from 1 percent to 1.25 percent. The index then climbed for another three years, gaining 37 percent between the first rate increase and the market's peak in October 2007.
Stocks rise when the Fed lifts rates enough to contain inflation, but not by so much that the hikes suffocate borrowing and lending. If the economy continues to expand, the benefits of stronger growth outweigh any headwind from higher borrowing costs.
A healthier economy also means stronger corporate earnings, which drive stock prices, says Jim McDonald, chief investment strategist at Northern Trust Asset Management.
Upcoming hikes are expected to be small and gradual, so they don't choke off growth, says Brad Sorensen, a director of market and sector research at Charles Schwab.
The median short-term rate supported by Fed policymakers at the end of next year is 1.38 percent, up from a range of zero to 0.25 percent currently.
RISKS
Of course, the Fed won't always read the economy right, and that's what makes stock investors nervous.
Four of the five previous bull markets since 1970 ended as investors got spooked by a recession, or the anticipation of one, and sold stocks. And what causes recessions? In three of the past five, it was the Fed hiking interest rates to slow inflation.
Typically, though, the problems for the economy and stock market don't come until after the Fed has hiked rates a number of times, not early in the process. Eventually, higher rates put a brake on the economy and crimp earnings, prompting investors to sell stocks.
The last cycle of rate hikes topped out at 5.25 percent, with the final increase coming in June 2006. Stocks peaked in October of the following year.
Still, some investors worry that the next hikes will defy historical patterns because of the Fed's unprecedented stimulus.
Once the central bank ends its third round of quantitative easing after its next meeting that starts Oct. 28, its balance sheet will stand at close to $4.5 trillion, about five times its size from before the financial crisis.
"A pessimist could say 'well, it's going to be different this time because the market's going to be inflated by all the stimulus from the Fed,'" Northern Trust's McDonald says.
Like Sorenson, though, he thinks the most likely scenario is that the Fed will raise rates gradually, the economy will continue expanding, and stocks will keep rising.
Some parts of the market are more vulnerable to rising rates:
— Dividend-rich shares of utilities, phone and consumer staples companies could get hurt, says James Liu, Global Market Strategist for J.P. Morgan Funds. Investors typically buy these safe-and-steady stocks when they are worried about a slowing economy. This year, they have been buying them for income because interest rates are low. Utilities have gained 9.3 percent, compared with 6.8 percent for the S&P 500.
— High-yield bonds, one of the riskiest parts of the debt market, are another worry for Liu. This debt is issued by companies that are more likely to default. If rates rise, the probability of companies defaulting also increases.
Investors will listen for more clues to the Fed's rate strategy at its next policy meeting in late October. Until more is known, investors may be in for a bumpy ride.
"We're going to be right back where we started in six weeks," says Liu, "So, it's not over yet."
-------------------------------------------------
Friday, September 26, 2014
Perpetual bonds bad for you and me
Why is perpetual bonds good for issuers and bad for you and me? You can read more about perpetual bonds at this URL...
In general, when you buy perpetual bonds, you are buying something similar to "shares", but yet without the liquidity in trading these perpetual bonds like shares, and the perpetual bonds are yet treated like shares by Monetary Authority of Singapore (MAS) and companies can issue as many units of perpetual bonds as they like without making their balance sheet appears too much in debt (when in fact they would have if they have treated perpetual bonds as debts just like the other "bonds"!).
Also, perpetual bonds are the lowest ranking among all bonds, and the coupons payments are not guaranteed and issuers can choose not to pay the coupons, and these coupon payments are not cumulative.
So in summary, when you buy perpetual bonds, you are buying something like shares, yet without the liquidity of trading it like shares (you may never be able to sell them at a reasonable price!), and without the opportunity to participate in price appreciation like shares.
Similarly, when you buy perpetual bonds, you are buying something like bonds, yet without all the benefits that come with real bonds!
So, you are better off buying shares or bonds if you prefer the former or the latter, but don't buy perpetual bonds!
------------------------------------------
Property Nuggets: A closer look at perpetuals
What’s New
• Mapletree Logistics Trust (MLT) is the first S-REIT to issue perpetual securities (perpetuals), raising S$350m at an interest rate of 5.375%.
• Our view is that this form of fund raising is generally positive for REITs if used to finance accretive acquisitions, but would be expensive to replace debt.
• We anticipate that this may be the beginning of more such issuance to come and highlight some of the implications for REITs.
Essentials
• Avoiding additional leverage. The Monetary Authority of Singapore’s (MAS) guidelines allow REITs to account for perpetuals as equity, as opposed to debt, thus reducing aggregate leverage when used to finance acquisitions. However, credit rating agencies do treat these hybrid securities as 50% debt/ 50% equity in calculating leverage, and excessive levels of perpetuals would trigger a credit downgrade.
• More competitive than equity fund-raising. Given that the cost of debt for REITs ranges from 2-4%, 5-5.5% perpetuals would be an expensive replacement for debt. However, when matched against the cost of equity at between 6-9% for REITs, perpetuals can be a viable alternative to raising equity.
• Essential to acquire properties with funds raised. Due to their costs, REIT managers should only issue perpetuals to fund acquisitions, and our view is that the issuance of perpetuals is a market signal that sizeable acquisitions are forthcoming. REIT managers would likely take care to closely match the timing of acquisitions and the issuance of perpetuals due to their high holding costs.
• Higher likelihood of being used by industrial and hospitality REITs due to higher acquisition NPI yields for industrial (6.5-8.5%) and hospitality (6-6.5%) properties compared against lower NPI yields for office (3.5-4.5%) and retail (5- 6%) properties. This would enable acquisitions financed through the perpetuals to be DPU-accretive to ordinary unitholders. Perpetuals could also be used to fund overseas acquisitions, especially in countries where the cost of debt is high, such as Australia, although this exposes the REIT to exchange rate risk.
• Risk is in fixed payments and higher priority vs ordinary unitholders. The main risk for REITs is in the fixed payout for the perpetuals, which would not change due to shifts in occupancies or rentals. Holders of perpetuals would also rank higher in priority than ordinary unitholders, but would not enjoy potential dividend growth in the longer term.
Action
• Larger REITs with higher exposure to the industrial and hospitality sectors are likely to issue perpetuals to fund yield-accretive acquisitions. Top picks include Ascott Residence Trust, MLT and Mapletree Industrial Trust.
------------------------------------------
In general, when you buy perpetual bonds, you are buying something similar to "shares", but yet without the liquidity in trading these perpetual bonds like shares, and the perpetual bonds are yet treated like shares by Monetary Authority of Singapore (MAS) and companies can issue as many units of perpetual bonds as they like without making their balance sheet appears too much in debt (when in fact they would have if they have treated perpetual bonds as debts just like the other "bonds"!).
Also, perpetual bonds are the lowest ranking among all bonds, and the coupons payments are not guaranteed and issuers can choose not to pay the coupons, and these coupon payments are not cumulative.
So in summary, when you buy perpetual bonds, you are buying something like shares, yet without the liquidity of trading it like shares (you may never be able to sell them at a reasonable price!), and without the opportunity to participate in price appreciation like shares.
Similarly, when you buy perpetual bonds, you are buying something like bonds, yet without all the benefits that come with real bonds!
So, you are better off buying shares or bonds if you prefer the former or the latter, but don't buy perpetual bonds!
------------------------------------------
Property Nuggets: A closer look at perpetuals
What’s New
• Mapletree Logistics Trust (MLT) is the first S-REIT to issue perpetual securities (perpetuals), raising S$350m at an interest rate of 5.375%.
• Our view is that this form of fund raising is generally positive for REITs if used to finance accretive acquisitions, but would be expensive to replace debt.
• We anticipate that this may be the beginning of more such issuance to come and highlight some of the implications for REITs.
Essentials
• Avoiding additional leverage. The Monetary Authority of Singapore’s (MAS) guidelines allow REITs to account for perpetuals as equity, as opposed to debt, thus reducing aggregate leverage when used to finance acquisitions. However, credit rating agencies do treat these hybrid securities as 50% debt/ 50% equity in calculating leverage, and excessive levels of perpetuals would trigger a credit downgrade.
• More competitive than equity fund-raising. Given that the cost of debt for REITs ranges from 2-4%, 5-5.5% perpetuals would be an expensive replacement for debt. However, when matched against the cost of equity at between 6-9% for REITs, perpetuals can be a viable alternative to raising equity.
• Essential to acquire properties with funds raised. Due to their costs, REIT managers should only issue perpetuals to fund acquisitions, and our view is that the issuance of perpetuals is a market signal that sizeable acquisitions are forthcoming. REIT managers would likely take care to closely match the timing of acquisitions and the issuance of perpetuals due to their high holding costs.
• Higher likelihood of being used by industrial and hospitality REITs due to higher acquisition NPI yields for industrial (6.5-8.5%) and hospitality (6-6.5%) properties compared against lower NPI yields for office (3.5-4.5%) and retail (5- 6%) properties. This would enable acquisitions financed through the perpetuals to be DPU-accretive to ordinary unitholders. Perpetuals could also be used to fund overseas acquisitions, especially in countries where the cost of debt is high, such as Australia, although this exposes the REIT to exchange rate risk.
• Risk is in fixed payments and higher priority vs ordinary unitholders. The main risk for REITs is in the fixed payout for the perpetuals, which would not change due to shifts in occupancies or rentals. Holders of perpetuals would also rank higher in priority than ordinary unitholders, but would not enjoy potential dividend growth in the longer term.
Action
• Larger REITs with higher exposure to the industrial and hospitality sectors are likely to issue perpetuals to fund yield-accretive acquisitions. Top picks include Ascott Residence Trust, MLT and Mapletree Industrial Trust.
------------------------------------------
Wednesday, September 24, 2014
NOL and its logistic business - Spin-off via listing or sell?
In my previous post, I made a summary of Neptune Orient Lines (NOL) and about its latest quarterly results. I believe its current CEO, Ng Yat Chung, should be able to pull it through to future profits. I have personally crossed path with several people who have worked with NOL's CEO before, and is able to obtain some insight into how he strategize and manage. I have faith in him and his ability, just like the many people who have worked with him.
Meanwhile, the below are some news regarding NOL's logistics business:
20 August 2014 NOL clarifies reports on plans to sell logistics business
SINGAPORE - Following media reports on Wednesday that Neptune Orient Lines (NOL) is planning to sell its logistics business, the Singapore-listed shipping company said such considerations are "preliminary and exploratory in nature".
Clarifying the report in a filing to the Singapore Exchange, NOL said it "continually evaluates all available options to improve the strategic positioning and performance of its businesses".
"These include considerations of a potential sale or initial public offering and listing of its logistics business as a separate, stand-alone unit from NOL," the company added.
It also stressed that "there is no assurance that any definitive transaction for the sale or an IPO of NOL's logistics business will be concluded".
Reuters reported early Wednesday morning that NOL, which is 67 per cent-owned by Temasek Holdings, is looking to sell its logistics business for more than US$750 million (S$935 million).
Shares in NOL jumped 3 per cent to their highest level in more than three months after the news.
20 August 2014 NOL shares jump 3% on news of potential logistics unit sale
SINGAPORE (Reuters) - Shares in Singapore's Neptune Orient Lines jumped 3 per cent on Wednesday to $1.01, their highest level in more than three months, on news that it is considering selling its logistics unit.
Reuters reported earlier that NOL, a shipping and logistics company in which Singapore's state investor Temasek Holdings owns a 67 per cent stake, is hoping to sell its logistics business for more than US$750 million (S$935 million).
20 Aug 2014 10:36 NOL: Considering Sale Or IPO Of Logistics Business
Neptune Orient Lines Limited continually evaluates all available options to improve the strategic positioning and performance of its businesses. These include considerations of a potential sale or initial public offering and listing of its logistics business as a separate, stand-alone unit from NOL. These considerations are preliminary and exploratory in nature. There is no assurance that any definitive transaction for the sale or an IPO of NOL's logistics business will be concluded.
20 August 2014 Logistics arm's sale or IPO 'preliminary and exploratory': NOL
SHIPPING and logistics company Neptune Orient Lines (NOL) on Wednesday clarified a Reuters report that said it is looking to sell its APL Logistics division for more than US$750 million and cited anonymous people familiar with the situation.
"NOL wishes to state that it continually evaluates all available options to improve the strategic positioning and performance of its businesses.
"These include considerations of a potential sale or initial public offering (IPO) and listing of its logistics business as a separate, stand-alone unit from NOL.
"These considerations are preliminary and exploratory in nature. There is no assurance that any definitive transaction for the sale or an IPO of NOL's logistics business will be concluded," it said.
NOL is made up of two major divisions - APL Logistics, a global freight management and logistics business, and a separate container shipping business named APL.
Reuters had reported that the company plans to launch a process in the autumn to find a buyer for APL Logistics and has hired banks to assist with that effort, according to sources.
Meanwhile, the below are some news regarding NOL's logistics business:
20 August 2014 NOL clarifies reports on plans to sell logistics business
SINGAPORE - Following media reports on Wednesday that Neptune Orient Lines (NOL) is planning to sell its logistics business, the Singapore-listed shipping company said such considerations are "preliminary and exploratory in nature".
Clarifying the report in a filing to the Singapore Exchange, NOL said it "continually evaluates all available options to improve the strategic positioning and performance of its businesses".
"These include considerations of a potential sale or initial public offering and listing of its logistics business as a separate, stand-alone unit from NOL," the company added.
It also stressed that "there is no assurance that any definitive transaction for the sale or an IPO of NOL's logistics business will be concluded".
Reuters reported early Wednesday morning that NOL, which is 67 per cent-owned by Temasek Holdings, is looking to sell its logistics business for more than US$750 million (S$935 million).
Shares in NOL jumped 3 per cent to their highest level in more than three months after the news.
20 August 2014 NOL shares jump 3% on news of potential logistics unit sale
SINGAPORE (Reuters) - Shares in Singapore's Neptune Orient Lines jumped 3 per cent on Wednesday to $1.01, their highest level in more than three months, on news that it is considering selling its logistics unit.
Reuters reported earlier that NOL, a shipping and logistics company in which Singapore's state investor Temasek Holdings owns a 67 per cent stake, is hoping to sell its logistics business for more than US$750 million (S$935 million).
20 Aug 2014 10:36 NOL: Considering Sale Or IPO Of Logistics Business
Neptune Orient Lines Limited continually evaluates all available options to improve the strategic positioning and performance of its businesses. These include considerations of a potential sale or initial public offering and listing of its logistics business as a separate, stand-alone unit from NOL. These considerations are preliminary and exploratory in nature. There is no assurance that any definitive transaction for the sale or an IPO of NOL's logistics business will be concluded.
20 August 2014 Logistics arm's sale or IPO 'preliminary and exploratory': NOL
SHIPPING and logistics company Neptune Orient Lines (NOL) on Wednesday clarified a Reuters report that said it is looking to sell its APL Logistics division for more than US$750 million and cited anonymous people familiar with the situation.
"NOL wishes to state that it continually evaluates all available options to improve the strategic positioning and performance of its businesses.
"These include considerations of a potential sale or initial public offering (IPO) and listing of its logistics business as a separate, stand-alone unit from NOL.
"These considerations are preliminary and exploratory in nature. There is no assurance that any definitive transaction for the sale or an IPO of NOL's logistics business will be concluded," it said.
NOL is made up of two major divisions - APL Logistics, a global freight management and logistics business, and a separate container shipping business named APL.
Reuters had reported that the company plans to launch a process in the autumn to find a buyer for APL Logistics and has hired banks to assist with that effort, according to sources.